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Australian exporters see globalisation as an opportunity not a threat

09 February, 2007

Globalisation causes anxiety in some quarters. From the protests against the World Trade Organisation (WTO) in the ‘battle for Seattle’ in 1999 to the anti-G20 activities last year, there are some concerns about global integration and its impact particularly for the developing world. Source: Tim Harcourt, Austrade.

However, in the case of Australian exporters – particularly our small and medium sized enterprises (SMEs) – globalisation is seen as a great opportunity rather than a threat, particularly with the rise of the emerging economies. 

According to the new survey, the Grant Thornton International Business Report, Australian SMEs are starting to capitalise on opportunities in the fast-growing ‘BRIC’ economies – that is Brazil, Russia, India and China. The report also said that more than a quarter of Australian SMEs had increased their business through China over the past year and 47 per cent of Australian enterprises saw globalisation as a major opportunity for expanding their businesses.

The BRICs case is interesting. Whilst economists always warn against “picking winners” in terms of industry sectors but they do make a lot of noise about which countries should invest their hard-earned in. There is perpetual talk about emerging economies and which market is going to be the ‘next big thing’ or in the BRICs case ‘the next big things’. The BRICs hypothesis came from a famous paper from Goldman Sachs which mooted Brazil, Russia, India and China will be the places to watch in terms of their growth rates, and eventual shares of world output and global trade. Goldman Sachs regarded ‘the BRICs’ as the new growth engines of the global economy. 

Of course, many predictions assume that countries will simply replicate economic growth patterns for long periods of time which is difficult to assume given the nature of external shocks and institutional reform. But if Goldman Sachs is proved correct (and this is a huge if) how would Australia fare? It seems from the data, quite well. Australia’s commodity base means that the new global economic engines will be hungry for resources, energy and the resource sector expertise. In fact, according to new research by Austrade, the BRIC economies are faring quite well as  there are now 3815 Australia exporters selling to China, 1806 selling to India with 425 to Brazil and 291 to Russia. 

The Grant Thornton result for China is also supported by recent research by Austrade and Sensis. The research showed that the proportion of Australian exporting SMEs had doubled in only the past two years (a process that would normally take a decade or so). The survey showed that you do not have to be a big fish like Rio Tinto or BHP Billiton to succeed in the Chinese market. Similarly, India is showing great promise with the growing middle class and favourable demographics (the ‘poppadom preach’ scenario) whilst Russia’s energy sector was drawing increasingly on Australian skills and technology in mining and agribusiness. Brazil has also drawn on Australian expertise in mining and transport infrastructure (aviation and railways) as well as agribusiness, telecommunications, tourism and education.

The Grant Thornton survey also confirmed the rise of WA and Queensland in the globalisation stakes. In WA, 36 per cent of SMEs were exporting to China, whilst in Queensland it was 32 per cent and both saw globalisation as a great opportunity. This is consistent with earlier Reserve Bank research showing the WA, NT and Queensland as the most export orientated states. However, it is not all about resources. For instance, an Austrade survey about Women in Exports also showed Queensland and WA leading the way in terms of female entrepreneurship in education, tourism, and personal and professional services.
In short, globalisation is here and Australian exporting SMEs are coming, ready or not. In fact, in the case of China, in particular, it seems they are already there. The Grant Thornton International Business Report provides more evidence that the Australian economy is becoming more integrated with the rest of the world and that exporting Australian SMEs are at the forefront.

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