When enterprising Chinese immigrants came to Australia in the 1930s to make their fortune during the gold rush it became clear the financial and economic prowess of Asian business was not to be scoffed at.

Decades later demand from the Chinese market drove Australia’s mining boom as iron ore shipped from our north fuelled a burgeoning economy.

In years to come, emerging powerhouses such as India, Indonesia and South Korea are tipped to fuel future booms.

The significance of Asia to the Australian market is not to be underestimated and, as the domestic market goes through its stabilisation, this will only become more significant.

However, many Australian companies are letting the opportunity pass them by.

According to a 2014 PricewaterhouseCoopers survey, out of more than 1000 Australian businesses, only nine per cent were operating in Asia at the time and only 12 per cent had any experience doing business in Asia at all.

It also showed 65 per cent had no intention of changing their stance towards Asia over the coming years. The statistics found Australian companies were investing more in New Zealand than in Asia.

The results show the idea of doing business in Asia is put in the ‘too hard basket’ for many Australian players.

And in the current market, can these firms really afford the missed opportunity?

China, India plan to spend

AsiaLink Business Chief Executive Officer Mukund Narayanamurti said companies that failed to engage Asia were missing out on a slice of a potential $1 trillion infrastructure spend over the coming years.

“Our mining services expertise will be central to assisting Asian economies continuing to industrialise and urbanise,” he said.

“The opportunities in Asia for Australia’s mining sector are exceptional.

“For instance, both China and India have projected $1 trillion spend plans on infrastructure over the next few years which will be heavily reliant upon improving the state of their mining sectors, which is a feeder into the

power and steel sectors and manufacturing, real estate and infrastructure.

“Supporting the mining sectors of these countries with our higher quality mining services, equipment and technologies will help deliver the enhanced productivity and reliability gains these countries are seeking.”

Mr Narayanamurti said there were several major mining businesses that were already operating successfully in Asian markets, and there was a real risk in not engaging, particularly for mining services companies.

“There will also be a growing need within several

Asian countries, including Indonesia, India and China,

for our world-class mining services, equipment and technologies, and also to learn from Australia’s mining sector on best practice operations management, OH&S and environmental management,” he said.

“Particularly in mining services, equipment and technologies, there is a risk for Australian service providers that by not seeking to engage with Asia they may suffer from a lack of opportunities from a mature mining sector in Australia.”

In order to ‘crack the market’, Mr Narayanamurti recommended continual engagement on the ground.

“For mining services, equipment and technology providers, it is critical to participate in both State and Federal government-supported trade missions into Asian markets and tap in to our extensive government- supported trade facilitation networks in the region,” he said.

“It is critical to spend time on the ground meeting with potential customers to articulate product and service value propositions and understand any commercial and regulatory hurdles that may need to be considered in selected markets.

“In addition, success will depend on developing the critical cultural competencies essential to building long-lasting successful partnerships with Asian partners.”

METS experience sought after

Developments throughout the mining sector in Asia combined with a slowing domestic market at home have led more Australian METS players toward the region, according to Austmine CEO Gibbs Stewart.

Ms Gibbs Stewart said an Austmine survey conducted in 2015 showed 66 per cent of Australian METS players were exporting, up from 55 per cent in 2013.

Importantly, around 67 per cent of those exporting were sending into Southeast Asia, where opportunities are plentiful and Australian expertise is valued.

“Australia is a very mature mining market and while investments and improvement on what’s happening here are being made, many Asian markets are developing,” Ms Gibbs Stewart said.

“Despite the low-cost environment, because of low commodity prices they still need to be efficient and productive in what they’re doing, so they’re looking for help and expertise to improve their operations.

“That’s really anything from right at the beginning with mine planning to development and issues related to closure.”

Ms Gibbs Stewart said while there were barriers facing companies which may want to enter the Asian market – such as finance, languages , regulations and finding the right partner – there was also plenty of support around for METS players looking to break in.

“While the hurdles are great there are obviously a lot of companies who are exporting out there. It takes a lot of learning, a lot of persistence and patience as well but certainly they can be overcome,” she said.

Importantly Ms Gibbs Stewart said organisations such as Austrade and companies who had done it before could offer help to those looking to break in and make the most of Asian opportunities.

“METS which might be feeling a bit of a pinch right now here and are looking to go offshore don’t have to do it alone,” she said.

“There’s a lot of assistance available and a lot of help so they can rely on others to make the path smoother when they’re trying to develop their business offshore.”

Australia on show

Austrade Resources and Energy Senior Trade Adviser Renee Barton said Australian METS players were being profiled at large international trade exhibitions to advertise the Australian sector.

“These platforms allow Australian METS companies the opportunity to meet with and network with high-level decision makers,” she said.

Ms Barton said there were a number of trade missions being run to key markets for Australian businesses.

“Opportunities are across markets including Vietnam, Indonesia, China, Mongolia, India, the Philippines and markets opening up such as Myanmar,” she said.

“Australia is recognised for providing solutions through the entire supply chain and we will continue to build on this.

“As well as these large trade exhibitions Austrade runs targetted missions to emerging mining markets such as Vietnam and Cambodia.

“In 2015 in partnership with Austmine, Austrade led a successful mission of 12 METS companies to Vietnam and Cambodia to participate in technical workshops, site visits, business matching and high-level discussions on how Australia could provide solutions to the Vietnamese and Cambodian mining industry.

“Austrade, in partnership with Hunternet, will again run this mission to Vietnam in April 2016.

“More recently, trade missions led by the Trade Minister to China, India and Indonesia have been instrumental in raising the profile of the Australian METS industry across Asia. These will continue, with the second mission to China taking place in April 2016.

“Seminars have also been run within Australia including regular market briefings, updates on the FTAs and how to take advantage of the benefits they provide, inbound buyer missions and tailored business matching through events such as AIMEX.

“Over the next two to three years Austrade will focus on opening up the opportunities through greater supply chain access across the mining industry.”

Ms Barton said companies could use Austrade as a resource to learn about foreign markets.

“Our Resources and Energy team is supported by an international network of more than 80 offices in 48 markets including a large presence across Asia with a METS specialist in many of these markets,” she said.

“Austrade can assist you to look at the best way to position yourself in the market to get access to the procurement managers and key decision makers.”

Optimism towards Asia

Evolution Mining Executive Chairman Jake Klein is involved purely in Australia through his current role, but spent much of the 2000s developing China-focused Sino Gold Mining into a world-class business before its C$2 billion takeover by Eldorado Gold Corporation in 2009.

Mr Klein said while he was a distant observer these days, he believed there was potential for Australian companies in China and the broader Asian region.

“Any foreign mining jurisdiction provides challenges, whether it is in China or anywhere else,” he said.

“From the political risks, language, legislative and compliance differences these all present substantial challenges – but in my experience they are all able to be overcome if you are prepared to spend time and effort establishing yourself in the new jurisdiction.

“That’s why I have always been an optimist about the potential for Australian companies operating in China or Asia – we are generally well received and welcomed and can be competitive.”

Mr Klein said there were likely challenges to competing with local companies in China at present, but more opportunities could emerge given the current economic climate.

“The bigger and more practical emerging challenge is that Chinese companies now have access to cheaper capital than a lot of their foreign counterparts,” he said.

“Many of the local competitors you will encounter have had Hong Kong listings for many years and have spent

this time improving their competitiveness both in their home market and through the international expansion and exposure most embarked on some years ago.

“That said, the current fall in commodity prices and Chinese stock prices may result in some interesting opportunities emerging for Australian companies as Chinese companies struggle with reduced prices and often have balance sheets with materially higher gearing levels than their Australian peers.”

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