Tim Watts MP: Asia capability must become a priority

2017 Asialink Leaders Program participant, Tim Watts MP, told Parliament that Asia capability must become a priority in Australia.

It's often said that every generation of Australians discovers anew the importance of Asia for our nation's future. Leaders and policymakers recognise the inescapable importance of the region—our region—to Australia's economic and strategic interests with cliched regularity. All too often, though, we fail to follow through to develop the capabilities to shape our own future in the region. Progress has been made, no doubt, over the past 40 years, but we've never truly followed through on the long-term commitment that we need as a nation to develop the language skills and the broad-based cultural and historical understanding of our region required to be deeply enmeshed and influential in the region. Even today, only nine per cent of Australian businesses operate in Asia.

The economic rise of Asia has been an undoubted boon for Australia, but the rise of the Asian middle class, 1.7 billion strong, creates new challenges. Selling middle-class goods and services—health care, aged care, financial services, arts and culture—to the burgeoning middle class of Asia will require more sophistication from Australian businesses than was needed during the mining boon. It's often said that Australia is now a services economy, but services currently represent only 15 per cent of our total exports to Asia, the vast bulk of which are education and tourism services provided from Australia. Free trade agreements are all well and good, but it's people who execute investment decisions and contractual agreements—people who know each other, understand each other and can build relationships of trust. Australians working in every segment of our society need to be investing in the capabilities needed to engage with Asia now, as a matter of urgency.

We ought to practice what we preach in this building, and, to this end, I've been completing the 12-month Asialink Leaders Program this year. Asialink was founded in 1990. It is one of Australia's oldest institutions dedicated to cultural connection with Asia through arts, education and business. The Asialink Leaders Program is one of its flagship programs for developing Asia capability in Australia, and, as a participant, I can attest to its rigour and value. It's been an opportune time to undertake the course as Asialink recently released its Match Fit: shaping Asia capable leaders report, produced in partnership with PwC and the Institute of Managers and Leaders.

This report systematically evaluated the Asian capability of more than 1,000 board members and nearly 500 senior executives from the ASX 200 and the top 30 private Australian companies. The findings were not encouraging. The companies studied in the report were judged against six capabilities: sophisticated knowledge of Asian markets; extensive experience operating in Asia; the existence of long-term trusted relationships in the region; the ability to adapt behaviour to the Asian cultural context; capacity to deal with government; and a useful level of language proficiency.

Despite 40 years of consensus that Australia's economic future lies in Asia, 67 per cent of ASX 200 board members have no observable evidence of extensive experience in doing business in Asia. Only 55 of the ASX 200 disclosed revenues earned in Asia. The biggest outbound destinations for overseas direct investment remain the United States, the United Kingdom and New Zealand. We're confronted by the same story: an Australian business community—both investors and management—that perceives doing business in Asia as too risky and lacks the long-term commitment to make it work. Not only is Australian business unwilling to invest in the development of Asian capability over time; it does not value it where it already exists. The report also highlights a shocking underrepresentation of Australians with Asian heritage in the senior management of boards of our major companies.

The report calls for a shift in mindset throughout Australia for an understanding that Australia's economic future, our growth prospects, depends on a long-term investment approach to engagement with Asia. The report argues that there's an urgent need for Australian businesses to invest in and recruit Asia-capable talent to execute this strategy. Other recommendations include reporting market-specific returns rather than region-wide returns, engaging Asia-capable advisory boards and building awareness in the media and the investment community of what's required for investments of this kind.

I asked my fellow participants in the 2017 Asialink Leaders Program—via WeChat, of course—what message they had for the parliament. They wanted me to tell the parliament of the urgency of investing in our Asia capability. They wanted me to tell the parliament that no-one owes us a living in Asia and that other nations are acting more decisively than we are to develop the capabilities needed to realise the opportunity. Many of them expressed the importance of developing Asian languages capability, but, beyond that, ensuring that our primary and secondary schools teach Asian history and cultural understanding to all Australian kids. They wanted more exchange opportunities with Asia to allow mid-career Australians in business and arts and culture to develop these capabilities. More than anything, though, they wanted government to make Asia capability a priority, not a slogan. I'm committed to making sure that that becomes a reality in the coming months.

This is a redacted version of the full Hansard entry from 6 September 2017.