Originally published in Australian Resources & Investment, June 2013
The rise of Asia will be a defining feature of the 21st century. By 2050, China is tipped to attain a global economic dominance reflective of its world status more than 300 years ago. By 2025, India is slated to become world’s fifth largest consumer economy. Indonesia’s stock exchange value has more than doubled since 2008, making it the third largest in Southeast Asia.
The forward charge of the ‘Asian Century’ may nowhere be felt more strongly than in the Australian mining industry.
The rise of Asia will be a defining feature of the 21st century. By 2050, China is tipped to attain a global economic dominance reflective of its world status more than 300 years ago. By 2025, India is slated to become world’s fifth largest consumer economy. Indonesia’s stock exchange value has more than doubled since 2008, making it the third largest in Southeast Asia.
The forward charge of the ‘Asian Century’ may nowhere be felt more strongly than in the Australian mining industry.
Is it really the ‘Asian Century’?
But is the 21st century really the ‘Asian Century’? Critics argue the title is a misnomer, which fails to acknowledge decades of effective economic, cultural and diplomatic engagement by Australia in the region. There is much truth to these assertions. Yet the ‘Asian Century’ signals something new, distinct and substantial: the rise of an Asian middle class with per capita income and buying power never before seen. By 2030, consumers in developing Asian economies are projected to reach $32 trillion (USD) in expenditures, comprising 43% of global consumption. Asia’s middle class already comprises 1.9 billion individuals, and this figure will likely increase.
The implications of a new and rapidly expanding middle class do not stop at the retail check-out counter. A growing middle class means progressive demands for infrastructure and services, which will fuel demand for mineral, oil and gas resources. Improved in-country technologies and access to resources will also foster greater efficiencies for off-shore operations.
The Australian mining industry’s linkages with Asia are not new, but these linkages are steadily increasing, and economic and resource interdependence will continue to grow as the Asian Century progresses.
The Australian mining industry’s linkages with Asia are not new, but these linkages are steadily increasing, and economic and resource interdependence will continue to grow as the Asian Century progresses.
Defining ‘Asia’: You say ‘tomato’, I think ‘potato’
While use of the term, ‘Asia’, may conjure distinct, oriental imagery and helps many to focus attention on a particular region, it is also problematic. Too often ‘Asia’ is conflated with China. And the catchall term belies the political, cultural, social, religious and financial differences throughout the region. Not to mention the hard reality of distinctive climates and geographies spread across tens of thousands of kilometres.
One of the greatest difficulties when discussing ‘Asia’ is the discrepancy between the ‘Asia’ in your own mind and that in others’. It’s the “you say ‘tomato’, I think ‘potato’ paradox”. Does Asia include Mongolia? Does it stretch up to Russia? What about Pacific Island nations like Papua New Guinea? And when we talk about something that is ‘Asian’, is that ‘Chinese-Asian’, ‘Indian-Asian’, ‘Thai-Asian’? This point is well illustrated by the jarring reality that, according to the Asian Development Bank, Asia’s top five largest middle class populations by market share are Azerbaijan, Malaysia, Thailand, Kazakhstan and Georgia. Not a China or India in sight by this measure.
How we understand ‘Asia’ will clearly differ according to context. What is most important for companies engaged in the Asia conversation is a consciousness of the complexities and the potential for miscommunication.
One of the greatest difficulties when discussing ‘Asia’ is the discrepancy between the ‘Asia’ in your own mind and that in others’. It’s the “you say ‘tomato’, I think ‘potato’ paradox”. Does Asia include Mongolia? Does it stretch up to Russia? What about Pacific Island nations like Papua New Guinea? And when we talk about something that is ‘Asian’, is that ‘Chinese-Asian’, ‘Indian-Asian’, ‘Thai-Asian’? This point is well illustrated by the jarring reality that, according to the Asian Development Bank, Asia’s top five largest middle class populations by market share are Azerbaijan, Malaysia, Thailand, Kazakhstan and Georgia. Not a China or India in sight by this measure.
How we understand ‘Asia’ will clearly differ according to context. What is most important for companies engaged in the Asia conversation is a consciousness of the complexities and the potential for miscommunication.
Setting big goals: The Asian Century White Paper
The ‘Asian Century White Paper’ is nothing if not ambitious. Released by the Commonwealth Government in October 2012, it sets a target for Australia to be one of the top 10 richest countries by 2025. It delineates five key areas of focus which must be prioritised in order to achieve this, including establishment of a ‘productive and resilient Australian economy’, ‘deeper and broader relationships’, and ‘operating in and connecting to growing Asian markets’. The paper positions Australia’s mining industry as vital to these objectives. But big goals require big actions. And an active regional focus raises considerable, but not insurmountable, challenges for the industry.
From a governance perspective, the Australian mining industry’s progressive engagement in Asia raises a range of questions. How will future public policy be managed within and between countries in the Asian region? What role will already complex issues of national sovereignty, human rights, voluntary international frameworks and environmentally and socially sustainable business play in the industry’s engagements?
Questions of national energy security and competing economic pressures, especially those arising from China’s reliance on and purchase of Australian resources, must be considered.
Despite looming governance challenges, the Asian Century is frequently presented as an open-armed offer of bounty, ripe for the taking. But sceptics argue this is a narrow and dangerous view, one which may be blinkered by economic prospects. For example, writing in The Conversation, Ross Garnaut cautions that China’s recently rapacious appetite for thermal coal will ease. Instead, shifting attitudes of the Chinese population toward climate change and environmental harm, combined with government commitments to reduced emissions intensity related to energy production, mean that demand for coal is slipping. China is beginning to look toward low-emission energy sources.
Demand for Australia’s coal certainly will not cease in the foreseeable future, nor are exports such as iron ore affected. The example stands, however, as an important reminder that resource demands are not driven by supply and pricing factors alone. Social attitudes towards climate change, populations with increasing social and environmental awareness, individuals with spending power to make ethical purchasing choices, and public perceptions of the mining industry, more generally, will all affect the potential benefits achieved during the Asian Century. Awareness and engagement with such factors, in the first instance, is required.
From a governance perspective, the Australian mining industry’s progressive engagement in Asia raises a range of questions. How will future public policy be managed within and between countries in the Asian region? What role will already complex issues of national sovereignty, human rights, voluntary international frameworks and environmentally and socially sustainable business play in the industry’s engagements?
Questions of national energy security and competing economic pressures, especially those arising from China’s reliance on and purchase of Australian resources, must be considered.
Despite looming governance challenges, the Asian Century is frequently presented as an open-armed offer of bounty, ripe for the taking. But sceptics argue this is a narrow and dangerous view, one which may be blinkered by economic prospects. For example, writing in The Conversation, Ross Garnaut cautions that China’s recently rapacious appetite for thermal coal will ease. Instead, shifting attitudes of the Chinese population toward climate change and environmental harm, combined with government commitments to reduced emissions intensity related to energy production, mean that demand for coal is slipping. China is beginning to look toward low-emission energy sources.
Demand for Australia’s coal certainly will not cease in the foreseeable future, nor are exports such as iron ore affected. The example stands, however, as an important reminder that resource demands are not driven by supply and pricing factors alone. Social attitudes towards climate change, populations with increasing social and environmental awareness, individuals with spending power to make ethical purchasing choices, and public perceptions of the mining industry, more generally, will all affect the potential benefits achieved during the Asian Century. Awareness and engagement with such factors, in the first instance, is required.
Keys for success in the Asian Century: Non-financial considerations
Not only is the White Paper ambitious, it is mostly positive about Australia’s prospects for the current century. “Australia starts from a position of strength. Just as our region has a lot to offer us, we have a lot to offer our region.” Furthermore, the paper positions the mining industry as a cornerstone for this optimism.
If these offerings are to be truly valuable and if optimal returns to Australia are to be achieved, the mining industry must look beyond the economic gains to be made. Australian mining companies must retain and enhance the focus on socially and environmentally responsible mining, demonstrated in recent years.
Particularly as lucrative new markets are discovered and opened in remote and developing Asian countries, the prioritisation of two-way stakeholder dialogue; acknowledgement of and respect for indigenous communities; commitment to voluntary, international principles to guide good behaviour (such as the UN Principles for Business and Human Rights and the OECD Guidelines for Multinational Enterprises); implementation of leading practice assessments (such as those guided by the improved IFC Performance Standards on Environmental and Social Sustainability); and commitments to financial transparency, even where local governments may not require it, are absolutely crucial.
If these offerings are to be truly valuable and if optimal returns to Australia are to be achieved, the mining industry must look beyond the economic gains to be made. Australian mining companies must retain and enhance the focus on socially and environmentally responsible mining, demonstrated in recent years.
Particularly as lucrative new markets are discovered and opened in remote and developing Asian countries, the prioritisation of two-way stakeholder dialogue; acknowledgement of and respect for indigenous communities; commitment to voluntary, international principles to guide good behaviour (such as the UN Principles for Business and Human Rights and the OECD Guidelines for Multinational Enterprises); implementation of leading practice assessments (such as those guided by the improved IFC Performance Standards on Environmental and Social Sustainability); and commitments to financial transparency, even where local governments may not require it, are absolutely crucial.
‘Asia literacy’: More than linguistic fluency
As market forces shift, bringing consequent changes in global political and military power, more will be expected of Western engagement with Asia. The ability to complete business interactions in culturally appropriate ways is currently a ‘nice to have’, given current power hierarchies. In future years, linguistic fluency, cultural aptitude and social nous will be a ‘need to have’.
‘Asia literacy’ is not just about Asian language skills. A 2011 Australian Industry Group and AsiaLink survey of 380 respondents from diverse business sectors found that “having an appreciation of the different political and legal processes” of Asian countries was seen as the single most important factor for business success in Asia. This was followed closely by Asia-sensitive managerial skills and local cultural knowledge. Asian language capabilities were seen as least important, yet of surveyed companies, 73% of senior executives and 84% of board members do not speak a single Asian language.
Coalitions like the Business Alliance for Asia Literacy, which includes several Australian miners and mining contractors, focus on the importance of improving studies of Asia in school education, including language and cultural exchange. With less than 6% of Australian year 12 students studying an Asian language, this will require swift and bold education policy.
But business leaders must be competent now, if the future generations of senior executives are to have the chance to exercise their new fluencies. Executive education and professional development must be part of the equation for Australia’s mining companies to retain their current competitiveness in the region.
‘Asia literacy’ is not just about Asian language skills. A 2011 Australian Industry Group and AsiaLink survey of 380 respondents from diverse business sectors found that “having an appreciation of the different political and legal processes” of Asian countries was seen as the single most important factor for business success in Asia. This was followed closely by Asia-sensitive managerial skills and local cultural knowledge. Asian language capabilities were seen as least important, yet of surveyed companies, 73% of senior executives and 84% of board members do not speak a single Asian language.
Coalitions like the Business Alliance for Asia Literacy, which includes several Australian miners and mining contractors, focus on the importance of improving studies of Asia in school education, including language and cultural exchange. With less than 6% of Australian year 12 students studying an Asian language, this will require swift and bold education policy.
But business leaders must be competent now, if the future generations of senior executives are to have the chance to exercise their new fluencies. Executive education and professional development must be part of the equation for Australia’s mining companies to retain their current competitiveness in the region.
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