Time to get serious about Asia

Last week marked the release of the Lowy Institute Poll 2015 which contained some worrying, if not surprising, results. It revealed a staggering lack of knowledge of our region and one that is a cause for real concern given the great importance Asia holds in our economic future.

In 1980 Asia accounted for about 20% of global GDP. Today it is around 40% and is expected to exceed 50% by 2025, just a decade from now. In fact PwC modelling for our World in 2050 report predicts that 4 of the world's 5 largest economies in purchasing power parity terms will be in Asia by 2030. These economies are China (#1), India (#3), Japan (#4) and Indonesia (#5).

Yet Australian’s told the Lowy Institute that they “don’t know” the leaders of these countries. In fact 53% of respondents said they “didn’t know” President Xi Jinping. The story was even worse for new Indian Prime Minister Narendra Modi (66%) and Japanese Prime Minister Shinzo Abe (59%) and only slightly better for the new Indonesian President Joko Widodo (42%).

Our feelings towards Indonesia have hit an 8 year low on the Lowy “thermometer” at 46 degrees putting Indonesia on par with Russia and Egypt in the wake of the Bali-9 executions and on-going people smuggling troubles.

Whilst steady, our feelings towards our other regional neighbours are only just “lukewarm” with China at 58 degrees, India 56 degrees and Malaysia 58 degrees. Japan is more warmly regarded at 68 degrees. The United States is at 73 degrees and New Zealand at 83 degrees.

Only 34% of Australians regard Indonesia as a democracy despite having held four free and largely violence free elections since Soeharto stepped down more than a decade and a half ago in 1998. Indonesia, our closest neighbour, is in fact the world’s third largest democracy. Last July’s Presidential election produced the largest single day of voting ever completed anywhere in the world – a remarkable achievement that deserves far greater recognition than has been given to date.

On a positive note, 76% of Australians agreed that “Australian Prime Ministers should work harder to develop personal relationships with their Indonesian counterparts”. Interestingly 59% agreed that “making private protests” was the most appropriate response to the execution of an Australian citizen in another country. 52% disagreed with the recall of our Ambassador in that circumstance.

The issue of foreign investment in real estate continues to attract popular attention with a whopping 70% of Australians believing that the government allows too much investment in residential real estate from China.

This is a curious finding considering that our foreign investment rules apply to all nationalities and perhaps suggests a particular fear of what we don’t really know or understand – China.

It would also suggest that there is a particular concern with real estate. Previous Lowy Polls have found that a smaller majority (57%) believed that the government was allowing too much Chinese investment in general.

China though is viewed very positively by 77% of the population as “more of an economic partner to Australia” than the 15% who viewed China as a military threat. In past polls, China was also viewed by an overwhelming majority (76%) as the most important economy to Australia compared to the US at 16% and Japan at 5%.

Perhaps Prime Minister Tony Abbott was reflecting public sentiment when he reportedly described Australia’s China policy as being driven by “fear and greed”. The Lowy Institute found that a large proportion of the population (73%) agree that “Australia should develop closer relations with China as it grows in influence”. 66% also say “Australia should do more to resist China’s military aggression in our region, even if it affects our economic relationship”.

The rise of Asia, fuelled by a fast growing and technology enabled middle class, is changing global supply chains rapidly. New trade agreements are both enablers and responses to these changes. As PwC has pointed out in "Passing us by" Australia's relationship with Asia is a bi-lateral one. While 6 of our top 10 trading partners are in Asia, our stock of foreign direct investment in Asia is less than in New Zealand. We trade with Asia but we are not in Asia.

There are some clear messages in this. We do not understand Asia and we need to – our economic future depends on it.

Australia lacks a comprehensive long-term national plan for our engagement with Asia and the Lowy Institute Poll shines a bright light on this failure. We urgently need a plan that has bi-partisan support and it must bring together business, academia and the different arms of government. To be clear, Governments have a vital role to play by providing clear and consistent long-term policy settings but it is ultimately Business that needs to step up to the plate here and lead.

It is not too late but time is not on our side – Asia is quite literally Passing us by.