If we continue to ignore the rising economic success of our Asian neighbours we will lose our place as a G20 economy by 2030, PwC Partner and Asia Desk Leader Andrew Parker said yesterday.
His comments follow yesterday’s release of the PwC report ‘World in 2050″ which projects China and India as world leaders in 2050, with the United States in third place, Indonesia in fourth, and with Australia kicked out of the G20 in the 28th spot based on GDP at 2014 Purchasing Power Parity (PPP) terms.
By 2030, four of the World’s top five economies will be in Asia with only the United States interrupting Asia’s dominance. Mr Parker said “The rise of Indonesia through the world rankings throughout the period to 2050 is very striking, rising from 9th in 2014 to 4th in 2050.”
“It is now clear that the global economic power shift away from the established advanced economies in North America, Western Europe and Japan will continue over the next 35 years” Mr Parker said.
“Global trade and supply chains are being redefined as a result of this shift, while being accelerated by technology and a glut of bilateral and multilateral trade deals,” Mr Parker said.
“Australia has sealed trade deals with China, Korea and Japan – we now need companies to step up and take advantage of them.”
Mr Parker said a recent PwC report, ‘Passing us By,’ revealed half of Australia’s large companies are doing business in Asia, but only 23 per cent have staff on the ground in-market.
“And when it comes to investment our track record is woeful with just $A28.2 billion of our foreign direct investment (FDI) stocks directed to ASEAN countries compared with $45.9 billion directed towards New Zealand. Japanese direct investment in ASEAN countries in 2013 alone was comparable to Australia’s total FDI stocks at the end of 2013,” Mr Parker said.
He said that these investments come as the ASEAN countries prepare to launch the ASEAN Economic Community at the end of this year in an effort to reduce tariffs and promote the free flow of goods, services and capital across the region.
“Businesses must immerse themselves in Asia, and build better relationships, networks and supply chains and we must invest in Asia, not simply trade with Asia, if we are to fully benefit from the region’s economic growth,” Mr Parker said.
‘Big companies originating from countries within Asia are operating across Asia and going global, and they are coming to our markets.
“We are seeing new alliances formed in response to these multilateral agreements and Australian companies are not part of them.
“The best example is the recent announcement of a $10 billion joint venture between CITIC in China, Itochu in Japan and CP Group in Thailand, a triumvirate you wouldn’t dream possible, geo-politically, a decade ago.”
Other findings in the World 2050 report are:
- China has already overtaken the US in 2014 to become the largest economy in purchasing power parity (PPP)
- China may moderate to around 3-4% GDP growth over the long-term where advanced economies are projected to grow at around 1.5-2.5% per annum.
- The GDP of the E7 countries will be around twice as high as that for the G7 countries by 2050 in PPP terms – E7 could grow at an average rate of 3.8% p.a. whilst the G7 could grow at an average rate of just 2.1% p.a.
Mr Parker said these projections of emerging nations’ success are not without risk. Asia will require immense investment in infrastructure and the implementation of anticipated improvements to political, economic, legal and social institutions.
“But these risks also bring opportunities for Australian companies. Australia is well positioned to help itself and others with rapid advances in technology, innovative ideas and our concentration of talented people that are the key drivers of economic growth,” he said.
“It’s time for Australian business to saddle up and get involved lest we are left out. It’s not too late but the clock is ticking.”
