Tim Harcourt

For The Airport Economist, it’s been a really frenetic few weeks as far as India and Australia are concerned. In November, I was on a Bollywood film set on the Sydney campus of The University of New South Wales (UNSW). In the film to be released next year, “From Sydney with Love” the story is set partly in Sydney and partly in India and comes as a result of the Filmmaker Prateek Chakravorty’s own love affair with Sydney when he was a student. It’s not unusual to film a Bollywood flick in Australia but it is unusual to have part of the storyline set in Australia. The film is strong on Australian references and even the UNSW’s own Vice Chancellor Professor Fred Hilmer has a walk on part in the film.

After Bollywood Sydney style I was off to Bollywood itself as part of the UNSW’s Australian Graduate School of Management (AGSM) MBA study tour to India and China. UNSW has teamed up with the SP Jain Center of Management in Mumbai and can now teach MBAs across Asia and the Middle East with in-depth courses on doing business in the new India. Everything was covered from the Mumbai Commodities Exchange to insights into Indian advertising, marketing and political economy. And of course there was a visit to a Bollywood film set and to the TV set of Indian master chef.

After Mumbai, it’s now back to Australia and to the Sydney Cricket Ground (SCG) as India aims to recover from its shock loss in Melbourne and to see ‘the little master’ Sachin Tendulkar score his 100^th ton either the second innings in the SCG’s hundredth match of test cricket or later in the series. Adelaide Oval would be a fitting place given Sachin’s connections with Bradman.

So why all this interest in India? Is it just to do with the cricket?

Cricket is certainly part of the story with the Indian Premier League (IPL) and the rise of the 2020 game. IPL has been the biggest revolution in the game since Kerry Packer’s World Series Cricket as the centre of gravity of global cricket power has shifted to the subcontinent. Just 25 years ago you couldn’t get Australian cricketers to even tour India (then captain Greg Chappell used to send Kim Hughes in his place to face the music) but now Australian cricketers, past and present, can’t wait to get over there, with Brett Lee singing Hindi songs, Matthew Hayden flogging cook books, Adam Gilchrist promoting Australian education and our GenY cricketers getting paid big bucks in the IPL.

But it’s also to do with economics too. Australian businesses were like our cricketers 25 years ago, when it came to India it was a matter of ‘where the bolly hell are you?’ But India’s economic resurgence has changed the business landscape significantly.

Whilst we’ve seen China grow as an export destination at test match pace, India has moved up our export ranks like an Indian Premier League 20/20 match. Ten years ago, India was not even in our top ten export destinations, now it is in the top 5. In fact, it recently passed the USA, as our 4^th largest export destination, accounting for $18.8 billion or 6.6 per cent of our exports. India now joins China, Japan and Korea as ‘The Big 4’ in Asia who account for just under $140 billion or nearly half of our total exports. There are now over 2,100 Australian businesses exporting goods to India with a rapidly growing services sector to the tune of $4 billion two-way services trade between India and Australia.

Why is it so? It’s partly due to the rapid rise of India’s economy in terms of scale. In fact, according to the Reserve Bank, India’s real GDP has tripled since 1990 (whilst Europe and the USA’s real growth has increased by 50 per cent over that period, and China’s has grown by six times its 1990 level). India’s industrial production has also grown, with Indian car sales, for example, trebling over the past eight years.

But is it all rocks and crops? Certainly coal, gold and other resources have played an important role in India’s rise given the commodity boom over the decade but it’s been happening at the chalk face as well as at the coal face. After some well-publicised attacks in Victoria on Indian students, Australia has diplomatically ramped up its commitment to its education relationship with India. This is not surprising given that India, together with China, accounts for one third of all students in Australia (compared to only 9 per cent a decade ago).  In fact, one reason for the filming of “From Sydney with Love” was Chakravorty’s affection for Australia based on his times here as a student. India’s rising middle class is opening up tourism export opportunities as well.

But India is an investment story as much as a trade story when considering the contribution made Indian investors to Australia’s development. Indian investment in Australia has increased 10 fold over the decade to the tune of over $1 billion, according to KPMG research and has diversified significantly into pharmaceuticals, ICT, healthcare, and consumer good as well as into resources. All the major global Indian brands are in Australia such as TATA Infosys, Wipro and Dr Reddy’s labs along with some major financial institutions such as the State Bank of India, Union Bank and the Punjab National Bank. For their part Australian businesses are also looking more to India as an investment destination. Australia’s corporate presence in India includes many major infrastructure companies such as Linfox, Leightons, Snowy Mountains Engineering Corporation (SMEC) along with household names in Corporate Australia like Macquarie, Woolworths, Qantas and ANZ bank. Also franchisees are finding India to be a lucrative market with Cookie Man, Accor Hospitality and Flight Centre taking advantage of the growth of India’s young consumer orientated middles class.

One reason for Australia’s success in India has been the efforts of Peter Linford, Australia’s dynamic Senior Trade Commissioner in New Delhi. During Linford’s term in New Delhi there has been a ramping up of trade and investment interest between Australia and India with a major expansion of Australian diplomatic and commercial resources under his watch including the expansion of new Austrade offices in Ahmedabad, Chandigarh, Jaipur, Kochi and Pune and offices in Bengaluru, Hyderabad and Kolkata to bring the total number of Australian trade offices in the sub-continent to 11. Linford describes sport particularly cricket “as an important mechanism for developing business interest between Australia and India” and is leading major business efforts at the SCG to introduce senior Indian business representatives to Australia. Linford, who works closely with Steve Waugh and Adam Gilchrist has an excellent track record in turning sporting links into business outcomes and has been described by AFL legend Kevin Sheedy as “the most effective representative of the Australian government he has ever worked with.”

Tim Harcourt is the JW Nevile Fellow in Economics at the Australian School of Business, UNSW and the author of The Airport Economist:  www.timharcourt.com

Tim Harcourt| The Airport Economist

In 1966, Geoffrey Blainey wrote his famous book “The Tyranny of Distance” on how Australia’s destiny had been shaped by its remoteness from the United Kingdom and Europe. Coincidentally, 1966 was the very same year that Japan overtook the UK as the number one naval destination for Australian shipping.

In the decades since then our integration with the Asia-Pacific region has increased exponentially. From exporting coal and iron ore – which we still do in huge quantities – Australian lawyers, architects and accounts have played a key role in the rapid development of India, western China and Indonesia.

Today, if Professor Blainey were to contemplate another book through the lens of the past four decades his title might be “The Power of Proximity” to describe Australia’s more recent good fortune in being part of the Asia-Pacific.

It is a momentum which has reached its most significant point with the announcement of the Trans-Pacific Partnership (TPP) comprising (so far) nine of the key economies of our region.

And with Greek debt and Roman ruins undermining the “old world” economy of Europe, the Asia-Pacific presents as the main hope for economic growth and Australia is indeed lucky to be an increasingly integrated part of the regional economy. But is luck we earned following the Hawke Government’s decision to open the Australian economy and the instincts of all sides of the Australian economic and political divide to continue to embrace the Asia Pacific region.

As the culmination of that momentum, the Trans-Pacific Partnership is probably the most significant economic announcement of the 21^st century so far in terms of Australia’s future.

Joining with the US and Japan along with Singapore, New Zealand, Malaysia, Brunei, Vietnam, Chile, Peru and even perhaps Canada and Mexico in a meaningful trade bloc is a major opportunity to streamline supply chains, regulations and rules of origin across the region, as well as to facilitate trade of green and digital goods.

It could also lead the way to an even larger trade grouping encompassing all of the countries of the Asia-Pacific Economic Forum, perhaps including – after the requisite diplomatic manoeuvrings – China.

It is Australia’s great fortune that we reformed our economy in the 1980s and 1990s just as the whole Asian region started to grow. That growth has gone beyond the traditional resources and manufacturing sectors and exploded into professional services and “stateless” services such as cloud computing, environmental technologies and other areas where Australia has developed competitive advantage.

Our $1.3 trillion superannuation industry is the envy of the world and our finance professionals occupy leading roles in regional financial institutions. Integrating our financial sector, in particular our funds management industry, with the Asia-Pacific is another major opportunity which can only benefit from the TPP initiative.

A key theme of the next decades will be the low carbon economy, and the APEC meeting took the step of cutting tariffs on environmental goods to five percent.

This is excellent news for the many innovative Australian cleantech companies whose prospects have already been boosted by the passage of the Government’s carbon pricing legislation. Lower tariffs can only benefit the push for Australian manufactured environmental goods to penetrate Asian markets. It will really put the green back into the green and gold.

Trade initiatives are important for workers as well as business. Exporters, on average, pay 60 percent higher wages and provide more job security than non-exporters.

APEC is often seen as little more than an annual Colourful Shirt Convention where world leaders gather and wear the national costume of the host country, but the TPP initiative is proof that APEC does matter, and is starting to deliver.

While the Doha Round of world trade talks ground to a halt and with it the whole World Trade Organisation process, the TPP announcement – and Japan’s support – give us concrete reasons for regional optimism.

In 1957, Japan helped Australia get into Asia by forging a commercial partnership with Australia, just 12 years after World War 11. With the TPP, Japan has supported what could be the most significant partnership to date in the 21^st century.

The exciting part is that it means so much more than commodities, agricultural products and old style manufactured goods. The TPP could give our transition to the low carbon, goods and services economy of the 21^st century some major momentum.

With the TPP in place Australia will really see the Power of Proximity in action and the Tyranny of Distance no longer holding fears for trade and commerce beyond our shores.

Tim Harcourt is the first J.W. Nevile Fellow in economics at the Australian School of Business at the University of NSW and author of The Airport Economist www.theairporteconomist.com