As Labor agrees to support Australia’s free trade agreement with China, one key issue often appears to be overlooked: trusted, intergenerational family relationships are paramount when dealing with Asia.
Australia’s official diplomatic relationship with Asia — dating back to the 1940s — is only in its adolescent phase. In fact, Australia has little or no history in dealing with powerful, dynamic, wealthy entities in Asia.
There is no doubt that Australia is useful to the region – we have the minerals, energy and agricultural resources that Asia needs. However, to be a relevant force of influence, we can no longer define Asia based on which areas and industries present an economic opportunity for us.
The assumption that Asia will be a benign place for us and that the region will be generous in serving up opportunities is at best flawed. Asia is now exercising its influence through the weight of its economic prosperity displaying less deference and making more exacting demands.
It is likely that volatility will become the new norm.
The slow crumbling of American power dominance over the region comes at a time of deepening rivalry and mistrust between the great powers of Asia who are using their growing wealth and power to restructure the world around them in ways that are more predictable and compatible with the needs of their own economies.
The Chiang Mai Initiative, a currency swap arrangement worth $240 billion, launched in 2010, by the countries of Southeast and Northeast Asia was aimed at assisting member countries facing a currency crisis. This initiative persisted despite the objections it faced from the United States and other western countries on the grounds that it constituted an alternative to the IMF, potentially diluting the IMF’s sway on member economies.
The $100 billion, New Development Bank (BRICS Bank) formed by Brazil, Russia, India, China and South Africa to address liquidity pressures in times of crisis and investment for infrastructure in emerging economies, was a direct response to frustration with the lack of reform of the Bretton Woods institutions such as the IMF. These measures addressed a growing worldview that the global economy needs “rebalancing” in the wake of the prevailing dominance of Europe, America and Japan.
China’s own recently announced initiative, the Asian Infrastructure Investment Bank, with 26 founding members, will meet the shortfall in investment for Asia’s infrastructure needs with over $50 billion in funding to Asian projects. This poses a direct challenge to old world order institutions like the World Bank and Asian Development Bank and heralds the beginnings of major changes to the governance and functioning of the global economy.
We are moving towards a world that is less concerned about familiar institutions. The result is a global economy of increasing interdependence but declining trust. As the ambit of Asia’s influence widens alongside the weight of its capital, Australia will need to reconsider its own relevance within a region that will be defined as much by its rivalries as it will by its trade and capital flows.
Much of the boost to infrastructure building across Asia has been driven by rivalry. If any single image conveys China’s ambitions to reclaim its place as the “Middle Kingdom,” linked to the world by trade and cultural exchanges, the Xinhua map is it. The Silk Road and Maritime Silk Road combined will create a massive loop linking three continents. Even the name of the project, the Silk Road, is inextricably linked to China’s past as a source of goods and information for the rest of the world.
Japan has responded with announcements of major funding initiatives for infrastructure across Southeast Asia. Competition within Central Asia for access to the region’s energy via competing pipelines is the “new great game” for strategic influence within the region.
In such a context, what is Australia’s measure of strategic influence as a largely benign power?
Never before has it become more imperative to demonstrate meaningful, strategic and regional leadership that goes beyond our traditional role of being the moral police.
As the region makes a transition from the familiar and seemingly subservient to the unfamiliar and powerfully dominant, Australian businesses will need to spend a great deal of time thinking about their Asia game plan.
Carving out a future for Australian businesses within the region in the context of Asia’s new geopolitics and a free trade zone defined by the Trans Pacific Partnership and the China FTA will require a change of our conduct of some magnitude.
Asia wants contributors to its growth.
For Australia this means becoming long-term equity investors into the region based on trusted intergenerational relations, and not just traders and suppliers of raw materials or property.
Rohini Kappadath is director of Cross Border Business at Pitcher Partners and a Telstra Business Woman of the Year finalist. This article first appeared in Business Spectator.