Last year, the number of visitors from Brazil, Russia, India and China increased by 6.4%, 7.1%, 13.0% and 28.2%, respectively. Is the Australian Tourism Industry prepared for this?

Here are some thoughts on how to attract the new BRIC Tourist:

Follow the money!

In the next decade, the tourism market for Chinese visitors alone is forecasted to be worth A$6 billion to Australia, with almost one million Chinese visitors forecast to visit Australia in 2020. The Chinese tourist contributes twice as much value as the Japanese, with total inbound economic value (TIEV) having increased on average by 17.1% per year for the past ten years (a contribution to the Australian economy of A$7,287 per person).

Indian tourists also spend on average more each day than other nationalities. The total inbound economic value of an Indian tourist has increased by 14.9% per year for the past ten years. Indian tourists spend, on average, $73 per night and $4,607 per visit. For the next decade, the TIEV for Indian tourists is forecast to grow 6.7% year on year, moving the Indian tourist from Australia’s ninth to our fifth most valuable inbound market.

In 2010, Russians spent $26.5 billion abroad. As the BRIC country with the highest GDP per capita and the lowest levels of debt, the Russians have high purchasing ability and a relatively large luxury consumer market which is predicted to reach the size of Germany’s by the end of this decade.

Education policies requiring Brazilian students to study English are fostering outbound education tourism. Australia is a popular destination for young Brazilians due to our outdoor way of life, beaches and cultural similarities. In addition, Brazilians devote a large portion of their income to discretionary spending and choose to live for the present!

Casting a Wider Net

Unlike in the past, when the tourism industry has relied on above-the-line advertising and travel agents to attract business, the number one source of information for one-third of Chinese, Indian and Russian tourists is the Internet. Even more compelling is the knowledge that, unlike western travellers who usually plan and book their travel many months in advance, Chinese tourists booked their flights within one month of their date of travel.

The importance of reaching potential BRIC customers via online promotional material and marketing campaigns will be a necessary competitive edge for all travel companies in the future.

However, traditional methods of marketing and search engine optimisation are of little significance for BRIC tourists, in particular the Chinese. As an example, the Chinese population’s most popular search engine is Baidu, the Chinese equivalent of Google.  It is therefore very important for the tourist industry to establish a presence in local popular Chinese search engines to attract the lucrative mainland Chinese market.

Revamping the Product

With such alluring growth figures, it is going to become even more important for all tourism companies to develop products that have direct appeal to the BRIC tourist. The BRIC tourist differs quite significantly from their stressed out Western counterparts in that they want to cover as much of Australia in as short a time as possible! A typical day may include a photo stop at Bondi Beach in the morning, followed by a bus trip to the Blue Mountains in the afternoon and then an evening at the casino. This contrasts with Western tourists who typically enjoy sunbathing and relaxing on the beach. With over one fifth of outbound Chinese tourists being labelled as ‘Self Challengers’, Australia is a popular destination for those attracted to adventurous pursuits, being pushed outside their comfort zone and those who are attracted to some of Australia’s more remote areas.

Recruitment

There are approximately 150,000 Chinese students studying at universities in Australia, almost 70,000 Indian students, 18,000 Brazilian students and 1,500 Russians, but very few of them successfully find work in Australian companies after they graduate. These students not only have valuable cross cultural and language skills, but also Australian knowledge, experience and qualifications and possibly even high level connections in their home country. With the limited time available until their visa expires, many students are forced to return home if they cannot find suitable employment in the short period available, and this results in a loss of talent and valuable skill sets which could otherwise be retained in Australia – particularly in the tourism sector.

A good place for Australian tourist companies to start in developing a strategy to attract new BRIC tourists is to review their recruitment policies to attract international students who, after a short period of training and on the job experience, will significantly enhance their ability to tackle the BRIC market.

Business Tourism

The market for business tourism is largely untapped, but with 87% of business travellers staying longer than the ordinary tourist, both before and/or after their business engagements, the business tourism market presents numerous opportunities for the tourist sector. In 2010, business travel from Brazil increased by 59% due to the rapid growth of Australia’s energy and resources sector and the desire amongst Brazilian companies to learn from Australia’s success.

Why not tailor a tourism package that incorporates business meetings, site visits or even networking events for the more entrepreneurial and business-minded BRIC tourist? With numerous delegations coming to Australia from Mainland China every week, is this a niche opportunity for local tourist companies to start tapping into?

Seasonal Differences

While a seemingly obvious point, it is important not to underestimate the power of seasonal differences, particularly to attract Chinese and Russian tourists. The peak months for Chinese tourist arrivals to Australia are in January and February which, amongst other things, is caused by their desire to avoid the harsh winter climate and travel over the Chinese New Year Season. For Russian tourists, December and January are the peak months for tourist arrivals as they seek to escape the harsh Russian winter.

Tourism companies should focus their marketing and promotional activities to attract Chinese and Russian visitors during our warm summer months.

Cultural Differences

Whilst there are distinct cultural differences between Australia and the BRIC countries, Australia is uniquely placed and well positioned to take advantage of our exclusive position as the only western country within the BRIC region.

With over 1 million Chinese Australians (either born in China or of Chinese ancestry), large numbers of business migrants arriving each year from all of the BRICs, our growing number of international students and our strong cultural and historical ties throughout the region, Australia is a truly multi-national, multi-lingual and multi-cultural society which has so much to offer the BRIC Tourist.

“Speak with one Voice”

In the words of Geoff Dixon, Chairman of Tourism Australia, Australia’s tourism industry needs to “speak with one voice” when marketing overseas. Unlike other sectors, The tourist industry is highly fragmented in Australia which means that collaboration, rather than competition, to attract the BRIC tourist will result in everyone having the chance to share in a much bigger pie.

As an example of this, in 2010, Italy, France and Spain signed an agreement to work jointly to attract BRIC tourists, a partnership which would have been unthinkable a decade ago.

Also, in Pattaya, Thailand, high end luxury resorts have been collaborating to attract the Russian Tourist, a innovative strategy which has met with almost immediate success. By introducing Russian street signs, Russian restaurants and developing training courses for hotel staff and waiters to learn Russian language and cultural differences, Pattaya is now attracting large numbers of big spending Russians.

The BRIC tourist presents an unprecedented growth opportunity for the Tourism Industry….what is your BRIC strategy?

This is a summary of a presentation I gave earlier this month to the Australian Tourism Export Council Meeting Place 2011 in Sydney.

While Jim had already gained recognition and widespread respect for his previous work as an economist and currency analyst, he acknowledges that his career has now been shaped in large part by this simple term. While many eyebrows were raised at the time by some of his more dramatic predictions, notably the one that China would overtake the US to become the largest economy in the world within 30 years, the BRIC concept is now almost a household term, widely recognised within the media, academia, business circles and certainly by the investment community.  At the end of 2009, Jim’s BRIC research was widely acclaimed as the “Call of the Decade”.

With the benefit of 10 years since he first invented the BRIC acronym, it is worth pausing to reflect on how much the world has changed since 2001. As Jim wrote this week in an article in the UK Telegraph in which he reflects on the progress of the BRICs over the last decade:

“All four of the BRIC countries have exceeded the expectations I had of them back in 2001. Looking back, those earliest predictions, shocking to some at the time, now seem rather conservative.

The aggregate GDP of the BRIC countries has close to quadrupled since 2001, from around $3 trillion to between $11 – $12 trillion.

The world economy has doubled in size since 2001, and a third of that growth has come from the BRICs. Their combined GDP increase was more than twice that of the United States and it was equivalent to the creation of another new Japan plus one Germany, or five United Kingdoms, in the space of a single decade.

Some observers say the effect of the BRICs on the world economy has been exaggerated because their growth was primarily driven by exports to the developed markets, as well as the rise in commodity prices.

Exports certainly played a major role for China, but since the 2008 credit crisis and the consequent fall in demand in the US and elsewhere, that is no longer the case.

For India, domestic demand has been the driver throughout the last decade, and increasingly it is the domestic consumer as well as an increase in infrastructure spending that is fuelling growth in the BRIC economies.

The credit-fuelled growth in US demand certainly played its part in their ascent, but even since 2008, and despite the ongoing US struggles, the BRIC economies have continued to power ahead.

However you choose to interpret the data, the importance of the BRICs in global economic growth is beyond dispute. Personal consumption in the BRIC countries has skyrocketed. In China, between 2001 and 2010, domestic spending increased by $1.5 trillion, or roughly the size of the UK economy.

The increase in the other three was about the same, perhaps slightly more. BRICs now account for probably close to 20 percent of world trade compared with less than 10 percent in 2001.”

Whilst the BRIC idea was first dreamt up as an investment idea or theme, designed to challenge the thinking of investors and their professional advisors, even Jim has been surprised by how quickly the BRIC countries themselves have started collaborating via their annual BRIC (now “BRICS” to include South Africa), Leaders Summit which has met every year since 2009 to discuss opportunities for political, economic and even trade collaboration.

The recent BRICS Leaders Meeting in China in April 2011 laid the tracks for greater ‘intra-BRIC’ trade and investment co-operation in the years ahead.  This is vital to the global economy and should be occupying the minds of all forward thinking business leaders, investors and entrepreneurs.

‘Intra-BRIC trade’, or trade among the BRIC members, has grown at the rate of 30 percent per annum since 1999 and now accounts for 8 percent of global trade. During the last 10 years, intra-BRIC trade increased nine-fold, compared to global trade which only doubled over the same period.

In recent years, Intra-BRIC trade has been mainly characterised by Russia and Brazil supplying natural resources to satisfy the industrial and infrastructural needs of India and China. However, this is likely to change. Watch out for more investment and trade deals between the BRICs as they create their own trading bloc and invest in each other’s capabilities.

10 years later, it is time to acknowledge Jim O’Neill’s vision, foresight and thought leadership. But as he reminds me from time to time, the BRIC idea has a long way to run yet!

What we don’t know, and is very hard to predict at the moment, is how painful this transition will be.  Will Germany accept the horrible reality of a $2 trillion deficit in southern Europe and take decisive action by paying a figure which represents two-thirds of their total GDP into the system to save Greece and other ailing economies, and prop up the banks that will become insolvent in the event of a sovereign default? Or will the politicians prefer the “death by a thousand cuts” approach which has prevailed so far? Will the US face up to its own insolvency (with its total debt now at 100 percent of GDP and rising) and make serious and meaningful cuts to its Federal Budget? Or are we simply putting off the day when the US faces its own major debt crisis which will be too large for any other country to rescue and lead to a deep and painful global recession? As each day goes by it isn’t hard to paint a very pessimistic scenario for the future, despite the hope that sense will eventually prevail. Volatile investment markets simply reflect the confusion, optimism, fear and panic that oscillates each day throughout the investment community.

Unfortunately, this all happened much sooner than it was meant to! The BRICs are still relatively small economies (though growing rapidly) and are nowhere near ready to prop up the whole global economy. In any case, they are all going through their own internal transformations so as to be able to maintain economic growth despite the absence of the American consumer, the engine that has fuelled global growth for the last 50 years or more.

The key BRIC trends to be following to feel confident and optimistic about the future are as follows:

Domestic Consumption
China’s transition from an export driven economy to one which is dominated by domestic consumption (with urbanisation, rising wages and the development of a world class services industry as key drivers) is the focus of the 12th Five Year Plan and was the subject of the July issue of Insights.  India’s economy is already dominated by strong domestic spending, and Brazil’s wealth of resources, agriculture and renewable energy offers a high degree of self-sufficiency.

However, Russia has the largest consumer class amongst the BRIC countries, the highest GDP per capita, the lowest level of debt, and now leads the whole of Europe in the sale of key consumables eg pharmaceuticals, mobile phones, broadband and even beer (catching up with Vodka as the beverage of choice amongst Russians!). According to the recently released Forbes survey of billionaires, Moscow has more billionaires (79) than any other city in the world (the closest is New York with 58) and Russia accounts for a third of Europe’s 300 billionaires, and 15 of the world’s 100 richest people. Not surprisingly, retail sales in Moscow now exceed Paris and London, and by 2025 the consumer market in Russia, which is now approximately 142 million, is expected to be larger than Germany’s, one of Europe’s largest markets.

It is, however, important to recognise that Africa is not a single homogenous entity, but rather a collection of 53 countries at different levels of economic, social and political development. This increases the complexity of investing across the region but, at the same time, creates substantial opportunity for those who are willing to make the effort to understand this exciting and dynamic continent.

Africa, in short, is a compelling investment story with a substantial growth trajectory. While there is much one could say in this regard, there are at least 10 compelling reasons to invest in Africa.

1. Improved Macroeconomic Stability
Africa has achieved significantly improved macroeconomic stability over the past 20 years, illustrated by the continent’s collective inflation rate reducing from 22 percent in the 1990s to eight percent in the 2000s, budget deficits reducing from 4.6 percent of GDP to 1.6 percent (the envy of many developed market economies), and government debt as a percentage of GDP reaching 59 percent from 82 percent over the period. External debt, in particular, has declined significantly over the past 10 years to a level that is lower than that of Central and Eastern Europe, and is approaching the levels found in developing Asia. This is allowing African investors to take a longer-term view of the future, illustrated by the recent launch of a 30-year local currency bond in Kenya which was oversubscribed by local institutions – something previously unheard of.

2. Robust Growth in GDP Per Capita and Productivity
Despite strong growth in Africa’s population, and even during the height of the recent financial crisis, Sub-Saharan Africa’s GDP per capita continued to grow, with forecasts for sustainable five percent growth going forward. Indeed, Africa’s real GDP increased by 1.8 percent in 2009, at a time when global GDP declined by -0.5 percent. Importantly, an analysis of the components of GDP growth indicate significantly improved growth in labour force productivity, rising from -0.5 percent in the period 1980-1990 to +2.7 percent during 2000-2008. This is leading to a more dynamic business environment across the continent, illustrated by 1,400 publicly listed companies, more than 100 companies with revenues greater than US$1 billion, and 316 million new mobile phone subscribers since 2000.

3. Favourable Demographics
Africa has the world’s most favourable demographics with a fast expanding labour force, in contrast to the problems faced in many emerging and developed markets. With 500 million people currently in the 15 – 64 age bracket, Africa’s working age population is projected to reach 1.1 billion by 2040 – exceeding that of both China and India.

4. Increasingly Diversified Growth
It is a common misconception, but Africa is not primarily a resources play. While over the last decade economic growth has accelerated in 27 of the continent’s 30 largest economies, this is only partly explained by the commodities boom. During the period 2000-2008 natural resources accounted for just 24 percent of Africa’s growth, followed by wholesale and retail (13 percent), agriculture (12 percent), transport and telecommunications (10 percent) and manufacturing (nine percent). Financial intermediation and tourism, while coming off a low base, continue to grow in excess of eight percent per annum.

[Continued]

The reason for this is simple. China’s “Going Out” strategy is designed (amongst other things) to reduce the country’s significant exposure to US Treasuries by investing in a diverse range of corporate, financial and other real assets around the world. This has caused a wave of activity in many countries, with new deals announced on almost a daily basis (particularly between the BRIC countries) and regular Chinese delegations to developed countries looking for investment opportunities (Chinese Premier Wen Jiabao was in Britain this week announcing an ambitious trade target of $100 billion between Britain and China by 2015). As a result, Chinese holdings of US debt has already fallen to US$1.145 trillion which is 2.6% lower than its October 2010 peak of US$1.175 trillion. But this is just the beginning!

Whilst much of the recent and most publicised activity amongst Chinese investors has been in the resources sector, those with an eye to the future will remember that China’s long term challenge and goal is to move from a “dirty, low margin, low cost, low quality, product manufacturing economy to one which is supported by a robust service sector, by increased consumerism and by a shift to high end, high margin, clean manufacturing.” Consequently, their longer term focus is on securing access and ownership of a much broader range of capabilities, from clean technology, renewable energy, food and luxury goods to tourism, education and professional services.

As a result of the above, every entrepreneur, company or institution should be looking to position itself as an attractive target for Chinese investors to (a) access new capital to improve, expand and/or export their capabilities, products and services, and (b) secure a Chinese partner to target new customers, clients and buyers in the world’s fastest growing economy.

So, how do you go about it? The following is an over-simplification of the process but creates a framework from which to start the planning process:

Step 1 – Prepare your business or idea for a Chinese investor
Remember this is all about them, not you! You need to put yourself in the shoes of a Chinese investor and consider your proposition, offer or opportunity from their perspective. For example, are your documents written in Chinese? Are you providing sufficient detail for them to understand your offer? Are you making too many assumptions about their level of understanding? Do your projections take into account a China market entry strategy? Are your growth targets sufficient to excite them? Are they believable after being subjected to scrutiny?

Step 2 – Source Chinese investors
Research the market and identify the different investor segments that apply to you and your offer? Perhaps they are business migrants or entrepreneurs? Or Government officials from China’s new third tier cities? Or existing Chinese businesses who are trying to expand their global footprint by partnering with leading players in foreign markets? The range of possibilities is almost endless so you have to be very targeted and focused before you can seek help and reach out to suitable investors.

For centuries, the Chinese have purchased their daily ingredients such as fruit, vegetables and meat from local fresh produce markets. More recently, due to urbanisation, modern supermarkets are gaining popularity and the trend to purchase weekly is slowly becoming more convenient for busy commuters. In the past, little attention was paid to the origin or treatment of the food, as “fresh” was simply considered the best form.

Whilst “fresh” is still a major consideration, Chinese shoppers are now more focused on food safety, health and diet. The spate of food quality incidents and a heightened awareness of the effects of pesticides have produced a more discerning consumer and organic options have gained popular interest.

Soil depletion, over-cultivated land, pollution and public health issues have also forced the government to look for solutions. They see organic farming as a potential remedy and for the past 30 years have been working on initiatives to develop a national standardisation body. Whilst these days there are multiple government and international bodies dedicated to achieving organic standardisation in China, the main one is the China National Organic Product Standard. Products that qualify are registered with the Administration of Certification & Accreditation of China (CNCA) body. Food products that satisfy the standard and attain this certification will receive the “fully organic seal”.

When it comes to organic food products, price sensitive Chinese consumers still pay close attention to whether they are grown locally or internationally. Generally international products are deemed more trustworthy, although price can still dominate the final purchase decision. With time, and as China continues to develop their food industry, more local options and choice will become available to local consumers. International competition in this market is still fairly new.

Chinese Consumers are buying their organic products from organic farmers markets, organic specialty stores, supermarkets and through home delivery. Perhaps one option that is becoming increasingly popular is online purchasing. It’s a common belief that the online channel offers better prices and higher quality.

With Australia’s good reputation for being a clean and healthy country, we enjoy popularity in China for our known quality foods – especially organic. This makes us a premium choice for local consumers when it comes to purchasing decisions. Sadly though, Australian producers are still very under-represented in the China market. As our organic growers become more aware of the potential for their products in China, and gain an appreciation of their popularity, hopefully more growers will start looking east to Australia’s largest trading partner.

If you are interested in testing the market or finding new distributors for your organic or healthy food products, then why not join us at the Hong Kong Food Expo in August this year? We are co-ordinating a high profile trade delegation in conjunction with the popular HKTDC Food Expo to give producers access to key local suppliers, distributors and partners. Click here for more details.

It is particularly interesting to find South Africa at the BRIC table, as this appears to have been driven more by geo-political than economic reasons. According to Jim O’Neill of Goldman Sachs, the original inventor of the BRIC acronym in 2001: “As far as the economics are concerned, South Africa is one of the more wealthy nations in Africa, and is currently the largest in US$ terms at around $350bn. However, this is quite small, not only by BRIC standards, but compared to some others. For example, Russia is around $1,600bn, nearly five times larger than South Africa, and India is currently similar in size to Russia. Brazil is currently closer to $2bn in size, while China is considerably larger at around $5,500bn. Importantly, there are a number of other economies from the so-called emerging world that are bigger than South Africa. This would include Indonesia (approximately $700bn), Mexico ($1,050bn), Turkey ($725bn) and South Korea ($1,000bn). These four nations, along with each of the BRIC economies, are all one percent or more of global GDP, and what we would increasingly think of as growth economies.” It is tough to see how South Africa matches up to these four countries, never mind the BRIC countries.

It made this next meeting of the “BRICS” leaders even more intriguing for those of us who follow the changing dynamics of the new world order, a world in which the US finds itself as more of an “observer” than the dominant player it once was, and a world in which some of the poorest African, Latin American and Eastern European nations are likely to have increasing influence and power at the expense of their western cousins.

This will inevitably challenge many of the practices, traditions and institutions that have been taken for granted during the last century, and will result in new alliances and groupings of countries who, until quite recently, were heavily dependent on the developed world for foreign aid, investment and financial support.

The global financial crisis of 2008/9 accelerated a process which began back in 2005 or so when China’s economic success, and the increasing dependency of the US on China, caused new trading and economic relationships to be formed between the BRIC countries. China started investing heavily in African resources, Russia and India traded energy, IT and military hardware, and Brazil exported iron ore, oil, coal and other commodities to China. Suddenly, the BRIC countries were voting as a “bloc” at WTO negotiations in Doha and collaborating on climate change at Kyoto (and later Copenhagen) creating significant new problems for the original G7 group of nations, which had become the G8 with the inclusion of Russia in 1994.

I thought Brazil offered the strongest prospects for investors and businesses looking to tap into its rapid growth fuelled by domestic consumption, infrastructure investment and intra BRIC trade.

In truth, this wasn’t a difficult prediction to make and I wasn’t alone in making it. Over the last two years the Brazilian economy has grown by 15 percent, the Real has risen by 46 percent and the Bovespa has climbed a staggering 213 percent since its lowest point in 2008.

Last week I chaired a panel of Brazil experts at the AISES From Delhi to Rio event, and there is no doubt that an increasing number of foreign companies are now looking to tap into the close to US$100 billion investment which has been announced so far as the funds set aside to invest in hosting the FIFA World Cup in 2014 and the Rio Olympics in 2016.

A further 1 billion was pledged last week during President Obama’s visit to Brazil and it seems that it will be hard to pick up a newspaper soon without reading more announcements, predictions and commentary about Brazil’s future influence on the global economy.

So, here is my prediction for 2011… this will be the year in which the Russian economy will surprise us on the upside, and over the next two years investors and businesses will beat a path to the door of Russia and Eastern Europe! Sounds unlikely? Well read on…

I am, as always, very grateful to Michael Hanson-Lawson, Karine Hirn and my friends at East Capital, an independent US$7.3bn asset manager specialising in investing in Eastern Europe, for the great work they do in educating us all on the truth about Russia and Eastern Europe, in contrast to the more negative commentary you read in the press.

I am therefore pleased to have their permission to showcase their 3Cs which are aligning to position Russia as the compelling investment story of 2011: Convergence, Consumerism and Commodities:

Convergence

Eastern Europe is catching up Western Europe through political, economic and financial integration. From Slovenia to Poland, all of the Eastern European countries are experiencing rising incomes, increasing productivity and a substantial growth in consumer spending. Across the 27 countries that make up the ‘investable markets’ of Eastern Europe, the GDP per capital has increased by 237 percent over the last decade, compared to only 93 percent in the Eurozone.

The total area of their country (in square kilometres)
Russia – 17.1 million
USA   – 9.8 million
China – 9.6 million
Brazil – 8.5 million
India – 3.3 million

Their large populations
China – 1.3 billion
India – 1.1 billion
USA – 310 million
Brazil – 192 million
Russia – 142 million

The availability of capital (as measured by the size of their GDP)
USA – US$14.72 trillion
China – US$5.89 trillion
Brazil – US$2.09 trillion
India – US$1.65 trillion
Russia – US$1.51 trillion

Based on these three economic factors, the fours BRICs, together with the USA, stand far ahead of all of the other economies in the world which explains why, as a group, they are so important and influential from both an investment, business and, more recently, a geo-political perspective.

It is very important to keep this in mind when reacting to shorter term perspectives and commentary from the media, market analysts and economic pundits!

In January this year, the Leaders of the four BRIC countries (who now meet at least once a year as a Leaders group, and maintain a regular dialogue on global economic policy) decided to invite South Africa to join their annual Leadership Forum and to participate in other BRIC Forums (for example, a study commissioned by BRIC finance ministers and central bank governors would now include inputs from South Africa as well).

This announcement caused economic commentators, bloggers and others to start speculating about whether BRIC should now be referred to as BRICS and whether in fact South Africa deserved a place at the table alongside these four large emerging economic super-powers.

Jim O’Neill, now chairman of Goldman Sachs Asset Management and creator of the BRIC acronym in 2001, was clearly surprised by this announcement and was quoted as saying, “While this is clearly good news for South Africa, it is not entirely obvious to me why the BRIC countries should have agreed. South Africa rightly sees itself as a leading emerging nation, and that explains their motive.

“Furthermore, their historic trade ties with Brazil and India would justify South Africa wanting to be part of any ‘club’ that relates to trade relations between them. Of course, the rapid growth in trade between China and Africa, South Africa included, can explain much of their motive also.

“When I created the acronym, I had not expected that a political club of the leaders of the BRIC countries would be formed as a result. In that regard, the purposes of the two might be regarded differently and more so after this news.

“As far as the economics are concerned, South Africa is one of the more wealthy nations in Africa, and is currently the largest in US$ terms at around $350bn. However, this is quite small, not only by BRIC standards, but compared to some others.

“For example, Russia is around $1,600bn, nearly five times larger than South Africa, and India is currently similar in size to Russia. Brazil is currently closer to $2bn in size, while China is considerably larger at around $5,500bn. Importantly, there are a number of other economies from the so-called emerging world that are bigger than South Africa. This would include Indonesia (approximately $700bn), Mexico ($1,050bn), Turkey ($725bn) and South Korea ($1,000bn).

During the process of facilitating this program, and observing our delegates during their initial engagement with potential investors and business partners, I made a note of some key points that are extremely relevant and important to anyone looking to do business in Asia:

Listen more, talk less!

In Western countries, we do have a tendency to talk too much! We want to get results and often start pitching our capabilities or products before we’ve spent enough time exploring the needs, desires and aspirations of the people we’re talking to.

In Asian countries this can come across as arrogant, discourteous and even rude. It takes longer but you’ll get better results if you take the time to ask open questions, listen carefully to the answers and tailor your products accordingly.

Prepare your pitch properly

When we visited the Deputy Director-General of the Financial Development department of the Government of Shenzhen, we were each handed a beautifully presented brochure with details of Shenzhen’s natural advantages as a financial services centre and the reasons to establish a business there.

In comparison, our own documentation is often shabby and, worst of all, in English only, with no Chinese translation. If you want some clues as to how to present your capabilities to an Asian audience, take great notice into how they present their credentials to you!

Asia is not one country

It’s absurd to think that you can have an ‘Asian strategy’ and treat Asia as one single market. The differences, idiosyncrasies and complexities of, say, Hong Kong, Singapore, Taiwan and Korea when compared with mainland China, India, Vietnam and Indonesia are diverse. Even China isn’t one market.

You need to do your research, settle on one (or maybe two) markets and then work out from there, for example, start in Hong Kong and work towards Taiwan and then Shanghai. It’s no different to how you would approach an entry strategy for Europe.

Focus on building relationships, not contracts

There’s a saying in China that you don’t talk business “until the third cup of tea”! In other words, you build the relationship first and only then should you focus on the business deal. Ignore this at your peril.

Make the time to get to know your potential business partners, extend the hand of friendship and tell them about your interests, hobbies and passions. When you’ve exhausted every possible topic of conversation and when the timing feels right, offer to start talking business. You’ll get a better result this way.

Send your best people

In Hong Kong all our delegates were the most senior executives in their organisations or the actual business owners themselves. But we heard stories of how other companies had failed due to sending the B team instead of the A team!

This is an obvious but common mistake. If you’re serious about success, and you want to give yourself the best chance to succeed, send your brightest and best people.
I will be leading another Australian financial services mission to the Asian Financial Forum in January 2012… come along to our Australasian Financial Forum in Sydney and Melbourne in March (see details below) to learn more.

Please consider

Attending our next Australasian Financial Forum in Sydney and Melbourne in March 2011. Follow the links to register for for the Melbourne Forum (18 March) and the Sydney Forum (23 March). Our activities in Asia are building momentum… please come along and join in the conversation.