The opportunities for Australian exporters in Asia are enormous. With 4.5 billion potential customers and 60 per cent of the world’s population located in Asia, it’s a highly dynamic marketplace.
A combination of very fast-growing emerging markets and mature markets means Australian exporters can potentially take their pick of opportunities.
Further, the median age for the region is 31 and people are generally becoming more affluent.
Markets such as Indonesia, Vietnam, and the Philippines are all growing quickly, and China is growing at six per cent per year.
This has seen huge demand for commodities like iron ore and coal, especially in China. There are also opportunities for Australia’s drought-ravaged agricultural industry.
However, there are challenges to be aware of before organisations commit to these opportunities. While there is a massive market waiting for quality Australian products, exporting also adds complexity to operations, and increases risk. It’s important for companies to ensure they enter the right market for their product.
It’s also crucial to find the right partner for exports. This has to be a partner that the Australian company can trust and, ideally, build a long-term relationship with. This is important because of the vast differences in culture between Australia and some Asian nations.
Potential language barriers
Cultural differences occur in addition to potential language barriers. For example, in some countries it can be seen as unforgivably rude to say no, even when the answer is definitively no.
This means Australian exporters could believe they’re entering into a deal with a business only to find that there is no real agreement. A cultural advisor or strong partner can help make those distinctions clear.
Also, different legal systems and expectations can affect the success of exporters’ efforts in some countries. There are well-known intellectual property issues when exporting products to some countries.
Businesses in those countries are often adept at reverse-engineering these products, then selling them at a price that severely undercuts the Australian exporter’s ability to compete.
Taking these cases to court is usually time-wasting, costly, and, ultimately, ineffective. The laws simply don’t protect intellectual property the same way in those countries. Even worse, some organisations have found themselves losing the right to the products they sell due to court action.
Importance of a trustworthy partner
Again, this highlights the crucial importance of a trustworthy partner. These markets can be opaque and the reliability or even availability of financial information is questionable. It’s essential to have a partner that can provide clarity and context for decision-making.
When things do go wrong for Australian exporters, another key challenge is their geographical distance from the epicentre of the issue. In some regions, the risk of customers taking the goods, refusing to pay, and simply disappearing is high.
The cost of recovering money or goods can add up quickly and taking customers to court in a foreign jurisdiction adds complexity.
Currency fluctuations can create risk
Even when all the relationships are in place and all parties honour ethical expectations, Australian exporters can be hit by currency fluctuations. This creates risk. When products become more expensive overnight, customers may simply refuse the goods. Or the exporter must absorb the hit and sell the products at the same price with a much smaller margin.
Refusing to sell the goods at that price means they’ll need to be stored or shipped back to Australia; another added expense.
It’s therefore important for Australian exporters to be aware of the risks and take proactive steps to mitigate them before seizing opportunities in new markets.
Non-payment can be catastrophic for SMEs
Businesses must also understand the extent to which they could recover from losses. When customers don’t pay, the effect can be catastrophic on small businesses without much margin for error.
It’s also important to keep an eye on the US-China trade war because a downturn in China could affect other Asian markets and Australia directly.
To succeed in the Asian market, Australian companies must identify the sectors they want to target and make sure they have products that fit, as well as resilience if things were to go wrong.
Relationships are key and should include a reliable debt collection service across the region.
And, of course, trade credit insurance is essential for helping you discover new Asian markets, checking the credit worthiness of potential buyers and to cover you if the buyer cannot pay.
Bart Poublon is executive manager risk, Asia Pacific, Atradius, a provider of trade credit insurance