Go forth and offshore. Okay, so that’s not quite what former Treasury Secretary Ken Henry said before the release of his Australia in the Asian Century white paper. But his message, along with that of the Gillard government who sponsored the report, is clear.
Australian businesses need to increase their links with Asia. To take full advantage of the Asian century we need to stop viewing our neighbourhood simply as a good place to sell iron ore, and start looking for opportunities to build two-way partnerships.
SMEs, which make up 99 per cent of Australian businesses and employ 70 per cent of the Australian workforce, are already rising to this challenge. Australian SMEs are beginning to recognise the huge opportunities for growth in our region, and they are adopting productivity enhancing tools to help them achieve it.
Our recent survey found that almost 90 per cent of our Australian clients – all businesses with staff based at our headquarters in the Philippines – are SMEs with fewer than 200 staff. More than 80 per cent of our clients begin with just one, two or three offshore staff.
We think about the Asian Century in terms of big miners and banks setting up expensive overseas offices and production plants. But often it is small, innovative businesses that are forging closer links with the region.
A recent global study by Forbes found that while in the past offshore staffing was seen as a way to cut costs, today businesses want to forge strategic partnerships with offshore staff providers – and tap into global talent pools.
SMEs certainly look to Asia as a way to tap into cost advantages. But they also do it because it helps them fuel business growth.
A recent study released by the Australian Industry Group and Asialink nicely illustrates Australian SMEs’ positive attitude about doing business with Asia. The study found that 68 per cent of medium and 53 per cent of small businesses report having some involvement with Asia.
But perhaps more interesting were the challenges Australian businesses reported when building partnerships in Asia: Respondents noted that understanding local management culture, employing local staff and having good cultural understanding are all important factors in doing business in the region – a finding that tallies with what our clients tell us about the value of having Asia-based staff on the ground.
The recent Asian Century white paper, which looks set to form the basis of government policy towards the region in coming decades, says that for Australian businesses to take advantage of growth opportunities, they must become part of regional value-chains. In the Asian Century, ‘legal, accounting, engineering and design services will be supplied across national borders.’
This experience is already being borne out by many of our SME clients. One regionally focused e-commerce client is based in Australia, but its sales team is in Singapore and their web development team in Manila. Another has a Philippines based team of staff to support executives in Melbourne and London. Already, innovative SMEs are tapping into the global talent pool to drive their expansion and integration with the region.
We tend to think about this type of exchange in terms of how it can benefit Australia. But in fact these linkages drive economic growth throughout the region.
The Asian Development Bank believes that service industries such as offshore staff leasing can spur economic growth in the Asia Pacific, even as manufacturing output slows. In the Philippines, offshore staffing accounts for 5 per cent of GDP. This doesn’t sound like much until you consider that mining accounts for 7.2 per cent of GDP in Australia.
Offshore staffing – often know as Business Process Outsourcing – is such big business that the ADB has revised its growth forecast for the Philippines up, even as other regional neighbours like China are being downgraded.
The BPO industry might just give Asia – the region that Australia’s economy relies so heavily on – the economic kick start it needs, providing a productivity boost to Australian SMEs.
The Asian Century white paper provides an important blueprint for both government and business to follow in planning their engagement with the region. Many forward-looking Australian SMEs are already rising to its challenge.
Ash Truscott is the MD of MicroSourcing Australasia, an outsourcing company with staff in the Philippines. ‘Productivity Enhancing Tools Drive Aussie Small Business Growth’ was released on December 6, 2012.