What business needs to know about Indonesia and China

What would the business world need to know about Indonesia and China? We asked Professor Edward Buckingham, Director of Engagement at Monash Business School.

What makes Australia an attractive trade partner for China and Indonesia?

Two factors are at play here. One is our geographical proximity and that we operate in a similar time zone. The second is that we have access to the modern world economy. This means we are close culturally and institutionally with the financial and legal centres in the United States and United Kingdom. We speak the same language as these centres and we also share the common law system with the United Kingdom, New Zealand and the United States.

Despite all the trade we do with Asia our financial system is based on that operating in Europe and America. Singapore may compete with us on these fronts yet we still have the advantage in terms of our size and the trade opportunities we offer in terms of our resources and property.

What business needs to know about China and Indonesia

Outline the key trends you have seen emerge from these markets?

In China, we are seeing is the emerging middle class which is different to Australian middle class but shares similar aspirations in terms of education, the desire to travel and experience fine food and wine and live in nice homes – all of which drive parts of our economy. In areas where Chinese buyers dominate this is where we will see businesses starting to cater more to this demographic.

In Indonesia we haven’t see the same burst of growth but it is still a big country with an emerging middle class that still draws on our education services and property investment. Australia still hasn’t seen big dividends from Indonesia in terms of trade but we have a close political relationship with the country.

This is in contrast to China where we have tight trade relations but political relations are still much more distant, despite all the rhetoric. Commodities trades are usually one off transactions that don’t require deep relationships. For example, an iron ore produce doesn’t need to have a deep cultural relationship with a steel manufacturer.

However, businesses selling services need deeper cultural relationships. This is why our education providers are changing how they market themselves as increasing numbers of young Chinese enrol in our universities.

How does one build business relationships in Indonesia and China?

Be prepared to adjust your expectations. Both countries are significantly culturally different to Australia. Even Chinese Australians and Indonesian Australians find it hard to go back to these countries and do business because the behaviour and institutions are very different.

Entrepreneurs must be prepared to learn but also identify their key values that aren’t negotiable. When businesses operate in another country, they need local partners and advisors.

Initially China had joint venture laws insisting that foreign businesses operate with a Chinese partner, now it is much easier to run wholly foreign owned businesses in China. But still there are sensitive industries in China where foreigners are not allowed to operate or where the rules are much stricter. These include areas such as media, education and farming.

Can linkage be made between expat communities in Australia and overseas markets and how can this best be leveraged?

The Australian workforce gets labelled that it isn’t ready to do business in Asia as doesn’t have language skills. This is where these expat communities can make a contribution. To get Australia more equipped in these markets we need to be more proactive in terms of getting our young people to Asia early on for life experiences. Monash Business School has a presence in Malaysia, China and India -  we need to keep demonstrating to our undergraduates how the ability to study at these campuses can assist their careers.