Why are Australian Businesses Averse to Southeast Asian Markets?

Despite Australia's proximity to Southeast Asia, its investment in the region remains underwhelming. Data from Australia's Department of Foreign Affairs and Trade show that only one Southeast Asian country -  Singapore -  was among Australia's top 20 investment destinations in 2023. This, despite the complementarities between Australia's “strong mining, agricultural and services sectors” and the region's manufacturing-based economies, observes Australian National University researcher Alexander Lee in a February 5, 2024 opinion published on the Lowy Institute's Interpreter website.

One reason for this lack of investment may be a “lack of risk appetite for developing markets,” according to a South China Morning Post report on March 16, 2024. Former Australian Foreign Minister Alexander Downer wrote in a March 10, 2024 Australian Financial Review column that Australian businesses believe that “it’s easier and safer to invest in the US and the UK than ASEAN,” citing concerns about protectionism and sovereign risk.  Other concerns are political risk, policy stability, and “a lack of confidence in dealing with state-owned enterprises,” according to ANU Postdoctoral Research Fellow Maxfield Peterson in an April 2, 2024 Interpreter op-ed.

These concerns are real, yet it is precisely riskier emerging markets like Southeast Asia that drive the world's growth today. With the region's top six economies projected to grow faster than China at an average rate of 5.1% per annum over the next decade, it is no surprise that Foreign Minister Penny Wong is worried that Australian businesses will lose out on regional market share to competitors from the US, China, and Canada. With the help of a team of trusted regional experts with deep knowledge of in-country conditions, coupled with robust due diligence, Australian businesses can enter Southeast Asia with confidence.