AUSTRALIA JAPAN BUSINESS CO-OPERATION COMMITTEE

1962 - 2012
24 Brisbane Avenue BARTON ACT 2600 PO Box 6005 KINGSTON ACT 2604 Tel: Fax: Email: (02) 6270 8030 (02) 6273 3196 ajbcc@acci.asn.au

Website: www.ajbcc.asn.au ABN 71 702 049 953

30th May, 2013 Australia in the Asian Century Implementation Unit Department of Foreign Affairs & Trade RG Casey Building John McEwen Crescent BARTON ACT 0221 Dear Sir / Madam,

Email: Asian.century@dfat.gov.au

Towards 2025 Australias Japan Strategy in the Asian Century

The Australia Japan Business Co-operation Committee (AJBCC) appreciates this opportunity to provide a submission on Australias Japan Country Strategy. Given its fifty year engagement with the bilateral relationship, the AJBCC would be appreciative if the Department were to continue the dialogue as the strategy is being developed. The AJBCC believes that the bilateral relationships short-term 2025 horizon and longer-term 2050 horizon will reflect largely different influences to those that shaped the past. These influences will be both external and peculiar to Australia and/or Japan. Some of the external influences include: The rapid urbanisation of Asian societies; The changing demographics of Asia; The evolution to market of new industries in the bio-sciences and nano-technologies; The quest for food, water and energy security; The demand for educational opportunity; The quest for environmental sustainability. Some of the influences peculiar to Australia and/or Japan include: The media focus on the destinies of China and India and the parallel shifted academic interest from Japan has inferred that the Australia-Japan relationship is Yesterdays Relationship. This runs counter to the reality of a very strong relationship of trust that has been built up between the two governments and business communities which is unique among Australia and other countries in the Asian region; Competition for attention from other countries in the Asian region such as China, India, Indonesia and South Korea risks creating a gap between the current suite of leaders who understand the critical importance of the bilateral relationship and its existing deep historical, social and political ties and those leaders in the next generation; The perceptions that each country has of the others economy which does not reflect reality of the current state of evolution of the economy of each country;

2 The new business opportunities which exist in each country as a result of the evolution of each countrys economy; The recently realised desire of the two countries to work together more closely in the Asian region politically, security, commercially - and the opportunities that this brings.

Being concurrent as well as immediate challenges for the horizon period, the policy responses individually and cooperatively by Australia and Japan will be strategically significant for both countries. The ageing populations in Australia and Japan, which have evolved to be two substantial services economies, will influence the strategic choices available to our two countries especially as the prime aim of government is to maintain or build the standard of living of the populace. Over the past century, trade has underpinned the bilateral relationship. People-to-people, educational, tourism linkages have flourished as there has been an appropriate desire to enhance mutual understanding of a significant trading partner. More lately, the strong respect and trust in the relationship has permitted enhanced multi-lateral fora, disaster response, security and defence cooperation. The presumptions for the horizon period include: Both countries will continue to engage in international commerce as a means of sustaining and building the standard of living of their populaces; Both countries share the belief that the integration of each economy into that of developing Asia will optimise their economic growth; Both countries will continue to favour cooperation in regional forums as a means of maximising Asias perception of the superior advantage of common endeavour in economic, anti-terrorism, disaster response, and security matters.

Opportunities
It is believed that the opportunities in todays dominant areas of the commerce, namely Energy and Resources, are NOT exhausted, for instance Coal-seam Gas and Rare Earths are amongst the new commerce. However, it is equally believed that there are substantial unrealised commercial opportunities for Australian businesses with respect to Japan in the following broad areas: Financial Services Infrastructure development and renewal Education Healthcare ICT Tourism Agribusiness and Food Processing Within each of these areas, Australia has various world-class competencies which have potential in the Japanese marketplace. Furthermore, combined with complementary competencies in Japan, there is collaborative potential commercially in Australia, in Japan, and in third countries in Asia. Over the past seven years, the AJBCC has been monitoring developments in these areas and observes that: The potential of China and India is often associated with their population size and their growing standard of living. In contrast, the potential of Japan has been negatively assessed due to extensive periods of stagnation over the past two decades and the political instability of annual successions of Prime Ministers and new ministries;

3 Japan on the other hand is only just beginning to understand that Australia is a services based economy rather than one based on resources and has world class competencies in certain services; Australian SMEs find that they rarely have the resources of manpower to devote to the requisite long-term relationship building, and secondly, the financial resources to localise their product / service to the Japanese market.

In response, the AJBCC has helped mitigate these limitations through a combination of: Emphasising that within the balanced and sophisticated Japanese marketplace there are significant opportunities for Australian companies in both goods and services; Indicating that the purchasing price parity per capita of Japan of US$36,040 is a little below that of Australias US$38,000 but compares with that of China at US$9,145 and of India at US$3,944 and that the latter two markets will take decades to match that of Japan; Stating the importance of in-market introductions by organisations / persons with a long standing credibility in the market government and private sector; Building an appreciation that Japans enormous investment into extensive supply-chains and production networks in Asia and other engagement have given it significant leverage within the region. Strong Australia-Japan bilateral relations could magnify Australias projection into the region which is the scene of intense global competition for political, security and commercial influence. AJBCCs exploration of the collaborative opportunities in Infrastructure and Healthcare demonstrate that opportunities can be developed by the business community and government acting together to provide the favourable pre-conditions for collaborative engagement. The three Joint Australia-Japan Public-Private Infrastructure Policy Dialogues held March, 2011, October, 2011, and October, 2012 have been identifying what market information and changes to rules and regulations would make Australian infrastructure a more attractive investment destination for the Japanese sector, and vice versa. Additionally, what is the desirable collaboration between the agencies of the Australian and Japanese Governments to facilitate the joint venturing of the Australian and Japanese Infrastructure sectors into third markets. The Dialogues are producing progress.

Priorities and Actions

The realisation of the potential of the bilateral relationship requires that the following be deemed priorities for the relationship. The suggested Actions are not exhaustive but can be readily initiated so as demonstrate intent and gain valued outcomes: The earliest conclusion of the comprehensive Economic Partnership / Free Trade Agreement (EPA/FTA). For the commercial sector of both countries, this is seen as the highest level of priority. As the two most balanced and sophisticated economies of Asia, Australia and Japan could position themselves for strategic leadership in Asia, if they were to pursue an active program of exploring and encouraging the optimum development of the fruits of the agreement over trade, services, investment and other economic matters, particularly mutual recognition of qualifications, harmonisation of standards and the exchange of personnel. Action: Australia and Japan should identify up to ten areas each for mutual recognition of qualification and/or harmonisation of standards and/or exchange of personnel that would be matrixed over current operability; steps for free interaction; actions to achieve. The matrix should be reviewed for progress annually and replacements made to substitute for areas of success every five years. The review of and updating to the 21st century of existing bilateral agreements, for instance the agreements related to science, technology and tourism. Action: Each existing bilateral agreement should be given a timeframe of every five years for its currency review.

Both Australia and Japan must continue to undertake economic restructuring to increase their productivity and international competiveness. As neither country can compete on labour costs, and are destined to have relatively high exchange rates, each must use its wealth and high education levels to generate and support innovation affecting existing industries and in creating new high value industries of the future. Action: Commencing with one industry, say Green Technologies and Systems, survey both countries capacities with a view to identifying, first, complementarities and secondly, collaborative R&D in-fills that would enhance the capacity of the Green technology and systems sectors to work together in Australia, in Japan, and in third countries. Regardless of the fact that English is the lingua franca of todays commerce, to optimise the benefits of the desired increased engagement of Australian academics, educationalists and business people with Japanese counterparts, it is critical that Australians markedly increase their Japanese language skills and cultural intelligence about Japan. This will greatly support Australian and Japanese capacity for collaboration for work in Australia, in Japan, and in third countries in Asia. Action: undertake a serious / dispassionate audit of the utility of current studies of the Japanese language and cultural intelligence in the Australian education system at all three levels; Action: allocate funds for a Train the Trainer program such as the former Australia Japan Foundation programme of the late 1990s, whereby Japanese educationalists who, in Japanese universities, had the role of teaching the instruction of English language to future school teachers, were selected for an intensive language course in Australia together with a homestay. With an increasing number of Japanese companies announcing a future intention to conduct their business meetings in English, there should be a readiness to embrace this proposition in Japanese academic circles. A converse programme to enhance Australias acquisition of Japanese language and cultural understanding would be logical. Action: enhance face-to-face teaching substantially by utilising current and future technology, and taking advantage of the same time zone, to teach via video conference. Action: encourage and support academics and educationalists in the development of appropriate networks which will always be best achieved via in-country sojourns. A strategic aim should be to have young leaders and up and coming leaders aware of the importance of the relationship and ready to champion it not only for the interests of their own organisations but for the broader benefit of Australia and our engagement with Japan, and together with Japan, in Asia more broadly. Education and effective knowledge sharing are key to this aim. Investing in the effective teaching of Japanese language and providing much improved continuity of learning to ensure improved proficiency and opening a necessary window on the relationship beyond just the language. Being concerned that for some years there were no PhD scholars enrolled in Australia researching the economics of Japan, and its portent should the situation continue of depriving Australian Government and Business of independent academic advice once the current generation retired, the AJBCC committed to the funding of a PhD Scholarship in the economics of Japan. But one is not enough. Action: Government policies should influence universities to look to our long term interests and fund and support learning related to Japan, its economy, its policies and politics. Partnership between Government, business (in both countries) and the Universities will be critical to renew and realise this focus and ensure sustained success. Action: The Reverse JET proposal, supported by the AJBCC and the Australia Japan Foundation is a good example of an effective initiative that can help realise this aim. Another would be the duplication of the Government of Japans five year (2007-2012) Future Business Counterparts from Australia Invitation Programme that saw fifty young professional per year visit Japan on a structured ten day programme of discussions, site visits

5 and cultural interaction. Alumni of these types of programmes are more likely to have Japan at the tip of the tongue and at the forefront of the mind when making key decisions. The AJBCC points to the huge infrastructure catalogues in Australia, Japan and Asia; the huge dimensions of the regions Healthcare and Education challenges; the need to be Asia conscious when formulating the financial services sectors rules and regulations, as some of the areas for fruitful collaboration. Action: As demonstrated by the AJBCCs Infrastructure Initiative, joint government and private sector explorations in these additional areas focussed bilaterally and on the region, would bear fruit. Bilateral sectoral collaboration requires extensive preparation time, a fact which both business and government must appreciate. In addition to generous time commitments by the personnel involved, it requires financial investment in the researching, exploratory industry meetings, travel, etc, that industry should not solely underwrite.

The AJBCC believes governments have an important responsibility to work with the business community to facilitate greater Japanese involvement in Australian commercial life, and vice versa. The AJBCC would be pleased to be involved in the further development of the Japan Country Strategy, and in its implementation.

Japan/BilatRels/ 13-AinAC-Towards 2025-30thMay