Regional insights

Southeast Asia is a growing source market for visitors to Victoria with growth averaging 39 per cent since 2014. This increasing demand from Southeast Asia reflects deeper commercial, education and people-to-people links.

Recent successes include:

• Citilink Indonesia has announced it will commence flights from Bali to Melbourne’s Avalon Airport in late-January 2020. This is Avalon Airport’s second international direct flight service after Air Asia X commenced a route to Kuala Lumpur.
• Vietnamese airline, Vietjet plans to launch direct flight services from Avalon to Ho Chi Minh City in late 2020.

Regional Victoria showcases its premium products

In February, Southeast Asian food buyers will visit Regional Victoria as part of an inaugural inbound mission to showcase Victoria’s horticulture products. Buyers from Malaysia, Thailand, Indonesia, Vietnam, Brunei and Singapore will visit significant Victorian exporters of stone fruit, table grapes and citrus in Mallee, Loddon and Goulburn Valley regions.

Victoria is Australia’s leading exporter of horticulture products, with $345 million in exports to Southeast Asia in FY 2018-19.

Victoria welcomes West Java Governor

Mr Ridwan Kamil, The Governor of Indonesia’s most populous Province – West Java, visited Victoria in February, his first official visit. This reciprocates the visit by the Governor of Victoria in October 2019 and signifies the importance of this relationship. The Victorian Government has a Provincial Government Director, based in Bandung, the capital of West Java.

The Province of West Java has a population of 45 Million and is Indonesia’s 2^nd most important economic region, with significant opportunities for Victorian companies in food and fibre, vocational education, infrastructure services and cleantech.

On 22 October 2019, the Premier of Victoria announced the opening of the 23rd Victorian Government Trade and Investment (VGTI) office in Ho Chi Minh City, Vietnam.

The office is the fourth VGTI in Southeast Asia, and joins with offices in Singapore, Kuala Lumpur (Malaysia) and Jakarta (Indonesia).

Ho Chi Minh City is a key commercial hub for both Vietnam and Southeast Asia. The new VGTI office will enable greater access for Victorian companies to engage with the dynamic Vietnamese market.

In recent years, the Victorian Government has elevated its activity with Vietnam, including trade missions within water, food and vocational education sectors. Victoria has also encouraged an increase in Vietnamese students, visitor numbers and business and investor migrants. This trend is likely to continue in line with the rapid development of the Vietnamese economy, which grew at over 7 per cent in 2018.

Opportunities for Victorian food and beverage exporters to access an expanding consumer class in Vietnam are emerging, and the region's growing desire to upskill the Vietnamese labour force has resulted in an increase of onshore delivery opportunities for the Victorian vocational education and higher education sector.

Vietwater Expo

The Government mandated development of Vietnam’s infrastructure has also created export opportunities for Victoria’s water sector, with eight Victorian companies travelling to Ho Chi Minh City in early-November for Vietwater – Vietnam’s largest water industry Expo. Victorian expertise in the water, liveability and urban infrastructure sector is highly valued by the Vietnamese Government and private sector. The Expo will provide an excellent opportunity for Victorian companies to showcase this expertise.

Want to know more?

Discover more about the opportunities emerging in Vietnam by contacting our regional specialist for Southeast Asia, Chris Hunter.

A busy schedule of political events in Southeast Asia in early-2019 has occupied the minds of observers, however the elections are unlikely to alter business conditions in the near to medium term.

Elections in Thailand and Indonesia will likely see the re-elections of a pro-business candidate (Jokowi) and pro-military candidate (Prayut) with economic conditions continuing largely within the current status quo. Where the changes will affect Australian exporters largely falls within policy decisions of the respective bureaucracies, including reforms of the Halal Certification policy in Indonesia and ongoing Industry 4.0 strategy in Thailand.

Indonesian Halal Certification Policy

Halal certification of an expanded range of products will become mandatory from October 2019 covering products with any biological matter, including all chemical, biological and genetically engineered products in addition to traditional consumer goods such as food and beverage. While this is believed to ultimately streamline the certification process, it also poses significant issues for exporters to comply with the regulations prior to October.

Thai Industry 4.0 Strategy

The Industry 4.0 strategy from the Thai Government aims to modernize the digital economy and connectivity of Thailand through a range of initiatives including widening Thailand’s WIFI hotspot network, cultivating start-up and innovative communities and raising the technological capability of its workforce through STEM education. As 2019’s ASEAN Chair, Thailand has chosen Industry 4.0 as its key focus with the proposition of a Regional Industrial 4.0 Development Plan which in turn will help to shape digital related non-tariff barriers across the region.

While economic growth is steady across the region, nationalist economic policy has been a focus of recent election campaigns in Indonesia and Thailand and it has also been prevalent in Malaysia and the Philippines, where politicians have sought to combat negative export growth with economic policies targeting the growth of domestic manufacturers. This has not negatively affected Victorian exports to the region overall but will continue to be closely watched by Global Victoria for future policy changes.

The Association of South East Nations (ASEAN) is comprised of 10-member states, including Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam. If the region were a single country, it would already be the fifth-largest economy in the world, with a combined Gross Domestic Product (GDP) of $US2.7 trillion in 2017. Home to more than 630 million people, it has a larger population than the European Union or North America, and the third-largest labour force in the world, behind China and India.

The region’s youthful population, declining fertility rates and stronger workforce participation is producing a demographic dividend, with ASEAN’s working-age population expected to account for 68 per cent of the total population by 2025¹.

ASEAN has dramatically outpaced the rest of the world in growth of GDP per capita since the late 1970s. This has been closely linked to high rates of urbanisation. Over one third of ASEAN’s population already lives in cities, but this third contributes more than two thirds of the region’s GDP. It is estimated that an additional 90 million people will live in cities by 2030, which could add more than US$50 billion to ASEAN’s GDP².

Already some 67 million households in the region are part of the “consuming class”, with incomes exceeding the level at which they can begin to make significant discretionary purchases. That number could almost double to 125 million households by 2025, making ASEAN a pivotal consumer market of the future³. These consumers will be younger, with more discretionary spending power and a greater focus on premium products.

Victoria has a great opportunity to capitalise on the significant and growing markets on its doorstep in the ASEAN region. We have good economic relationships with key markets in the region and a well-established presence in market, with Victorian Government Trade and Investment offices in Indonesia, Singapore and Malaysia – but more can be done to better leverage existing links, relationships and expected growth in the region.

^{Source: 1, 2 and 3:}

https://www.mckinsey.com/industries/public-sector/our-insights/understanding-asean-seven-things-you-need-to-know