Speech 2nd Australia-Chile Economic Leadership Forum
Melbourne 6 December, 2016
Download the presentation
Introduction (slide 1)
Good morning everyone. It’s a great pleasure for me to be here today and to speak with you at this Australia-Chile Economic Leadership Forum.
You’ve heard a lot about the Australia-Chile relationship so far, and so today I’d really like to speak to you about “The Big picture through the unique lense of the Australian Trade and Investment Commission” and what this picture could mean for the relationship moving forward.
As you’re all well aware, the mining sector has been an important block in the foundation of the relationship between our two countries; one that has had significant flow on effects for other parts of the industry. Indeed, there are now over 90 Australian companies providing services and technologies to Chile’s mining industry and Austrade has worked to both support our established companies and also to provide opportunities for new entrants.
But now, I’m going to focus on our plan to take the Australia-Chile bilateral trade and investment relationship to the next level. Following on from our success in mining, businesses in other industries have begun to enter Chile with greater regularity, whilst more sophisticated trading platforms are enhancing the way in which we do commerce globally. As both Chile and Australia’s economies diversify, it is these emerging areas that will become the new engines of growth between our two countries, and therefor today I’ll be sharing with you:
1) the trends we have identified beyond the mining sector
2) How we can boost these new areas by joining forces: Going from competition to competitive complementarity
3) How Australians are using Chile as a springboard for doing business regionally.
1. Chile 3.0: Beyond mining
So where is our trade relationship now?
Chile is Australia’s main trading partner in Latin America. We have an FTA and a double taxation agreement in place. This has facilitated trade between our countries with two way trade in goods and services amounting to just over $1 billion. Chile is home to over 180 Australian companies and other entities. (Prompt: Move to slide 2)
Whereas our presence in the region used to be defined by names such as BHP Billiton and Rio Tinto, we have entered a new period of engagement where companies such as SEEK, carsales.com.au, Amcor, Latam Autos, Cochlear, and Nufarm are seizing a different set of opportunities. The trend is not driven by mineral wealth but by the growing wealth of the middle class and increasing connectivity in the region.
Austrade understands this trend, and through our office in Santiago is working to exploit opportunities across a range of industries to ensure the continued expansion of our relationship: (Prompt: Move to slide 3)
a. Health: We are very proud of our capabilities in the health sector. Australia’s medical technologies are making a global impact; solutions such as the cervical cancer vaccine, the cochlear implant (the bionic ear) and multi focal contact lenses are just a few Australian inventions that have transformed the lives of people around the world.
These solutions are making their way to Chile, where Cochlear implants are helping the hearing impaired and where Truscreen’s portable cervical cancer screening device should soon be providing real time, 99% accurate detection of cervical cancer.
We are exploring cooperation in the aged care sector. Chile, much like the rest of Latin America, is trending towards the progressive ageing of its population. By 2050 Chile will have the second largest percentage of senior citizens in all of Latin America with 30.6% of the population. This increase in the ageing population requires a range of public policy responses to address a number of challenges and issues that this demographic trend presents. In the last 20 years, Australia has seen a similar pattern, implementing policies, skills and aged care infrastructure relevant to address the needs of our senior citizens. As such, there is an explicit experience that we can share.
b. Infrastructure: Our engineering companies, which have established themselves in the mining sector are now successfully diversifying and pursuing opportunities in other sectors.
With over 15 years in Chile, GHD is leading the charge on this front. Today, GHD is working on major projects across multiple sectors, including:
- the engineering study for the repair works of the recently collapsed Tolten bridge;
- studies for the expansion of one of Chilean Patagonia’s most dangerous navigation channels (the Kirke Channel);
- redesigning the promenade of the beautiful southern city of Frutillar and
- power plant engineering, to name a few.
Australian transport infrastructure expertise is also finding a receptive audience as the government looks to double rail cargo and more than triple passenger numbers by 2020 with a US$7.6bn reform. It has already identified Australia as a compatible partner given similarities in the two country’s rail systems and Austrade secured a keynote address slot for an Australian expert in rail communications systems at a major seminar for stakeholders this year and we are of course pleased to be hosting the Vice-Minister for Transport this week.
c. Agribusiness and Food: Both of our countries are agricultural power houses. Our geo-climatic conditions are very similar and we share export destinations. Hence, it’s not surprising to observe increasing cooperation amongst our agencies and a growing number of agri-tech companies exploring opportunities in each other’s countries.
There is an increasing number of Chilean wine-tech companies (such as Cargobulk) and enologists in Australia’s wine industry. We see Australian automation equipment companies (GP Graders), seed (Valley Seeds) and water solution (Rubicon, Sentek) companies successfully establishing themselves in Chile. Over the past 24 months we have welcomed farmers from Chilean Patagonia who have visited our shores in search of sheep and cattle genetics and fruit producers seeking water management solutions.
We are also very excited to share that CSIRO and Chile’s National Institute for Agricultural Innovation are exploring joint cooperation to investigate and find solutions to common challenges in the agricultural sector.
d. Education: Productivity is high on the Chilean government’s agenda and there is a renewed focus on skills and vocational education and training as part of the country’s ambitious education reforms. The Australian Qualifications Framework and training packages have become a model to be shared and adapted according to the local needs. The Chilean Skills Council for Mining is an example of this. The Chilean g overnment is set to create 15 new public tertiary level VET institutions, with potential opportunities for Australian institutions across curriculum development and teacher training. The creation of a new Ministry of Science and Technology has been announced and a greater emphasis on strengthening local research capacity and capability is expected as a result of this.
What we identify (beyond pure trade) is in fact the opportunity for our companies, educational institutions and science agencies to join forces with their Chilean counterparts to tackle even greater opportunities.
2. Competitive Complementarity
(Prompt: Move to slide 4)
Both Chileans and Australians are diggers, planters and service providers. To us, that means that whilst we could be viewed as natural competitors, the nature of that competition is highly complementary and makes us ideal partners in a number of fields.
We both do well on the international business stage and have similar business cultures. Both of our countries are platforms for our respective regions: Australia for Asia and Chile for Latin America. Our universities and research agencies are working together and we offer each other’s companies fertile business environments. These are more than just observations; our companies and research institutions have already developed a number of strong and successful partnerships.
As is to be expected, some of our strongest partnerships have been in the METS space, where we have seen cases like Seeing Machines team up with GTD and create Seeing Machines Chile. They are well established in the Chilean market and are now exploring opportunities in Brazil and Mexico. Conymet is a well-known Chilean Mining services Company that went to Australia, invested in Duratray, and is now selling Duratray’ s mining truck dump trays to Chile’s main mine operators. Romteck and Vantaz have also teamed up to form a distribution partnership. Thanks to Vantaz, Romteck’s technology is now monitoring mining employee fatigue in both Chile and Peru.
Like our relationship more broadly, these partnerships are extending beyond the mining industry. For instance, in Agribusiness we can see Rubicon Water teaming up with Agro Riego Tattersall to pursue opportunities in Chile and now Peru.
We can see that cooperation is growing organically in mining and agriculture, let’s look at a few other potential areas of competitive complementarity:
a. Services (Prompt: Move to slide 5)
Both countries’ services sectors are considerable. In Australia, services represent 80% of our GDP. In Chile, the services sector accounts for 61.5%1 GDP, putting it at the lower end of the developed economies range.
As you can see from the graph, our service industries are at different stages of development. Australia’s larger and more mature services sector therefore has the opportunity to provide solutions to Chilean businesses in several critical sectors.
Chile’s services sector is made up of business and financial services, transport and communication, hotels and restaurants and personal services such as education, healthcare and real estate. Australia’s sector correlates well, with financial and insurance services leading the way, closely followed by construction and healthcare. One area where the opportunity for cooperation is high is in:
Agricultural services. Both Australia and Chile have had to resolve similar challenges in the Agri sector. These range from high labour costs, to water management, to pasture improvement. Our companies and research agencies are already engaged with Chilean counterparts and customers. We see considerable potential in following the steps of mining companies and joining forces to service this sector, where we have common customers in Asia.
These services areas provide exciting opportunities for collaboration which we look forward to pursuing.
b. GVC’s: (Prompt: Move to slide 6)
A 2013 OECD study reported that approximately 70% of world trade is structured within multinational corporation (MNC) global value chains. That is to say, 70% of world trade is in unfinished goods.
The income from trade flows within GVCs has more than doubled between 1995 and 2010. For China it has increased six-fold, India five-fold and Brazil three-fold. GVCs are an integral part of the global economy now, and will only grow in importance over time.
Increased engagement in GVCs by our respective countries is therefore essential to boost our relevance and competitiveness in the global economy.
This is particularly the case as certain functions of MNC value chain decision making and production nodes move into countries and regions such as Mexico, South Asia and ASEAN to access a trifecta of innovation, cost efficiencies and proximity to significant emerging customer bases.
Australia’s strong reputation for innovation, a highly educated workforce, urbanised and digitally connected means that Australia is well-placed to take advantage of global opportunities related to the evolving needs of multinationals.
Austrade is pursuing this strategy through customer access programs, by working with major MNC customers to diagnose and prioritise particular needs in relation to their value chains and then employing a ‘Team Australia’ approach to identify and position best-in- class Australian solutions.
Chile’s favourable trade and investment openness create an attractive environment for Global Value Chains. Low import tariffs, both at home and in export markets, and engagement in preferential trading agreements position Chile well in Central and South America.
Chile has easy access to a number of GVC’s operating within its borders. Together we can access opportunities in: Mining, Fisheries (Biomar, Aqua-Chile Marina Harvest, Cermaq) and Agriculture (Ferrero Rocher, Nestle) Another option, which is closer to home and a much more immediate strategy for Austrade is the regional migration of our companies.
3) Australia-Chile - regional springboards for migration (Prompt: Move to slide 7)
Chile is familiar to Australian businesses and provides a direct entry point to Latin America. It’s a great country for Australians to familiarize themselves with the business environment and then grow. Likewise, Australia is familiar to Chilean businesses and provides an excellent gateway to Asian markets.
This slide is a good illustration of how Australian companies, universities and science agencies are using Chile as a springboard for regional migration. It shows companies that have set up their operations in Chile (either by establishing a subsidiary or engaging a representative) and have then gone on to either establish offices or pursue opportunities in Argentina, Peru and Colombia.
Helping Australian companies, universities and science agencies grow and pursue opportunities in neighbouring countries is a key component of Austrade’s strategy. We have agile and closely connected teams posted across the region. We share intelligence about business opportunities and local country conditions, develop valuable networks and have the capability to guide our companies though the unique business culture of each country. We would be very pleased to support Australian-Chilean partnerships in their search for greater opportunities abroad. (Prompt: Move to slide 8)
But it’s not all one way, Chilean companies are taking advantage of direct air-services to Asia from Australia and established partnerships and linkages between Australia and Asia to export their goods and services. And Chinese companies in particular are making investments in Chile through Australian acquisitions, Pacific Hydro is an example.
There’s no denying the importance of the Mining sector to the Australia-Chile bilateral trade and investment relationship, but I hope I’ve made a case that the complementarity between our two economies extends through a much broader range of sectors. Health, Infrastructure, Agribusiness and food, and Education.
Moreover, the depth and breadth of Australia’s services sector offering, Australia’s capacity to feed into the global value chains of multinationals corporations that are operating out of Chile in increasing numbers, and finally the access both our countries offer to larger regional economies suggests that the future of our economic engagement will be significantly more weighted toward a variety of more globally integrated sectors.
It is therefore critical that we work collaboratively to leverage each other’s strongest capabilities and work to open ourselves up to new industries and markets.
(Prompt: – move to slide 9)