The best thing any director of a medium-sized company could do is take a flight to China. Indeed, all Australian companies need to lift their gaze beyond the mining boom and look to China and India to accelerate their business growth.
Companies - especially small and medium-sized companies - should be seriously studying these markets. Our architecture firm, Peddle Thorp, employs just over 150 people. As a medium-sized company, we recently had work in designing estates of 84,000 houses in China and more recently an estate of 20,000 houses in India.
The scale of these projects gives an idea of the enormous opportunities available in the region. Yet, these are run of the mill projects in these countries that would dwarf most housing projects in Australia. For example, the major development Caroline Springs in Melbourne’s Western suburbs contains just 8,000 houses.
It is not just the size of these projects. We found there was a generally higher standard of products, materials and design in the current wave of Chinese buildings and apartments. Certainly for an architect, it is a terribly exciting place to do business.
For example, Peddle Thorp designed the Teda Soccer Stadium, near Beijing, which opened late last year. The stadium had a landmark design that included state of the art facilities for players, spectators, officials and media. The stadium profile has been designed to achieve excellent viewing lines to the playing area.
The design represents an expression of the latest technology in services, architecture and engineering and the stadium may well be used in the forthcoming Olympic Games.
This work represents the type of value adding that Australian companies should be focussed upon. Interestingly, we have now imported the ideas developed for the stadium back to Australia and they have been used at a major AFL stadium in Geelong. We took the concept of the curved support trusses and adopted a more refined and sophisticated version of these to Skilled Stadium. Our experience has shown that this curved structure is the most efficient way to support the cantilevered roof used at the arena. By working in the demanding environment of China, we are improving our own core business at home.
Peddle Thorp now employs 35 people in our office in Shenzen. Certainly our growth is nothing in scale compared to the BHPs of this world, but it is a clear sign that small and medium-sized companies can be successful in both countries in areas well away from Australia’s traditional strengths of mining.
Australian companies do things well, but overall we are too cautious in approaching foreign markets where huge opportunities await. Australian engineering, design, architecture and other companies have great ideas and products.
It is not simply a matter of waiting for the right policy settings from government: a simple change of attitude is needed. Australian companies need to look at China and India with fresh eyes to take advantage of the opportunities that a major emerging economy presents. We have companies and ideas already here and the time is ripe to take advantage of them.
The reasons for these opportunities are quite clear. The Chinese Academy of Social Sciences has estimated that the number of middle class citizens in China has risen to one-fifth of the entire population. While its definition of middle class may not meet our own, there is still a basic underlying trend. The medium-income class is expected to grow by one per cent per year and it is estimated that by 2020 the medium-income class will be 40 per cent of the whole population.
Yet far more quietly, India has also been progressing well. For the past 23 years India's GDP has grown at an average annual rate of 6 per cent, making it one of the fastest-growing economies in the world. The growth rate may have been lower than that of China's, but India's middle class now has more than tripled in size to 250 million people. Each of these countries has markets of more than one billion people. But it is not just size; it is the growth of the middle class that offers the best long-term opportunities. By any measure, these are massive growing markets that Australian companies must consider in their planning in the future.
The present approach seems to concentrate on digging up our assets and selling them off. This approach is fine in the short term, but there is so much more we as a nation can do to guarantee a sustainable future. And, of course, the problem eventually arises of what do we do when we run low on coal, gas or steel. Even Australia’s massive reserves are finite.
Australia has a raft of service industries and business models that could expand in these markets. Both India and China offer really exciting opportunities and companies and we should be embracing them. They mean much more than minerals.
At the very least, Australian business leaders need to get on an aircraft and get over to the growth regions to see what is happening - and then start thinking.