Author: Colin Bettles
Publication: Farm Online
FIND a suitable long-term trusting partner who shares common values and serves mutual needs and then sign-up for sustainable contractual arrangements to seal the deal and share the future benefits.
It may sound like the relationship advice provided by any number of dating websites to set the pathway towards forging the foundations of a solid marriage.
But it’s actually the words of business wisdom of former federal Trade and Investment Minister Andrew Robb when asked for his best tip of what Australian agribusinesses need, to establish secure and profitable access into the booming Chinese market.
Mr Robb retired ahead of last year’s federal election to a gush of praise from a range of often mean-spirited political analysts, including the National Farmers’ Federation where he once worked, describing him as the nation’s greatest ever trade minister.
He spearheaded the Coalition’s big picture China, Japan and Korea Free Trade Agreement (FTA) signings and was also pivotal in securing Australia’s name on the Trans Pacific Partnership contract, after eight years of protracted talks.
He’s now joined forces with the Andrew “Twiggy” Forrest inspired ASA100 group that’s aiming to develop “Brand Australia” to enhance the export of Australian farming products into China, bringing together big agribusiness players from both nations.
Mr Robb has joined as an honorary adviser and will lend his expertise to aid the efforts of Australian farmers and agribusiness, to maximise their capacity to extract economic benefits from the China and Australia FTA.
He says that goal can be achieved by Australia playing to core business strengths like having a growing reputation for producing safe, healthy foods to supply a market that’s becoming increasingly hungrier - and willing to pay premium prices - for farm products that readily speak to Chinese consumers, to identify and demonstrate provenance.
ASA 100 is co-chaired by Mr Forrest who is also using his intimate knowledge of the Chinese market, gained during the mining boom, to identify and remove obstacles for selling Australian agribusiness product in the post-FTA business environment, with lower tariffs on big exports like beef and dairy.
New Hope Group chairman Liu Yonghao who has pledged to spend $1 billion in Australian agriculture by 2020 is one of China's richest men and is co-chair of the China chapter.
Mr Robb was recently invited by Chairman Liu to address the ASA 100 branch in China about doing business in Australia and asked me to be an honorary adviser which the former Liberal MP accepted.
Mr Robb said the best advice he could give to any Australian agribusiness looking to establish itself in the Chinese market in a more liberalised trade scenario was “find a good partner”.
“I’d spend a lot of time, more than anything else, identifying the right partner and that’s true for the Chinese coming to Australia too,” he said.
“There’s so much difference in both markets in terms of regulations for instance.
“The food standards and all the rest of it to me achieve the same end but they are different.
“The nature of registrations and all that minefield of the system in both countries can be terribly difficult and confusing and discouraging and costly whereas if you’re tied up with a good partner, all of those issues fall into place.
“It’s not true for every single one but for the overwhelming majority who want to do business in China, that is to me is the number one priority.
“It’s important to be prepared to invest some time, to get up there into China and to work through different possibilities in that regard and to satisfy yourself that you’ve got someone you can trust.
“In the end trust is what successful businesses are built on and it applies even more so, when working across borders.”
Mr Robb said one of the Mr Forrest’s priorities for the ASA100 which he also firmly backed was adopting long-term, sustainable contractual arrangements for farm exports into China “not ones that are going to be torn up in two or three years’ time”.
“It’s important to have a good partner because they’ve got skin in the game,” he said.
“That gives certainty and then banks can finance these projects.
“Unless you get that certainty, the banks and financiers are going to be shy about backing that investment.
“The project has to be bankable and it can only be bankable once the project is going and the market at the other end is sustainable.”
Mr Robb said in the past four or five years while he’s been working more closely with China, the clean green image of Australian farm products had, “just grown and grown and grown and grown”.
But he said China’s sensitivity to food security was also increasing, having 20 per cent of the world’s population and 7pc of its water but 63pc of it polluted.
“A lot of that polluted water won’t be fixed for centuries because the heavy metals are so deeply embedded in the substrata and they’re also taking up more agricultural land to build cities in China so their capacity to deliver the food needs to the population just won’t be there - especially as they become wealthier and the demand for higher quality higher protein foods grows bigger,” he said.
“First and foremost they want good healthy diets and that’s a huge opportunity for Australian agriculture and so we need to achieve greater certainty of contractual arrangements in the sale process.
“If we can do contractual arrangements for 20 years for resources and energy projects why can’t we do it for agriculture?
“They’re both primary products and in a commercial sense it makes the same sense.
“If you’re going to back a $60 billion LNG project you need some certainty and the financiers need some certainty for the next 15 to 20 years about what’s going to happen with the production.
“We’re not talking the same type of money in agriculture but the principle is identical.”
Mr Robb said in the seven months he’d been working on the ground in various projects around trade, since leaving politics, he was convinced the investment required to take agriculture to “another level”, from a productivity point of view, can only be properly secured and “only make sense”, if end produce was, “guaranteed a market”.
“In other words if there’s a 10 or 15 year contract for a particular quality of horticulture product or whatever,” he said.
“But that’s what the Chinese want too and I think that’s true in other parts of Asia; certainly for the Japanese.
“The big trading houses want certainty of supply.
“Some of them have thought that they needed to come and buy the farm in Australia to get that certainty but many of them realise you can also get it by other means, through long term contractual arrangements, and if they can achieve that, then their major objective has been met.”
Mr Forrest said Australia was the perfect match for China having the highest standards of quality, clean green and safe food.
He said China had a large population of “wonderful people who deserve such high standards of food reliability”.
“Other countries can look at China as price times volume strategy - I’m happy to leave that to them,” he said.
“I believe their people deserve better than that and Australia can deliver the highest safety standards, reliability and quality every day of the year for the next 100 years.
“We have a clear proposition to offer the Chinese and that is of ‘safe Australia’ and a ‘clean, green Australia’ that loves to serve.
“This is why we are committed to working with the Australian government in developing and testing “Brand Australia” in China.”
Mr Forrest said the China and Australia FTA could only go so far in lowering tariff barriers.
“Now we need to work with a strong network of Chinese companies to pull our agrifood products through the myriad of technical barriers and to promote our “Brand Australia” to the Chinese middle class,” he said.
“This is an incredible opportunity – a once in a generation chance for Australian farmers to catch that wave that is the burgeoning Chinese middle class.
“We are looking forward to working with Andrew Robb to help us navigate these new and exciting waters.”
Mr Robb said Chinese consumers were asking for and looking for an indication food products were produced in Australia and the ASA100 was “totally consistent” with that outlook.
He said tomatoes were peeled by consumers in China because “they don’t trust what they’ve been grown in; what’s been sprayed on them; and the quality of water they’ve been washed in” but sadly, 70pc of the goodness is in the peel.
“It’s those sorts of examples that show you the level of distrust locals have in food,” he said.
“The more the Chinese acquire wealth, and there are hundreds of millions of them in the middle class, the more they want protein and they are very much looking for Australian meat and lamb in particular but also many other products.
“And they want to see, and know and have confidence that the providence is from Australia so there are increasing attempts from people in China to find what are seen to be secure channels of supply.
“Against that background the ASA100 has produced a large number of people running agribusiness in Australia and similarly a similar number of the private sector players in China who are running large agribusiness operations like New Hope.”
Mr Robb said the ASA100 would also help with reducing the cost of regulations and market bureaucracy “dramatically” because local knowledge would be shared, on both sides of the business.