What are some of the risks in key export markets?

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Risks vary significantly by country, with certain risks more pressing in some countries than others. Here we have provided a brief overview of the possible risks of doing business in some of Australia’s most popular export markets:

India

  • India is Australia’s fifth largest goods export market.
  • India’s large and young population coupled with a strong growth trajectory present significant opportunities for Australian business.
  • However, despite recent progress, per capita income and the business climate significantly lag regional peers.
  • The World Bank’s ease of doing business gauge ranks the Indian business climate 134th out of 189 economies. Enforcing contracts, paying taxes, starting a business, and gaining construction permits are particularly difficult.
  • The World Bank ranks India in the second bottom quartile for three dimensions of governance: control of corruption, regulatory quality, and government effectiveness. India scores in the lowest quartile for political stability and absence of violence.

 

South Korea

  • South Korea is Australia’s fourth largest trading partner.
  • South Korea scores well on creditworthiness, growth and ease of doing business.
  • South Korea’s business climate comes in at 5 out of 189 economies on the World Bank’s ease of doing business gauge. It outperforms most other advanced economies, although registering property is more difficult in Korea.
  • A key characteristic of Korea’s development has been the existence of Chaebols (a conglomerate of family-controlled firms) that participate in most areas of business. These firms exert considerable market power, which can pose problems for competing firms.
  • South Korea scores in the top 50% in all areas of governance, however it lags behind most other advanced economies.
  • Political stability and absence of violence scores are particularly low by developed world standards. Instability in North Korea poses the most significant security threat.
  • Two way trade will likely rise after both countries signed a free trade deal in April 2014, opening up opportunities in a range of industries

 

China

  • China overtook Japan to become Australia’s number one export destination in 2009
  • China outperforms its peers in East Asia and Pacific on creditworthiness and business climate
  • Economic growth is expected to moderate over the medium term but is still strong
  • The World Bank’s ease of doing business gauge — which attempts to measure regulation and red tape relevant to a domestic SME — ranks the Chinese business climate 96th out of 189 economies. It ranks the lowest on the measures of ease of registering property and enforcing contracts.
  • The World Bank ranks China in the second bottom quartile of economies for three dimensions of governance: rule of law; political stability and absence of violence; and control of corruption. China scores in the lowest quartile for voice and accountability.

 

Japan

  • Japan is our second largest export destination and trading partner
  • Japan is the world’s third largest economy after the US and China and has a credit rating and business climate on par with most developed countries, however economic growth is weak
  • Japan’s business climate is generally on par with most other advanced economies. It ranks 29 out of 189 economies on the World Bank’s ease of doing business gauge. But paying tax is significantly more difficult in Japan.
  • Japan scores in the top quartile in all areas of governance. However, it underperforms peers on measures of regulatory quality.

Australia and Japan entered into a free trade agreement in Aril 2014. The FTA will allow more than 97% of Australian exports preferential treatment into Japanese markets

Efic’s Country Profiles provide more information on the risks of doing business in a range of different markets around the world.

While it is important to be aware of the potential risks involved in exporting to these markets, there are some great opportunities for Australian SMEs looking to do business in Asia. With the new North Asia Free Trade Agreements (FTAs), there will be even more opportunities for Australian businesses looking to export to China, Korea and Japan. For more information on how your business could benefit from the FTAs, visit Austrade’s website [insert hyperlink: http://www.austrade.gov.au/Export/Free-Trade-Agreements].