NEW YORK - Australia, the world’s most China-dependent developed economy, invests more in the obscure South Pacific nation of Papua New Guinea than it does in its biggest trading partner.
Part of the reason for such an imbalance is corporate Australia’s long history of failure abroad, which deters boards from venturing beyond their often cosy oligopolies at home. Yet when it comes to China, there’s also reason to be circumspect.
“It’s a high-risk area,” said Alan Oxley, a former Australian trade negotiator, citing problems with corruption and difficulties maintaining business relationships in China. “Those that do go in frequently find themselves pressured to share patents.”
Market access is becoming a global flashpoint as China shifts from being the honeypot for businesses eager to plug into its vast manufacturing value chains or sell cafe lattes to its 1.3 billion people to being a net acquirer of companies, commodities and real estate.
The most recent spark: The US said this month it will investigate whether Beijing is violating international trade law by forcing foreign firms to hand over intellectual property.
Australian investments in Papua New Guinea, a former colony whose highland region is so remote that some villagers didn’t come into contact with Europeans until the 1930s, centre mainly around energy and minerals.
Australia’s largest investment in the nation is in a project that started shipping liquefied natural gas in 2014. There are plans to double production by 2023 at a cost upwards of $US20 billion.
In 2016, Australian foreign direct investment into Papua New Guinea totalled $AU15.8 billion versus $AU13.3 billion into China.
By contrast, Australia’s two-way trade with China totalled $US117.3 billion last year, versus $US4.7 billion with Papua New Guinea, according to International Monetary Fund data compiled by Bloomberg.
A report this month showed two-thirds of board members in ASX 200 companies have no extensive experience operating in Asia, while more than half demonstrate little to no knowledge of the region’s markets.
- with assistance by Garfield Clinton Reynolds