Throughout the last generation, Asia has become the fastest growing region on Earth, with hundreds of millions of people entering the global middle class. With higher incomes come greater expectations. People want cars, consumer goods, better schools for their children, better quality clothing, and international travel.
They also want better food. They want to eat out, they want high status products like meat and wine, and they think of eating as a pleasure rather than a necessity. Australia, with its large agricultural surpluses and high-quality produce and products, is well placed to service this growing demand. Indeed, our efforts to meet that demand, and our success in doing so, are key themes of this book.
Australia has one of the world’s most efficient agricultural sectors, and some of the cleanest and healthiest food. Australia’s biosecurity is second to none, thanks to high internal standards and strict quarantine precautions. The sheer volume of Asian demand means Australia cannot be the food bowl of Asia, but it can certainly be a specialist and high value supplier of the finer foods in life.
Walk down any street in Asia’s cities and globalisation – which usually means westernisation – is abundantly apparent. Some deride it as ‘cocacolonisation’, but it is an unstoppable force. Billboards tout western products, people wear western clothes, radios play western music. Western culture blends with eastern, especially at the dinner table.
But when it comes to food, globalisation works both ways. Such are the delights of most Asian cuisines that they have conquered the west as thoroughly as western food has conquered the east. Australians of a certain age remember when the evening meal was meat and three veg, and when Asian food meant the Chinese restaurant at the local shops. First European, and then Asian, immigrants have vastly expanded Australia’s culinary tastes.
It has also given us a greater appreciation of what Asia wants, from paddock to plate. Boundless Plains to Share is full of examples of how Australia’s agricultural products and processed foods are exported to Asia and the world. Australia’s great challenge is to meet the growing and changing demands of Asian consumers as they quickly become aware of the importance of acquiring good food from safe sources.
FROM PLAIN RICE TO PRIME BEEF
According to the World Bank, the global population is expected to reach 8.2 billion by 2030, a significant increase from its current level of slightly more than 7 billion. Even more remarkable is the exponential growth of the global middle class, most of which will emerge from Asia.
There are currently about two billion people in the global middle class. Half of them live in Europe and North America, with only one third in Asia. But by 2030, according to Reuters, the global middle class will grow to 4.9 billion – with two-thirds living in Asia.
As the Asian middle class consumer becomes wealthier and healthier, we will see an insatiable demand for a safe and sustainable supply of high-quality food.
This large Asian middle class will be the key driver of future global consumption – of cars, food, housing, and a host of other commodities. By 2030 this group alone will account for more than half the world’s total consumer spending.
Driving the growth of the Asian middle class are the world’s fastest growing and most highly populated countries, China and India. By 2030, China’s middle class will reach one billion, nearly 70 per cent of its total projected population. And despite India’s middle class currently sitting at only 50 million (still more than twice Australia’s population), it is expected to grow to 200 million by 2020 and 475 million by 2030. At that time, India will contribute more people to the global middle class than China.
One indication of rising affluence is in the usage of technology. In 2009, the Asia Pacific region had just 86 million smartphone users. By the end of 2015, that number had exceeded one billion users – four times the total in Western Europe. With rising incomes, increasing private wealth and a higher standard of living, Asia’s middle class consumers will spend increasingly more by indulging in what they want rather than what they need.
The transformation of the Asian consumer is exemplified by China. During the Communist years, people wished to own sanshengyixiang (三转一响) ‘three rounds and sound’ – a wristwatch, bicycle, sewing machine and radio. Today, China’s middle classaspire to Prada handbags, BMW and Mercedes Benz motor vehicles and overseas holidays. One study found the number of Chinese households earning more than $40,000 (considered to be the threshold to afford overseas travel) will nearly triple to 63 million by 2023.
THE CHANGING DEMAND FOR QUALITY FOOD
As well as being wealthy, these new middle class consumers are both aspirational and health conscious. Healthcare expenditure in Asia is expected to double by 2020. And higher expenditure on health care is matched by greater investment in healthy living.
As the Asian middle class consumer becomes wealthier and healthier, we will see an insatiable demand for a safe and sustainable supply of high-quality food. The Australian Trade Commission (Austrade) predicts that by 2050, more than 60 per cent of the world’s demand for food products will come from Asia. Asian tastes are also evolving, demanding more variety in their diets and becoming increasingly aware of the importance of protein and dairy.
Rice has been a staple in Asian diets for centuries. Currently, 90 per cent of the world’s rice is produced and consumed in Asia. But recent studies confirm as income levels rise in Asian countries, the consumption of rice per capita declines at a similar pace. Asian middle class consumers are now eating more foods derived from livestock, wheat, imported fresh fruits and vegetables, and other foods that are higher in protein and energy than rice. For example, Chinese beef-meat consumption is expected to increase from 5.13 million tonnes in 2000 to 7.96 million tonnes by 2020.
Changes in diet patterns can be attributed to a variety of factors. One fundamental aspect of Asian culture is the importance of health. Food safety and best practices in production are becoming more transparent in Asia, particularly in China, and many consumers are becoming increasingly interested in the cleanliness and quality of their food.
The burgeoning Asian middle class is more willing than ever to pay top dollar for premium products for a combination of health, safety and lifestyle reasons. In addition, the status attached to eating imported foreign foods (particularly dining out) is a huge motivator for Asian middle class consumers to display their growing affluence and influence. According to a recent study, people in Thailand and China spend more on average when eating out than Australians.
By 2030, Australia will have nearly 4 billion people in our international neighbourhood, with more money to spend on better quality healthcare services, housing, education and, most importantly, food. Estimates suggest by 2050 Australia will be poised to capture more than $1 trillion in food exports, which suggests that, if managed properly, the agricultural sector represents the next boom for Australia’s economy.
However, as will be discussed throughout Boundless Plains to Share, Australia faces enormous challenges in mobilising, energising and expanding an agricultural sector which has been neglected in recent times and which suffers from fragmentation, parochialism and a lack of investment. Australia currently produces enough food for about 40 million people. Our position as a major player in the Asian Century will be defined by our ability to increase this number by many times.
FIVE DRIVERS OF ASIAN GROWTH
One of the most significant drivers of economic growth and expansion in Asia is urbanisation. Urban growth alone produces an increase of 20 per cent of gross domestic product (GDP) per capita. It increases rural productivity, boosts demands for resources, commodities and energy, and drives consumption – urban dwellers spend 3.6 times more than rural residents.
Indonesia is experiencing the fastest pace of urbanisation of any country in the world. It is estimated the ratio of Indonesia’s urban-rural migrants will leap to 71 per cent from its current level of 53 per cent. With rapid urbanisation and growth sweeping a nation of 250 million people, analysts are forecasting that Indonesia will rise to become the world’s seventh largest economy by 2030, overtaking the UK and Germany, and will become the third largest middle class among emerging markets by 2050, behind India and China.
China is also undergoing urbanisation at an unprecedented rate. In the past thirty years, its urban population has risen from 200 million to a staggering 700 million. By 2025, a further 350 million urban residents will be added. Growth at this scale has meant China now has 15 megacities with a population of more than 10 million people, who will contribute more than $7 trillion to its GDP by 2025. Even today, China has more than 100 cities with populations of over one million.
Asian countries are already leading the world in many areas of scientific development, including the biosciences, information technology, and in the development of new forms of sustainable energy.
This leadership is best seen in Guangdong, one of China’s original manufacturing hubs and the birthplace of most products ‘Made in China’. The capital of Guangdong province is the massive port city of Guangzhou (once known as Canton), which has a population approaching 10 million.
The Guangzhou Municipal Government has been promoting its aim to move away from products ‘Made in Guangzhou’ to ‘Created in Guangzhou’, propelling the city up the global value supply chain. By 2020, Guangzhou aims to increase the output value of high-tech products to RMB 2 trillion ($430 billion).
The growth of China’s innovation industry is also evident in the renewable energy sector, where China leads the world in investment into renewables – more than $56 billion in 2014. China should not be disregarded in this respect. Its ability to innovate at speed and scale already places it as a major world player in research and development as well as in manufacturing, and challenges the established innovation powerhouses of the US and Germany. Its telecommunications products company Huawei is already the world’s largest.
A young, dynamic and ambitious population can propel economic and social growth over long sustained periods. It has been predicted India will surpass China during this decade as the world’s fastest growing economy, due to its low average age of 25 and the massive growth of its working-age population. India will soon have an incredible 20 per cent of the world’s working-age population (people between the ages of 15 and 64).
Throughout the next decade, India’s working-age population will rise by 125 million, and by another 103 million in the following decade. Not only is the population growing, it is becoming increasingly educated. By 2020, India’s higher-education graduates will account for 12 per cent of the world’s total, more than that of the US.
A massive, educated workforce has created an enormous opportunity for India to become a leading global economy. But as a developing country, the risk of unemployment remains significant. It is vital the Indian government delivers on its promise to supply more jobs, skills training and infrastructure investment to ensure opportunities for its young and growing workforce.
Despite a great deal of talk, buzzwords and catchy titles, the process of globalisation is still in its infancy and will continue to propel companies into the increasingly competitive international market, where the potential for economic gains are immense.
Riding the waves of globalisation, Japanese companies such as Canon and South Korean companies like Samsung and Hyundai have achieved great successes in overseas markets (Canon has become the largest camera firm in the US). After the initial waves of globalisation, Asian firms are emerging in an increasingly competitive international market where they are internationalising their brands, workforce and operations. For example, Hyundai Motors has invested $2 billion across 15 years in its Indian factory in Chennai, which now has the capability to build a car every 68 seconds, making it the country’s second- largest car firm behind Suzuki.
In many respects real globalisation has not even started yet. In spite of significant advances in technology, and despite high speed broadband and interconnectivity, there remain many new opportunities to connect and collaborate with other global business leaders and entrepreneurs in China and India, or to outsource low level tasks to the Philippines, Indonesia or Vietnam.
Apart from an abundance of land, people and capital, Asia benefits from a dynamism and entrepreneurial spirit derived from a combination of ambition, energy and aspiration. In many countries, and especially India and Indonesia, this aspiration comes with a young demographic profile that will propel economic growth well into the next century.
Only 30 years ago most Asian countries were suffering extreme poverty, for a wide range of largely unrelated reasons. Since opening up and attracting foreign investment, they have now acquired a taste for success and wealth, a desire that has energised the whole region.
This is best seen in China, which has emerged as Asia’s leading economy. It held this position a millennium ago and now, after more than a century of massive political unrest and significant disruption of its society and economy, China has regained what most Chinese regard as its rightful place in the world.
The policies, introduced in the 1980s, that led to China opening up to the world and returning to a market economy not only energised the county’s economy but also sparked great patriotism amongst the population as China re-entered the global landscape. China has been extremely driven to put the economic and social damage and chaos of the Great Leap Forward and Cultural Revolution in the 1960s and 1970s far behind it. Since 1981, China has lifted a staggering 700 million people out of poverty and, as a result, is now the major engine of growth in Asia.
OPPORTUNITY FOR AUSTRALIA
Boundless Plains to Share is full of examples of how Australia’s agricultural products and processed foods are being exported to Asia and the world. Australia’s great challenge is to meet the growing and changing demands of Asian consumers quickly becoming aware of the importance of good food from safe sources.
Australian agriculture faces significant challenges and opportunities to increase its influence in Asia and the world. This is particularly the case with China – our largest trading partner – and a fast growing Indonesia – our closest neighbour – which has access to people and capital but not enough land.
There are many factors working in Australia’s favour: the cleanliness and safety of our food (biosecurity), proximity to and growing links with Asia, and the fact that we have the very products that Asian consumers are increasingly demanding.
All that remains is the ability to capitalise on these advantages. Australia has an opportunity to become a major food and agricultural player in its own right but, more importantly, it has the ability to export its knowledge, capabilities, innovation, experience and technology to Asia.
This will be the defining challenge for Australia (the “lucky country”?) as it transitions “from mining to dining” and lives up to the words so nicely crafted in the second verse of our national anthem:
Beneath our radiant Southern Cross
We'll toil with hearts and hands
To make this Commonwealth of ours
Renowned of all the lands
For those who've come across the seas
We've boundless plains to share
With courage let us all combine
To Advance Australia Fair.
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