CHANGING patterns of demand in Asia represent a truly transformative opportunity for Australia’s food and agribusiness sector. By ANDREW ROBB, Minister for Trade and Investment
Feeding the region’s growing middle class could help double our agricultural output, in part through the development of vast, untapped potential in Northern Australia.
Some sceptics have expressed doubt recently about our ability to become “the food bowl of Asia”.
It is always wise to keep a sense of proportion but I’m an optimist when it comes to this question: we may not become the food bowl of Asia but we can become a key supplier. One of several food bowls, if you like.
The Government’s trade, investment and broader economic policies are designed to help make this happen.
Reducing public debt, removing unnecessary regulation and abolishing the carbon and mining taxes are all about boosting private sector growth and freeing up space for individual responsibility, enterprise and innovation.
Our aim is to create the type of environment where our natural strengths come to the fore.
As the Minister for Trade and Investment I am a firm believer in backing these strengths and our food and agribusiness sector is clearly among them.
In my portfolio, we are working hard to ensure the sector has both the market access and the investment it needs to compete and grow market share.
Australia already has a strong reputation in Asia. Our high quality, nutritious food is highly valued in a region where food security and safety is a growing issue.
That’s a fantastic advantage but in many ways it’s also just a starting point.
The region’s middle class is set to grow from 600 million to more than three billion over the next 20 to 30 years and as it grows in size it will also grow in wealth, shifting towards a higher protein, higher value diet.
We are already seeing signs of the effect this will have. Exports of our red meat to China, for example, have increased significantly and continue to rise. In 2011 we exported 12 containers of oranges to the same market. Citrus Australia estimates the volume could reach 1,000 containers in the 2014 season.
Free Trade Agreements with our key partners in the region will help turn growth like this into permanent market share by ensuring our producers compete on a level playing field.
The Government has already finalised two such agreements this year with two of our largest trading partners, Korea and Japan, and we are working hard to secure a similar outcome with China.
Negotiations with other regional partners and the Trans-Pacific Partnership countries also show real potential for progress.
Agriculture has featured prominently in all these negotiations. In Japan, for example, tariffs of up to 219 per cent will be eliminated or substantially reduced on a wide range of agricultural exports.
Likewise in Korea, our agreement removes tariffs on some key exports and substantially reduces others.
Exports of our high quality wine to both of these markets will benefit from getting rid of a 15 per cent tariff making us more competitive against our major competitors such as the United States, France Spain, Italy and Chile.
China has been the fastest growing export market for Australian wine for several years. We are the second largest exporter of wine to China behind France but we cannot be complacent.
Along with a need to be consistently marketing our quality advantages, removal of tariffs under a Free Trade Agreement will serve to maintain and enhance our market share.
Competitors like New Zealand and Chile currently benefit from their own Free Trade Agreements with China.
On the investment side, we are committed to ensuring Australian producers have access to the finance they need to increase output and meet the huge increase in demand these market developments represent.
That is why we have made food and agribusiness one of five key national investment priorities alongside infrastructure, which will also be crucial in enabling us to transport our products to market cheaply and efficiently.
Investment will, of course, also be crucial to realising the potential to expand agriculture in Northern Australia.
One of the reasons I’m so confident Australia will play an important role in helping to feed Asia over the years ahead is that many countries in the region face severe restraints in expanding their own agricultural production.
China, for example, has just 7 per cent of the world’s fresh water, despite having 20 per cent of its population.
In many countries, much of the groundwater is polluted and major rivers are contaminated.
In contrast, there is an estimated 152,000 gigalitres in total surface water run-off across Northern Australia; around 60 per cent of the water that falls in Australia.
We currently capture only 2 per cent of it but if we increased this to just 6 per cent, and used it for agriculture, the benefits for food security in China and other countries in feeding millions of people would be enormous.
The Government itself cannot build the infrastructure to make this happen but we can empower the private sector to do so by creating an environment that encourages enterprise and investment.
Some of this investment will need to come from offshore, just as it has done during all the important periods of development in our history. Capital is available for viable projects.
Our task is to make sure overseas investors understand the potential.
Northern Australia will be a major focus of our investment attraction efforts through Austrade. We are also looking at ways to use Australia’s overseas missions to promote the international profile of the region more widely.
Some of this investment is already happening. In the Ord River region of Western Australia, for instance, Chinese company Shanghai Zhongfu is transforming 13,400 hectares of pastoral country into irrigated farmland for sugar and other crops, with spin off industries contributing to the local economy.
The value of this type of investment is not limited to Northern Australia of course and we are also seeing a wave of foreign investment and joint ventures across the country.
Western Australia’s largest meat processor V & V Walsh, for example, recently concluded a $1 billion joint venture with the Inner Mongolian Government and the Heilongjiang Grand Farm Group that will boost its operations by 500,000 lambs and 30,000 cattle a year.
The company wants to deliver up to 50 sea containers of lamb and beef per day, requiring investment in both Australia and China.
The scale of these projects indicates just how significant the opportunities in Asia have become.
As part of the Government’s overall approach to generating growth and jobs, our commitment to helping our food producers, processors and exporters benefit from the transformations underway in Asia sets the course for our future prosperity.