IBS210: Assessment Task 2: Part 1

Australian-Asian Food Export

The future of the Australia’s next economic boom

Tutor: Roy SHERRE
Tutorial time: 4PM Monday

Student: Leo SHIGENAGA
Student ID: 1070142

Date: 22 April 2013
Online submission date: 23 April 2013
Word count: 963

The oldest and most important building block of international business is international trade. The impact of the mining boom in Australia has helped the nation to withstand global financial turmoil, but now has reached a peak. Today, Australia has the chance to export the food produced in the land to the Asian food market. Most of the projected increase in food demand will come from Asia. Over the decade to 2025, agriculture’s share of the Australian economy is expected to rise. Driven by the need to feed a larger, more urban and richer population, the real value of global food demand in 2050 is planned to be more than 70 per cent higher than in 2008 (According to the Australian Government).

In Melbourne, on April 18 2013, The Australian presented a landmark conference -Global Food Forum- about food security and to explore the potential for agriculture to become Australia’s next great economic boom. During this event, many food leader companies and industry experts were assisted to share their opinions on the opportunities and challenges Australia is facing to meet the demand for food in Asia. Indeed, Asian Pacific middle-class is growing, and its demands for food as higher-protein diets offers an exclusive opportunity for Australian agriculture industries and farmers. Moreover, the world is running out of food and Australia has land to produce and export foods. It is, now, the best opportunity to take advantage of this market in Asia (Kitney 2013)

Asia is now the fastest-growing population and the increase of demand for food will be an attractive market for Australia. There is definitely a rising demand of animal protein in the diet and also products as dairies, fruits and vegetables (McMichael 2000). Australia’s agriculture and food sector is well positioned to take advantage of those emerging opportunities and to build on its strengths thanks to the proximity to markets in Asia, a robust biosecurity system, a record of innovation and reputation for producing high-quality, environmentally friendly and safe food products and a skilled workforce. However, Australia has to find a way to address the many barriers that threaten to restrict market opportunities in the future. In the Australian economy, the most volatile sector is the agriculture due to the seasonal variations, especially in the rainfall and that have a direct impact on productivity. This is why the Global Food Forum had been presented to find any solutions. The investment estimation made by experts to be able to capture our share of this enormous and growing market is $1 trillion in capital in Australia’s agriculture sector (Batt 2012).

To be able to have a comparative advantage on exporting food in Asia, Australia government and industries have to invest in many sectors such as innovation, infrastructure, skills and education, tax reform and regulatory reform. Foreign investment in Australian’s agriculture and food sector is also welcomed. Kraft Foods company already started to invest and opened a big food research and development facility in Melbourne in February. This facility is based on the innovation-hub model proposed by the Prime Minister’s Innovation Taskforce. More than 100 food scientists, technologists and graduates are working in the facility, and all focus on both Australian and Asian markets. It’s not only Kraft Foods company which will invest, big companies such as Dairy Australian, Coles, Murray Goulburn are going to invest as well in infrastructure and innovation.

At the domestic level, producers are constantly under pressure due to the high value of the Australian dollars. Also, the competition between major Australian supermarket chains