Introduction

Southeast Asia is a major opportunity for Australian business.

The region and Australia share bright economic growth prospects, geographical proximity, economic complementary, and a need for trade diversification.

This provides a strong basis to significantly expand commercial links, which will advance mutual prosperity and security. More trade and investment means more and better-paid jobs and national income.

In recent years, Southeast Asia has been one of the fastest-growing global regions, and all its settings – demographics, economic openness, political stability, and ambition – mean it will drive global economic growth through to 2040 and beyond.

Australia stands to benefit from, and contribute to, this growth by being a reliable and high-quality supplier of commodities, including agriculture, minerals and energy, and as a provider of first-class services, particularly university education. There are also major opportunities for Australian business in meeting the region's major infrastructure investment and green energy transition needs. Population growth, including an increasingly large and affluent middle class, and urbanisation trends will create growing demand for a wider range of goods and services. There will also be an important role for small to medium-sized enterprises (SMEs) as key sources of innovation and employment.

Australian businesses and institutions have never been more globally competitive and capable of providing the goods, services and skills needed in this rapidly growing region. They also have the financial strength to support substantial investments and operations in the region, including through the A$3.5 trillion and growing superannuation industry.

At the same time, Australia's own economic size, impressive growth record, highly skilled workforce, and emerging needs all provide scope for a major expansion of Southeast Asian exports and investment into Australia.

The size of the opportunity is considerable: if two-way trade continued to grow at around the 20-year compound average growth rate of 5.5 per cent, total trade would be around A$465 billion in 2040, an increase of A$287 billion on current levels. But if trade growth could be boosted to 6.3 per cent, total trade would triple by 2040.¹

Figure (a) Potential value of two-way trade between Australia and Southeast Asia by 2040

Source: Department of Foreign Affairs and Trade (DFAT), Direction of Goods and Services Trade, July 2023; DFAT analysis.

The region needs considerable capital investment. For example, by 2040 the region will require an estimated $3 trillion in infrastructure investment,² and have similar needs for green investment.³ This will provide major opportunities for Australian investors.

But none of this is assured. While Australia's trade with the region has grown in nominal terms over the past 20 years, the proportion of total trade has remained constant at around 14 per cent. Australian investment in the region is underweight, and growth in foreign direct investment has stagnated in the past decade.

Special Envoy for Southeast Asia, Mr Nicholas Moore AO, has led the development of this Southeast Asia Economic Strategy to 2040 to identify a path to increase two-way trade and investment.

National governments have an important role to play with investors and business, and concerted engagement is required. The Australian Government will work with Southeast Asian counterparts, Australian state and territory governments, businesses and communities. In Australia, ensuring an open and competitive economy, strengthened by streamlined regulation and improved access to skilled human capital and technology, will be important for improved trade and investment performance.

A whole-of-nation effort with our region

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Required actions

This strategy outlines four categories of actions that are necessary to realise the commercial potential between Australia and Southeast Asia.

These required actions frame an examination of 10 key industry sectors: agriculture and food; resources; green energy transition; infrastructure; education and skills; visitor economy; healthcare; digital economy; professional and financial services; and creative industries. These sectors offer the most potential for greater commercial activity between Australia and Southeast Asia.

Recommendations: A total of 75 general and sector-specific recommendations are presented for consideration by the Australian Government and other stakeholders. A snapshot of the key recommendations is set out in the matrix immediately following this introduction. A full list of recommendations is at Appendix B. The strategy also contains – for Australian action – Southeast Asia country-specific plans. Progress against the strategy's targets should be reviewed annually through the Australian Government's Trade 2040 Taskforce, or another mechanism.

Scope: This strategy covers Australia's relationships with the countries of Southeast Asia: Brunei Darussalam, Cambodia, Indonesia, Laos, Malaysia, the Philippines, Singapore, Thailand, Timor-Leste and Vietnam (nine existing member states of the Association of Southeast Asian Nations [ASEAN] and Timor‑Leste). Myanmar is not covered in this strategy due to the ongoing crisis.

Key recommendations

Raise awareness

• National Cabinet should consider developing a whole-of-nation plan to strengthen Southeast Asia literacy in Australian business, government, the education and training system, and the community.
• Establish a new Australia – Southeast Asia business facilitation initiative to undertake targeted sectoral business missions and build the capability of business chambers.
• Australian Government to work with states and territories, and business to ensure a coordinated approach to promoting Australia, leveraging and building upon the Nation Brand.
• Australian Government to work with the ASEAN Secretariat and business to examine an ASEAN trade, investment and tourism promotion campaign in Australia.
• Develop a strategy to engage with Australia's Southeast Asian diaspora to inform efforts to deepen SME business links with the region.
• Australian Government to invest in education promotion across Southeast Asia to raise awareness of Australia's offerings and attract more Southeast Asian students.
• Expand tourism promotion and build industry capability to meet Southeast Asian demand.

Remove blockages

• Continue exploring opportunities to reduce regulatory burden under the Foreign Investment Review Board (FIRB), as the foreign investment framework regime allows, and seek reciprocal action in the region.
• Establish a single-door concierge service to facilitate inward foreign investment.
• Australia's Trade 2040 Taskforce, in collaboration with Southeast Asian partners, to review the scope of existing FTAs to determine priorities for agreement upgrade negotiations.
• Expand collaboration on trade rules and standards harmonisation with Southeast Asian partners.
• Australian Government to implement the Migration Strategy and associated reforms to improve the visa system to facilitate mobility.
• Australian Government to prioritise updates to air services agreements and explore reciprocal open skies agreements with interested Southeast Asian partners where in the national interest.
• Australian and Southeast Asian governments to increase cooperation with professional bodies and education providers on qualifications recognition.

Build capability

• Extend government-to-government technical assistance to other Southeast Asian countries through a new government-to-government partnerships program and other mechanisms.
• Develop a regulatory framework to facilitate intra-regional hybrid training and work mobility programs in high-priority industry sectors.
• Establish a new public and private sector multi-country program to arrange professional exchanges and internships at the company or organisation level.
• Increase whole-of-government trade and industry policy and commercial engagement capability in Australia's Southeast Asia diplomatic missions and in Australia to assist Australian businesses to use FTAs and deliver market access.
• Establish a targeted program to support Australian First Nations businesses to increase trade and investment with the region.
• Australian Government to encourage universities and vocational education providers to offer work-integrated learning internships as part of course offerings to Southeast Asian students.
• Australian Government to coordinate a whole-of-nation initiative to better engage alumni, including a scheme for connecting alumni with Australian and Southeast Asian businesses.

Deepen investment

• Australian Government to establish a strategic investment facility for Southeast Asian infrastructure projects, utilising Export Finance Australia and other government-supported funding sources.
• Establish new investment 'deal teams' for Southeast Asia, blending private sector and Australian Government capabilities to provide outward investment (including financing) services.
• Australian Government to extend Partnerships for Infrastructure and expand into early-stage project preparation support.
• Australian Government to work with industry to fund a Southeast Asia research grants scheme in areas of mutual interest with Southeast Asia.
• Australian Government to consider establishing Austrade Landing Pads in Indonesia and Vietnam to support Australian tech companies, similar to Austrade's Landing Pad in Singapore.

¹ 2001–2021 compound average growth rate. Department of Foreign Affairs and Trade (DFAT), Direction of Goods and Services Trade, July 2023; DFAT analysis.

² Global Infrastructure Hub, Forecasting infrastructure investment needs and gaps, [dataset], 2018, accessed 30 June 2023.

³ Boston Consulting Group (BCG), Southeast Asia Green Trade and Investment Opportunities, report to Australian Government Department of Foreign Affairs and Trade, BCG, March 2023. BCG estimates draw from International Renewable Energy Agency (IRENA) and the ASEAN Centre for Energy (ACE), Renewable Energy Outlook for ASEAN: Towards a regional transition, IRENA and ACE, Abu Dhabi and Jakarta, 2022. United Nations Environment Program (UNEP) and DBS, Green Finance Opportunities in ASEAN, UNEP and DBS, 2017.