IN some ways, the global crisis might turn out to have a silver lining for Australian companies looking to export to Asia, as there are signs that the situation is pushing the governments of the region to 'rebalance' their economic strategies, looking less to exports - especially to the US, Japan, and Europe - and more to domestic consumption to drive their economies.
This fits with the emergence of a substantial middle class across the region, looking to an improved quality of life, a better environment, and greater choice and variety of products.
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But the statistics for 2009 are daunting. According to a recent report by the authoritative Asian Development Bank, growth in the region is likely to be only 0.7% this year, down from 4.3% in 2008.
All Asian countries have slowed, with Singapore and Thailand the hardest hit. The brighter spots are Indonesia, the Philippines, and especially Vietnam.
"The high growth rates of a few years ago have fallen back, and there might still be some bad news to come, especially for the trade-dependent countries," says Rod Morehouse, Austrade's Jakarta-based Senior Trade Commissioner responsible for ASEAN relations.
"But there is no sense of the regional economy collapsing. There is no sign of rising levels of bad debts, which is a crucial indicator. There are still plenty of trade shows and exhibitions taking place. It means that there is a willingness to look past the current problems."
Morehouse notes that the food and beverage sector is still doing well, especially at the upper end of the market. One Australian company that illustrates this is Perth-based Little Creatures Brewing, which exports boutique-level beer to the Singapore market.
"The Singapore economy might be under pressure but we haven't really felt it at the retail level," says Miles Hull, head of Creative Development for the brewer.
"The key is to understand your niche, and for us that is up-scale bars and restaurants. That market segment is still doing well, and people in that group have an interest in products that are innovative, new, and of premium quality."
The ADB report takes the position that the slowdown is likely to be only temporary, with growth forecast to bounce back to over 4% in 2010.
Most of the governments of the region are in a good fiscal position, and a silver lining to the crisis is a reduction of inflationary pressures.
Investment, both from governments and the private sector, is continuing, and so far the impact of the global slowdown on financial stability has been limited.
However, the ADB adds the important proviso that the return to growth depends on economic recovery in the US, Japan and Europe in 2010, and that is by no means certain.Agreements in place Australia's two-way trade with the countries of the Association of South-East Asia Nations - Indonesia, Malaysia, the Philippines, Singapore, Thailand, Brunei, Burma (Myanmar), Cambodia, Laos, and Vietnam, totalling about 600 million people - is already worth $80bn a year, more than trade with China, Japan, or the US.
Australia currently has Free Trade Agreements in place with Singapore and Thailand, and FTA negotiations are under way with other countries in the region.
But trade relations with south-east Asia took on a new dimension in early 2009 with the signing of a Free Trade Agreement between the ASEAN nations and the CER countries, Australia and NZ, in February.
The AANZFTA will bind current low tariffs and will eventually eliminate tariffs on between 90 and 100% of tariff lines, covering 96% of current Australian exports to the region.
These tariff reductions will act as a guarantee against sudden tariff surges and are likely to function as a barrier against protectionist responses to the present economic pressures.
Simon Crean, Minister for Trade, points out that there are around 18,500 Australian exporters already doing business in ASEAN countries.
"Trade barriers are coming down in the region, and the agreement with ASEAN has great potential to increase opportunities, and I have asked Austrade to roll out a commercial strategy to take advantage of the market openings created by AANZFTA," he said.
"We see the agreement as an extremely strong signal to the rest of the world that the Asian region remains committed to pursuing economic growth, exports and jobs to help drive economic recovery. It represents a historic milestone for the region's trade."
He notes that the AANZFTA includes an economic cooperation component to provide technical assistance and capacity building to developing ASEAN countries to assist in implementation of the agreement.
"This cooperation is an integral part of the FTA, and Australia will provide up to $20m in funding for worthwhile capacity-building projects over a five year period," Crean said.
"Australia stands to gain from this agreement across many sectors, including exports of agricultural products, industrial goods and services."
Building relationships An area with huge potential for Australian manufacturers looking to export is the automotive industry, with Thailand - increasingly being called 'the Detroit of the East' - emerging as the key player.
The eastern seaboard of Thailand has become a major automotive 'cluster' with most of the global car producers establishing factories there, to take advantage of the booming market in the Mekong Delta.
A number of Australian companies have established facilities in the Hemaraj business park.
Glen Dobinson, a principal of Dobinson's Spring & Suspension, based in Rockhampton on the Queensland coast, sees a great deal of potential in the industry in Thailand.
He points to the FTA between Thailand and Australia as a turning point for his company's exports of automotive components, especially coil springs.
"Austrade was very helpful in getting us introductions to people, but it was the reductions in duty that really changed the picture for us," he said.
"We have developed a very good understanding with our main customer there. The Thais are good to work with but they always drive a pretty hard bargain.
"There has been a dip in demand this past year but I have no doubt that there will eventually be a recovery. You have to be prepared for a slowdown, work at maintaining your relationships, and be there when times get better."
In the past ten years, the Thai industry has expanded from cars and cycles into vans and trucks, including vehicles for towing, a new market segment in much of the region.
"The future of the automotive industry in Asia is driven by demographics, and all those signs point to strong growth in the long term," said Morehouse.
"Whether it is in that industry or another in Asia, Australian companies should realise that the ASEAN region will be our number two market by 2015, after China.
"There are lessons to be learned from the Asia contraction of 1997-98. Companies that left Asia then found it very hard to return for the upswing, while those that did everything possible to hold their positions did well. It's the same story now: it might be difficult, but the effort will be worth it."
Big projects look to the future Despite the current crisis, several of the ASEAN governments are continuing to put money into huge development projects.
One of the most significant for the region is the Iskandar Malaysia project, which is expected to attract a total US$110bn in international and domestic investment. When finished in 2025, the project will cover an area three times the size of Singapore.
The location of the project, in the Johor Bahru region at the southern tip of the Malaysia peninsula, is crucial: at the pivot of the Indonesia-Malaysia-Singapore Growth Triangle, and midway between the markets of India and China.
The aim is to capitalise on this strategic position to develop Iskandar as a metropolitan hub.
Simon Crean recently led a high-level business delegation to Iskandar to examine opportunities for Australian businesses, and the project has been the subject of a successful series of seminars organised by Austrade and the Urban Development Institute of Australia. Several Australian companies, especially in the construction sector, have already established positions in Iskandar.
Singapore, even while experiencing a contraction, is also pouring money into forward-looking projects. The government has nominated the medical sector as a key area for the country's future, and one aspect of this is Biopolis, a huge new research precinct built at a cost of S$500m. The emphasis on the medical industry offers opportunities for Australian companies engaged in pharmaceuticals, medical instruments, and therapeutic equipment.
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