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Bat for a better FTA play

Australia must enter the Indian defence market, leveraging its ties with the US and the UK

In his first interview after the G20 World summit in Australia, Alan Jones, arguably Australia’s most powerful breakfast show host, was silent on Prime Minister Tony Abbott’s declaration to secure a Free Trade Agreement ( FTA) with India by December next year. Australia’s balance of trade has been consistently high with India, and Australia’s imports from India are significantly small, compared to those from China. On the other hand, Alan Jones questioned the Australian Prime Minister on the FTA with China. He told Abbott that Australia does not want an FTA with China. Alan admonished the Prime Minister, “You have to win the pub test … Can you buy a farm in China? Can you buy a steel mill in China? The answer is no…” Alan Jones was playing the role of a shock-jock for the galleries of middle Australia, the traditional vote base of Abbott’s conservative Liberal party, and Alan also continued to lecture the Prime Minster on the dismal record of China and the US on carbon gas emissions. The exchange between the talk show host and the Prime Minister of a country where winning the middle Australian pub-test (votes) is everything, was a telling point.

First, let us look at Australia’s interests. With Chinese investments in infrastructure projects in the Pacific increasing and with the increase in dumping of China funded-and-subsidised consumer goods in the region, the geopolitical influence of Australia in the region has been diminishing over the last two decades. Even Fiji, the small island nation with a population base of close to 40% of Indian diaspora, and once considered a ally of Australia, has been warming up to China, to the extent that it now procures most of the defence equipment from China, bypassing Australian interests. India is the world’s biggest arms buyer with a near-$38 billion defence budget compared to Australia’s $14 billion. The proposed FTA and the closer relations with the world’s largest democracy will open a number of opportunities for Australia. It will also leverage on its defence ties with the US and the UK to develop multilateral defence trade with India.

Australian corporates, more importantly middle Australia, recognise the importance of a socio-economic power balance in the Pacific region. They also know India is on the world stage and she is more than curry, cricket and Bollywood. Although many Australian corporates outsource the back-end operations such as billing and customer services to India, they have missed—after playing so much cricket and watching how every village in India knows Shane Warne and Steve Waugh—converting the touch points to kick-start Australia’s entry into one of the world’s largest energy generation, infrastructure and defence market. As they say, it hurts more when we think of all those long summer days on the cricket fields of India and Australia. Incidentally, Australia ranks ninth among all foreign nations making contributions to NGOs and voluntary organisations in India, and is ahead of France, the UAE, Singapore and Hong Kong.

For India, Australia is the obvious answer to her critical requirements for gas and coal to fuel the new power generation capacities and major infrastructure developments. Its closer defence ties with the US and the UK will help Australia enter the Indian defence market through partnerships. It is commendable that the Narendra Modi government quickly recognised the geopolitical importance of Australia, and Modi’s visit to Fiji was such a master-stroke that history will judge it as the turning point of India’s relationship with the Pacific region. Smarter, new generation Indian entrepreneurial companies were quick to realise the potential and establish themselves in the search for fuel for India’s power generation. The middle Australia that listens to Alan Jones knows that the story of Indian mining companies disturbing ecological balance of Great Barrier Reef is a googly from countries and companies with vested interests in spoiling the Australia-India business play, and they know how to let it go to the keeper or duck the ball. Last month, during the Indian Prime Minister’s visit to Australia, the Queensland government agreed to partly fund the rail project from the coal reserve at Galilee Basin to Abbot Point for the greater benefit of Australia. Several independent agencies, under both Liberal and Labor governments, have concluded that the rail and port development would not cause any harm to the ecological balance of the Great Barrier Reef.

During the last two decades, even after the European and US corporates have discovered the new India and tapped into its growing middle-class market of 200 million and India’s super soft-power, both Australian and Indian companies failed to collaborate seriously and participate in India’s growth story. For Middle Australia, India was still a bit ancient, but which played good cricket. Modi’s extempore speech addressing the Australian Parliament changed all that.

Australian corporates are keen to act as catalysts to an FTA between the two nations, and develop partnerships to participate in India’s growth story by working around the barriers of entry into the market. They are asking, “If Americans and Europeans can do it, why can’t we?” Yes, we can, after watching all those potential middle Indian market that follow the main religion of cricket.

The question is, will Indian corporates play ball or continue to look towards the West only?

By Rajeev Sunu & Sridhar Samu
Sunu is an Australian-Indian and vice-president with Tata Projects, currently on a sabbatical. Samu is Assistant Professor of Marketing, Indian School of Business, Hyderabad. Views are personal
rajeev.sunu@gmail.com & sridharsamu@gmail.com

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