Businesses across sectors such as manufacturing, infrastructure, construction and engineering have enormous scope to leverage opportunities in Southeast Asia, an industry leader says.

(above image: Petronas Towers at Kuala Lumpur in December 2019, author Jamess Kerwin from Tbilisi, republished under Creative Commons Licence 2.0)

During a recent interview, Sourceable spoke with David Singleton, CEO and Managing Director of Austin Engineering, about the opportunities available to Australian firms in Southeast Asia.

With operations spanning around the world, Austin Engineering designs and manufactures customised mining equipment such as dump truck bodies, buckets, water tanks and tyre handlers for use in the mining industry.

In terms of Southeast Asia, the firm operates a manufacturing facility on Indonesia’s Batam Island.

Located within a Free Trade Zone and a Free Port Zone, the facility sits just 20 kilometres southeast of Singapore – one of the world’s largest and busiest ports – and enjoys access to international shipping routes.

In 2023, the facility underwent a major expansion which added an extra 10,000sqm to its floor space and doubled its capacity.

During the interview, Singleton told Sourceable that opportunities in Southeast Asia should not be underestimated.

Speaking from a manufacturing viewpoint, he said that common sentiments that Australia is unable to compete on the world stage are misplaced.

Nevertheless, a meaningful presence in Southeast Asia can help firms to overcome traditional limitations that are inherent back home.

“The narrative in Australia is often that Australian manufacturing companies can’t compete on the world stage,” Singleton said.

“(The narrative is often that) Australia is not a set up for manufacturing – the Europeans, the Americans, the Chinese do this a lot better and it’s not something for us.

“I thoroughly and utterly disagree with that. And I think it’s (the narrative) because the discussion is framed in the in the wrong way.

“The reality is that Australia sits on the edge of what is now the most productive industrial area in the world with big capacity, large populations, good cost structures and – these days – very friendly and positive relationships between those countries in Southeast Asia and the Australian Government.

“So, if you think about that then as a story for us. Think about what Australia’s strengths are. We’re a very entrepreneurial country with very entrepreneurial people. We’ve got high quality people who are, by international standards, extremely well-educated and very motivated. And in this country, we have good access to finance for the right type of businesses so we can invest them.

“But the problems that we have are that we’ve got a relatively small home market except in mining where we’ve got a world class market here. We’ve got a limited workforce – it’s a small country still with 27 million people. And there is still this tyranny of distance from Australia to certain export markets.

“And so Southeast Asia is really the place to be if you’re in manufacturing.

“But the way to do that is that combination of the strengths that we have here in Australia – those things I talked about – with the strengths that we have in Southeast Asia. And if you bring those two things together, you’ve got this ideal situation.

“And if you think about that on a world scale, it’s what Mexico, for instance, has been to the United States – the way that they’ve created capacity and cost advantage in using Mexico. It’s what Eastern Europe was to the likes of Germany …

“… I think our situation in Australia is that situation, but turbocharged. I think the opportunity, the cost base, the capacity, the friendliness of Southeast Asian nations to Australia, is far greater today than those that we saw with those other two examples that I gave to you.

“I like to think that Southeast Asia for us has really unlocked the potential of our people and our company in Australia.”

(Pictured above, Austin Engineering’s Batam facility in Indonesia underwent a major expansion in 2023 to double its capacity. Image source: Austin Engineering)

A massive opportunity

Singleton’s comments come as the Australian Government is undertaking considerable effort to assist firms to develop opportunities in Southeast Asia.

Broadly speaking, the region encompasses countries such as Indonesia, Malaysia, Thailand, Singapore, Philippines, Laos, Vietnam, Cambodia, Brunei and Timor-Leste.

In 2022, Australian Prime Minister Anthony Albanese commissioned Nicholas Moore AO, Special Envoy for Southeast Asia, to lead the development of a national strategy to increase trade and investment between Australia and Southeast Asia between now and 2040.

The resulting strategy, released in 2023, identified ten priority sectors. These include infrastructure, clean energy, resources, food/agriculture, tourism/accommodation, healthcare, skills/education, digital economy, professional/financial services and creative industries.

The strategy indicated that opportunities in the region are enormous.

In infrastructure, the report estimates that Southeast Asia has a $US3 trillion investment gap that will require average annual investment of $US210 billion between now and 2040. This is occurring as infrastructure requirements are being driven by rapid urbanisation, digitisation and climate change.

Turning to energy, the report says that the region needs an estimated 454 gigawatts in new electricity generation capacity by 2050. Of this, 60 percent will need to be in renewables if nations across the region are to meet their Paris Agreement targets.

Infrastructure Investment Need: SE Asia 2023 to 2040

(above chart sourced from Invested: Australia’s Southeast Asia Economic Strategy to 2040, Department of Foreign Affairs and Trade, 2023)

Not Too Hard

According to Singleton, a common misconception is that operating in Southeast Asia is too difficult for all but the largest of enterprises. In particular, some companies are concerned that legal and governance structures across the region may not be reliable and that foreign companies may not have access to a level playing field.

Whilst he acknowledges that these may have been legitimate sources of anxiety in decades gone by, Singleton says such concerns are nowadays largely unfounded.

For those concerned about such issues, Australian institutions such as the Australian Trade and Investment Commission (Austrade) and the Australian embassy can provide guidance on what to do and who to work with (or not work with).

Blend local and company cultures

Asked about working with different languages and cultures, Singleton says that challenges in these areas are not insurmountable.

To do this, it is important to blend your existing company culture with the local culture in which you are operating. This involves being respectful of the local culture but also maintaining the culture that firms have within their Australian business.

When foreign businesses respect local culture, Singleton says that locals generally reciprocate and respond to company requirements and expectations.

In Austin’s operations in Batam, for example, there are Muslim workers who pray five times per day and need to leave site on Fridays to attend mass.  The company has provided a prayer room on site to facilitate the prayer needs.

By making such accommodations, Singleton says that differences in culture are manageable.

Furthermore, local people generally value the job and career opportunities which Australian companies provide. Moreover, Australian firms are valued on account of the way in which they are seen to operate fairly, reasonably and respectfully.

(Austin Engineering CEO and MD David Singleton. Image: supplied)

Four Tips for Success

When pursuing opportunities throughout Southeast Asia, Singleton encourages four actions.

First, it is important to treat investments in the region as a core part of overall strategy rather than a convenient add-on. This involves a meaningful investment of time and resources along with the development of the culture you want the local operations to follow.

Next, it is important to take advice from Australian institutions and other Australian companies with existing operations in the region.

In terms of institutions, Austrade can provide advice on matters such as incentives that may be available (tax free zones, grants, tax free holidays etc.), local governments that are receptive to foreign investment and reputable/non-reputable partners with whom to deal. Austrade can also provide a list of other Australian companies that are active within the region.

Meanwhile, sharing learnings with other Australian companies can help you to gain a greater appreciation of opportunities, challenges and risks that may be evident in particular areas as well strategies that may be needed to overcome challenges or mitigate risk.

Third, it is important to respect local culture whilst remaining true to your existing culture and requirements, as referred to above.

Finally, it is important to take a long-term view of your Southeast Asian operations. Among other things, this involves taking account of time zones and travel/logistics– particularly in cases where staff will be travelling back and forth continually.

In the case of Austin’s Batam operations, Singleton’s journey from Perth involves a four-hour plane ride to Singapore followed by a 30-minute boat trip. This enables him to leave Perth at around 6am and return home at around midnight that night.

(Thanks partly to rapid urbanisation, Southeast Asia needs $3 trillion worth of infrastructure investment between now and 2040. Image view from Baiyoke Sky Hotel, Bangkok in 2012. Author David McKelvey, Republished Under Creative Commons Attribution 2.0 Generic License)

Should be Done

Finally, speaking again from a manufacturer’s viewpoint, Singleton says that firms should absolutely establish operations throughout the region.

“There might be a few exceptions, but generally speaking, manufacturing businesses absolutely should have an engagement with Southeast Asia in their strategy.”