Japanese Business in Australia Scales New Heights - FDI Tops $100 billion

  

Anyone who relies on the general media for information may have the view that Australia only has one major economic partner and that it is China. But readers of this Newsletter know that the US and Japan are far larger investors in Australia.

  

Recently released figures from the ABS show that Japanese foreign direct investment (FDI) into Australia reached $105.9 billion at the end of 2018. Japan retains its position as the second largest investor, having overtaken the UK in 2015. Japan accounts for 10.9% of all FDI into Australia.

The USA remains the largest source with $214 billion, the UK third with $99 billion, The Netherlands fourth with $49 billion and China fifth with $40 billion, which is 4.1% of the total. The shares for both The Netherlands and for China actually shrank in 2018.

  

Additionally, in the past five years, Japanese FDI into Australia has grown by over 36%, the highest growth rate amongst the major investing countries. It is a remarkable story and the micro data show that the growth is also broad, across every sector of the economy.

  

Many Japanese companies are now entering Australia through M&A, building on their own experience and capabilities and adding to the Australian economy. These investments are occurring in addition to, not instead of, investment in the traditional sectors of energy, resources and agriculture.

  

Digital services (LIFULL), bottled water (Eneco), auto dealerships (IDOM), insurance (MS&AD, Daido, Da-ichi Life), management consulting (Outsourcing), construction (Misawa Homes, Daiwa House, Bunka Shutter), financial services (MUTB), equipment leasing (Nisshio Rent All) and parking stations (Park24) are just some of the examples in 2018.

  

The mutual importance of the Japanese and Australian economies continues to grow in dimensions we could not foresee a decade ago, at least not the specifics.  In a report from 10 years ago (Australia and Japan Beyond the Mainstream), I wrote about the power of adjacency, which refers to the advantage conferred to ventures that have connections to existing business networks.  The depth of the relationship built over many decades is being repeated in a wider number of sectors.

  

There will be new challenges to deal with as M&A introduces complexities around differences in governance, communications, decision making, human resources policies, etc. But there are people with heavy engagement in the relationship who are ready to contribute to future success.

  

Author: Manuel Panagiotopoulos

Managing Director, Australian and Japanese Economic Intelligence