GDP (2018) : US$ 1.42 trillion
World Bank “Ease of Doing Business” Rank (2018) : 18
Bilateral Trade with India (2018-19) : US$ 16.65 billion
Resilient and resourceful
Among the developed economies, Australia has performed consistently well in the past two decades and was largely unscathed by the global financial crisis of 2008/2009. With a stable, open and democratic political and regulatory environment, as well as an open, efficient and transparent legal system, Australia provides a high degree of confidence and certainty for investors.
Australia actively encourages direct foreign investment, with the regulatory environment being progressively liberalised since the mid-1980s.
The country has a mature, established, safe and low-risk business environment, which companies will find relatively easy to navigate. In 2015, its FTA with China was the latest in a string of agreements with key Asian trading partners, opening up more business and investment opportunities, especially in the export sector.
Australia offers a highly-skilled, multilingual workforce, supported by strong tertiary education. India companies entering the market can benefit from a high-quality workforce with entrenched cultural ties to the region.
Food and Agri-business
Australia’s growing agri-business and food sector offers unique opportunities for investors interested in food and fibre production, as well as downstream processing industries.
The government has been stimulating the agricultural sector, such that both mining and dining are important economic drivers. Australia has found a niche demand market in Asia for its healthy, premium-quality food products, and hopes to capitalise on the region’s fast-growing consumer base. The government has started exploring northern Australia’s potential as a food bowl, encouraging private sector investment to assist in developing the region’s infrastructure to facilitate future agricultural production. Agricultural exports include wheat, barley, sugarcane, fruits and vegetables, cattle, sheep, poultry and seafood.
With global food demand booming, Australia is well-placed to become a premium food supplier and a long-term partner of choice in food security. It has the advantages of abundant arable land and operational efficiency, proximity to Asia, and a reputation as a safe and secure source of healthy, high-quality produce. This reputation is supported by a transparent food chain and highly effective regulation.
In 2017, the Turnbull government announced that it would invest US$ 75 billion in transport infrastructure over the next ten years. This includes major passenger and freight rail projects such as the Melbourne to Brisbane Inland Rail, as well as the US$ 5.3 billion Western Sydney Airport, set to open in 2026. The government is also boosting its funding for various road improvement programmes. These major infrastructure plans provide many long-term opportunities for Indian firms.
Resources and Energy
Australia still has the world’s largest share of iron ore, uranium, gold, zinc and nickel reserves. Iron ore and coal are the key commodities export, and Australia’s mining industry has previously been a major driver of economic growth. However, falling commodity prices and rising operating costs have resulted in fewer projects coming on stream.
In the energy sector, Australia has a long history of oil and gas production, and is focusing on becoming a key global player. The industry’s contribution to GDP is forecast to reach 3.5% by 2020, up from 2% in 20121. In particular, LNG production is expected to rise by 30 million tonnes from 2017 to 2020. Besides conventional energy, Australia is also well-endowed with resources for renewable energy, including wind, water, geothermal and solar energy.
For companies interested in Australia’s energy sector, LNG and renewables are particularly worth exploring. There is still a substantial pipeline of new and planned projects with 25- to 50-year life cycles which offer sustainable investment opportunities in mining, oil, and conventional and unconventional gas production.
The economic and commercial relationship between India and Australia has grown substantially over the past decade, the turning point being the liberalisation of the Indian economy in the 90s. Bilateral trade is growing exponentially. From A$ 6.54 bn in 2003-04, trade in goods and services between India and Australia reached A$ 19.29 billion in 2015-16. India’s exports to Australia were A$ 6.45 billion, while India’s imports from Australia were A$ 12.84 billion.
Australia’s exports of goods to India rose by an annual average of nearly 25% over the past five years. India’s ranking among Australia’s export destinations has risen from sixth to fifth in this period. India’s exports of goods and services to Australia have increased by an annual average of 12% over the past five years. Venture to Australia.
The service sector, including tourism, education and financial services, accounts for about 70% of Australia’s GDP, although the country is also a major exporter of agricultural products, minerals and energy.
INDIAN INVESTMENT IN AUSTRALIA
Aditya Birla Group owns copper mines at Nifty (Western Australia) and Mt Gordon (Queensland) and is listed on the Australian Stock Exchange. In September 2015, Aditya Birla Group sold its closed Birla Mt Gordon copper mine to Lighthouse Minerals Holdings Pty Ltd for around A$10.8 million. Gujarat NRE Co. operates three coal mines in New South Wales. It employs about 300 people across its operations in Australia. In September 2013, Jindal Steel and Power Limited (JSPL) took over the management control of Wollongong Coal Limited (WCL) from the original promoters, Gujarat NRE Coke. JSPL invested A$45 million for around 45% in the company.
Asian Paints acquired Pacific Paints Ltd, a company based in Queensland, among others. It was acquired by Omega Paints International in 2000. The company employs 30 employees and generated A$ 11.5 million in 2016. Reliance has entered into a partnership agreement with Uranium Exploration Limited based in South Australia. Uranium Exploration has 28 uranium exploration licences across three states – Northern Territory, South Australia and Western Australia. Reliance has 49% stake in four of these projects.
Pacific Seeds was acquired by Advanta Seeds in 1996 and later became part of United Phosphorus Ltd. after it acquired Advanta Seeds. Advanta Seeds operates in all states and territories, with a research farm at Gatton, Queensland, and a seed production farm located in the Ord, and a variety of agronomic trials across the country. Each day, over 100 employees work to produce tonnes of the highest quality seed which is competitive in an increasingly tough market and sets the standard in the paddock.
Essar has two offshore petroleum exploration permits in the Bonaparte Basin, off the Northern Territory, (NT/P77 and NT/P78). Essar will have to pay a 40 % tax on its profits from the blocks as per the norms of the Australian government but will have the freedom to bring in the oil and gas to India. Mahindra has established distribution channels and after sales network for its tractors and other commercial vehicles. Mahindra sells tractors and also has a commercial utility vehicle by the name of Pik-Up.
Mahindra Satyam caters to many Australian corporate clients and has development centres in Melbourne. Tata Power and Australian company Geodynamics have entered into an agreement involving Tata Power taking an 11.4 per cent stake in Geodynamics for A$ 44.1 million and a seat on its Board. Tatas have enhanced their investment in a mining joint venture (led by Vale of Brazil) in Queensland. In June 2013, Tata Power further strengthened its footprint by commissioning a 1 MW geothermal plant in Australia. Petronet LNG Limited, New Delhi signed an agreement with ExxonMobile on 10 August 2009 to source 1.5 mmtpa of LNG from its share of Gorgon Project, for 20 years starting from 2014.
Adani Enterprises, India’s biggest coal importer, has reached an agreement to buy one of Linc Energy’s Queenslnd coal permits for $ 500 million plus royalties. Linc has sold its Galilee Basin coal deposits to the Adani Group in a deal worth up to $ 3 billion over 20 years. Linkc’s Galilee tenement is about 100 km north of Alpha in central Queensland. The deal has already been approved by the Foreign Investment Review Board and the Queensland Government has also indicated it would approve the transfer of the coal tenement. It is expected that Adani would begin producing thermal coal from the site from 2014. Adani Enterprises, through its subsidiary, Mudra Port and Special Economic Zone has acquired rights to manage the Abbot Point Coal loading terminal for a period of 99 years at a cost of A$ 1.83 billion. Abbot Point Coal terminal is a crucial export hub for coal transport from the Bowen and Galilee basins in Queensland.
In December 2010, Indian power giant Lanco Infratech made the biggest Indian investment to date in Australia, spending almost A$ 850 million to buy the coal assets of Ric Stowe’s failed Griffin Group and unveiling plans to triple the export capacity of the mines.
GVK Power and Infrastructure finalised the purchase of two thermal coal mines from Australia’s Hancock Prospecting for about US$ 2.4 billion and is also investing in development of rail network from the mine to the nearest port, which entails a total investment of U$10 bn. The company faced legal challenges from anti – mining protestors since 2012. In September 2016, the Queensland Court of Appeals decided to uphold the Environmental Authority for its Alpha Coal Project, thus allowing GVK Power to continue develop the project that will create thousands of jobs in Queensland. NMDC has concluded the purchase of half stake in Perth based Legacy Iron Ore in September and is conducting due diligence for the purchase of the Ridley magnetite project of Atlas Iron Ore. NMDC had first acquired 50 per cent equity Legacy Iron Ore in 2011, and raised it to 78.6 per cent in 2014.
Infosys has acquired Portland Group, a sourcing and category management services firm in Australia for A$ 37 million. The Infosys Portland relationship has transformed Portland into a true end-to-end procurement services organisation. In addition to sourcing and procurement capabilities, Infosys has also enabled Portland to expand its supply chain management services where they leverage Infosys offerings to support supply chain processes.
All the major Indian IT companies have a presence in Australia and are rapidly growing. These include Infosys; Mahindra Satyam; TCS; HCL; Polaris Software Lab Ltd; Birlasoft; NIIT; ICICI Infotech; Wipro; Mahindra-British Telecom Ltd; Pentasoft; Kale Consultants Australia P/L; Tata Infotech Limited; Zensar Technologies; i-Flex and igate among others. Satyam Mahindra has the largest product development centre outside India in Melbourne. NASSCOM also has a Sydney chapter. IN
Government of India offices and PSUs in Australia include the Tourist Office; State Bank of India branch office (since April 2004) received license for full trade finance activities in 2007; New India Assurance Co Ltd (in Australia since 1955); and Air India (offline station).
AUSTRALIAN INVESTMENT IN INDIA
While presence of Australian companies in India is growing, it is still small, compared to its presence in other countries, notably China. Some of the major Australian companies which have presence in India include Telstra (telecommunications); BHP Billiton (mining); Rio Tinto (mining); MIM Holdings (mining); Snowy Mountains Engineering Corporation (infrastructure development); AWB (formerly Australian Wheat Board) Argyle diamonds (technical support office for diamond sales); P & O Australia (development of container ports); Clough Engineering (port development); Orica Limited (joint venture with Imperial Chemical Industries); Lucent Technologies (IT); ANZ (IT); Fosters (brewery); Boral Ltd; Qantas (Airlines); Other companies include: TNT Express (courier services); Village Roadshow (entertainment); Cookie Man (biscuits); Faber Castell (stationery products); Futuris brakes; Minter Elison (legal services); Narrowcasters (simultaneous interpretation in Museums in Mumbai, Delhi and Jodhpur); Mayne Group (pharmaceuticals); Sigma (pharmaceuticals); among others. Recent entrants include Macquarie Group (infrastructure); Blue scope steel; L J Hooker (property development); Leighton Holding (property development); Axa Asia Pacific (joint venture agreement with Bharti Telecoms Group for Insurance); Woolworths (retail and IT opportunities with Tata Sons and TCS); among others.
In November 2008, Insurance Australia Group Limited (IAG) and State Bank of India (SBI) signed a joint venture agreement to establish a general insurance company in India. IAG would invest $170 million in the joint venture. IAG currently owns 26% of SBI General Insurance Company, a joint venture with State Bank of India, India’s largest and most recognised financial services organisation. Cartridge World – the South Australia-based company already has over 90 stores in India as of September 2011.
India Resources Limited is based in Perth, Western Australia. The company has developed a close commercial alliance with Hindustan Copper Limited (HCL), a Government of India enterprise).
In April 2009, Investment bank Macquarie Group and the State Bank of Indiaalso launched a new fund called the Macquarie-SBI Infrastructure Fund (MSIF), to invest in infrastructure projects in India. The fund is an unlisted fund, which provides finances to Indian companies in infrastructure. The fund closed for investment in March 2011. The portfolio of the fund comprises of Telecom towers – 21%, Power generation – 18%, Renewables – 3% and Uninvested Capital – 58%. As of March 2017, Macquarie Infrastructure and Real Assets (MIRA) is in advanced talks to acquire a 320 megawatt (MW) portfolio of solar assets from Hindustan Power Projects Pvt. Ltd (HPPPL).
In July 2009, the Indian arm of Leighton Holdings Limited, Leighton India, signed a Project Alliance Agreement with Tata Realty and Infrastructure Limited (TRIL) for the delivery of the new Ramanujan IT Park in Chennai. The US$ 230 million project involves the construction of over 570,000 sq. mts. built up area comprising a mixture of IT offices, a convention centre, retail, residential, hospitality, entertainment and car park facilities. Leighton India, a subsidiary of Leighton Holdings, Australia’s largest construction company has won a contract for two major infrastructure projects in India worth US$ 550 million, which includes US$ 500 million contract for engineering, procurement and construction work on the 9 km Chenani-Nashri road tunnel in Jammu, for road operator IL&FS Transportation Networks and a US$ 50 million contract for the Vizag Port expansion on India’s east coast, in a consortium with Indian conglomerate Sterlite.
Rio Tinto signed a memorandum of understanding with India’s Jindal Steel and Power to commercialise Rio’s Hismelt iron ore smelting technology and move Rio’s mothballed Kwinana Hismelt plant to Jindal’s Orissa plant. The diamond business unit’s most advanced exploration project was the Bunder Project in District Chhatarpur, Madhya Pradesh, India, where Rio Tinto became the first foreign group to be granted a prospecting license there. In February 2017, the mining giant formally handed over the project to the state government.
ANZ Banking Group opened its first branch in Mumbai in June 2011 to support trade and investment flows between India and Australia and will serve corporate and institutional clients. In May 2014, ANZ received in-principle approval from the Reserve Bank of India (RBI) to open new branches in Gurgaon, New Delhi’s prime business hub and in outer Bengaluru. ANZ commenced operations in Gurgaon in July 2015, and in outer Bengaluru in May 2016.
In May 2012, Australian bank Westpac announced plans to open its first branch in India after receiving a permit from the Reserve Bank of India. The branch was opened in Mumbai in November 2012. The branch will support Australian customers and a growing number of Indian customers with trade and investment links to Australia.
Top exports from India to Australia include mineral fuels, locomotives, pearls, pharmaceuticals, electrical machinery, iron & steel and textiles.
|HS Code (2-digit)||Product Label||India’s imports from Australia (in US $ million)|
|27||Mineral fuels, mineral oils and products of their distillation; bituminous substances; mineral …||829.2|
|86||Railway or tramway locomotives, rolling stock and parts thereof; railway or tramway track fixtures…||351.3|
|71||Natural or cultured pearls, precious or semi-precious stones, precious metals, metals clad…||288.9|
|85||Electrical machinery and equipment and parts thereof; sound recorders and reproducers, television…||183.2|
|84||Machinery, mechanical appliances, nuclear reactors, boilers; parts thereof||159.6|
|73||Articles of iron or steel||138|
|63||Other made-up textile articles; sets; worn clothing and worn textile articles; rags||131.4|
|87||Vehicles other than railway or tramway rolling stock, and parts and accessories thereof||114.2|
|62||Articles of apparel and clothing accessories, not knitted or crocheted||106.1|
Source: ITC Trade Map
Untapped Trade Potential
The products with greatest export potential from India to Australia are motor vehicles for the transport of persons, medicaments consisting of mixed or unmixed products, for retail sale, and diamonds, according to the ITC Market Potential Map.
|Product code||Description||Export potential|
|8703XX||Motor vehicles for the transport of persons, nes||US$ 385 million|
|3004Xb||Medicaments consisting of mixed or unmixed products, for retail sale||US$ $141.0 million|
|710239||Diamonds, worked||US$ 42.4 million|
|711319||Jewellery, of precious metal, nes||US$ 51.1 million|
|3808||Insecticides, rodenticides, fungicides, herbicides & similar||US$ 42.9 million|
|730511||Line pipe used for oil or gas pipelines||US$ 80.7 million|
Source: ITC Trade Map
|Product Code||Product Label||India’s imports from Australia (in US$ million)|
|27||Mineral fuels, mineral oils and products of their distillation; bituminous substances; mineral …||10,335.5|
|26||Ores, slag and ash||916.3|
|28||Inorganic chemicals; organic or inorganic compounds of precious metals, of rare-earth metals, …||660.9|
|71||Natural or cultured pearls, precious or semi-precious stones, precious metals, metals clad …||618.5|
|51||Wool, fine or coarse animal hair; horsehair yarn and woven fabric||202.9|
|76||Aluminium and articles thereof||200.6|
|78||Lead and articles thereof||130.6|
|72||Iron and steel||116.1|
|08||Edible fruit and nuts; peel of citrus fruit or melons||104.8|
|07||Edible vegetables and certain roots and tubers||97.9|
Source: ITC Trade Map
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