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Opportunities to surf Australia’s current, next and future growth waves
Japan-Australia Economic Partnership Agreement (JAEPA)
3 OpportunIties under the JAEPA 4 Agribusiness
5 Energy and natural resources 6 Services
7 How Deloitte can help
Contents
Japan-Australia Economic Partnership Agreement (JAEPA) 3
Australia has recently entered into a number of free trade agreements with key Asian trading partners which will create opportunities for investors to access current, next and future waves of growth in the Australian economy. Japan and Australia have long enjoyed a close relationship, with Australia’s Prime Minister recently nominating Japan as Australia’s closest friend in Asia. Trade is undoubtedly a key element of this relationship, with Japan currently Australia’s second largest export market and partner1.
In a strengthening of these existing ties, the two countries entered into the Japan-Australia Economic Partnership Agreement (JAEPA) in July 2014. JAEPA took effect on 15 January 2015 and, once fully implemented, will be the most liberalising trade agreement that Japan has ever been a party to1.
From an Australian perspective, JAEPA will deliver significant benefits to agricultural producers, energy and resource exporters, service providers and consumers. Once fully implemented more than 97 per cent of Australian exports to Japan will receive preferential access or enter the country duty free1.
From a Japanese perspective, JAEPA will see a gradual elimination of tariffs on a range of Japanese imports into Australia, including motor vehicles, electronics and white goods. The Foreign Investment Review Board’s screening threshold for Japanese investment in non-sensitive sectors will also increase from $248 million to $1,094 million. Japanese businesses will also be able to leverage the Australian company benefits noted through the acquisition and operation of their own Australian businesses.
JAEPA represents significant potential opportunity for both Australian and Japanese producers, exporters, investors, service providers and consumers. It is also fundamentally aligned with some of the key current and future growth sectors in the Australian economy, as identified in Deloitte’s Building the Lucky Country paper, Positioning for Prosperity: Catching the next wave. These opportunities can be broadly grouped into three categories: agribusiness, energy and natural resources, and services.
Opportunities under the JAEPA
Future wavesNext waves
Current wave
Australian advantage (right is stronger)
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Water and waste services
Health
TourismGas
Agribusiness
Oil
Reail and wholesale
Business and property services
BankingConstruction
Telecommunications
Other education and training
Transport and logistics
Public administration
Mining
Internal education
Wealth management
ICT
Manufacturing
Media
Australia's current, next and future waves of growth, 2013-33
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Reference: 1Department of Foreign Affairs and Trade
Agribusiness is one of the key future growth opportunities for Australia
Agribusiness
Key JAEPA initiatives
• Rapid beef tariff reductions
• Immediate elimination of tariff on bulk wine and the 15 per cent tariff on bottled wine over seven years
• Establishment of a duty free quota for Australian Cheese
• Immediate elimination of tariffs on lobsters, crustaceans and shellfish, and a ten-year phasing out of tariffs on tuna and Atlantic salmon
• Fast tariff elimination for the vast majority of Australia’s fruit, vegetables, nuts and juices
• Immediate and preferential duty free access for milk protein concentrates, lactose and casein, as well as additional opportunities for ice-cream and frozen yoghurt products
• Immediate duty free quotas for feed barley, and wheat and streamlined export arrangements for some Australian wheat varieties
• Immediate tariff elimination and reduced levies for high polarity raw sugar.
Agribusiness is clearly one of the key future growth sectors for the Australian economy, premised on increasing global demand for agricultural products driven by ongoing growth in a number of emerging economies which is leading to greater consumption of dairy, fruit and vegetable and protein products. This is also expected to drive future opportunities in the food processing sector.
Australia is well positioned to capitalise on this, given the abundance of its agricultural production, history of production security, the quality and freshness of our produce and the level of innovation achieved in the industry. However, key risks include the highly fragmented nature of a number of sectors, and a demographic shift away from agricultural production.
Deloitte view
4
Japan-Australia Economic Partnership Agreement (JAEPA) 5
A number of future growth opportunities exist to follow on from mining and gas
Energy and natural resources
In addition to the ‘current wave’ of opportunity around mining, there are ‘future wave’ opportunities in gas, clean coal, gas transport, and next generation solar and nuclear energy. All of these have significant potential, underpinned by strong ongoing global demand, the search for alternate energy sources (compared to nuclear or dirty energy sources) and open markets with a number of strong participants.
Given its wealth of natural resources, close proximity to key customers/markets and well developed technology, Australia is well placed to capitalise on these advantages.
Key risks to this opportunity, however, include a continued high cost of doing business and increasing regulatory burden.
Elimination of tariffs on:
• Entry of coke and semi-coke coal, non-crude petroleum oils, aluminium hydroxide and titanium dioxide
• Paints, key plastic products and pearl jewellery
• Unwrought nickel and fero-manganese.
Key JAEPA initiativesDeloitte view
Education and wealth management are key future growth drivers
Services
Services are seen as a key future growth driver, especially given the challenges being faced by traditional industries such as manufacturing. This specifically includes sectors such as education and wealth management as well as slipstream opportunities such as financing. These opportunities are premised on increasing demand from emerging economies with growing middle classes, greater average wealth, and ageing populations.
Australia is well-placed to take advantage of these factors, given our well-developed education and wealth management industries which enjoy well-earned reputations for quality and trustworthiness, which can be leveraged into these markets.
Key JAEPA initiativesDeloitte view
• Australian financial services products – guaranteed cross-border access to Japan for providers when providing investment advice and portfolio management services
• Legal services – improved access for Australian law firms
• Education – guaranteed market access for Australian education providers to Japan’s higher education services market, including vocational and technical training
• Telecommunications – commitments on non-discriminatory treatment, regulatory transparency, competitive safeguards and fair and reasonable access to telecommunications networks and services
• People – Australian professionals to benefit from guaranteed market and visa access arrangements for their families.
6
Japan-Australia Economic Partnership Agreement (JAEPA) 7
Deloitte has a long history of successfully assisting Japanese companies invest in Australia and vice versa; we understand the opportunities available, as well as the issues typically faced, and can help you in addressing both. Underpinning this are strong teams in both Australia and Japan, who have well-developed relationships and a co-ordinated and pragmatic approach to supporting clients.
How Deloitte can help
We understand the available opportunities, the associated risks, and can help you to invest successfully
We are uniquely positioned to support potential investors across the breadth of the M&A lifecycle, from target selection, to due diligence and through to post acquisition integration. The breadth of our service offering which includes economics and real estate services, in addition to our core accounting, advisory and tax services, means we are able to provide a broader perspective on potential investment opportunities.
This publication contains general information only, and none of Deloitte Touche Tohmatsu Limited, its member firms, or their related entities (collectively the “Deloitte Network”) is, by means of this publication, rendering professional advice or services.
Before making any decision or taking any action that may affect your finances or your business, you should consult a qualified professional adviser. No entity in the Deloitte Network shall be responsible for any loss whatsoever sustained by any person who relies on this publication.
About Deloitte
Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee, and its network of member firms, each of which is a legally separate and independent entity. Please see www.deloitte.com/au/about for a detailed description of the legal structure of Deloitte Touche Tohmatsu Limited and its member firms.
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About Deloitte Japan
Deloitte Tohmatsu Group (Deloitte Japan) is the name of the Japan member firm group of Deloitte Touche Tohmatsu Limited (DTTL), a UK private company limited by guarantee, which includes Deloitte Touche Tohmatsu LLC, Deloitte Tohmatsu Consulting LLC, Deloitte Tohmatsu Financial Advisory LLC, Deloitte Tohmatsu Tax Co., DT Legal Japan, and all of their respective subsidiaries and affiliates. Deloitte Tohmatsu Group (Deloitte Japan) is among the nation’s leading professional services firms and each entity in Deloitte Tohmatsu Group (Deloitte Japan) provides services in accordance with applicable laws and regulations. The services include audit, tax, legal, consulting, and financial advisory services which are delivered to many clients including multinational enterprises and major Japanese business entities through over 7,900 professionals in nearly 40 cities throughout Japan. For more information, please visit the Deloitte Tohmatsu Group (Deloitte Japan)’s website www.deloitte.com/jp/en.
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© 2015 Deloitte Touche Tohmatsu.
MCBD_MEL_04/15_051522
Ashley Miller Partner – Corporate Finance Tel: +61 3 9671 7029 Email: [email protected]
Nobuyuki NagataPartner – Corporate FinanceTel: +81 80 4435 1513 Email: [email protected]
Ian Thatcher Financial Advisory Lead Partner – Asia Pacific Tel: +61 2 9322 7640 Email: [email protected]
