Access Asia
Leveraging Free Trade Agreements
for Australian Trade Growth
October 2016
kpmg.com.au
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Contents
Introduction 5
FTAs are important for Australian bilateral and export trade
6
FTAs are underutilised in Australia
10
How much trade are we missing?
11
Why is this happening?
15
So how do companies actually access FTAs?
17
FTAs are no substitute for developing and executing the right strategy
18
Six critical elements for Asian trade success 20
E-commerce – the bilateral trade super highway
24
Alibaba Group: New markets for Australian exporters. A case study
26
Asia bound – How do you navigate transfer pricing and
other evolving tax laws in the region?
28
Summary
33
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Former Australian Trade Minister
Andrew Robb and his Korean counterpart,
HE Yoon Sang-jick, Korea Minister of Trade,
Industry and Energy, at the conclusion of
negotiations for a Free Trade Agreement (FTA)
with the Republic of Korea. © 2016 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.
AAP Image/DFAT
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Access Asia
Leveraging Free Trade Agreements for Australian Trade Growth
Introduction
Successfully negotiating Free Trade
Agreements (FTAs) is tough going
for governments, but the deals
are only of commercial value if
businesses know how to get access
to the concessions gained, and
take action.
International exports of goods and
services are critically important to
Australia, together contributing
41 percent of nominal GDP1. Eleven
of Australia’s top 15 bilateral trading
partners are Asian.
Ten of our top 15 trading partners
are covered under Free Trade
Agreements with Australia
(Indonesia and Vietnam under
AANZFTA).
Economic modelling reveals that
benefits from our recent North
Asian agreements (China, Japan and
Korea) could increase exports by
more than 11 percent, and generate
a cumulative Gross Domestic Profit
(GDP) increase of more than
AUD 24 billion in present value
terms between 2016 and 20352.
On the flipside, KPMG’s modelling
highlights that Australian
merchandise exporters who
underutilise FTAs will miss out on
at least AUD 14 billion of potential
export trade revenue over the next
five years. This is a conservative
view as it does not include
underutilisation of opportunities
for trade in services or foregone
productivity gains – which is huge!
1
Australian Bureau of Statistics, Balance of Payments
and International Investment Position, Australia
December 2015, Cat. No. 5302.0. 1 March 2016.
Figure is for the December 2015 quarter.
2
The Centre for International Economics. (2015).
Economic benefits of Australia's North Asian FTAs.
Canberra: Prepared for Department of Foreign Affairs
and Trade.
Many companies we’ve spoken to
as part of our research say they are
having difficulties in utilising these
complex trade mechanisms. They
are struggling with market entry
strategies, local Asian partners,
distribution models, branding and
intellectual property (IP) protection,
reputational and legal risks and other
non-tariff barriers.
This report discusses the current
underutilisation of FTAs and
reasons for this. It seeks to assist
Australian companies exporting to
and importing from Asian markets
with favourable FTA agreements
in place to make the most of the
opportunities.
Our report provides practical
insights and experienced advice
to assist clients across many
sectors and countries on market
entry strategies, supply chain
solutions, customs, and tax and
grant incentives and other key
considerations.
While numerous
FTA deals have been
done and media
announcements made,
a lot of work is required
to capture and maximise
the benefits.
The Turnbull Government is
pursuing an ambitious trade
agenda, with agreements under
negotiation including India,
Indonesia, Regional Comprehensive
Economic Partnership members
and several other countries.
These can be expected to create
more opportunities for Australian
businesses to grow their exports,
strengthen their import supply
chains, and ultimately drive much
needed economic growth and create
more Australian jobs.
There is great interest from
Australian companies in growing
trade relationships with these
exciting and developing markets
in Asia. There is clearly scope for
existing Australian exporters to
up-scale and move into multiple
markets as well as a significantly
increase the overall number of
Australian companies exporting.
© 2016 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.
All rights reserved. The KPMG name and logo are registered trademarks or trademarks of KPMG International. Liability limited by a scheme approved under Professional Standards Legislation.
5
Access Asia
Leveraging Free Trade Agreements for Australian Trade Growth
FTAs are important for Australian
bilateral and export trade
Australian Governments have actively pursued bilateral free trade agreements with Asian markets,
with considerable success. (Table 1 below).
Table 1: Australia’s trade in goods and services by top 15 partners 2015
Bilateral trade ranking
by country
2015 Bilateral
Trade (AUD
million)
Share of
bilateral
trade (%)
% Growth
2014-2015
Share of
Exports (%)
1. China
155,447
23.2
1.9
28.9
2. United States
70,195
10.5
15.8
7.0
3. Japan
64,950
9.7
-7.4
13.4
4. Republic of Korea
35,805
5.4
2.8
6.3
5. Singapore
25,683
3.8
-13.1
3.5
6. New Zealand
24,021
3.6
2.2
4.0
7. United Kingdom
23,021
3.5
10.0
2.8
8. Thailand
20,767
3.1
9.5
1.7
9. India
19,826
3.0
25.8
4.2
10. Malaysia
19,164
2.9
-7.4
2.5
11. Germany
18,570
2.8
6.2
0
12. Indonesia
15,064
2.3
-4.0
2.2
13. Taiwan
12,462
1.9
-1.7
2.4
14. Vietnam
10,065
1.5
0.3
1.5
15. Hong Kong SAR
9,819
1.5
13.4
1.8
FTA status
FTAs in place
FTAs in negotiation
No FTA
Source: Australia’s trade in goods and services 2015 (Department of Foreign Affairs and Trade, 2016).
6
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Access Asia
Leveraging Free Trade Agreements for Australian Trade Growth
Current stocktake of Australia’s FTAs
FTAs currently available for Australian companies are:
1983
Australia-New Zealand CEA (ANZCERTA)
2003 Singapore-Australia FTA (SAFTA)
2005 Thailand-Australia FTA (TAFTA)
2005 Australia-United States FTA (AUSFTA)
2009 Australia-Chile FTA (ACl-FTA)
2010 ASEAN-Australia-New Zealand FTA (AANZFTA)
2013 Malaysia-Australia FTA (MAFTA)
2014 Korea-Australia FTA (KAFTA)
2015 Japan-Australia Economic Partnership Agreement (JAEPA)
2015 China-Australia FTA (ChAFTA)
Former Australian Prime Minister Tony Abbott (centre) looks on as Chinese Minister of Commerce Dr Gao Hucheng (left) and former Australian
Minister for Trade Andrew Robb sign the Free Trade Agreement (FTA) between the two countries in Canberra, Wednesday, June 17, 2015.
7
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AAP Image/Lukas Coch
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Access Asia
Leveraging Free Trade Agreements for Australian Trade Growth
South Korean President Park Geun-hye (fourth from left) and Former Prime Minister Tony Abbott (third from left) look on as trade ministers
of South Korea and Australia sign a bilateral free trade agreement at the presidential office, Cheong Wa Dae, in Seoul, South Korea,
Tuesday, April 8, 2014.
The Asian trifecta of FTAs –
a huge win and opportunity
for Australian exporters
The Department of Foreign Affairs
and Trade (DFAT) estimates the
benefits from Australia’s recent
“Trifecta of FTAs” with China,
Japan and Korea to be substantial.
On commencement, in excess of
80 percent of Australian exports
should receive preferential duty
treatment for China and South Korea
(Japan not stated) and upon full
implementation, in excess of
99 percent of Australian exports
should receive either free or
preferential duty rates under the
three FTAs3.
The initial feedback from Australian
companies that KPMG spoke to
after the Trifecta of FTAs with Japan,
Korea and China was very positive.
A senior executive from a major
Australian dairy exporter told us
that the ChAFTA was particularly
exciting as industry was involved in
consultation and announcements.
The same executive felt the ChAFTA
represented an acceptance by the
Chinese Government that China
can’t meet its dairy requirements
and is genuinely committed
to implementing the terms of
the agreement.
The future pipeline of FTAs
and the rise and rise of the
mega FTA
The Government is focused on
progressing both bilateral and
multi-lateral “mega” FTAs.
These FTAs currently in development
or awaiting enactment include:
• Trans-Pacific Partnership (TPP)
• Regional Comprehensive
Economic Partnership (RCEP)
• Pacific Agreement on Closer
Economic Relations (PACER),
the update to the South Pacific
Regional Trade and Economic
Co-operation Agreement
(SPARTECA)
• India-Australia FTA
• Indonesia-Australia CEPA
3http://dfat.gov.au/trade/agreements/pages/tradeagreements.aspx (benefits at a glance).
8
In addition to important FTAs being
negotiated with India, Indonesia and
Pacific Islands, there are two megaFTAs currently under development
or awaiting formal approval:
© 2016 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.
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Access Asia
Leveraging Free Trade Agreements for Australian Trade Growth
AAP Image/Yonhap
• Trans-Pacific Partnership (TPP)
where negotiations have been
concluded. The TPP parties are
Australia, Brunei, Canada, Chile,
Japan, Malaysia, Mexico, Peru,
New Zealand, Singapore, the
United States and Vietnam and
represent 25.6 percent of total
world trade4; and
• Regional Comprehensive
Economic Partnership (RCEP)
which has concluded its 15th
round of negotiations. RCEP
parties are China, Japan, South
Korea, New Zealand, Australia,
Singapore, Thailand, Malaysia,
Philippines, Brunei Darussalam,
Vietnam, Laos, Cambodia,
Myanmar, Indonesia and India,
representing almost 60 percent
of Australia’s two way trade5.
Whilst some would question the
value of negotiating more FTAs
that include multiple parties and
countries with which Australia
already has an FTA, there are
definite benefits to megaagreements such as with ASEAN,
the TPP and RCEP.
Regional agreements, provided they
offer the same or greater benefits
than their bilateral counterparts,
reduce the administration in
assessing hundreds (if not
thousands) of rules of origin under
multiple bilateral FTAs.
We live in a world of global supply
chains and those supply chains can
be leveraged and influenced by
regional FTAs as they allow for the
concept of accumulation to apply
to goods. Accumulation creates
an FTA zone which allows multiple
parties’ inputs, in multiple FTA party
countries, to obtain preferential
duty benefits for completed goods.
This allows parties to build on
the strength of manufacturing
capabilities in the region and
recognises the fact that most
products are not manufactured from
inputs that are wholly produced in
one country.
4http://dfat.gov.au/trade/agreements/tpp/pages/transpacific-partnership-agreement-tpp.aspx
5http://dfat.gov.au/trade/agreements/rcep/pages/
regional-comprehensive-economic-partnership.aspx
© 2016 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.
All rights reserved. The KPMG name and logo are registered trademarks or trademarks of KPMG International. Liability limited by a scheme approved under Professional Standards Legislation.
9
Access Asia
Leveraging Free Trade Agreements for Australian Trade Growth
FTAs are underutilised in Australia
A survey conducted by
The Economist Intelligence Unit
(EIU) in 2014 identified that FTA
usage rates are low, with Australia’s
particularly low usage rate at
19 percent6 (see Figure 1 below).
This means that only 19 percent of
exporting businesses surveyed are
using an FTA. Australia’s least used
FTA was with Chile (7 percent), and
most used was with New Zealand
(30 percent). The average FTA
usage rates of Asia-Pacific countries
surveyed was 26 percent.
However, of the Australian
companies that did use an FTA for
exporting, 59 percent reported a
moderate increase and 16 percent
reported a significant increase in
exports. They are therefore very
helpful when used properly.
A Joint Select Committee Report
on Business Utilisation of Australia’s
FTAs was tabled in the Australian
Parliament on 15 October 20157.
This report identified issues around
the complexity of FTAs and costs of
compliance with many new terms.
The Export Council reports between
43 percent and 52 percent of
exporting Australian businesses
don’t know how and whether an FTA
would apply to their business; and
between 9 percent and 18 percent
don’t know the FTA exists at all.
There are also significant start-up
costs for identifying and connecting
to new export markets. In its
submission to the Inquiry, the Export
Council of Australia referred to the
Australian International Business
Survey (AIBS). The AIBS had
1,237 respondents across a range
of sectors and identified behaviours
in engaging in international trade,
including utilisation of FTAs8.
It’s clear that action is needed to
engage businesses to make the
most of new opportunities and
improve their market access.
Figure 1: Use of FTAs signed by countries in 2015 (% respondents)
100
80
65%
63%
60
51%
48%
40%
40
26%
19%
43%
42%
30%
33%
20
39%
23%
37%
27%
16%
21%
0
Total
Average
Australia
China
Hong Kong
India
Indonesia
Malaysia
Singapore
Vietnam
Most used
Source: Economist Intelligence Unit (The Economist, 2014).
6
10
The Economist. (2014). FTAs: fantastic, fine or futile?
London: The Economist Intelligence Unit Limited.
7
Joint Select Committee on Trade and Investment
Growth. (2015). Report on the Inquiry into Business
Utilisation of Australia’s Free Trade Agreements.
Canberra: Commonwealth of Australia.
8
Australia’s International Business Survey. (2015).
Summary Report. Canberra: AIBS.
© 2016 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.
All rights reserved. The KPMG name and logo are registered trademarks or trademarks of KPMG International. Liability limited by a scheme approved under Professional Standards Legislation.
Access Asia
Leveraging Free Trade Agreements for Australian Trade Growth
How much trade are we missing?
Australian merchandise exporters
who underutilise FTAs will miss
out on at least AUD 14 billion of
potential export trade revenue over
the next five years, according to
KPMG analysis. This represents
a conservative view as it does
not include underutilisation of
opportunities for trade in services
or foregone productivity gains.
How can we understand
the potential trade lost from
underutilisation of FTAs currently
in force with Australia’s trading
partners? To be honest, it’s very
difficult, subjective and requires
key assumption-based economic
modelling.
KPMG has considered the current
underutilisation of the bilateral
Australian FTAs that have recently
come into force with China, Japan
and Korea – and projected the 2015
results against global export growth
projections for 2016 to 2020.
Applying KPMG’s global trade
model9 allows an assessment of the
economy-wide impacts associated
with changes in export demand and
productivity and quantification of the
loss in GDP, employment and other
industry-specific outputs.
As depicted by the left-hand side
panel of Figure 2 we need first
to estimate the direct economic
effects of the underutilisation of
FTAs in Australia. These are of
two kinds: trade flows effect and
productivity effect. Once they
have been estimated, they can be
applied to KPMG’s global trade
model, represented by the middle
panel of Figure 2. The model is then
able to simulate the economy-wide
impacts of lost economic activities
on different economic indicators,
such as GDP and employment at
the industry level, as shown on the
right-hand side panel of Figure 2.
Figure 2: Schematic representation of direct and indirect effects in an economy-wide modelling framework
Consumption Indirect Effects
Lower income for households lowering
consumption demand for other goods
Direct Economic Effects
Slower growth in
trade volume
Slower productivity
growth
Production Indirect Effects
Backward linkages: less inputs needed
Forward linkages: less goods produced
Economy-wide
Impacts
Overall impacts of
direct effects on
industry employment
and activity as well as
on macroeconomic
indicators (e.g. GDP)
amplified by indirect
linkages effects
Source: KPMG Economics
9
KPMG’s global trade model is dynamic and is based on
the latest version of the Global Analysis Trade Project
(GTAP) database.
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All rights reserved. The KPMG name and logo are registered trademarks or trademarks of KPMG International. Liability limited by a scheme approved under Professional Standards Legislation.
11
Access Asia
Leveraging Free Trade Agreements for Australian Trade Growth
Figure 3: Use of FTAs by Internationally Active Australian Businesses in 2015
Malaysia-AU FTA
Thailand-AU FTA
Singapore-AU FTA
AU-US FTA
AU-NZ Closer Economic Relations
ASEAN-AU-NZ FTA (AANZFTA)
AU-Chile FTA
0%
20%
40%
60%
80%
100%
Yes – Found FTA helpful for accessing this market
No – Don't know FTA exists
Uncertain about how and whether the FTA would apply to my business
No – Exported to this market but chose not to use FTA
Source: Export Council of Australia citing AIBS (Department of Foreign Affairs and Trade, 2016).
Estimating the direct effects
Direct economic effects of
underutilisation of FTAs in Australia
are of two different types. The first
and probably most obvious effect
is the lost volume of trade with
Australia’s FTA partners. The second
direct effect is related to foregone
productivity gains as a result of
missing out on lower trade costs.
Trade flows effect
The Australia’s International
Business Survey (AIBS) identifies
a proportion of businesses that
found the FTA useful for accessing
a market, represented by the first
entry legend in dark blue in Figure 3.
It also identifies groups who either
did not know about the FTA, or do
not know how to use it, represented
by the second entry legend in teal
and by the third entry legend in
purple, respectively.
Tariff reductions from FTAs primarily
affect trade in merchandise goods,
since the flow of physical goods
is easier to apply duties to as they
enter or leave a country. Based on
the AIBS data at the industry level, it
is possible to estimate the proportion
of Australian businesses across
agriculture, mining and manufactured
exports sectors that could increase
12
utilisation of FTAs in the future. These
estimates are reported in Table 2
and vary between trading partners
and industries.
The missed potential merchandise
export revenue from Australia’s
trade agreements in 2015 can
be estimated using the share of
exporters that could potentially utilise
FTAs in the future applied to bilateral
trade revenue between Australia and
its FTA partners, and an estimate
of the increase in export volume as
Australian businesses using FTAs
become more competitive.
Assuming an annual export
growth projection of 2.5 percent,
as published in the International
Monetary Fund Global Outlook, the
cumulative loss from 2016 to 2020
is extrapolated to be at least
AUD 14 billion.
Table 2: Share of Australian exporters potentially utilising FTAs
in the future
Agricultural
Mining
exports % exports %
Manufactured
exports %
AU-Chile FTA
15.1
17.7
41.0
ASEAN-AU-NZ FTA (AANZFTA)
28.7
45.0
35.4
AU-US FTA
38.5
10.8
36.7
Malaysia-AU FTA
23.1
0.0
33.2
Korea-AU
33.1
11.3
34.3
Japan-AU
33.1
11.3
34.3
China-AU
33.1
11.3
34.3
Source: KPMG Economics analysis using AIBS data (Export Council of Australia, 2015).
Note that averages of Asia FTA partners were used for China, Korea and Japan, since AIBS data were not available.
© 2016 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.
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Access Asia
Leveraging Free Trade Agreements for Australian Trade Growth
Figure 4: Estimated lost export revenue with Australia’s FTA partners from 2016 to 2020
Export revenue (AUD million)
5000
36%
29%
4000
25%
3000
26%
26%
26%
Korea
Japan
China
19%
2000
1000
0
Chile
ASEAN
Agriculture, forestry and fishing
United States
Mining
Manufacturing
Malaysia
Percentage of business not using FTAs
Source: KPMG Economics analysis using AIBS (Export Council of Australia, 2015), GTAP data (Aguiar, Narayanan & McDougall, 2016) and AB data (ABS, 2016).
Figure 4 shows the distribution of
this estimated lost export revenue
across Australia’s FTA partners.
A clear finding is that the bulk of
lost export revenue is concentrated
among countries with recently
concluded agreements – China,
Japan and South Korea. A second
major finding is that almost
all lost export revenue across
Australia’s FTA partners relates to
manufactured exports, suggesting
a need to focus efforts on better
engaging Australian manufacturing
businesses.
Although several assumptions are
used to determine these impacts,
they represent a conservative view
since they only consider businesses
that currently export goods. Many
non-exporting companies may also
benefit from understanding and
using FTAs. Ultimately, this lost
revenue is due to limited knowledge
on how to access the market
opportunities that Australia’s
FTAs provide.
The loss is ‘at least’ AUD 14 billion
because it doesn’t take into account
lost revenues in the services sector
and lost productivity opportunities.
FTAs often contain provisions for
trade in services, such as trade
facilitation measures, reductions in
barriers to investment, as well as
mutual recognition of products and
qualifications. These modalities are
much less homogeneous across
agreements and much more difficult
to measure. They represent nontariff barriers which FTAs seek to
address but are not modelled in
KPMG estimates.
Productivity effect
In addition to lost international trade
due to underutilisation of FTAs,
there are associated productivity
impacts that Australian businesses
are likely missing. Openness of
trade is known to drive competition,
and transfer knowledge such as
technological advances and best
practices for firms. This results
in a productivity increase since it
improves the output of Australia’s
capital and labour force.
One example is research conducted
by Austrade in 2015, which surveyed
exporting businesses using the
Export Market Development
Grant Scheme (EMDG).
Austrade’s results indicate an
average labour productivity benefit
of 16.1 percent10. This means an
Australia business could produce
16.1 percent more output for the
same labour cost.
Another example of exportproductivity linkage is associated
with the shifting of resources from
less efficient to more efficient
plants. Based on a panel data set
covering approximately 60,000
individual manufacturing plants in
the US for the years 1983 to 1992,
it was estimated that firms in the
exporting sector are 8 percent
more productive than firms that
never export11. This highlights the
importance of better engaging
Australian businesses in trade, and
maximising the opportunities they
have with our trade partners.
10 Austrade. (2015). Certainty and Confidence—Exports
and jobs for a changing global economy: Review of
the Export Market Development Grants scheme.
Canberra: Austrade.
11 Itakura, K., Hertel, T. W., & Reimer, J. (2003). The
Contribution of Productivity Linkages to the General
Equilibrium Analysis of Free Trade Agreements. GTAP
Working Paper, No. 23. West Lafayette: Center for
Global Trade Analysis.
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All rights reserved. The KPMG name and logo are registered trademarks or trademarks of KPMG International. Liability limited by a scheme approved under Professional Standards Legislation.
13
© 2016 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.
All rights reserved. The KPMG name and logo are registered trademarks or trademarks of KPMG International. Liability limited by a scheme approved under Professional Standards Legislation.
Access Asia
Leveraging Free Trade Agreements for Australian Trade Growth
Why is this happening?
Our qualitative research has identified nine key barriers to maximising FTA utilisation, namely:
Lack of awareness
of FTA benefits
Complex rules of origin
for each FTA
Opaque trade
regulations in Asian
markets
IT infrastructure
challenges
Market access
difficulties and
non-tariff barriers
Multi-jurisdictional
supply chain challenges
Internal capability
limitations (SMEs)
Increasing services
export to Asia
(not products)
Lack of comprehensive,
affordable FTA advisory
services
Source: KPMG Access Asia 2016
Lack of awareness of FTA benefits
has been identified as the largest
obstacle for many small and
medium sized companies.
This can and will eventually be
reduced through education and
awareness programs.
However, KPMG is also observing
widespread confusion around the
technical understanding of FTAs
both in Australia and foreign markets
and serious challenges with the
implementation of strategies from
many Australian companies.
Rules, Rules, Rules…
Our FTAs are normally underpinned
by years of very detailed
negotiations on product-specific
rules of origin which lead to
confusion by both importers
and exporters in the post FTA
implementation phases.
Clearly, when governments
have difficulty negotiating and
summarising the minute detail
of FTAs, it’s no surprise that
companies, especially Small
Medium Enterprises (SMEs) which
lack internal resources, have great
difficulty in understanding and then
implementing processes to access
FTA benefits.
For Australian importers to access
preferential duty rates for all 10 of
the FTAs to which we are a party,
there are an estimated:
• 42 specific acts, regulations and
schedules in Australian law;
• 76 general rules of origin; and
Australian exporters wishing to
gain FTA duty benefits in each of
our FTA partner's markets face
the mammoth task of navigating
hundreds of in-country customs
laws across Asia (in foreign
languages and cultural practices)
that enact the FTA and depending
on the number of products they
manufacture, an innumerable
number of product-specific rules.
In addition to product specific rules,
FTAs have rules of consignment
which only allow shipping via third
countries under strict conditions.
Certificates of origin are required
under many FTAs (mostly those with
our Asian neighbours).
• In excess of 26,000 product
specific rules.
© 2016 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.
All rights reserved. The KPMG name and logo are registered trademarks or trademarks of KPMG International. Liability limited by a scheme approved under Professional Standards Legislation.
15
Access Asia
Leveraging Free Trade Agreements for Australian Trade Growth
Businesses must understand these
rules to access FTAs and also have
the ability to assess which FTA
provides the best outcome where
Australia has multiple FTAs covering
a single market (e.g. Thailand,
Singapore and Malaysia are
countries with which Australia has a
bilateral FTA and are also covered
by the ASEAN-Australia
New Zealand FTA).
There are also plenty of strange and
unexpected outcomes noted from
the new FTAs, including:
• KAFTA: certificates of origin
being issued for goods with
accompanying European Union
certificates of origin for the exact
same goods;
An FTA is just one part
of the international trade
puzzle. Companies need
to navigate the customs
export and import laws,
have a solid market
access plan and have
the technical resources
(in house or by using
specialist advisors)
to make the most of
our FTAs.
• ChAFTA: original consignment
rules denied FTA entitlement to
goods shipped through Hong
Kong (a major distribution hub)
as it is a duty-free port with no
customs bonded zone.
16
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Access Asia
Leveraging Free Trade Agreements for Australian Trade Growth
So how do companies actually
access FTAs?
Unfortunately, there is no one-stop
shop for FTA trade facilitation.
Both the federal and state
governments recognise that
Australian companies need practical
and cost effective assistance to
access and leverage the FTAs.
Through Austrade, the federal
government has been developing
useful information resources,
providing FTA outreach programs
and building teams to help provide
practical advice and facilitation.
The Department of Foreign Affairs
and Trade has developed Trade IT
support systems.
However, any IT infrastructure that
will quickly and effectively assess all
product types in all markets would
be extremely complex and there is
a limit to what government bodies
can provide given the complexity
of product rules from global
supply chains to multiple export
markets cutting across many FTA
jurisdictions.
In addition, due to the number
of state and federal support
programs, it is difficult for exporters
to accurately assess which
programs will provide them with
the assistance.
In order to accurately assess
FTA entitlements, Australian
companies need specialist advice:
• to interpret the FTA specific
legislation;
• to better understand global supply
chains and the origins of all inputs
of the goods they are exporting;
• to develop the internal resources,
processes and IT systems to
accurately classify goods in the
customs tariffs;
• to navigate both Australian export
laws and the relevant import laws
(which in Asia can be extremely
complicated and paper driven).
It is important also for exporters to
be aware of the tariff classification
of the product in the importing
country, as it is not uncommon
for jurisdictions to interpret rules
differently, leading to a denial of
access to the FTA and preferential
duty rates.
Services
Australia’s FTAs do not just deal with
preferential duty for trade in goods.
In 2015, Australia’s services exports
were worth an estimated
AUD 57.4 billion12 and are continuing
to grow.
Our FTAs contain a component
which facilitates greater access
to foreign markets in the services
sector. For example, China is
Australia’s largest services
export market and the ChAFTA
includes improved market access
for Australian banks, aged care,
health, legal and education and
telecommunications services
Taking advantage of the trade in
services components of Australian
FTAs can provide a competitive
advantage to Australian business
in those FTA countries, including
preferential market access and
mutual recognition of qualifications.
FTAs do not remove non-tariff
barriers such as phytosanitary
(quarantine) requirements, antidumping duties and other regulatory
requirements such as labelling.
Often, non-tariff barriers mean
that Australian exporters simply
can’t access the markets covered
by our FTAs which makes seeking
specialist advice critical at
the time of preparing export
market strategies.
12https://www.efic.gov.au/news-events/latestnews/2015/march/services-exports-to-asia-on-the-rise/
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17
Access Asia
Leveraging Free Trade Agreements for Australian Trade Growth
FTAs are no substitute for developing
and executing the right strategy
Taking a step back from the practical
challenges of implementing FTA
related initiatives, it’s important for
Australian companies to revisit their
strategy for Asian market export
growth, supply chain solutions and
outbound investment.
Based on the 2016 Australia
International Business Survey
(AIBS), 18 percent of respondents
targeted the United States as their
first priority overseas market. China
was the second most popular
choice for a first export market.
AIBS respondents indicated that
the toughest overseas markets to
operate in were India, China and
Indonesia. However, these are the
markets that offer the greatest
growth though.
Where to focus in future?
Is it all about China?
Based on our observations, the
focus for many Australian companies
has been China and how to take
advantage of the ChAFTA within
a 12-18 month window – ahead of
companies from other countries
who have yet to establish
similar trade access agreements
with China.
Historically, China was the prime
market within the Asia Pacific region
for many Australian businesses to
establish offshore operations to
directly manufacture and source
goods and industrial products at a
very low cost. But today, the primary
reason that these same businesses
maintain operations in China is
primarily to serve the China market.
As regional economies integrate,
so too do supply chains, as investors
seek innovative and cost-effective
inputs into regional or global
production. Over the post war
period, as economies develop and
production and manufacturing costs
rise, there has been a continual shift
within the region – from the Asian
tiger economies of the 1980s and
1990s (Japan, Korea, Hong Kong,
Taiwan and Singapore), to China
which became Asia’s low-cost
manufacturing supply chain hub.
Now we are seeing the shift from
China to ASEAN countries, so
we encourage companies to look
to the future – ASEAN and more
specifically Indonesia, where
regional FTAs are in place and
bilateral FTAs are being negotiated.
The ASEAN Economic
Community (AEC)?
Australian companies should be
increasingly focused on the growth
opportunities closest to home –
ASEAN – with the 10 countries that
are embracing a regional focus to
compete with larger markets such
as Japan, China and India.
According to McKinsey13, the ASEAN
region represents the seventh
largest economy in the world with
a combined GDP of USD 2.4 trillion
and expected to become the world’s
fourth largest economy by 2050.
It has a combined population of over
600 million people, half of which will
be under the age of 30 by 2020 and
represents the third-largest labour
force in the world which is great
for manufacturing and consumer
services.
13http://www.mckinsey.com/industries/public-sector/
our-insights/understanding-asean-seven-things-youneed-to-know
18
Australian Trade and Investment
Minister Steven Ciobo, in interviews
conducted with ANZ recently in
Laos,14 talked about Australia having
a 42 year relationship with ASEAN
which is founded upon collective
interests and one that should go
from strength to strength. He said:
“The opportunities throughout
ASEAN are quite significant. There
is tremendous potential among
the 10 ASEAN members and
Aussie businesses should be at
the forefront of that. Many are, but
frankly a lot more should be.”
or more specifically:
Indonesia!
Despite being Australia’s nearest
geographic neighbour, Indonesia
ranks outside the 10 largest
trade and investment markets for
Australia. In 2014, bilateral trade
with Indonesia was AUD 16 billion,
merely 10 percent of China-Australia
trade flows. There are many reasons
for this; including low Indonesian
consumer incomes and the fact
Indonesia is also a major natural
resource and primary industry
exporter and hasn’t, until quite
recently, been an exporter of
high-value manufactured goods.
However, with a young middle
class population of 45 million that
is growing at 11 percent per annum
and expectations that Indonesia will
become a major world economy in
next 15 years, there is increasing
interest from Australian companies.
This was evidenced by approximately
360 Australian business leaders
across eight industry sectors
attending the inaugural Indonesia
Australia Business Week (IABW) in
Jakarta in late 2015.
14 ANZ Blue Notes 12 October 2016.
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Access Asia
Leveraging Free Trade Agreements for Australian Trade Growth
Figure 5: ASEAN – an Emerging Regional Power
At a glance
ASEAN is a diverse region
with multiple challenges
and opportunites.
USD 5,869
GDP per capita
(2013)
If the 10 ASEAN members
were a single country it
would be the seventh largest
in the world.
617 million
Population (2013)
Across ASEAN, policies
have evolved in isolation,
preventing consistency
and certainly required by
investors.
USD 2.3
trillion
Total GDP (2013)
190 million
Middle class in 2010
400 million by 2020
It is a very diverse region –
with countries right across
the development spectrum.
Despite regional coordination
through the ASEAN
Economic Community (AEC),
issues are generally on a
market-by-market basis.
Source: Statistics from ASEAN Economic Community
Chart book 201315.
Indonesia’s President Widodo is
often referred to as a “business
first” president committed
to reforming Indonesia and
strengthening the bureaucracy,
policies and processes so that
foreign capital will invest to help
Indonesia grow.
There is a need for Australian
project planning, structuring and
management services, stateowned enterprises (SOE) asset
privatisation/capital recycling
programs and the start of a national
superannuation and pension system
for long-term capital.
to varying degrees, with ANZ the
largest. They all tend to concentrate
on cross border trade, investment
and high net worth flows as well
as rolling out branchless banking
services. Within Indonesia there is
also an opportunity in insurance and
re-insurance.
Central to Indonesia’s development
is investment in infrastructure
and the development of financial
services – both areas for Australian
interest to help finance and jointly
deliver these projects. New
infrastructure worth AUD 450 billion
– including 24 new sea ports,
15 new airports, 49 new mega
dams, 39 megawatts of additional
power and extensive road, rail and
public transport infrastructure – is
in the planning stage. Around 40-50
percent of this will require Public
Private Partnership (PPP) solutions.
Despite 170 competing domestic
banks, Indonesia’s financial services
industry is nascent and only
accounts for 3.3 percent of GDP
(compared to 8.7 percent in Australia
and 15.9 percent in Hong Kong).
Around 70 percent of Indonesians
have only one to two banking
products. Of a total population of
260 million there is less than one
million who invest in managed funds
and there is almost no insurance
industry with only 400 insurance
agents nationally. All of the big four
Australian banks are represented
Other than infrastructure and finance
the greatest opportunities for
Australian companies appear to be
in food and agribusiness (live cattle,
animal feed, feedlots, aquaculture,
and cold chain logistics) and
education and vocational training –
particularly in financial services
and healthcare.
The opportunities for Australian
business in Indonesia are certainly
there, but the investment and
operating landscape remains very
challenging and the lead time to
invest and build relationships is long.
15http://asean.org/resource/statistics/
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19
Access Asia
Leveraging Free Trade Agreements for Australian Trade Growth
AP via AAP/ Xu congjun
Six critical elements for
Asian trade success
Turning an Asian investment into
a profitable business venture
takes careful planning and a
disciplined approach.
Despite the numerous challenges
of operating in Asia, we have seen
foreign brands achieve amazing
results (such as Starbucks, KFC
and Louis Vuitton). They have been
successful because they’ve been
able to truly understand local
consumer trends, align their brand
for Asian consumers and navigate
the numerous regulatory challenges.
20
Asia is tough and complex. The
ability to grasp the entirety of a
large number of challenges and
conjure effective solutions takes
time and experience. Frequent
travellers to Asia consistently miss
the opportunity to get to the bottom
of such operational complexities and
therefore, the majority of “fly in,
fly out” executives are inadequately
equipped to manage the challenges
of doing business in Asia.
Based on our experience and
interviews conducted with
senior executives from Australian
companies succeeding in Asia, we
have identified six critical elements
that Australian businesses need
to consider to execute a
successful Asian market entry
or expansion strategy.
© 2016 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.
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Access Asia
Leveraging Free Trade Agreements for Australian Trade Growth
01
Selling into or sourcing
from Asia’s many markets
is not easy. It's best to view
China, Indonesia and India as
comprising a number of unique
markets within each country.
Plan how to interact with each
market separately, tailoring
product specifications and
delivery mechanisms that
meet the needs of local
customers within each
distinct market.
02
03
Practical suggestion: Good people are hard to find and keep
For a major Australia wine exporter, hiring and retaining people,
developing new product categories and developing unique marketing
ideas have been their greatest challenges.
For a major Australian dairy exporter the greatest challenges have been in
having senior executives to lead with an in-depth understanding of how
‘Asia works’, with relevant industry experience and the ability to manage
local client and staff relationships. They described the ideal person as
“more than a sponsor, an active proponent of their (local Asian office)
needs and requirements”.
A high proportion of the Asian
population will be classified as
middle income earners by 2025
as regional economic growth
seeds prosperity and the
future of Asia’s market will be
driven by these people with a
propensity to spend. Australian
businesses must be ready to
compete in a dynamic and
fast-paced environment and
interact with new consumers
through various channels.
Practical example: Locally attractive products are vital
Think about the successful
marriage and exit options
upfront, not just the
honeymoon. Plan an approach
that aligns to your long-term
objectives.
Practical example: JV partners
Businesses expecting to
set-up as they have back in
their home market and achieve
overnight success have usually
departed Asia quicker than
they arrived.
With a significant rise in the demand for personal and household
consumer items in China, it is not surprising that two of the largest global
Consumer Product Multi-national Corporations (MNCs) have both invested
in local operations within China. Over recent years, both organisations
have also established large scale innovation hubs in China, in response
to the changing demands of the local consumers who seek high quality
foreign branded goods but with more local ingredients and taste. These
innovation hubs aim to refine everything, from product specifications
and materials, packaging and size of product to align with local Chinese
consumer requirements, who will no longer accept imported products
that do not cater to their specific tastes.
It is important that Australian business can successfully identify a
JV partner that can leverage its local presence, without exposing it to
additional operational risks. Several Australian companies interviewed
cited the challenge of finding the right local partners. There are a huge
number of unsolicited Chinese parties who present themselves as
potential local partners.
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21
Access Asia
Leveraging Free Trade Agreements for Australian Trade Growth
04
05
06
22
Whether it be future
customers, suppliers or
service providers, finding and
incentivising the right trading
partners is critical. You must
really understand who you
are dealing with and what
motivates them to achieve the
outcomes that you both desire.
Practical example: Distribution partners
Understand the non-trade
barriers relating to your
product, supply chain and
chosen markets so that
you can navigate the many
different local customs and
unique country regulations
effectively.
Practical example: Non-tariff barriers
Have a thorough stakeholder
communication strategy. Be
prepared on how and whom
to communicate with should
your business/supply chain/
products experience a critical
incident.
Practical example: Board support
A global animal health care products group which was the leader in more
than 140 separate markets around the world and had been operating
in China for more than 8 years was unable to achieve a market share in
China of more than 1 percent. Analysis of the China market revealed that
the company had locked itself into an agreement with a distributor which
only had access to 2 percent of the total China market, had limited sales
capability and was not motivated to focus its efforts on this company’s
products. Despite the extremely high demand for products within this
market segment (exceeding more than 50 billion units of product per
year), this MNC had not established the right distribution network (nor
partner support) within China to access the customer base, or provided
a value proposition with a unique service or cost advantage over its
competitors and subsequently failed to attract Chinese demand despite
being the market leader in every other market.
Several Australian companies interviewed felt non-tariff barriers were not
well addressed in ChAFTA, including preferential tax treatment for local
competitors, difficulties around foreign executive work visas, provincial
and local product registration processes and IP laws that remain
inconsistent with international norms.
Several Australian companies interviewed confirmed the importance of
having a board that is supportive of the long-term strategy and committed
to investment, delivery and implementation.
A number also stressed the importance of the headquarters to have a
local Asian mindset and “can’t apply local Australian internal processes”.
This requires internal education and consideration of local Asian issues
before jumping to a decision, an action or implementation stage.
© 2016 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.
All rights reserved. The KPMG name and logo are registered trademarks or trademarks of KPMG International. Liability limited by a scheme approved under Professional Standards Legislation.
© 2016 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.
All rights reserved. The KPMG name and logo are registered trademarks or trademarks of KPMG International. Liability limited by a scheme approved under Professional Standards Legislation.
Access Asia
Leveraging Free Trade Agreements for Australian Trade Growth
E-commerce – the bilateral trade
super highway
Traditional exports and sales
processes are being disrupted by
e-commerce and China is no doubt
the best and most important market
to look at for understanding the
impact of e-commerce on trade.
The total e-commerce market in
China already surpassed that of the
US in 2013 (see Figure 6). China’s
e-commerce market (including but
not limited to luxury) was worth
around USD 426 million in 2014.
According to several sources and
analysts, it may grow to
USD 1 trillion by 2018 or 201916.
Online shopping for products or
services is fast becoming normal
practice for both Business to
Consumer (B2C) and Business to
Business (B2B). Reuters reports
that since 2012, more than 2,000
firms have registered in China
as cross-border e-commerce
businesses. Based on KPMG
China’s 2015 survey report China’s
Connected Consumer, the top
reason consumers are buying
online remains pricing and gaining
a better deal than traditional store
based shopping. Consumers are
increasingly being driven by the
appeal of accessing, comparing
and buying a global smorgasbord
of luxury branded items from the
USA and Europe in particular. Online
shopping also remains less time
consuming and easier.
Furthermore, respondents in
the 2015 survey indicated that
the maximum amount they felt
comfortable paying online for a
single item was RMB 4,200. This
is far higher than the amount of
RMB 1,900 that consumers were
comfortable spending in 2014 – an
increase of 121 percent. All of these
trends indicate that online luxury
shopping is set to grow as
Chinese consumers are growing
increasingly more comfortable with
online purchasing.
Figure 6: Total e-commerce sales growth and value in China
80
1200
1000
Growth %
60
50
47%
800
35%
40
32%
30
600
27%
22%
16%
20
200
10
0
400
2013
2014
2015
2016
2017
2018
E-Commerce value (USD bln)
70
0
Source: eMarketer, http://www.emarketer.com/Article/Retail-Sales-Worldwide-Will-Top-22-Trillion-This-Year/1011765
16http://www.reuters.com/article/china-retail-internetidUSL5N0VM0RT20150225
24
© 2016 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.
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Access Asia
Leveraging Free Trade Agreements for Australian Trade Growth
AAP Image/Lisa Martin
The Kaola.com website from NetEase, a Chinese tech firm, as seen on a computer in Hangzhou, China, Tuesday, Oct. 11, 2016.
Australia is set to cash in big time from China's misspelling of koala as the world's most populous country experiences an online
shopping boom. There are tens of thousands of products and more than 100 brands from Australia sold through Kaola so far.
Based on the 2015 KPMG China
survey findings17:
• Online confidence is booming!
45 percent of luxury online
shoppers now buy over half of
their luxury goods online. We
expect 50 percent of China’s
domestic luxury consumption will
be generated online by 2020.
• Import duties reductions
combined with brands’ recent
moves to realign prices between
overseas and China will boost
China domestic full-price
e-commerce, and challenge
overseas websites.
• From reviewing social media
content, we noticed the
emergence of retailer generated
content alongside key opinion
leaders’ and user-generated
content. Brands need to adapt
and publish more relevant and
consumer-centric digital content
or risk seeing their brand
image diluted.
17 Source: KPMG China’s Connected Consumers: When
10,000 Chinese shop… Insights from a 2015 survey,
KPMG, 2015
• Although they remain valuedriven, Chinese consumers –
especially younger generations
– are less price obsessed. This
opens new opportunities for full
price e-commerce for premium
and luxury brands.
• Alibaba recorded nearly four
times more sales on Singles’ Day
than 4,200 retailers did in the US
on Black Friday (the traditional
post-thanks giving day retail sales
event).
• The smartphone is the most
commonly used device for daily
retail visits across Chinese luxury
online shoppers.
• Online luxury services are
booming – while luxury product
sales are also growing the
Chinese online luxury consumer
now is also looking for luxurious
services and experiences.
What does all this mean for
Australian companies?
Based on AIBS 2016, 47 percent of
Australian exporting respondents
already use e-commerce18.
Cross-border shopping is now more
accessible through smart technology
and e-commerce. The overseas
e-commerce spend is growing
rapidly, especially throughout China
and the rest of Asia. Consumers
are becoming very discerning and
focused on best in the world quality
and value. This means transparency
is high and competition is incredibly
tough. Australian exporters can’t
just expect their product to sell
online without ensuring their
product is world class and marketed
in a manner that meets Chinese
consumers' taste and expectations.
• The older generation is still
lagging behind in its purchase of
luxury products online – despite
their ability to afford luxury.
18 Australia’s International Business Survey. (2015).
Summary Report. Canberra: AIBS.
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25
Access Asia
Leveraging Free Trade Agreements for Australian Trade Growth
Alibaba Group: New markets
for Australian exporters.
A case study
Alibaba Group has been at the
forefront of assisting Australian
exporters in accessing new markets.
Research shows the value of China’s
e-commerce market exceeded
USD 600 billion in 2015. Of this
amount, Alibaba alone contributed
around USD 485 billion in sales in
e-commerce, making Alibaba Group
the world’s largest retailer.
Australian products are increasingly
popular on Chinese e-commerce
channels. Alibaba sees strong and
growing demand for a range of
products such as dairy, premium
foods, healthcare, skincare, and
mother and baby products.
Each year, Alibaba runs the largest
shopping festival in the world, the
Double 11 Shopping Festival, on
11 November. In 2015, Australia
ranked 5th among 41 countries
globally on Tmall Global, the platform
for international branded goods,
with Chemist Warehouse hitting
RMB10 million in the first
46 minutes of the shopping festival.
Alibaba Group has plans to open an
office in Australia to better support
its Australian clients, and to help
more Australian companies access
the Chinese market. Currently, there
are over 1,300 Australian companies
on Tmall and Tmall Global, with
over 80 percent of them accessing
China for the first time via Alibaba’s
platforms. There are also more than
2.7 million Australian Alibaba.com
accounts providing Australians with
new opportunities to buy and
sell products.
The momentum is likely to continue
with the staged implementation of
ChAFTA. While Australian products
are already high on the wish list
of Chinese consumers due to the
premium and quality reputation
of products made in Australia,
ChAFTA will further reduce tariffs
and increase the competitiveness of
Australian produce.
Alibaba Group has also forged a
strategic partnership with Australia
Post. Australia Post’s Tmall store
provides a solution for exporters,
particularly small and medium
enterprises, to access some of the
420 million Chinese consumers
active on Alibaba Group’s platforms.
26
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Access Asia
Currently, there are over
1,300
Australian
Leveraging
Free Trade
Agreements for Australian Trade Growth
companies on Tmall and Tmall Global, with over
80 percent of them accessing China for the
first time via Alibaba’s platforms.
Success through
Alibaba’s B2B channels
Banaban
Coconut Oil
Banaban is currently
involved with two major
research projects here in
Australia and Canada in
medical fields related to
pre-term infants and the
development of healthy
supplements for the
elderly.
Banaban is Australia’s leading coconut oil
brand marketed as Banaban Virgin Coconut
Oil. The family owned business started in
the parent’s garage on the Gold Coast in
2004 and with the help of Alibaba.com the
brand is taking on the world and achieving
exceptional growth.
The Banaban brand started as a mission to
tell the world of the Banaban story through
traditional foods used by the Banaban
Islanders for centuries.
With the help of Alibaba.com, Banaban is
becoming more world renowned for its
business innovation, and it comes in many
forms such as the development of outside
the square world first ideas, an incredible
state of the art HACCP and organic facility
and partnerships with leading Australian
and international universities into research
programs to scientifically prove the benefits
of Banaban products.
Banaban is currently involved with two
major research projects here in Australia
and Canada in medical fields related to
pre-term infants and the development of
healthy supplements for the elderly.
The company’s strategy for the last three
years, and moving forward, has been
implementing a mini website within
Alibaba.com as a B2B platform to on sell
our unique range of Banaban coconut
products to the world. Over the last three
years the company has seen new clients
and orders from other regions including
Europe and Asia.
Over this time using Alibaba.com the
company secured eight new distribution
channels worldwide and each day Banaban
is receiving 10-15 international enquiries.
The company’s recent success with
Alibaba.com has been setting up a new
distribution network within supermarkets
in Spain with their first order valued at over
AUD 100,000.
Banaban has also secured distribution
through Alibaba.com to countries such
as Germany, Poland, Malta, Hungary,
Mongolia, Hong Kong, Taiwan and soon to
be South Korea.
Since the late 2000’s Banaban has been
using Alibaba.com as a B2B platform.
Banaban first started selling bulk virgin
coconut oil on Alibaba.com and in particular
to countries such as Brazil and Canada.
Jessica’s
Suitcase
Jessica’s Suitcase
is a cross-border
e-commerce business,
connecting premium
Australian brands with
China’s online shopping
community through
Alibaba’s Tmall Global
platform.
People are fascinated by China’s economic
success. The population of some Chinese
cities exceeds the entire population of
Australia and, for many, China has a
magnetic energy. This was the case for
Jessica Rudd, a lawyer, PR consultant,
author of novels Campaign Ruby and Ruby
Blues and daughter of former Australian
Prime Minister Kevin Rudd.
Rudd lived in Beijing for five years, but in
early 2014 the family decided to return to
Australia. Although she left China, Jessica
wanted to remain connected to her
experiences there. When Chinese friends
from her mothers’ group regularly asked
her to bring back Australian products like
Blackmores and Swisse vitamins and
synthetic-chemical based toothpaste; she
knew there was a real grassroots level of
demand for Australian goods.
Jessica's Suitcase is a cross-border
e-commerce business, connecting
premium Australian brands with China's
online shopping community through
Alibaba's Tmall Global platform.
The Chinese cross-border e-commerce
market is large and complex and Jessica's
Suitcase aims to facilitate access to
this space for Australian SMEs, which
otherwise may not have the resources or
the market knowledge to be able to do it
on their own.
Since launching in June last year, the store
has grown to house 15 brands with several
others in the pipeline, of which almost
half are on exclusive arrangements. Based
on her success as a trusted brand and
image in China, Jessica Rudd was recently
signed as Australia and New Zealand
Lifestyle Ambassador for Alibaba, the first
appointment of its kind.
Given Jessica's unique position in China,
she has been able to bring several coveted
media and promotional opportunities to the
brands, including being featured on Tmall
live broadcasts and a web series hosted on
Youku – China's YouTube equivalent with
over 500 million active monthly users.
© 2016 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.
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27
Access Asia
Leveraging Free Trade Agreements for Australian Trade Growth
Asia bound – How do you navigate
transfer pricing and other evolving
tax laws in the region?
What companies need to know about tax in Asia
Expanding operations into Asia
creates exciting opportunities.
Many Australian companies have
specific strategies to exploit the
breadth of offerings and richness
of Asia through extending their
market reach or leveraging potential
procurement opportunities. Many
will have noticed however, an
increased focus on transfer pricing
and international tax issues in recent
years globally and in the region
which needs to be considered for
cross border expansion into Asia.
Most topically, many will have
observed the focus by the G20
(the 20 major global economies)
the Organisation for Economic
Co-operation and Development
(OECD) on the Base Erosion and
Profit Shifting (BEPS) project. Under
this project, the OECD divided its
focus in to a 15 point action plan
releasing findings reports and
recommendations under each area
since 2014 and covering topics
ranging from debt deductibility
and hybrid structures, Controlled
Foreign Company (CFC) taxation,
treaty abuse, taxation of permanent
establishments, to transfer pricing
and transparency.
As a region, Asia has been quick
to enter the BEPS debate and
has generally been an early
adopter of many of the OECD
recommendations but the level of
acceptance and pace of adoption
differs between individual countries
in the region.
Specifically, the transparency
measures recommended under
OECD BEPS Action 13 provide an
example of fast and broad adoption
across the region. Action 13
proposes increased transparency
for revenue authorities based on a
three tiered structure made up of a
multinational group master file, local
files and completion of a Country
By Country (CbC) reporting data
matrix. These materials are generally
required of multinational groups
with group turnover greater than
AUD 1 billion, and once prepared
typically have to be submitted to
one or more revenue authorities
in the region (or shared between
them based on automatic
information exchange agreements).
Action 13 reporting discloses
significant data about the group’s
operations, countries of operation
and organisation structure, types
of transactions, transfer pricing
policies, revenue, profit and
taxes paid.
To date, many countries in Asia have
adopted the recommendations,
legislated their own versions or
signalled intentions to do so with
application from early income years
commencing after 1 January 201619.
For those Australian companies
expanding into Asia or thinking
about doing so, watching the
developments under the BEPS
15 Point Action plan is important as
the rules can differ when adopted in
countries across the region.
Whilst many countries in Asia
continue to offer economic
incentives to attract trade and
commerce, understanding the
specific transfer pricing and tax laws
including the BEPS developments in
each country is also important
to successful expansion into
the region.
19 To date, countries in the region who have adopted
these measures or have signalled the intention to
do so, include Australia, China, Hong Kong, India,
Indonesia, Japan, Malaysia, New Zealand, Pakistan,
Singapore, South Korea, Taiwan and Vietnam Specific
thresholds and reporting requirements differ between
specific countries. Further information in respect of
Action 13 adoption in Asia and around the globe can
be accessed from the KPMG global summary, kpmg.
com/action13updates.
28
© 2016 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.
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Access Asia
Leveraging Free Trade Agreements for Australian Trade Growth
The ATO’s increased focus on
cross border business
Australia has recently strengthened
its domestic transfer pricing and
international tax rules increasing
the focus on cross border activity,
which is relevant to any Australian
company considering its options to
expand into Asia. Key considerations
under the international tax
provisions should include the
CFC rules, Capital Gains Tax, Thin
Capitalisation, Foreign Tax Credit,
participation exemption, deductibility
of interest and foreign hybrid
provisions.
As a key part of its international tax
focus, the Australian government
has also recently modernised
its transfer pricing rules, passing
new legislation in September
2012 (applying to arrangements
covered by double tax treaties with
retrospective application back to
1 July 2004)20 and March 2013 (with
application to all arrangements for
income years beginning on or after
1 July 2013)21.
20 Subdivision 815-A of the Income Tax Assessment Act
1997 (ITAA 1997).
21 Subdivisions 815-B to 815-E, ITAA 1997.
The new rules contain
reconstruction powers and extend
the focus beyond transactional
pricing, additionally requiring
Australian taxpayers to consider if
third parties acting independently
would have structured the related
party arrangements in the same
way. As part of this inquiry,
Australian taxpayers are expected to
consider if any functions, assets or
risks have been transferred overseas
and whether a third party (in the
shoes of the Australian taxpayer)
would have agreed to the transfer
and/or would have expected to be
compensated for the transfer. These
new laws are particularly relevant
to operations expanding into Asia
to the extent Australian companies
look to migrate key group activities
or intangibles into Asia.
In addition to updating its transfer
pricing rules, the Australian
government recently introduced
tougher anti-avoidance measures
via the Multinational Anti-Avoidance
Law (MAAL)22 which sharpen
the focus under the Part IVA
General Anti-Avoidance provisions
specifically in respect of sales
made by principal entities resident
offshore directly to Australian
customers. More anti-avoidance
legislation has also been proposed
in the May 2016 Federal budget, in
the form of a Diverted Profits Tax
(DPT) which looks to apply punitive
taxes to cross border arrangements
which ‘divert’ profits from Australia
and lack economic substance.
In working with the new law, the
Australian Taxation Office (ATO)
has also increased its focus on
cross border activity. In 2013, the
ATO introduced the International
Structuring and Profit Shifting
(ISAPS) field review program which
looks specifically at cross border
arrangements in light of updated
domestic Australian law and the
issues emerging from the OECD
BEPS project. More recently,
the government has announced
an additional AUD 680 million in
funding for the ATO over four years
to establish a new Tax Avoidance
Taskforce.
22 Section 177DA of the Income Tax Assessment Act
1936.
© 2016 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.
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29
Access Asia
Leveraging Free Trade Agreements for Australian Trade Growth
Whilst some of these laws require
rule based stepped analysis (such
as the Capital Gains Taxation (CGT),
Withholding Tax or CFC provisions),
some require consideration of what
third parties acting independently
would do (i.e. the transfer pricing
provisions), whether under an
objective test, there is a purpose to
avoid Australian tax (i.e. Australia’s
General Anti-Avoidance provisions)
or whether irrespective of third
party behaviour and purpose,
the arrangements lack economic
substance or are deemed to lack
substance (i.e. the proposed DPT)23.
In addition to considering the
local tax laws of countries in Asia,
keeping up to date with Australia’s
tax law and policy changes is
therefore important to successfully
managing the local tax obligations in
expanding offshore.
What are common
considerations in
expanding into Asia?
For most companies expanding their
operations beyond the Australian
shores, questions of what to place
overseas and where commonly
come up as well as how to fund
offshore operations. Broadly
speaking, transfer pricing and
international tax rules look at, how
much income offshore activities
should derive and on what basis.
Transfer pricing and international tax
rules also govern the deductibility
and taxability of financing
arrangements.
23 Under the current DPT proposal, a lack of economic
substance can be deemed to the extent that a tax
differential between that paid offshore and that which
would paid if the income was derived in Australia
is greater than commercial benefits derived from
offshore structures.
30
Figure 7: Expected returns of different economic models
Full Risk
Entrepreneur
Licensee
with
exploititative
rights
Expected returns
The taskforce will consist of
1,300 people, including 390
new specialist officers who will
focus on compliance activities of
multinationals, large public and
private groups and high wealth
individuals and is expected to raise
AUD 3.7 billion in tax over the
four year period.
Limited Risk
Distributor/
Procurer
Simple
Buy/Sell
Logistics
Company
Service
Company
Intensity of functions, assets and risks
Source: KPMG Access Asia 2016.
What to place overseas
and where?
Applying generally accepted
principals, transfer pricing
typically examines any functions
performed, assets utilised and risks
borne by entities in cross border
arrangements. As the above diagram
illustrates (Figure 7), general
economic theory would suggest
that as the intensity or value of the
functions, assets or risks increase,
the expected return also increases.
Given the trend toward establishing
offshore marketing and procurement
hubs, the ATO recently released
a discussion paper in respect of
offshore hubs and some proposed
practical compliance guidelines to
assess transfer pricing risk arising
from hubs used by multinational
companies in Australia to centralise
business activities such as
procurement, marketing, sales and
distribution functions24.
Unsurprisingly, given the increased
appetite of Australian companies
to move into Asia, the ATO
has become very focused on
determining appropriate returns for
offshore entities within Australian
multinational groups.
24http://lets-talk.ato.gov.au/offshorehubs
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Access Asia
Leveraging Free Trade Agreements for Australian Trade Growth
How to fund offshore
expansion?
The other question that often
arises in offshore expansion into
Asia, tends to be how to fund
the offshore operations. Broadly
speaking, Australian companies
might choose between equity
and debt funding. Equity requires
compliance to formal corporation
law requirements and depending
on the country, any dividends
repatriated may be subject to
withholding tax. Due to its ability
to match specific needs, debt is
often considered to provide more
flexibility but the structuring of
the debt and interest deductibility
should be considered under
general deductibility, local transfer
pricing, thin capitalisation and antihybrid rules (also like dividends,
withholding tax also typically applies
to interest payments in the region).
Furthermore, in 2015, the Federal
Court handed down a decision in
the Chevron case which is the first
substantive decision delivered under
Australia’s new transfer rules and
was made with regard to cross
border debt arrangements. The case
involved a question in respect of
the pricing of an inbound loan from
a related party US subsidiary to the
Australian taxpayer of approximately
USD 2.45 billion. Whilst still waiting
appeal, the decision raised a number
of issues relating to the onus of
proof, use of evidence, comparability
and expert witnesses, but affirmed
the power of the Australian transfer
pricing law to reprice arrangements
based on what might be expected at
arm’s length.
What emerges from this brief
discussion of two common key
considerations in expanding
abroad to Asia, is that Australian
companies should consider their
proposed cross border structures,
arrangements and transactions
based on the particular tax laws in
relevant jurisdictions and what third
parties might be expected to agree
at arm’s length. This might require
some analysis of any existing
arrangements with independent
third parties, and/or a more detailed
examination of other arm’s length
arrangements and transactions
sourced externally.
Where should companies start?
Whilst it is often easy to feel
overwhelmed by an apparently
long list of tax considerations,
particularly when first venturing
abroad, the key to successfully
navigating the compliance
requirements across Asia often
begins with thinking simply.
The starting point for many
Australian companies expanding
into Asia is typically to identify
and articulate well the commercial
purpose and operational objectives
behind the emerging strategies,
as well as the level of investment
desired for expansion. Whilst it
might seem obvious, understanding
the commercial purpose and
operational objectives needs to be
at the core of any strategic decision
to expand into Asia as the relevant
tax considerations are determined
by the underlying operational needs
and strategies of the business.
The starting point for many Australian
companies expanding into Asia is typically to
identify and articulate well the commercial
purpose and operational objectives behind the
emerging strategies, as well as the level of
investment desired for expansion.
Shareholder interests often play
an important part in articulating
the commercial purpose and
strategies of the company. A
desire for growth, profits and/or
dividends can influence how you
might expand into Asia and in what
way. The selection of any operating
models applied (and the economic
consequences of those models) and
the timeframe in which the business
might progress through different
stages of expansion needs to work
operationally for the business and
may evolve over time.
The business’ ability to handle
change and locate key and strategic
decision making/risk management
abroad can also affect the selection
of operating models. Differences
can emerge between the business’
desire to locate certain functions
and decision making and/or key
assets such as intangibles, close to
suppliers or customers to optimise
opportunities abroad, and the
business’ ability to locate those
functions and decision making
remotely in offshore locations and/
or separate to the historic centre of
control in Australia.
The different operating models
available and the commercial drivers
for those models have different tax
considerations and implications.
Equally, changing the model once
implemented can have important tax
implications, so aligning the model
and growth path to the needs of the
business is important to manage
the success of expansion and
operational evolution. Companies
might not necessarily have to create
the end state model from the first
day of expansion and so defining
the growth path is important to
managing the investment into Asia
and the tax compliance that comes
with that level of investment.
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31
Access Asia
Leveraging the Free Trade Agreements for Australian Trade Growth
© 2016 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.
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Access Asia
Leveraging Free Trade Agreements for Australian Trade Growth
Summary
• Successfully negotiating Free Trade Agreements (FTAs) is tough going for
governments, but the deals are only of commercial value if businesses
know how to get access to the concessions gained, and take action.
• Eleven of Australia’s top 15 bilateral trading partners are Asian. And ten of
our top 15 trading partners are covered under FTAs with Australia.
• Australia’s FTA usage is particularly low by world standards, at just
19 percent25. Between 43 percent and 52 percent of exporting Australian
businesses don’t know how and whether an FTA would apply to their
business; and between 9 percent and 18 percent don’t know the FTA
exists at all.
• Economic modelling show that benefits from our recent North Asian
agreements (China, Japan and South Korea) could increase exports
by more than 11 percent, and generate a cumulative Gross Domestic
Profit (GDP) increase of more than AUD 24 billion in present value terms
between 2016 and 203526.
KPMG economic modelling has revealed three major findings:
1. Australian merchandise exporters who underutilise FTAs will miss
out on at least AUD 14 billion of potential export trade revenue over
the next five years. (This represents a conservative view as it does
not include underutilisation of opportunities for trade in services or
foregone productivity gains.)
2. The bulk of lost export revenue for Australia is concentrated among
countries with recently concluded agreements – China, Japan
and Korea.
3. Almost all lost export revenue across Australia’s FTA partners relates
to manufactured exports, suggesting a need to focus efforts on better
engaging Australian manufacturing businesses.
KPMG finds the top two reasons for lack of FTA uptake are:
1. A lack of awareness of FTA benefits, particularly by many small and
medium sized companies;
2. widespread confusion around the technical understanding of FTAs,
both in Australia and foreign markets and serious challenges with the
implementation of strategies from many Australian companies.
It’s clear that action is needed to engage businesses to make the most of
new opportunities and improve their market access. This report suggests a
range of ideas for doing so.
25 The Economist. (2014). FTAs: fantastic, fine or futile? London: The Economist Intelligence Unit Limited.
26 The Centre for International Economics. (2015). Economic benefits of Australia's North Asian FTAs.
Canberra: Prepared for Department of Foreign Affairs and Trade.
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33
Access Asia
Leveraging Free Trade Agreements for Australian Trade Growth
Asia &
international
market
entry
Supply
chain
KPMG
Access Asia
34
© 2016 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.
All rights reserved. The KPMG name and logo are registered trademarks or trademarks of KPMG International. Liability limited by a scheme approved under Professional Standards Legislation.
Access Asia
Leveraging Free Trade Agreements for Australian Trade Growth
KPMG can assist
companies to
access Asia
Trade,
Customs,
Tax
Incentives
& grants
Economic
modelling &
analysis
Government
relations
Regulatory
risk &
compliance
KPMG is answering the call
from our clients: the Australian
large corporate and SME sector,
industry representative groups
and government bodies to lead the
way by providing assistance for
those battling with the challenges
of market entry and trade growth
across Asia and international
markets.
Access Asia is an integrated KPMG
initiative comprising teams of
dedicated specialists combining
skills and experience to create
a comprehensive client service
offering for Australian companies
accessing Asia. Our team has been
assembled to help our clients who
are interfacing with Asia by providing
a full range of services including:
KPMG has developed a new service
offering known as Access Asia that
integrates several key services to
assist our clients to fully access and
leverage the Asian FTAs.
• market entry strategy,
Access Asia is KPMG Australia’s
strategic response to the increasing
regional trade opportunities arising
from the FTAs recently introduced.
Our services are aimed at Australian
companies and clients exporting
and importing goods and services
internationally.
• transfer pricing,
Many Australian private sector
companies are championing market
access opportunities and we are
proud to work with many of them.
Together, with their experience and
our skills, we can provide others
with insights and open doors
so they can begin their journey
prepared, with knowledge
and support.
• Asian regulatory and operational
risk management,
• supply chain and procurement,
• customs and excise tax
efficiencies,
• incentives from local and
international governments,
• trade and economic policy,
• economic modelling and analysis,
• government relations,
• co-ordinated help on the ground
in Asia.
© 2016 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.
All rights reserved. The KPMG name and logo are registered trademarks or trademarks of KPMG International. Liability limited by a scheme approved under Professional Standards Legislation.
35
Access Asia
Leveraging Free Trade Agreements for Australian Trade Growth
KPMG Access Asia team leaders
Asian & International Markets
Market Entry Strategy &
Supply Chain Consulting
Trade & Customs
Doug Ferguson
Peter Liddell
Leonie Ferretter
Partner in Charge, Asia & International
Markets Partner, Deal Advisory
Sydney
Partner in Charge, Asian Supply
Chain Consulting
Partner, Management Consulting
Melbourne
Director, Trade & Customs
Sydney
+61 2 9335 7140
[email protected]
KPMG Australia maintains a dedicated
Asian Markets coverage team to support
inbound Asian investors from Japan, China,
India, South Korea and ASEAN as well as
Australian companies trading and investing
in the Asian region.
Over the past five years we have
co-ordinated assistance both locally and
offshore for Australian companies across
most sectors including food and consumer
brands, industrial manufacturing, financial
and health services and real estate. Our
experience extends to strategic briefings
to C suite executives and boards, preparing
research and commercial analysis, due
diligence planning, translating Asian
language documents and providing
Asian cultural context to counterparty
communications and corporate affairs.
We have also been engaged by State
Governments to assist with trade and
investment strategies with key countries in
the Asian region. Our overriding objective
and purpose is to provide clients with quick
and valued access to the strengths of
KPMG both in Australia and in the region.
36
+61 3 9288 5693
[email protected]
KPMG has a strong and experienced
National Supply Chain & Operations
Advisory team, supported by our Asia
based Supply Chain specialists. Together
we support multi-national clients in the
development of their China/Asia market
entry strategies and to help them realign
their global and regional supply chains.
The Australian KPMG team is skilled in
assisting with the development of Asian
market entry strategies, where we not
only help you to determine the best way in
which to enter and compete successfully
in Asia, but also structure and adapt
your business model such that it aligns
with local regulatory and operational
requirements. Laying the groundwork for
a smooth entry and transition into Asia is
what our team does best.
+61 2 9455 9330
[email protected]
The KPMG Customs and Excise team
have a long history of providing our clients
with practical advice on accessing FTAs
and dealing with international trade and
customs agreements. We are passionate
about trade and assisting our clients gain
the benefits of our FTAs.
By understanding the specifics of free
trade and the challenges associated with incountry duties, taxes and non-tariff barriers
of products and export markets, our clients
are more enabled to make informed and
intelligent decisions, supported by an
experienced and committed team. To
assist, we work closely with our clients
to make the international trade journey
easier, to maximise the benefits of FTAs
and importantly to provide solutions to
interpreting complex technical international
trade rules. Our team is global and we can
partner with our Asian Member Firms
to deliver on the ground assistance
as required.
© 2016 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.
All rights reserved. The KPMG name and logo are registered trademarks or trademarks of KPMG International. Liability limited by a scheme approved under Professional Standards Legislation.
Access Asia
Leveraging Free Trade Agreements for Australian Trade Growth
International Tax Advisory
Economic Modelling
& Analysis
Government Relations,
Trade & Economic Policy
Jeremy Capes
Laurent Cretegny
Warwick Ryan
Partner, International Tax Advisory
Sydney
Director, Economics
Canberra
Director, Trade & Economic Policy
Canberra
+61 2 9335 7665
[email protected]
+61 2 6248 1454
[email protected]
+61 2 6248 1124
[email protected]
Our International Tax Advisory practice
helps organisations navigate international
tax and transfer pricing challenges
and manage international compliance
obligations. Moving across border into
Asia requires a good understanding of
local country tax requirements, regional
trends and differences. Governments
and their revenue authorities are
responding to the globalisation of
business operations by strengthening
legislation, increasing documentation and
transparency requirements and imposing
higher penalties for non-compliance.
In this increasingly globalised world,
understanding the full value chain of
multinational groups has become an
important lens for international tax
compliance and transfer pricing analysis.
KPMG Economics can assist you with
pursuing and formulating more effective
policy. With world’s best practice economic
modelling and economic advisory services,
our goal is to enhance your ability to make
optimal decisions at all stages of the
policy and decision-making cycle, from
design and evaluation to implementation
and economic forecasting. FTAs are
complex both in terms of negotiations and
utilisation as they typically cover most of
the sectors in the economy, which have
interactions with one another. Initiated with
the Uruguay Round in 1986, Computable
General Equilibrium (CGE) modelling has
been the framework predominantly used
for trade policy analysis for 30 years now.
KPMG’s International Tax Advisory Services
practice is an international team of tax and
transfer pricing practitioners, economists,
and analysts helping clients navigate
key tax considerations and compliance
obligations across the region and reduce
the risk of challenge from revenue
authorities.
KPMG’s global CGE model has the ability
to handle inter-sectoral linkages within
countries together with bilateral trade
flows among 140 countries. It allows
governments and businesses to clarify
potential trade-offs between many intricate
trade policy options and thus to formulate
optimal policies based on sound evidence.
Our dedicated team is committed to
building trusted and enduring partnerships
with you that combine cutting edge
analytical techniques, highly experienced
and credentialed professionals.
The KPMG Government Relations team can
assist small and big business to develop
and execute stakeholder engagement
strategies aimed at actively shaping the
trade regulatory framework, including
achieving optimal tariff and non-tariff
barriers reductions in trade negotiations,
removing discriminatory treatment
against their products and services,
and, more broadly, facilitate strategic
market access gains. This engagement
can include stakeholders located both in
Australia and internationally. ‘Traditional’
targeted stakeholders include Government
trade negotiators and decision-makers,
Intergovernmental Organisations
(e.g. World Trade Organization (WTO)
committees), International industry
representatives, as well as global
diplomatic networks.
We advise Australian corporations and
funds, and foreign multinational groups
on the tax implications and considerations
of their regional activities and operational
planning. This includes corporate
structuring, investments and disposals,
and structuring and pricing cross border
arrangements and dealings. Our multidisciplinary approach and global mind set
enables us to cover a broad range of issues
and work collaboratively with our clients
to find solutions to complex cross border
challenges.
Our team works to provide business with
access to trade negotiators to provide
informed input into future FTA negotiations,
as well as reviews and updates of
existing FTAs, in order to influence trade
policy design and outcomes. This is
achieved, inter alia, by drafting technical
submissions to DFAT in order to achieve
specific commitments in Australia’s FTAs
and providing policy, economic and legal
expertise across areas of trade policy,
including goods, services, technical
barriers to trade, sanitary and phytosanitary
measures, trade remedies (subsidies and
anti-dumping), investment, intellectual
property as well as dispute settlement
mechanisms.
© 2016 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.
All rights reserved. The KPMG name and logo are registered trademarks or trademarks of KPMG International. Liability limited by a scheme approved under Professional Standards Legislation.
37
Access Asia
Leveraging Free Trade Agreements for Australian Trade Growth
Risk Consulting
Government Incentives
Access Asia Trade Solutions
Michael Hill
Philip Doyle
Amelia Hartney
National Partner in Charge,
Governance and Risk
Melbourne
Director, Government Incentives
Melbourne
Access Asia Program Leader
Melbourne
+61 3 9288 6859
[email protected]
+61 3 9288 5089
[email protected]
Our National team of Research &
Development (R&D) and Government
Incentives experts help businesses access
Australian and Global funding opportunities.
Accessing government grants can be
challenging. The availability of programs
can change rapidly and the identification
of opportunities that are strategically
important to business can be difficult.
New exporters will find a wide range of
government support is available and can
accelerate their journey if they navigate the
opportunities provided by both State and
Federal government agencies, including the
grants and in-country support.
Access Asia is KPMG Australia¹s strategic
response to the increasing regional trade
opportunities arising from the recently
introduced FTAs. Access Asia is an
integrated KPMG initiative comprising
teams of dedicated specialists combining
skills and experience to create a
comprehensive client service offering for
Australian clients exporting and importing
goods and services internationally and with
a particular focus on the Asian region.
+61 3 9288 5589
[email protected]
KPMG has a strong and experienced
national Governance and Risk team,
supported by our global Governance and
Risk team, who focus on assisting our
clients in identifying and understanding the
risks and compliance obligations created
with exporting and/or setting up offshore
offices in Asia. The Governance and Risk
team has worked with clients across
the Retail, Manufacturing and Financial
Services industries.
The Governance and Risk team assists
clients in performing a dynamic risk
assessment which uses three dimensional
network theory and leverages data
analytics to identify, connect and visualise
risks. Dynamic risk assessment identifies
critical risk clusters and interconnectedness
and the contagion effects of these risks
within the organisation. In addition, we
support our clients in developing potential
risk mitigation strategies.
In addition, our team can work with
you to identify and understand the new
compliance and regulatory obligations and
reporting requirements in the offshore
location. We can assess your existing
compliance and regulatory reporting
framework to assess how effective,
efficient and sustainable your compliance
framework is to absorb changes to the
business to ensure that it will align with
future local regulatory and operational
requirements.
38
Governments have long assisted innovation
and business growth through grant funding
and tax benefits. Each year, hundreds
of government grant programs worth
billions of dollars are made available to
businesses in Australia and internationally.
However, accessing these funding
opportunities can be challenging, as both
availability and eligibility criteria change
frequently. Our Incentives services range
from reviewing previous grant and R&D
incentive applications to managing the
entire claim process, including registration
with appropriate government bodies, claim
preparation and assistance with audits. By
accessing funding opportunities to support
growth into Asian and other global markets,
our clients gain a competitive edge and can
accelerate their international journey.
Our team draws on existing service lines
and has been assembled to help our
clients who are interfacing with Asia by
providing a full range of services including
market entry strategy, supply chain and
procurement, customs and excise tax and
Free Trade Agreement reviews.
KPMG is proud to have worked with many
Australian companies who are championing
market access opportunities internationally.
Together with their experience and our
skills, we can provide other clients with
insights and open doors so they can begin
their journey prepared, with knowledge
and ongoing practical support.
For more information about Access Asia,
please contact Amelia Hartney.
© 2016 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.
All rights reserved. The KPMG name and logo are registered trademarks or trademarks of KPMG International. Liability limited by a scheme approved under Professional Standards Legislation.
© 2016 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.
All rights reserved. The KPMG name and logo are registered trademarks or trademarks of KPMG International. Liability limited by a scheme approved under Professional Standards Legislation.
kpmg.com.au
The information contained in this document is of a general nature and is not intended to address the objectives, financial situation or needs of any particular individual
or entity. It is provided for information purposes only and does not constitute, nor should it be regarded in any manner whatsoever, as advice and is not intended to
influence a person in making a decision, including, if applicable, in relation to any financial product or an interest in a financial product. Although we endeavour to
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in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.
To the extent permissible by law, KPMG and its associated entities shall not be liable for any errors, omissions, defects or misrepresentations in the information or for
any loss or damage suffered by persons who use or rely on such information (including for reasons of negligence, negligent misstatement or otherwise).
© 2016 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative
(“KPMG International”), a Swiss entity. All rights reserved.
The KPMG name and logo are registered trademarks or trademarks of KPMG International.
Liability limited by a scheme approved under Professional Standards Legislation.
October 2016. NSW N14695ASIA