All of us who are engaged in the Australia-Japan relationship have said or have heard others say that the relationship is characterised by high levels of trust. This may seem like public relations or diplomacy speech but in my view trust is a real asset, in the economic sense, i.e., it creates wealth for both parties because it minimises the risk associated with all business transactions. Trust also promotes long term investment and collaboration, with the accompanying exchange of sensitive knowledge and technology. The elements of trust in the Australia-Japan relationship are found in 21 トランプull range of fields: social, commercial, security, financial and geopolitical.

A just-released report on Japanese investment into Australia by Herbert Smith Freehills (https://www.herbertsmithfreehills.com/insight/japan-australia-investment-report-2022-decarbonisation-and-energy-security ) shows clearly how the decades of cumulative trust have resulted 21 トランプ enormous proliferation of investments and partnerships in a dazzling number of sectors, now including R&D with various universities and in healthcare.

Naturally, there is a lot of activity 21 トランプ energy sector, since we are in a transition period towards zero carbon. Investments and partnerships are occurring in both traditional resources and in renewables and 21 トランプ circular economy. There have also been some divestments from both gas and thermal coal despite high commodity prices because of a commitment to long term goals and the need to use proceeds of divestment for new investment.

The report shows that in 2022 there were 42 acquisitions and 8 divestments and 51 new partnerships. Overwhelmingly, the new commitments have risen to levels of pre-COVID since executives have been able to travel freely and make decisions with more confidence.

21 トランプ past decade there have been more examples of 100% M&A deals from Japan, different from the earlier pattern of minority equity participation. Now there is a further new trend, of large Japanese companies investing in or acquiring Australian SMEs or start-up enterprises that have some unique technology that can be developed into scale. JETRO has been a part of supporting this new trend by establishing J-Bridge, a platform which connects Japanese companies with innovative Australian firms.

Australia is an attractive destination for FDI. Figures from the OECD show that in 21 トランプive year period 2017-2021, FDI flows into Australia averaged 2.7% of GDP. This remarkable figure is almost twice the average of other OECD countries or of the G20 (1.4% of GDP). This result is fascinating because the OECD is mainly developed countries but with Canada and Chile, which are both resources rich. Australia is an interesting combination of developed and resource rich, both in carbon and non-carbon assets. Population growth, high per capita GDP and favourable business environment are also key factors.

Political and regulatory stability are also important. However, as the HSF report shows, recently there have been some decisions by State and Federal Governments (royalty increases, gas reservation and price caps) which have caught investors by surprise. These types of decisions are not unique to Australia 21 トランプ current global environment of high inflation and supply shocks, but nevertheless will make some investors more cautious. Trust is a very valuable asset and we cannot be complacent about the trust we have built up over many decades.

Author: Manuel Panagiotopoulos

Managing Director, Australian and Japanese Economic Intelligence