Australian corporates – no ticker

There was sad news from the ANZ bank this week. No, not the hundreds of millions of dollars written off as it retreated from its Asian expansion strategy – the admission that another big Australian corporate didn’t have the ticker or the competence to play in the world’s greatest growth markets.

Most companies, like most people and nations, tend to do what’s easiest for them or what they must. That’s understandable and, in a way, economically sound, at least in the short term.

In the longer term, wise people, companies and countries invest in their future in case relatively easy options aren’t available. And, sometimes, there are ambitious individuals and institutions that desire to do more, to do as much and achieve as much as possible, to explore and test boundaries. The reality is that such people and institutions are relatively rare. Most of us prefer to stick with what we know, what we’re comfortable with.

Australia’s Big Four banks are prime examples of that. And their performance when they try to stretch and go beyond their own backyards tends to reinforce the perceived wisdom of staying home.

Faced with a mature domestic market, ANZ had a crack at getting aboard the Asian Century and seriously expanding in challenging growth markets. The idea was to have a quarter of the bank’s income coming from Asia relatively quickly. It hasn’t worked out that way. The board and new CEO have given up on that ambition. It’s turned out to be a very expensive exercise lesson – and that’s if you only count the inflated salary of the previous CEO, Mike Smith, who was hired from HSBC to lead the Asian expansion. How wonderful to fail but still receive eight figures a year.

ANZ’s major shareholders have applauded the retreat. Australian institutions – superannuation funds, mostly – are a timid, risk-adverse lot. Their secure, government-mandated, index-hugging, multi-billion-dollar gravy train doesn’t call for bravery.

It seems I’m in the very small minority of shareholders (the Pascoe family super fund holds ANZ shares) who regret the retreat, giving up so soon. I really didn’t mind the company losing money in Asia as long as it was learning from the experience and getting steadily better. Because ANZ gave up so soon, after just a half-dozen years, we’ll never find out if it’s management and board were capable of anything other than being mediocre locals, playing in the domestic league.

I’ve been a fan of the Asian story practically all my life. Pretty much as soon as I could, I left Australia as a very young journalist and joined the South China Morning Post. It was as close as you could get to China in 1976. I’ve been known to say I grew up in Hong Kong and, in many ways I did.

Some lessons learned then have stayed with me. The companies that make it big in Asia require lifetime commitment. Success can’t be gauged over a few years – as the ANZ has done – but decades. Asia is made up of very diverse and challenging markets. Single countries are made up of very diverse and challenging markets. Yet the potential rewards of being part of such a big future are enormous.

There’s a fine aphorism that management is doing things right while leadership is doing the right things. Some of ANZ’s failure in Asia was poor management, some of it poor leadership. The methods of expansion in some countries were poor and the personnel sometimes not of sufficient quality to handle it. There also was the problem of impatience back in the bank’s Melbourne head office, the inability of the institution to stick at the task until they got it right. A little like Woolworths’ Master shemozzle, they weren’t capable of the total commitment required to fix things that didn’t quickly go right for them.

So much of the failed empire has been sold to a Singaporean bank, DBS, with the “for sale” sign left hanging around the necks of the remaining Asian retail operations.

Singapore hasn’t been a “lucky” country. It has no natural resources or agricultural wealth. It had a difficult and sometimes precarious birth. There has been no easy way for it to progress, no necessity has forced it to rely on the talents of its people and to invest in them. Singapore has proven capable of becoming a regional financial and services centre – what Australia has failed at.

Along the way, little Singapore has grown wealthy. On a purchasing power parity basis, Singapore’s GDP per head is now substantially higher than Australia’s. Good luck to them.

Singapore needs to be good at international business in all its forms. Australia, and especially its big retail banks, doesn’t have to be so good to watch the money roll in. I think it’s still sad that we’re not prepared to realise all our potential.

And there’s another gripe along the way: the wheeze of our bank senior executives being paid as if they were international players. They’re not. Turns out, they’re just not good enough.

Michael Pascoe is one of Australia's most respected finance and economics commentators with over four decades in newspaper, radio, television and online journalism. He regularly appears on Channel 7's Sunrise and news programs and is a regular conference speaker, MC and facilitator.