Major export markets—Stronger governance boosts Australia’s exports
World Risk Developments October 2022
Governance indicators strengthened in most of Australia’s 20 largest emerging market export destinations between 2016 and 2021, according to Worldwide Governance Indicators compiled by the World Bank. Importantly, better governance was associated with faster export growth to these markets (Chart).
For countries like Vietnam, governance has steadily improved alongside global economic integration and trade liberalisation through participation in multiple international trade deals. A track record of political stability has also been conducive for doing business in several countries, including Vietnam. Fiscal reforms and revenue mobilisation measures have allowed governments to implement economic and social projects, increasing policy effectiveness. For example, tax increases in Indonesia have supported higher government spending on education, infrastructure, health, and social safety nets while tax reforms in the Philippines have helped fund the government’s “Build, Build, Build” infrastructure investment program.
Governments in Pakistan and PNG benefit from financial and technical support from international financial institutions, such as the International Monetary Fund, supporting greater administrative capacity. Structural reforms in areas of anti-corruption (including in Indonesia, Pakistan and Malaysia), reducing rigidities in labour markets (Indonesia and Saudi Arabia), enhancing insolvency and bankruptcy laws (India), and digitalisation of government operations are helping to strengthen institutional quality in these markets. Scores on the rule of law and control of corruption improved in Thailand, Malaysia and Indonesia between 2016-21. Recent research from the Asian Development Bank finds that a strong rule of law has a positive effect on business innovation, while less corruption is correlated with an increase in new entrepreneurs. Improved governance and business conditions in Australia’s largest emerging export markets bode well for continued export growth.