Appreciating Australia’s place in the Asian Century
20 December, 2011
“Whoever is first in the field and awaits the coming of the enemy will be fresh for the fight; whoever is second in the field and has to hasten to battle will arrive exhausted” Sun Tzu, The Art of War
Sun Tzu’s quote best captures the advantages of being the first mover. The Asian Century is seeing a shift by globalising law firms to Asia. Hong Kong best captures this, with as many as 86 foreign law firms from Australia (5), Bermuda (2), British Virgin Islands (1), Cayman Islands (3), China (2), France (2), Italy (1), Luxembourg (1), Sweden (2), UK (20), USA (42) and USA/UK (4) establishing presences of varying sizes (Legal500, 2011).
Asia’s powerhouse economies are enjoying double digit GDP growth. Specifically, China has grown at 17% CAGR since 2000 and the IMF estimates the GDP to close the year at a whopping $6.9 trillion (IMF, 2011). China’s economic expansion is driven by its comparative advantage on labour cost derived from the size of its population, 1.3 billion to be exact (IMF, 2011). The global manufacturing hub’s continuous industrialisation and urbanisation are contributing to the demand for mineral resources (Australian Government Department of Treasury, 2010). Australia’s strategic location in the eastern hemisphere and resource-rich lands have seen its ascendancy as the single largest FDI recipient from China (The Heritage Foundation, 2011).
Since 2008, major domestic and globalising law firms have entered Perth to ride the resource super-cycle. Here are but a few examples:
- Middletons’ combination with two Perth firms in 2008 to pursue ASX-listed miners.
- Gilbert + Tobin’s recent merger with Perth-based Blakiston & Crabb, specialising in the energy and resources sector.
- Perth-based Jackson McDonald’s amalgamation with McKenzie Moncrieff to create the largest Perth law firm.
- Allen & Overy raided Australian law firms to establish a partnership of 17 in Sydney and Perth to capture cross border investment flows and ride the resource super-cycle.
- Clifford Chance’s entry into Australia via mergers with Chang Pistilli & Simmons and Cochrane Lishman Carson Luscombe inter alia to capitalise on Perth’s booming resource sector and intense demand from Asia.
- Holman Fenwick Willan launched a Perth office to service the oil, gas and mining industry clients.
- Squire Sanders picked up most of Minter Ellison’s Perth office as a strategic resource play in Perth.
The Asian legal industry is at a tipping point driven by the continuous growth of developed and developing Asian economies. Recent cross-border Asia-Pacific law firm mergers signify the continuously expanding role of Australia in the Asian Century:
- The recent Ashurst merger with Blake Dawson is a move to solidify the merged entity’s position in Asia.
- The King & Wood and Mallesons Stephen Jaques’ combination is a move to create a regional powerhouse as the pre-eminent competitor for US and UK firms that have traditionally dominated major cross-border deals.
With more firms setting up in Australia, how many assets remain? Speed-to-market is critical in seizing the opportunities still available. Sun Tzu’s quote still rings true in an uncertain 2012.
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