Asia has officially become the fastest growing market for Australia’s exported legal services, with lawyers saying Asia’s developmental needs will drive the growth further and see more law firms move into the region.
According to research issued this month by Australia’s International Legal Services Advisory Council (ILSAC), from 2006-2007 Australia’s exported legal services to Asia grew by 56.4%, compared to the 25.5% growth from the previous period (2005-2006). For the first time, China overtook the UK as the second largest market for Australian exported legal work, accounting for 16% of the total revenue generated. The United States remained Australia’s largest legal services market.
Although the research captures the market before the advent of the global financial crisis, Jim Dunstan, a Hong Kong-based partner heading Allens Arthur Robinson’s Asia operations, says the growth coming from Asia was likely to be sustained. He said the possibilities for legal work in Asia were almost “limitless”, and that the region will remain somewhat insulated from the effects of the financial crisis.
“The underlying demand for infrastructure and the increasing wealth throughout Asia will drive growth over the next 25 years,” Dunstan says. “The demand for those areas is almost endless and it will continue to grow as things sort out following the current crisis. In addition, the sophistication and rapid growth of middle-class wealth in Asia will provide more opportunities for the financial services industry to do more routine banking, [as opposed to] developed economies where they’ve come to the end of what they could do, [since] everyone has a bank or super account.”
John Corcoran, president of the Law Council of Australia – which cocommissioned the ILSAC report, has a similar outlook.
“I think the growth in exported legal services to Asia is likely to move forward even further despite the economic crisis, because the Asia economies, with some exceptions, seem to be maintaining their growth and activity, and perhaps are more likely to rebound from the crisis, particularly in China and Hong Kong,” he says. “Both of those economies will grow in the foreseeable future and, looking specifically at the sectors, Australia has been involved mostly in M&A and corporate transactions, and they are very consistent with the areas that China is likely to need legal services in.”
Corcoran says that Australian firms will continue to push further into the Asian market either by setting up offices, establishing joint ventures or through the “fly in, fly out” method.
“It’ll be interesting to see [more firms moving towards Asia] as Australian firms in Asia practice in different ways – some are involved in ‘fly in, fly out’ transactions; others have a number of offices in Asia. I think it’ll be combinations of both and possibly joint ventures with local firms,” he says.
As law firms look towards Asia in response to the downturn, it is likely that competition will become more heated in the short term. But Corcoran says that Australia’s links to the region will set its firms apart from competitors.
“Many law firms from the UK and the US have a significant presence in Asia, and I guess they are competitors with Australian firms in the area,” he says. “But there’s still a lot of upside for Australian firms in Asia as we understand the region well and we practice in the areas that are likely to meet the need in.”
The firm expects to meet more demand in practices such as litigation and insurance, as work filters down from the US towards the Asia-Pacific region.