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Wednesday, 27 March 1985
Page: 909


Senator MAGUIRE(5.20) —I move:

That the Senate take note of the paper.

(Quorum formed) The annual report of the Management and Investment Companies Licensing Board is yet another milestone in Australian public life. It is the first annual report of the Board, which was established by Act of Parliament. The Board first met in 1984 and the management and investment companies program was introduced during the financial year 1983-84. The aim of the program is to boost high-growth industries in this country, particularly those which use innovative technology. I believe that there is a very great need for this sort of development in our country. On a number of occasions the Minister for Science, Mr Barry Jones, has highlighted the fact that many countries have a much higher proportion of their export products incorporating high technology than does Australia. Therefore they are gaining some comparative advantage over us. Australia ranks very low according to its proportion of exports which involve high technology.

Under the arrangements with the Management and Investment Companies Licensing Board, the Government allows a 100 per cent tax deduction to investors in management and investment companies-MICs. The Government budgets to lose $20m annually to revenue as a result of this tax deduction, which can be seen as a form of government investment in high technology innovative companies. During the financial year in question-1983-84-the first seven MICs were licensed. They included a number of large companies, such as BT Innovation Ltd and West-Pacific Investment Co. Ltd, the two largest. By the end of the year the seven licensees had raised some $32m from an approved capital of $50m. It is very important to note that, of the $32 m which was raised, some $12m came from individuals. Most of the balance came from companies.

The MIC program was ultimately derived from the Espie High Technology and Financing Committee report about developing high technology enterprises in Australia. That report was commissioned by the Australian Academy of Technological Sciences and it saw two important Australian obstacles to rapid development in these areas. It saw an absence of appropriate sources of venture capital and it saw a widespread lack of management and commercial skills within Australian enterprises. This program should be applauded because it begins to address those matters.

The MIC program aims to overcome the lack of capital available for young, high-growth technological businesses in our country. MIC investment companies can invest in business entities if the latter meet at least three of the following criteria: The use of innovative technology; export orientation, and Australia has had a very poor performance in that field from its manufacturing industries in particular; international competitiveness; potential for rapid growth and potential for creating skilled employment in Australia. Of course, the last factor is very important indeed. If Australia is to make progress we must increase the skill base of our work force.

Other criteria for investing in particular business entities include the fact that the businesses must be high on research and development and must have 100 employees or fewer, or $6m or less in net assets. As I have mentioned, the businesses must be expecting rapid growth. The MIC program requires companies to expect an annual sales growth of some 20 per cent a year, which is a high figure but no doubt a number of small businesses in the country have that sort of potential. Among the other criteria for investment is the fact that the businesses chosen must give some emphasis to areas such as computer software and must, in some cases, have scientific orientation.

As well as raising capital, MICs have been out in the market place seeking investment opportunities. By the end of the financial year in question some 400 investment proposals had been put to the MICs. One company had already been certified as being eligible for funding. That was a computer company which made portable computers. Since the end of the financial year a further three licences have been granted and the level of capital approved has been increased from $50m to a total of $71m. A very large and significant start has been made to this most important program to boost the high technology growth industry in Australia through the agency of small business.