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Address to the Council for International Business Affairs, Melbourne



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JOHN KERIN

MINISTER FOR TRADE & OVERSEAS DEVELOPMENT SPEAKING NOTES COUNCIL FOR INTERNATIONAL BUSINESS AFFAIRS MELBOURNE 13 AUGUST 1992 (Delivered on Mr Kerin's behalf by Stephen Martin, Parliamentary Secretary to the Minister for Foreign Affairs & Trade)

This morning Senator Evans gave you an overview of the Government's strategic approach to trade liberalisation at the multilateral, regional and bilateral levels.

I want to focus on strategies of trade development and promotion, with emphasis on Austrade and our immediate region. And I will touch on Australia's self-image and how important that is to our strategic approach and our performance.

Gareth mentioned the National Trade Strategy process which kicked off last November. The primary aim of this strategy is to improve information flow and coordination between all levels of Government and industry so that Australian trade and investment activities are coordinated and purposeful.

(For example: I recently signed an agreement with Wayne Goss under which Austrade will provide overseas trade development services to Queensland companies. This allowed the Queenslanders to drop their expensive plans to set up their own overseas network, and ensures that there is an overall Australian

identity to our products and our promotion efforts overseas.)

For last November's meeting we produced a booklet - of which there are copies here today. It will help you see the kind of work we are doing and the information available to help frame your own export initiatives.

The initial premise is clear and simple: Our current account situation makes it inescapable that export growth is the only way for Australia to maintain and raise its living standards. The ratio of exports to GDP must improve, and export growth must outstrip import growth for a sustained period.

In particular, just to stabilise our current account deficit we need a sustained surplus of at least 1.5% of GDP on non-income items, primarily goods and services.

Theoretically this could be achieved by artificially curbing import growth via tariffs, quotas and the like. In the long run this would be self-defeating and, as you are aware, the Government has not embraced this path.

As you will see from this booklet, we have analysed our export performance up till now and projected export growth out to 1994, at the same time breaking it down into sectors and markets.

We also identify 24 priority markets: Japan, Korea, China, Hong Kong, Singapore, Indonesia, Malaysia, Thailand, the Phillippines, Vietnam, the US, Canada, Mexico, Chile, the UK, Germany, Italy, France, the Netherlands, Belgium and Luxembourg, New Zealand, PNG, Iran, and India. Detailed information on each of

these markets is supplied (in Appendix 3, which is bigger than the rest of the book).

DFAT uses this framework to guide its own allocation of resources - both here and overseas - as does Austrade. But the Government is not in the business of production and export, nor do we assume coercive powers when it comes to influencing the decisions of industry. After we gather the best information

and develop the best strategic approach in consultation with industry and other interested parties, we must communicate it to the private sector. That is what we are about here today. After this, its up to people like yourselves.

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For Australia to have a coherent and, as I said before, purposeful approach to trade and investment development this framework should be used by the private sector to guide plans for export development.

By doing so you will be making the best use of the intelligence that the Government gathers. You can also be confident that Government support will be more likely to be available in the form of market intelligence and assistance on the ground.

The most important and active involvement by Government in export development and promotion comes through Austrade.

Austrade's story reminds me of the ugly duckling tale. In the early formative years it struggled and got a lot of knocking, some of it deserved. Since then McKinsey has spoken, hard decisions have been taken, jobs have been shed, and costs cut.

But a lot of negative perceptions still overhang the major organisational changes that have taken place since McKinsey reported 18 months ago. This is a performance and communications challenge which Austrade's management understand and are attacking in a sensible, measured way.

Austrade's Corporate Centre staffing has been reduced by 26%, and its budget by over 30%, saving $8m which has been redeployed in the field.

Austrade's strategic approach is outlined in its corporate plan for the next three years:

new Posts are being opened in key markets, particularly Asia

operational resources allocated outside Australia will increase to 70%

closer collaboration with the States and Territories and industry associations

, Business Development Units will focus on the needs of around 300 high-potential clients

Grants and loans will reinforce in-market support

administrative and other costs will be reduced

In 1992-93 we will see this largely put into effect:

Austrade will spend $150 millon on its operations in 1992-93

- 63% of that will be spent offshore, up from 53% pre-McKinsey. This will rise further to about 70% in 1993-94

- 52% of offshore funding will be devoted to Asia, up from 41% pre-McKinsey.

In Australia, the centre of responsibility has shifted from Canberra to Sydney and responsibility for market intelligence and promotion is now largely devolved to overseas regional executive general managers.

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To ensure the shift in funding is fully utilised, responsibility for its allocation has been shifted directly to the field.

In East Asia, for example, this means three regions are run "hands on" by three Executive General Managers:

Greg Dodds in Tokyo responsible for Japan and Korea

Peter Forsythe in Hong Kong responsible China, Hong Kong and Taiwan

John Allgrove in Singapore responsible for South East Asia.

The devolution of responsibility is streamlining and improving Austrade's offshore operations, particularly in the dynamic markets of Asia.

- Resources can be shifted rapidly and efficiently on the basis of need within the region

- Market strategies can be rapidly modified and adapted to changes in circumstance

- Priorities can be more readily set and monitored

- Weaknesses and strengths in human resources can be more readily identified.

In short, Austrade's ability to achieve its objectives has been measurably enhanced.

Let's look closer at these three key market areas.

JAPAN AND KOREA

This year, 80 staff will run seven offices in Japan and Korea.

three new ones (Sendai, Sapporo and Nagoya) will be open by December, modelled on the two-person operation in Fukuoka

- one A-based, one locally employed

- @ $300,000 p.a. each to run.

designed to give Australian exporters a cheaper gateway into Japan than through Tokyo, especially with existing Qantas freight routes in mind.

as an example of the potential, Sapporo is already nearly as big a market for us as New Zealand, with the potential to be bigger

Greg Dodds has initiated strategies across the primary, industrial and service sectors:

- and is particularly conscious of the under performance of ETMs in the Japanese market as a proportion of our exports.

Without going into the detail of sectoral strategies, there are a couple of keys which he has addressed which are common to all three regions of Asia as designated by Austrade:

- Image

- Lack of cross investment.

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• 7.1

We want the new small office network to raise Australian awareness of

Japan beyond Tokyo and Osaka, and to go some way towards broadening interest in the market potential that undoubtedly exists there.

EAST ASIA

Austrade has 70 staff in five offices in East Asia.

• including one soon to open in Guangzhou (courtesy of part of the $5 million allocated to Austrade in the One Nation Statement).

• A major feature of the region some of you will have heard articulated by Peter Forsythe is that "China ain't China"

- i.e., it is made up of a series of quite distinct markets, and needs to be dealt with as such.

• Future growth of Austrade's presence in the region could well see a chain of small offices opened in PRC along the lines of the model introducted in Japan by Greg Dodds

- and a possible new office in Taiwan's south.

I will not go through specific market strategies. However, here too the issues of investment and image loom large as a challenge for not just Austrade but Australia in general.

SOUTH EAST ASIA

Austrade has 110 staff in 13 offices in South East Asia, including about-to-be-opened Surabaya and new Trade Correspondent appointments in Cebu and Guam.

• An A-based officer, Jenny Lloyd, has been placed in Phnom Penh to meet the quite extraordinary levels of demand there at the moment.

• Again, cross-investment and image loom large as challenges to be addressed.

It is also worth noting that parts of South East Asia are very much the flavour of the year for both small and large exporters

Jakarta and Hanoi, for instance, are dealing with enormous amounts of traffic - much of it not well planned and coordinated.

CO-ORDINATION

This brings me to my final point - the importance of coordination between Australian Operations and the overseas network to maximise the utility of Austrade.

• I have talked about "flavours of the month" among the Australian export community.

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At the moment, two posts in South East Asia are the recipients of • enormous workloads - Jakarta and Hanoi.

In Jakarta, incoming inquiries have been as high as 1000 a week in recent months.

- In Hanoi, five separate trade missions (none of which seemed aware of the existence of the other) wanted meetings organised in May alone.

• These sorts of volumes are welcome as they are expressions of a strong and growing interest in Asian markets.

• But they make it extremely difficult for posts to operate effectively. In short, traffic to and from posts has to be managed in order to properly service Australian exporters.

• That is the raison d'etre for Austrade's Australian Operations, and will continue to be. In order to maximise the effectiveness of posts, as much information as possible needs to be available to clients within Australia. For this we need:

- a body of market information maintained and delivered in Australia

- traffic to and from posts being managed in a consistent way on a nation-wide basis

- Post priorities administered and adhered to in Australia on a nation-wide basis.

So quick turnaround times, quality control, and maximisation of the offshore facility, require a dedicated and professional A-based support team.

I won't go any further into Austrade's strategic approach. I hope this little snapshot helps you appreciate the restructuring that has been bedded down in Austrade and how they are focussed on their mission.

I would like to finish up by addressing an important part of any strategic approach, but one we run the risk of taking for granted. This also has a lot to do with the image problem I have already mentioned.

You have to know who you are, where you are, what you are, what you want, what your strengths and weaknesses are, and what your goals are - before you march off to implement any strategy.

Recent comments from the NAB's Bill Irvine showed that some of us are still a bit confused about the basic geopolitical realities which define us. And it is not so long ago that John Elliot suggested we join the EC.

Similarly, the popular prejudices that many Australians hold about this country are often ill-founded, especially when we compare ourselves with our Asian neighbours. This was highlighted when Tom Burton, who writes for the Sydney Morning Herald, recently used some figures supplied by my office to put together

a column entitled 'Australia is not so trashy after all'.

He pointed out that after Japan and China, Australia is a close third in Asia in the overall size of our economy, and that the combined GDP of Australia and New Zealand is greater than all the ASEAN countries put together.

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There was more. But the most revealing aspect was that Burton received a lot more calls than usual after this was published, all to express surprise. In short, Australians have a defensive and insecure image of their country and their economy, and this does us no good out there in the marketplace.

What makes this especially frustrating and annoying is that we are achieving a great deal on many fronts - often much more than could be expected from a nation of our size - but we do ourselves in the eye by devaluing or disregarding our achievements.

On the Government side, the fact that we instigated the Cairns Group and lead it in the GATT round negotiations, thereby greatly amplifying our presence in this crucial international forum, is hardly appreciated.

Similarly, our initiative in defining APEC and bringing it to fruition is a major diplomatic and trade success which is taken for granted. Our role in the Cambodian peace process has been crucial and earned us great respect in our region - but it is treated domestically more in terms of its potential for

failure.

On the corporate side, the fact that we have achieved a surplus in goods and services trade for 7 of the last 8 quarters would be a surprise to probably 99 out of 100 Australians. The fact that our exports of manufactured goods have increased by 26% in each of the last two years would be equally well-known.

The fact that over two thirds of our trade is with Asia may be a little better appreciated, but I imagine at least 99 out of every 100 Australians would be surprised to find that over 300 Australian companies have offices in Hong Kong.

It is often said that the problem here is the media. But although the media in Australia may have some particular Aussie quirks, I believe it is generally no worse nor better than any other western media.

In this matter, I think the Australian media is a part of our society, not an external influence. It reflects a deeper Australian ethos - the tall poppy syndrome, the Aussie knocker, the world according to Hanrahan. A sociologist

could explain this perhaps by referring to our colonial origins, our climate, and what happened in Gallipoli. But, for our purposes, we should be more interested in how we can grow beyond this and start to get our self-image in kilter with the reality.

Put simply, the best way is to continue performing better and better. The -Government has set the scene over the last ten years and will continue to do so. In many ways the private sector has taken up the challenge - the recent surpluses in trade in goods and services show this plainly. But we need to

keep pushing it further out each year.

As we do so, the message will start to permeate our self-image, the media will discover it and probably overplay it, greater improvements in our performance will feed off this, and our self-confidence will start to match our achievements.

That would be a welcome turn around, and an essential step in our growth toward maturity as a competitive economy and a nation.