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Thursday, 10 October 1996
Page: 3980


Senator BISHOP(7.27 p.m.) —This week the Economist Intelligence Unit released a report entitled, Australia's Foreign Investment Challenge: The Harsh Realities . It outlined the views of managers from over 50 multi-national corporations on Australia as an investment destination. The report gained significant press in the national media. According to the report, Australia accounts for only one to two per cent of global sales, therefore we are not a high priority at the boardroom tables of multi-national corporations. One manager said that, since Australia only has one per cent of their sales market, we `get about one per cent of the board's attention'.

Australia will never be a country which has a large domestic market. However, our location provides us with the opportunity to be a production and support site supplying the fast-growing Asian region. The key point to come out of the report is that there is a real perception amongst managers that Australia lacks a coherent and consistent industry policy, both at the macro-economic level and for many specific industries. The managers in the report complain that it is not obvious who is in charge of industry policy in Canberra. They say that `existing policies change too often'. I would like to quote one manager's experience. He said:

We've spent four years building up exports from Australia and headquarters was beginning to accept that we were a viable sourcing site.

. . . . . . . . .

But in the government's scramble to cover its deficit it cuts the tariff concession order so we now pay a 3% import tax on materials that are not even produced in Australia. Policy changes like these seem to come out of the blue with no clear direction or aim and seem to totally ignore industry.

The hesitance of many multi-nationals to invest in Australia because of a perceived lack of industry policy is concerning in light pf the report's revelation that many of the world's leading multi-national corporations have already decided to put their next world-scale plant in Asia—but are yet to decide where. This is a great opportunity and we must give them a reason to choose Australia.

The government's irrational fear of industry policy should not prevent Australia from missing out on the huge export revenues that will flow from multi-national corporations locating their regional manufacturing plants in this country. These plants will export to the entire region. The average multi-national plans on more than tripling its sales in this region. This means huge export revenues for the countries where they choose to establish their headquarters. And the establishment of value-adding, export-orientated manufactured plants in Australia will create real jobs and contribute significantly to lifting our standard of living.

Strategic industry policy was pursued successfully by the previous Labor government. According to the report, 11 per cent of the firms interviewed were involved in the Button car plan, which lifted automotive exports from under $400 million in 1984 to $1.5 billion in 1995. Sixteen per cent were involved in factor F, which increased pharmaceutical industry exports to their current levels of $1.4 billion per year. Twenty seven per cent were involved in the successful partnership for development scheme. Other industry policies include the book bounty, which increased book exports by 200 per cent; and the shipbuilding bounty, which saw production rise nearly 200 per cent and exports grow by 150 per cent.

The report's statement that the biggest magnet for multi-national corporations is a broad, cohesive industry policy should come as no surprise. Report after report, all by prominent organisations such as the World Bank, have said that a key reason for East Asia's stunning growth over the past three decades has been the effective industry policy of countries in that region.

It is clear from the report that we are facing strong competition from Asian countries when multinational corporations consider where to locate. As the report says, `The Asian countries Australia competes against are all driven by industry policy and, if you want to win investment away from them, you have to focus on having a coherent industry policy.' Seventy-four per cent of managers feel Australia does not have a clear industry policy. Seventy-nine per cent believe we do not have a consistent industry policy and 72 per cent believe industry policy is not consistent across federal ministries.

One senior manager explained that he had worked in a number of countries, but he found Australia's system of developing industry policy the strangest of all. He outlined how the industry department consulted industry whilst Treasury preferred to look at academic studies of economic studies of efficiency. He said managers did not know which department to believe, and described it as `a system guaranteed to create confusion'.

It is clear from this report that there needs to be a debate in this country regarding the development of an effective industry policy. We should look at our competitors in the region and develop policies which will ensure that we meet the challenge of competition. The current idea of simply opening a textbook and following it to the letter does not work. The report specifically criticised `frequent government statements that they are not in the business of picking winners or providing "corporate welfare"'. Rather, it must be recognised that the government has a responsibility to create truly level playing fields. We must have the same concept of the level playing field as our Asian neighbours do. This means public policy directed towards assistance to high value, high yield, expanding export-oriented manufacturing industries.

The government has a responsibility to nurture these key industries and a responsibility to ensure good economic policy that delivers results is followed, not some blind ideological pursuit. This report is a deafening warning bell to the government: unless you develop a strong industry policy, Australia will not attract the foreign investment which is so integral to the growth in our economy and, over time, the living standards of all Australians.