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The global biotechnology industry: speech to Ausbiotech National Conference.

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The Global Biotechnology Industry Speech to Ausbiotech National Conference 25th October 2007

Dr Susan Pond, Chair of AusBiotech, Dr Anna Lavelle, CEO of AusBiotech, ladies and gentlemen - thank you for the opportunity to address you today.

The AusBiotech National Conference has become a premier event in the global biotechnology industry, particularly in the Asia-Pacific region. There are over 1400 delegates from 29 different countries represented - including almost all the major global players. I have been told that this has been the most successful AusBiotech National Conference yet.

Now, in the midst of the 2007 Australian Federal Election campaign, this is certainly a key forum for Labor. It is especially important for me, as Labor’s spokesperson for Industry, Innovation, Science and Research.

Your organisation represents over 2,500 members. It is a major landmark in the Australian industrial landscape, and its growth reflects the burgeoning biotech industry sector’s success here in Australia. Employment in your industry actually doubled over the two years 2005 and 2006 - reaching an estimate of over 12,000 by that time.

There are more than 2,500 companies and other entities in the Australian biotech industry, in biotech itself and in medical and related devices sectors. Your industry covers the agriculture sector as well as the human therapeutics sector: it is crucial not just to human health, but to Australian primary production.

I agree with Dr Lavelle, who made the point in The Age just over a week ago that the biotech industry extends beyond the medical and agricultural sectors, and crosses and influences “everything from ecology and climate change, to alternative fuels and medical devices.”

The Australian biotech sector is also a major contributor to Australian exports. I am sure we are all aware of the emerging possibilities in the fast-growing Asian market, as well as traditional ones in Europe and the US.

This conference has attracted support of State Governments. In recent times, the interest of the Commonwealth has waned when it comes to providing support to the biotech industry. There has been an increasing reliance to leaving industry support to the States.

I wish to give you this assurance, that a Rudd Labor Government will restore national leadership to development of our biotech industry. This is important not just nationally, but internationally.

Kim Carr

The Government has taken action to commission a “review survey” of AusBiotech and the National Biotechnology Strategy more generally. The consultants, Deloitte Insight Economics, are due to report at around the time of the coming election. I am concerned about reports that this review has been cloaked in a degree of secrecy, and that there has not been a sufficient level of genuine consultation with the industry.

Given the importance of this evaluation and given that it is likely to report shortly after the Federal election, I am surprised there has not been more consultation with Federal Labor. You would have hoped that on an issue of such importance,

there would have been an attempt to attract bi-partisan support.

Beyond Discovery 2007 report This Conference marks the launch of a pivotal report for the Australian Biotech industry: Beyond 2007. This is a report on a survey of health biotech companies that follows up on an earlier one in 2004.

Among many interesting things, the survey indicates that universities and public research agencies play an important and continuing part in commercially significant discoveries for the sector - 35 per cent and 24 per cent respectively. But companies themselves are now more than twice as active in this respect as they were just three years ago - up from 21 per cent then, to 44 per cent now.

Firms in health biotech are also more likely now to contribute funding to early research discoveries in their own fields. All this illustrates the fact that your industry, to a greater extent than many others in Australia at the moment, is built on innovation.

2007 Bioindustry Review This new report comes on top of another important insight into the Australian biotech industry - the 2007 Bioindustry Review. That report assessed 2006 as “a major turning point in health innovation”. The writers point to the emerging leadership of CSL; and to the fact that there have now been developed “enough well-founded products based on real science to make the industry competitive and robust.”

The authors go on to say, however, that analysis of the industry still “focuses on the dollars rather than the strength of research and commercialisation skills.”

The report acknowledges Commonwealth funding to support research infrastructure in biotech sciences, and also that of the Queensland Government. But it goes on to note that the planned Melbourne-based Neuroscience Cooperative Research Centre (CRC) was not funded in the 2006 round, and that no national neuroscience initiative is funded as a CRC.

Labor in Government will review the current CRC program and has vowed to restore its capacity to achieve its original purpose - public interest research.

I would add that, in recent times, the Commonwealth Government’s interest in the biotech industry has waned. Increasingly, it has left responsibility for support for

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your industry to the states.

The 2007 Bioindustry Review also expressed concern about the Howard Government’s decision to close the Biotechnology Innovation Fund (incorporating it into the Commercial Ready grants program) finding that:

The negative impact of the closure of the Biotechnology Innovation Fund in late 2005 continued to be felt [in 2006]. … relatively few small grants are being provided to new companies.

In 2005-06, the sector recorded only 19 start-ups, compared with a peak of 60 new firms in 2000-01.

Labor’s agenda for innovation: addressing skills shortages In the middle of a federal election campaign, it’s appropriate that I give a brief overview of Labor’s policy approach on innovation. In terms of nation building, innovation policy stands central to Austrlia’s future.

Labor believes that, in the 21st century, innovation policy is industry policy. Nowhere could this be truer, or more apparent, than in your own industry.

Australia’s national innovation edifice is in need of serious repair. Despite the best efforts of sectors such as your own to pursue innovation, Australia has been left behind because of policy neglect and a short-sighted approach to education and skills formation.

For example, we are lagging internationally when it comes to turning out PhD graduates: our Australian workforce contains only 7.8 PhDs per thousand workers, while Canada has 8.2 and Germany 20.1.

And the skill shortage - much-publicised in the trades area - extends to university graduates in many crucial science and engineering fields.

In this country we have only 308 engineering graduates per million of population. Korea has more than three times that number - 935; Japan has 814 and Finland has 816.

This dire situation is one of the reasons that Kevin Rudd has announced Labor’s Education Revolution. We in Australia need urgently to lift our game at all levels of education, from early childhood, through trade and technical areas, right up to higher degrees. By international standards, as the recent OECD report shows, Australia is falling behind our competitors.

Labor in Government has plans to address the issue of research training. We want to see an increased effort, in terms of student places, stipends and research infrastructure, all of which will require greater public funding.

But it’s in the sciences, especially the enabling sciences (Maths, Physics, Chemistry), that we must take the most urgent action. The number of high school students taking these subjects is falling rapidly - take mathematics, where the

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number doing intermediate or advanced maths at Year 12 fell from 41 per cent in 1995 to just 35 per cent in 2004.

As the Australian Mathematical Sciences Institute has observed, if things go on as they are, Australia will be unable to produce the next generation of students and graduates with an understanding of fundamental mathematical concepts.

In 2006, Australia ranked only 35th in the availability of scientists and engineers in the World Economic Forum’s Global Competitiveness Report - described as a notable competitive disadvantage. On this measure we trail behind Morocco, Portugal and Chile.

We no longer have enough qualified teachers in these subjects, and the size of university departments in these disciplines is also falling, with academics enticed overseas or into the private sector. It is a vicious circle.

Labor in Government will address these issues. For a start, we’ll halve HECS fees for new maths and science students while they are studying; and we’ll halve the repayments of maths and science graduates if they take up work in a relevant maths/science occupation - particularly teaching.

Labor’s innovation agenda: overview Labor’s plan for an innovation-based economy goes further than skills development.

A Labor Government will establish a Commonwealth Department that brings together responsibility for industry, innovation, science and research. This reflects the fact that the generation of ideas through science and research is a key driver of innovation across the economy. It also reflects the truth that, in the 21st century, innovation policy is industry policy.

Labor has developed a Ten Point Plan for a national innovation system, which will see a Rudd Labor Government:

z Strengthen investment in creativity and knowledge generation, including

basic research. z Focus business R&D incentives to promote global competitiveness.

z Accelerate the take-up of new technology, so that Australian firms have

access to the best ideas. z Support international partnerships and collaboration, and foreign investment

in Australian R&D. z Strengthen publicly funded innovation and research infrastructure, and

develop multiple pathways for industry to access the expertise of our universities and research agencies. z Encourage cross disciplinary and cross-institutional collaboration, building

our international reputation and strengthening institutional autonomy and a pursuit of research excellence.

Research I have already touched on the need to revamp Australia’s research training

system. This would be a key task for a Rudd Labor Government.

In addition, we understand that university research infrastructure has been badly neglected by the Howard Government over the last 11 years. The Higher Education Endowment Fund (HEEF) - announced in the 2007 Budget - is welcome. But it would take five years for the income stream from this fund to cover the maintenance backlog alone - which DEST figures put at $1.5 billion.

This still leaves us with the question of how to pay for the increasingly complex research infrastructure required for our universities to be truly world class.

I am also concerned that the Howard Government has not come clean on whether the HEEF is in reality little more than a replacement for the current National Collaborative Research Infrastructure Scheme (NCRIS), which terminates in 2011.

Just as with the training of skilled labour, Asian countries such as China and India are stealing the march on us in research performance. To take just one discipline - mathematics - Australia more than doubled its annual research paper publication numbers in the 20 years from 1985 to 2005 - lifting it to 1,250. Over the same period, China almost quadrupled its own output - from 2000 papers a year to over 9000.

This stunning growth is matched by levels of investment in high-tech and biotech industries.

A Rudd Labor Government will encourage research collaboration between universities, public research agencies and industry. In the university sector, our approach is a model based on hubs and spokes - those researchers working in less research-active universities will have access to facilities and colleagues at the research-intensive institutions.

Our Enterprise Connect program, including up to $100 million for Manufacturing Centres in five states, will also help to forge and support links between universities, research agencies and firms to facilitate innovation.

This will be important for the biotech industry, particularly given the predominance of small and medium-sized enterprises in this sector. I note that 63 per cent of companies surveyed in your report had revenues of less than $2 million. Finding a suitable alliance relationship was identified as the most important area for assistance in the development of international markets.

We recognise, too, the importance of international and truly global partnerships in research and innovation, and will facilitate and encourage these.

In relation to this, we need to ask ourselves how Australia can best leverage its position as a “two per cent economy” - that is, an economy that produces roughly two per cent of the world’s research, innovation and indeed output.

One idea that I’ve discussed a bit recently is that we form a coalition (or a sort of

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“Cairns Group”) of smaller nations - countries such as Chile, South Africa, Ireland and South Korea - to identify where we can work together more effectively. This might include fostering the establishment of formal and informal research networks. It might be enhanced international research training linkages - exchanges and collaboration.

R&D Tax Concession In response to the surge in research and investment on the part of our Asian neighbours, our developed country competitors are upping the ante. In the last few months, New Zealand has introduced a 15 per cent tax credit for R&D (equivalent to a 150 per cent concession under the Australian scheme); and the UK has increased its R&D tax credit for small and medium businesses from 150 to 175 per cent and for large companies from 125 to 130 per cent.

And while I’m on the subject, many of you would be aware that the Brown Labour Government announced earlier this month that it will invest a further £1 billion over three years to further boost the UK’s already strong innovation system.

Labor has been looking hard at the current arrangements for the R&D Tax Concession, with a view to developing a much more effective scheme.

The arrangements for the Tax Offset are of particular interest for the biotech sector. Many of the firms shut out of eligibility for the Offset by the $1 million cap on expenditure are R&D intensive biotech start-ups.

Labor has advocated that this cap be amended and I was extremely disappointed that no action was taken by the Howard Government in its Industry Statement - despite the Productivity Commission finding that the current expenditure cap creates “perverse incentives” for firms.

Government’s Global Opportunities Program Before I conclude, I have been asked to comment on Labor’s position on the Government’s Global Opportunities Program.

We fully support the objectives of this initiative. And I’m pleased that the Howard Government has belatedly recognised the need to coordinate it with Austrade, the Industry Capability Network and industry associations.

However, we have some concerns. The Howard Government’s record on coordination of industry programs with Austrade has been poor.

At the same time, it has slashed Austrade programs such as the Export Market Development Grants scheme. Since 1995-96, Federal Government expenditure on export promotion has been reduced by half in real terms. No wonder annual growth in exports of elaborately transformed manufactures averaged only 1.2 per cent a year over the five years from 2001 to 2006, compared with 16 per cent a year under the previous Labor Government.

The bottom line is that the Global Opportunities program risks increasing duplication and confusion - despite the Government’s assurances - because it

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remains essentially set in the “silo” mould. As I say, the objective is a great one, but I’m just not sure you can trust a re-elected Howard Government to deliver on its rhetoric.

Conclusion In conclusion, I want to congratulate you on this wonderful Conference and on the achievements of the Australian biotech industry generally. Your sector is at the cutting edge of innovation in this country - and you have reached where you are today, I would contend, largely despite, rather than because of, the Howard Government and its piecemeal approach to innovation.

If a Rudd Labor Government is elected, it will show national leadership with a national innovation agenda that will be a true partnership with the states, with researchers and with industry.

It is only through the capacity and willingness to innovate that our economy can maintain its place in the world, and can generate the strength to provide all Australians with a secure, just and prosperous future.

It will be an exciting journey - one that I hope to embark on soon, with your help. I look forward to working with you to realise Labor’s vision for our nation’s future.

Authorised by Tim Gartrell, 161 London Circuit, Canberra City, ACT 2600

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