Is the Asian Century the key to Australia’s manufacturing success?

Top issues facing manufacturers in the Asian Century white paper:

1. To rank Australia in the top 5 countries for ease of doing business.
2. Be in the world’s top 10 for productivity
3. Business leaders to be more knowledgeable about Asia
4. More trade and investment resources to be invested in Asia
5. To be ranked in the top 10 in the world for innovation systems

The white paper on the Australia in the Asian Century, commissioned by Prime Minister Julia Gillard, outlines 24 objectives for the nation to achieve by 2025.

The paper says the wealth of Australia as a whole will be boosted in the next decade through increased engagement with Asia.

''The Asian Century offers a wealth of opportunities and career choices in a variety of businesses, including small and medium-sized enterprises, especially for Australia's young people,'' it says.

The paper aims to exploit the opportunities in a region where the pace and scale of change ''have been staggering'' with the region set to become home to most of the world’s middle class.

One of the ways that paper suggests tapping into the Asian boom is by increasing ties through manufacturing, R&D and shared knowledge between the two regions.

“Construction and engineering services and manufacturing will support resources development; research and design services will, in turn, support manufacturing and engineering, “ the report states.

The paper says Australian manufacturing is expected to grow and that firms must find ways to ‘”adapt by anticipating changes in their markets, building the talents of their people and constantly innovating and lifting their productivity”.

It states that Asia’s wealthy consumers will provide a new market for niche manufacturers’ while firms will also see growing opportunities from the region’s growing resource sector and infrastructure projects.

But while the paper points out the opportunities available, it does concede that small to medium sized firms faced significant challenges in developing and producing goods.

“Manufacturing firms will need to change their business models, improve their market orientation and improve their innovation performance, including through their links with research organisations,” the report states.

A roadmap which aims to support the manufacturing sector to become even more productive and capitalise on the opportunities arising from Asia is set out in the paper and include changes to tax reform, innovation, infrastructure and regulatory reform.

However with no firm policy decisions on which of the 48 recommendations will implemented from the Prime Minister’s Taskforce into Manufacturing, the paper has been labelled by some as ‘rhetoric only.’

While the paper is overwhelmingly positive in its assessment, critics argue that it is slight on the detail of how it will open Australian manufacturing to emerging markets to make the sector grow in productivity and competitiveness.

Kanishka Jayasuriya, the director of the Indo-Pacific Governance Research Centre at the University of Adelaide labelled the paper as being a set of “vaulting ambitions equally matched by a limited set of policy ideas for institutional reform.”

While there was a clear emphasis on the need for businesses to adapt and innovate in order to cater for Asia’s emerging middle class, little was said on how the government proposed to help business achieve export success against the backdrop of a high Australian dollar and the demand for natural resources.

And while it can be rightly assumed that increasing productivity will put Australian manufacturers in good steed to compete in Asia, the paper fails to address issues which damage competiveness such as the high dollar, rising labour costs and the inability to locate open markets in Asian regions.

The infrastructure and engineering group UGL Limited criticised the lack of attention given to IR.

Its CEO Richard Leupen said the white paper didn’t consider “our expensive labour costs in manufacturing, nor restrictive work practices, which are not offset by productivity.

“There is nothing new in the paper that would change the way we do business,” he added.

Innes Willox, CEO of the Australian Industry Group, also agreed that the absence of IR was disappointing.

“Disappointingly, another key ingredient of productive performance – workplace relations reform – is noticeably absent in the White Paper,” he said.

Willox went on to say that in order to lift productivity the sector needed the identification of taxation reform, reducing regulatory burdens and an injection of long-term cross-jurisdictional planning and private sector funds to address our infrastructure backlog.

"In all of these areas, delivery of results has proved very difficult to date and we urge all parties and all levels of government to commit to real reforms and real results," he said.

Meanwhile Alan Oxley, managing director at ITS Global, has criticised recommendations involving quotas on board members with Asian experience, and said doing business in the region was made difficult by the lack of openness in trade in some markets.

“So I think the expectation that there's an easy spot for our industries to move into those areas is probably wrong,” Oxley said.

“I mean, they're good, they're competitive, but they'll go where they can do business. And in the short to medium term, it's going to remain the United States and Europe.”

And it seems most industry bodies agree that growth opportunities exist, without regulatory reform, the paper will do little to ensure the manufacturing industry will be able to tap in to the opportunities.

“We need the government to act urgently because without a competitive domestic industry these export opportunities will never be realised. Excessive regulation is a handbrake on industry’s competitiveness and only the government can release that handbrake” said Gary Dawson, CEO of the Australian Food and Grocery Council (AFGC).

“It is very difficult for companies to think of long term export opportunities, when they are struggling to deal with the immediate issue of rising input costs that range from commodities to labour to energy to regulatory compliance.”
“Innovation is at the heart of the industry's vision for a competitive future and it maintains a huge potential for growth into Asia. The support for greater food industry innovation in the White Paper needs to be progressed to detailed, costed, practical proposals.”

With the paper throwing light onto the issues facing the manufacturing sector, it has succeeded in creating a discourse around the changes the industry needs, and what it feels is important for future success.

But with the detail, funding and policy not visible at this stage, it seems the Asian Century white paper fails to deliver on just how the government proposes to do so.

Now that the national framework has been set, and a national discussion is flowing, specific measures on what policies will best help achieve its goals is the next step.