PRIME MINISTER1
STATEMENT BY THE PRIME MINISTER, THE HON P J KEATING MP
LAUNCH OF " EMERGING EXPORTERSO
Today I am pleased to launch the final report " Emerging Exporters: Australia's
High Value-Added Manufacturing Exports" that was prepared Jointly by
McKinseys and the Australian Manufacturing Council. I acknowledge the role
the AMC has played in commissioning research in this important area.
The key findings of the study that we have a significant group of dynamic
small firms achieving export success are now well known. The growth of
these exporters is evidence of the transformation of the Australian economy
since the mld-1980s.
This transformation did not happen by chance.
It reflects Australian firms responding to competition in the international market
place. I
It reflects our well trained workforce and our strong technological base.
It reflects increasingly competitive communications and transportation systems.
It reflects government policies that have opened up the Australian economy
and encouraged Innovation and the emergence of new firms.
And above all, it reflects the ingenuity and commitme nt of many individuals, of
a new breed of Australian entrepreneurs.
It Is these individuals who have recognised and taken opportunities. Some
have built there success on unique products, others on innovative approaches
to mark~ eting. B~ ut they all have relied on providing quality Australian goods
tailored to the needs of their customers.
The study has identified 700 firms that have been central to Australia's success
in raising our exports of elaborately transformed manufactures in recent years
by 15 per cent each year on average. .15/ 93
This Is impressive, but it Is not enough. These successes are from a relatively
small base.
The challenge now is to encourage the development of new firms. Even more
Importantly. it Is to encourage more of the 90% of existing manufacturing firms
who are not actvely engaged In the international market place to do so. It will
never be easy to export for the first time, but the rewards for those who
persevere can be immense. These will be the firms of the future, and the
leaders will be Australia's business leaders.
The conditions for Success have never been better. Our production costs and
our exchange rate are extremely competitive; our inflation rate Is among the
lowest In the world; the tax changes introduced In investing in the Nation mean
that we compete fa~ iourably not only among OECD countries but also In our
region; our work practices are becoming much more responsive; our workforce
is better trained: and our research effort has been strengthened and directed
increasingly to commercial applications.
Emerging Exporters is largely a message for our entrepreneurs, managers and
other employees. It shows how we can succeed even in today's difficult
economic circumstances,
The report also contains important messages for government policy.
Economic policies under Labor were pivotal In many of these 700 success
stories. As the report makes clear, tariff reductions have forced manufacturers
to become Internationally competit * ive and once a company is competitive.
looking to overseas markets is an obvious step. This change in culture has
been profound. For example, three-lquarters of the emerging exporters
identified by the study haye r ecently begun exporting after an average of 27
years of domestic activity,'
The report also highlights. thie importance of other government policies to these
firms, policies that include direct Incentives for exports, support for research
and development, microeconomic reform, cooperative industrial relations and
so on.
These policies have produced results, but just as individual firms need to be
responsive to changing demands so too policy needs to be responsive and
relevant. The Report makes a number of policy recommendations of both a general and
specific nature. Many build on or modify existing programs. My Government
will be closely examining these, but some brief comments are warranted now.
Changing Attitudes
Attitudes are changing, but some fundamental messages must be driven home.
That Is why today's report Is so valuable, and why the Government welcomes
the Australian Manufacturing Council's continuing involvement In encouraging
dialogue and spreading the message.
A central message is that exporting requires attention to quality and service.
This was the motivation behind the launching of the Australian Quality Council
In March ealer this year. It Is also why the Australian Quality Council Is
working with NIES to introduce a Best Practice manual for small and medium
sized enterprises ( SMEs).
The Report also recommends that the Australian Best Practice Demonstration
Program be more consciously targeted at SMEs. The Government will
examine how to moreG effectively demonstrate best practice to SM Es.
Market Access
The Report contains some important observations about access to markets,
particularly to Asian markets, that go beyond the rules of the game that
governments set. Of course, an open multilateral trading system is needed to
ensure that our exporters have appropriate access to their markets and thus
resolution of the remaining hurdles in the Urugu ay Round Is a very high priority.
Also, we are actively engaged in enhancing regional trade through APEC and
our bilateral relationships.
There is a pressing need to change the Image potential buyers have of
Australia. Our image as a country cf wide open spaces and unique wildlife has
served our tourist industry very well, but the report identifies the need to also
present Australia as a modem., sophisticated society where high tech products
equally reflect contemporary reality as the quality of our beaches.
We are committed to bripadening perceptions of Australia. This will require a
quire a continuing stratdgy on a number of fronts including, for example, the
recent commencement of ABC TV services to the region. We will also explore,
with business, whether a jointly funded campaign to change our image abroad
should be developed as recommended in the Report.
1
The Report highlights the hurdles that many of this group of emerging exporters
face In getting started In overseas markets. Because it Is difficult to go it alone,
business organisatons and the NIES program have helped to getting flrms to
form themselves into clusters or networks. We can develop these mechanisms
much further. The establishment of common marketing, distribution and other
support facilities in strategic locations in Asia, including some of the foreign
access zones that operate there, would assist many potential entrants. The
direct Involvement of Australian banks would strengthen the operation and put
the banks in a better position to assess the risk associated with particular
exports. Technology The report highligh~ s*-the critical role that innovation plays in fast-moving
international markets.
Our policies are playing a key role in supporting business research and
development. We have made the 150 per cent tax concession for research and
development a permanent feature of the tax system, provided a range of grants
for industrial research and development, provided funding for CSIRO, and set
up the highly successful Cooperative Research Centres program.
Australia now has one of the fastest growing rates of business R& D in the
OECD. Of course, much more needs to be done: our level of business R& D Is
still on the low side by world standards.
The report suggests that we need. to ensure that our programs are effectively
targeted and delivered. The competitive advantage of many of the emerging
exporters identified by McKlnseys. relled in large part on a particular
technological edge. In most cases this technology was developed within the
firm with few of these firms having research connections to outside research
institutions such as the riSI. RO or a university.
I welcome CSIRO's current work in progress on developing a strategy to build
better links with emerging exporters and smaller businesses. In addition, the
Industry Commission's inquiry into research and development will look at
incentives and impediments to the creation of linkages between research
agencies, higher education institutions, and business.
Finance The availability of finance is a major issue for many emerging exporters who do
not have the support of a largo parent. The reasons for this are clear there is
always a high failure rate among smaller firms while expanding into new
ventures, especially exports, can be very risky. But the rewards can also be
very high and as a nation we need to be able to supply adequate finance to this
group of emerging exporters.
In Investing in the Nation we encouraged the banks to go further down the path
of developing close relations with their business customers. The Treasurer will
very shortly be in a position to announce the details of the measures in
Investing in the Natortand see them put into effect. One of these measures
will be the establishment of a business advisory council that will advise the
R~ eserve Bank board on the concerns of small and medium size enterprises.
The Governor will report on the advisory council's deliberations to both the
Treasurer and Minister for Industry, Technology and Regional Development
who confronts the question of finance routinely in his discussions with industry.
In many cases traditional bank finance will not be appropriate. it is important
that other forms of finance, both debt and equity, are available on suitable
term's, Monitoring the availability of all forms of finance will be a priority of
Government as economic recovery proceeds.
Support for Exports and Small Business
Small and medium sized enterprises ] MEs) have provided the engine of
growth in Australia and indeed in most advanced countries in the last few
years. By the end of 199$ employment in small firms exceeded that in larger
Australian companies for-the first time. During the recession new jobs have
continued to be treated ih smaller companies. This study shows how many of
them have succeeded in'export markets.
The Government has placed considerable emphasis in giving small business a
" hand up", particularly in the areas of developing export markets. A number of
programs have been effective:
Export Access provides training and practical assistance in developing an
export strategy, and Is expected to reach 700 companies over four years;
AUSTRADE is helping an increasing number of small firms to enter markets
overseas, and is establishing more services specifically designed for the
needs of SMr~ s;
* The Export Market Development Grants program, administered by
AUSTRADE. has helped most companies which have succeeded in
overseas markets:
* The NIES program, jointly funded by the Commonwealth and the States,
priovides consultancy services to SMVEs which can improve their
performance in a range of areas.
In many countiries the emphasis of industry policy has been changing in favour
of smaller companies and away from bigger firms, which often have the
information and resources needed to look after themselves.
While the Government already assists smaller firms in a number of ways, as
we have seen, the nature of the support for this sector and the effective
coordination of programs will be examined In the coming months. The findings
and recommendations of the AMC-McKinsey study provide a valuable
contribution to any a~ sessment of the policy environment for smaller Australian
companies. CANBERRA June 1993