That ‘ locals’ (life-long residents) tend to have a different perspective on important State issues compared with people who have moved from interstate or overseas to settle here (“outsiders”), has been quite obvious to me since returning to Tasmania well over a decade ago, to settle and farm in the Tamar Valley.
As a generality, locals appear more inclined to preserve the status quo whereas newcomers, with different experiences and ideas, are often more prepared to challenge the established order.
While this “divide” may cause some short-term tensions and social division, a diversity of views is always healthy and an essential ingredient in community development.
In this context: I was invited recently to engage in a Q and A session with a very impressive group of young people from interstate involved in a leadership development program. All were graduates, occupying junior and middle management positions, and were surprisingly well-informed on problems affecting the State. Their particular interest was in identifying cause, and exploring possible remedies for those problems.
At the conclusion of a very stimulating Q and A session, a group spokesperson observed that my views were very important in “balancing out” some quite different thoughts and views put to them by other individuals and groups in previous days.
Balancing out? This suggests my views were consistently out of step with those other individuals and (presumably) business groups. A synopsis of the Q and A session I was involved in follows, and perhaps provides clues to the ‘differences” in thinking and views that the touring group encountered in Tasmania.
Viva la difference?
The questions and the Answers:
Q: There are many concerns being expressed about Tasmania’s economic situation. What are your primary concerns?
TWW
That there appears to be no vision, or strategic plan for future economic development. This represents a failure of leadership, with business and political ‘leaders’ reactive to events and financial pressures : attempting to muddle through with short-term ‘quick-fixes’.
A number of factors may account for this situation: firstly, the political cycle encourages short-term thinking; and few, if any of our “leaders”have a well-developed ‘world-view’ gained from involvement in large scale enterprises with national and international exposure to markets.
The State is, by any measure, a big-business entity, but those charged with managing its finances and running it effectively, simply do not have the requisite skills and experience to do so – and that includes the bureaucracy.
A related concern is that those bereft of a world-view seem not to understand that, as we are an integral (if small) part of the global economy, we are subject to economic forces that can scuttle established businesses, industries and markets in short order if world demand, or market sentiment suddenly shifts. Attachment therefore to “old world”, often failing businesses, is a recipe for economic stagnation and ultimately, collapse.
Q: Are you saying the State is now stuck in the slow lane?
TWW.
Yes, and will struggle to make any headway until it comes to terms with the changing global economic landscape, and takes sensible steps to slot into it.
Q: A changing global economic landscape?What does that entail?
TWW
We have entered a post-industrial ‘information’ age, characterised in the developed world by a rapid shift away from the traditional ‘ smoke-stack’ industries towards service industries, high-tech telecommunications and other start-up “green energy” businesses utilising new technology.
This is happening at time of a rapid increase in world population coincident with a take -off to economic growth in the Asian region thereby adding to demand growth, competitive pressures and increased volatility in the traded goods ‘ markets.
Overlaying this is world-wide concern about ‘global warming’ and its potential environmental affects.
Another factor is an increasing recognition around the world of limits to economic growth: that most of the world’s natural resources are finite and when exhausted, depletion will have consequences for present and future generations – their quality of life, and even survival in some cases. This mandates a re-think of the previous “open-slather” exploitation of scarce resources and despoliation of fragile ecosystems.
With all these forces now in play, it is difficult to name any country in the world at present not suffering a degree of economic stress. Indeed, many are now awash in a sea of debt and struggling to survive.
Q: How do you think this come about?
TWW.
I believe that in most cases, the countries concerned had not read the market signals and repositioned themselves to survive, longer-term, in a world undergoing rapid transition, from the old to the new. Tasmania finds itself in that situation now.
Q: What can Tasmania do now to respond to these changes?
TWW
Firstly, recognise the nature of the economic transition underway: that the centre of economic activity and power is shifting away from North America and Europe to Asia –toan extent that this is now being dubbed “ The China Century”. We should now be prepared to innovate, and invest in producing those goods and services required to satisfy demand in the rapidly-growing Asian markets particularly.
Q: What approach would you advocate?
TWW
We should look to nurture and develop those industries and businesses where we have a clear competitive advantage; that are sustainable longer-term; that accord with community needs and expectations and have little or no adverse environmental affects.
At the same time, we should seek to transition out of existing heavy industrial businesses which are not viable longer-term; and avoid investment in any new, large-scale businesses where we have no competitive advantage, are high-risk, and have the potential to impact adversely on other business operations and the environment (they will fail, sooner or later).
Q: What role, if any, should Governments play in promoting economic development?
TWW
They should restrict themselves to sensible investment in infrastructure (roads, rail, ports, shipping ,airports and the like ); providing seed funding for promising new business developments; ensuring workable planning laws, and reducing red-tape – anything conducive to attracting private business investment.
What they must NOT do is seek to be a “player”, that is, act as if a proponent in business developments – trying to pick winners and in the process, putting scarce public funds at risk.
Have you ever seen a government sponsored/promoted/funded major business enterprise ever succeed? Never, in my experience! The most notorious example is the car industry in Australia, set up at a time when no other car manufacturer in the world was operating profitably. Backed to the hilt by State and Federal governments, it has consumed tens of billions of taxpayer dollars, but will inevitably fail anyway. This is what happens when populist politics trumps economic fundamentals: Australia had no competitive advantage; there was no established long-term market; competition was growing apace; and input costs were higher than competitors. What chance did it ever have of succeeding?
Unfortunately, the lessons do not appear to have been well- learned and therefore, we are bound to see repeats, with the same disastrous results.
Q: Given this history and background, what sorts of businesses do you think Tasmania should pursue to shore up its economic future?
TWW
As part of the global economy, we should first identify those few businesses/industries involved in globally-traded goods and services where demand is growing and have greatest potential for sustained growth in the decades ahead. Next, we should determine those businesses/industries where the State enjoys a competitive advantage, and has the wherewithal (perhaps with further investment ) to satisfy market demand for the foreseeable future. Then look for matches between the two.
Simply said, but not easy to achieve given the inertia in our economic system, and the apparent attachment of business and political leaders to traditional businesses, whether viable or not.
Q:What are the particular growth industries that you believe Tasmania should seek to tap into, and why?
TWW
Firstly, agri-businesses. With the “China Century” now upon us, and rapid population and economic growth throughout the Asian region, demand for agri-products can be expected to increase exponentially in the decades ahead. Out State producers have worked hard in recent times to establish niche markets for their products and have earned an enviable reputation as reliable producers of quality goods.
This head-start gives us a competitive advantage, as does the skills of our farmers and producers; the availability of productive farm-land; favourable weather (e.g. reliable rainfall) and growing investment in related value-adding businesses.
Organically produced goods now command premium prices in markets around the world and demand is predicted to continue to grow strongly. Tasmania should seek to imbed itself in this lucrative end of the market, leveraging off its ‘clean green’ image. To do so however, it will have to reduce its dependence on chemicals in production processes: a formidable, but not insurmountable challenge and a test of its ‘clever’ credentials.
The “food bowl” concept, allied with investment in irrigation schemes and a planned business trip to China, suggests the government is now moving to capitalise on the promise of our world-class agribusinesses.
Next, tourism – presently, the world’s largest industry with growth potential limited only by diminished per-capita wealth in some of the established economies, post GFC; but fuelled by the increasing wealth and propensity to travel of Asian people.
Again, Tasmania is ideally positioned to offer tourists an interesting and ‘different’ experience: in a remote Island destination featuring magnificent ancient rain-forests, wild rivers, foodstuffs, wine, spirits and beer of unsurpassed quality, world-class surfing and the like. Our Eco-tourism potential is still largely untapped.
These are the sorts of destinations increasingly being sought by tourists but to be successful in a very competitive world market, our infrastructure will have to improve to match visitor expectations: roads, rail, airports and air services, accommodation, restaurants, and trained hospitality staff.
We have long traded on the slogan “clean, green and clever” in selling Tasmania as a desirable place to visit, to move to , or setup business in. While clean and green is often spruiked, the ‘clever’ part of the slogan is hardest to justify. However, the information age now provides us almost unlimited opportunities to leverage off the NBN and set up specialist (clever) IT services that in turn,feed into, and support education, health, law enforcement and other social services, as well as new business developments.
It will enable our University for example, to sell specialist education services around the world – and education itself is a growth industry. The concept of Regional Economic Hubs (developed by Dr Tony McCall and colleagues) would facilitate community growth around these new, specialist groupings.
Another growth industry, in which Tasmania is already active but could play a greater role as world demand for clean, green and clever innovations and products increases, is renewable energy. Now in its infancy, the potential for growth is enormous. To its credit, our State energy provider has already sought to develop alternative means of power generation (wind farms). That is but a start.
These are the sorts of businesses of the future.
Q: Do you include forestry in the agri-businesses you mentioned?
TWW
I see sustainable, properly certified forestry operations as an integral part of a balanced economy.Specialty timbers particularly will continue to be sought longer-term for fine furniture and building construction. The scarcity factor means that Tasmania should be able to operate at the more lucrative, top-end of the market. It would be economic stupidity (at best) to convert our scarce, specialty timbers into low-value end products.
In reality, forestry is now a small part of the State’s economy, contributing perhapsas little as 4% of GSP , with diminishing employment – on latest reports, now only about 1% of the permanent workforce . It is intriguing therefore that so many of our politicians, business organisations and community representatives seem to view it as the fulcrum around which the whole Tasmanian economy revolves. Perhaps, one day, the reasons for this will become more explicable to business ‘ outsiders’.
Q: What of mining?
TWW
Having worked in various management positions in the mining Industry for nearly twenty years, I have witnessed many of its excesses on the one hand, and successes on the other. These largely inform my views on current mining issues in this State.
Like forestry, mining has a long, if not always distinguished history in Tasmania. A small land mass, and its particular geographical, geological and topographical features effectively preclude large-scale open-cut, and deep underground mining operations. Small, often low-grade mineral deposits , difficult to access, presently limits the capacity of mining to make a major economic ontribution.
My view is that when a mineral deposit is discovered, of measurable quality and quantity in an area not subject to heritage or other protections; has overwhelming community support; can be properly remediated after mining operations cease; will cause little or no environmental damage during the mining period; is subject to stringent monitoring throughout (water, air quality, noise and so on); and will deliver a significant economic benefit to the State, it should be allowed to operate.
Like forestry, smaller well-managed mining operations can contribute to a balanced economy.
Q: From what you have said, you apparently don’t see a pulp mill as fundamental to the State’s future economic development?
TWW
Ask yourself these questions:
• Do we have any competitive advantage?
• Do we have proven experience and expertise in operating large-scale industrial enterprises of this sort?
• Would we be a low-cost producer?
• Could we guarantee raw-material inputs for life of the business( without fail?)
• Is demand for pulp likely to match or outstrip supply over the longer-haul thus propping up price and profitability ?
• Could the business survive a long term interruption to production and shipping caused by a natural disaster: flood, drought, cyclone, earthquake, disease?
• Is it clean, green and clever and therefore, guaranteed not to adversely affect community health, the environment and other businesses in the region in which it operates?
• Does it have the financial resources to survive a global market shock (such as the GFC) without the need for call on public funds?
• Can it be guaranteed to operate effectively over the life of the business without government subsidies and support ?
• Can it be guaranteed a social license to operate?
If the answer to all (or most) of these questions is in the negative, the mill could well be a blight on the State economy rather than a contributor to future economic growth. This was in fact the findings of an independent group of economists, academics and businessmen who assessed, on the information available to them, that the mill would likely incur losses of about $3 billion over the projected life of the business.
In a nutshell, this is a high-risk business proposition at a time countries in the developed world are increasingly risk-averse and transitioning away from ‘smoke-stack” industries that consume massive amounts of scarce resources, pollute, and will attract a carbon tax in the future (further weighing on cost-competitiveness).
Big is not necessarily better. If a big business fails (for whatever reason) the results can be devastating for a community, a region , a state, and even a nation. In an increasingly uncertain economic climate, it would be imprudent to bet the future health of any economy on a high-risk business.
In my view, given the size of Tasmania, its fragile economy and population spread, it would make better economic sense to have, say, twenty small “clean, green and clever” businesses with 10- 15 employees, distributed around the State, rather than one large business, in one location, employing 200-300 employees. The economic and social impacts of failure of a small business, while not inconsequential, are not usually devastating.
For these sorts of reasons, I concluded my assessment of the pulp mill IIP (for a political aspirant in 2008 ) as follows :
• Wrong type of mill ( technology)
• Wrong scale of operation
• Wrong time ( for investment this size, this industry )
• Wrong location ( manifestly )
• Wrong reasons ( wealth creation and employment : problematic at best)
• Wrong business ( high risk : declining industry, volatile market, competition)
• Wrong way – go back. Reconsider.
Tony Whish-Wilson
Aug, 2012.
