Tag: economic development

Australia in the Asian Century – Chapter Two: The future of Asia

Chapter two of Australia in the Asian Century attempts to predict the development of the region’s economies over the next decade

This post is one of the series of articles on the Australia in the Asian Century report. An initial overview of the report is at Australian Hubris in the Asian Century.

“Asia’s economic resurgence is set to continue” is the bold statement at the beginning of Chapter Two of the Australia in the Asian Century report and with that the chapter immediately falls back to warm motherhood statements;

Average living standards are set to improve dramatically and transform the way people live and work. Asia’s economies are projected to expand at a strong rate. The region’s expansion and development will change the contours of Asia and the globe—opening up exciting new opportunities, while also posing some challenges.

All of this is true, however the report struggles to identify exactly what those challenges and opportunities are as Asia develops and where Australians fit into the region’s evolving economy.

Demographics will matter, but they are not destiny

The constant mantra through the report is “demographics will matter, but they are not destiny.” Yet, despite the headline, Chapter Two illustrates that so far it has been destiny.

Graph 2.6 of the report shows how Japan’s, and now South Korea’s, productivity has tailed off as the population has aged. This is to be expected when economic expansion has been based on labour intensive manufacturing, as China’s is today.

Frustratingly, the report acknowledges this with the following paragraph;

But the fruits of adopting new technology and adapting it will become harder to harvest. A point will come, though it’s still some way off, where the growth of labour productivity in developing Asian economies will slow—opportunities for gains from importing foreign technology and for shifting workers from agriculture to industry will diminish.

“Some point in the future” doesn’t wash when the rest of the chapter shows off various ‘firm’ numbers estimating ‘base’, ‘low’ and ‘high’ growth rates. If you can quantify those growth assumptions, then it should be fairly trivial to estimate the turning point where aging populations start to affect China.

Luckily others have done this work, the Australian Macrobusiness site suggests that turning point could be as early as 2015. In which case, unlike Japan and South Korea, China will have got old before it got rich.

If this true, then IMF’s projected growth rates will miss their targets – particularly the ‘low growth’ scenario which is almost identical to their ‘base scenario’.

Rise of the middle class

Much of the emphasis in this view of Asia’s development is on the rise of the middle class and the report features a case study of Hitesh, a middle class stockbroker in Ahmedabad.

While there’s no doubt Hitesh and his family’s income and standard of living are rising, the idea that several hundred million Indian and Chinese will jump to European or North American income levels before 2025 is improbable.

Most stockbrokers in New York, London or Sydney earn between 30 and 300 times Hitesh’s $5,000 a year and in 2010, average Chinese income was a tenth of the US.

Even if the Indian and Chinese middle classes did manage a tenfold growth in income over the next decade, the assumption they would adopt the debt driven high consumption patterns of the US or Australia isn’t a given as we see in how the Japanese middle classes haven’t aped the spending behaviour of their profligate Western friends.

The credit and banking points in this chapter illustrate the hubris mentioned in my original overview of Australia in the Asian Century.

And with financial systems in advanced economies unwinding the high debt levels built up before the Global Financial Crisis, financial institutions in stronger economic positions, such as those in Australia and elsewhere in the Asian region, will have opportunities to expand into new markets.

Given the dire records of Australian banks in expanding overseas along with the “stronger economic position” being due more to government guarantees during the GFC and the desperate political desire to prop up Australia’s property market at all costs, it’s difficult to see exactly what Australian institutions have to offer Asian savers except to further underwrite the never ending down under housing bubble.

Chapter two of the Australia in the Asian Century report finishes with an overview of the current geopolitical situation which is notable more for what has been left out. This is again probably due to Canberra public service politics and the report suffers for it.

One major region left out is Central Asia and Russia – outstanding given the report’s view  that a resource poor Asia (that Japanese assumption again) will need Australia to fuel its energy and resources needs – which ignores the construction of pipelines and railways to China and India.

Also missed are the projects to upgrade China’s railway and road links to Europe and Central Asia. These in themselves may trigger major geopolitical changes over the next few years, as we’re seeing today in Tibet and Xinjiang after railways were built to Kashgar to Lhasa. Yet none of this is considered.

Not the ‘Stans should feel aggrieved, like the rest of the report the emphasis is on China and India with scant mention of other Asian countries.

For Australia, much of the hope in the report seems to be in providing raw materials for Asia’s industrialising and urbanising societies along with being a holiday destination and education provider. This is all lazy 1980s thinking which projects Australia’s Japanese experience of thirty years ago onto China and India today.

The predictions of Asia’s future in the Australia in the Asian Century report are largely are a continuation of the status quo. If this report had been written in 1960, it may have picked the rise of Japan over the following twenty years but the main focus would have been on Burma as Asia’s richest independent country.

Exacerbating the report’s weakness are the assumptions that development paths will follow the same course as Japan, Taiwan or South Korea in the late 20th Century.

Development wasn’t a smooth path in all three of those countries and each had their own unique political and economic upheavals in that time, the failure to recognise that similar disruptions will happen in Asia’s emerging economies as they develop is probably the greatest weakness in the entire report.

It’s very easy to draw straight lines on graphs based on ‘best case’ IMF projections but history is rarely linear. This is probably the greatest intellectual failing of the white paper.

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Australian Hubris in the Asian Century

Australia in the Asian century is the story of opportunities missed.

This post is one of the series of articles on the Australia in the Asian Century report.

The release of the Australia in the Asian Century discussion paper today raises the question of where the country sees itself and where it is going. It lets us down on many levels.

While there’s a lot more to discuss in the paper, which I’ll do over the next few days, there’s a few issues that come to mind on first reading.

The reliance on mining

A constant  in the discussion about Australia’s future is the continued mining boom. This was the underlying theme of Monday’s Mid-Year Economic Outlook and is also the case in the Asian Century paper. Here’s chart 4.4.2 from the document which shows the forecast makeup of Australia’s exports.

Today mining exports are shown as being just over 50% of Australia’s trade with Asia and have mineral income growing to well over 60% of trade by 2025.

What is frightening about this is the belief across Australia’s political and business leaders that the mining boom is here to stay and will continue to keep growing.

Little risk analysis

Also notable about the report is how little acknowledgement of risk there is in the document. Most of the risks are dismissed in six paragraphs in Chapter 4.4

Geopolitical risk does get its own chapter, but even there most of the challenges are glossed over. Eventually most of the risks are dismissed with this line.

None of these developments of themselves make major power conflict likely—in some important ways they will probably act as a constraint. All the major powers recognise how interdependent their economic interests are.

This is reminiscent of the line used in the late 1980s – “no two countries with a McDonalds have ever gone to war against each other.” A glib nonsense which ceased to be true when NATO attacked Serbia in an effort to stop the massacres of the Yugoslavian disintegration.

Trivialising the big risks

Had anyone predicted in 1986 that within five years, there would be a bloody civil war in Yugoslavia, the Eastern Bloc collapse and the Russian Empire’s eagle replace the hammer and sickle on the Kremlin they would have been dismissed as fools.

Yet that is exactly what happened.

The risk of instability within the People’s Republic of China isn’t mentioned or even the effects of what a collapse of North Korea would mean to South Korea – another key Australian mineral market – both of which would have massive effects on Australia’s export markets over the next decade.

While I’m certainly not forecasting the collapse of either the DPRK or the Communist Party of China in the near future, these are massive risks to any plan which purports to look at the next decade. Ignoring them or trivialising them does not help the paper’s credibility.

Australian hubris

Most notable in the white paper is the tone of Australian Exceptionalism through the commentary. In the Prime Minister’s speech she said “we are the nation that stared down the economic crisis.”

Calling massive stimulus packages, reinflating the property market and guaranteeing bank liabilities is hardly ‘staring down’. Australia’s avoiding going to into recession after the 2008 crisis was due to the “go early, go hard” philosophy of pumping money into the economy which was learned by Australia’s bureaucrats in the 1990s recession.

That policy worked to stave off recessions during the Asian currency crisis of 1998, the Long Term Credit Bank collapse and the post September 11 uncertainty. It worked on massive scale during the post-Lehmann Brothers collapse.

Crediting Australia with some sort of miracle economy is hubris on a grand scale and hardly the basis for developing a sensible plan to guide us through the next decade.

What is Australia’s competitive advantage?

Essential to understanding where the nation can prosper from the rise of Asian economies is where our current strengths lie. Apart from empty phrases on “skilled workforces” and “new opportunities will emerge in manufacturing” there’s no explanation of exactly where Australia can profit from these.

In fact most of the case studies refer to Australian companies outsourcing or Asian trading patterns that really don’t need any skilled or valued added contribution at all, a case in point is the story of ‘Hitesh’, one of India’s rising middle class.

Hitesh, 31, is a stockbroker in a firm that he opened with his friend several years ago. He brings in an annual income of US$5,280, placing his family squarely in the middle of Ahmedabad’s middle class.

Nowhere does the case study explain exactly what Australia can offer him – the air conditioners and cars certainly won’t be made or designed in Australia and his daughters’ educations in 2025 might well come through the internet from MIT or the London School of Economics instead of them flying to Melbourne to drive taxis and do barista courses in the hope of getting Australian permanent residency.

In fact if anything, it’s difficult to see why an Asian company would choose to do business with an Australian stockbroker when they earn thirty to a hundred times more than Hitesh.

1980s thinking

Much of what is in the white paper is what we’ve heard before in the 1980s – back then it was Yuske in Nagoya who was going to buy our wine and come to the Gold Coast for holidays.

There’s nothing in the projections we haven’t heard before, except today we’ve squandered two decades of opportunity by ramping up our property markets and building an unsustainable middle class welfare state.

Sometime in the 1990s – possibly around the time of John Howard’s election – Australia turned inwards and insular. We had the opportunity  to position Australia as a credible mid-level power in the region but we chose instead to renovate our kitchens.

That opportunity has been lost and repeating the mantras of the 1980s with the words ‘China’ and ‘Chinese’ substituted for ‘Japan’ and ‘Japanese’ won’t cut it.

Australia in the Asian Century was an opportunity to show some vision and stake a claim on sharing some of the 21st Century’s riches. Instead the writers chose to give us platitudes underpinned by the certainties of a never ending economic boom.

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Building new technological Jerusalems

Britain’s hopes of building a new technology hub are similar to those of Harold Wilson – how much do they owe the ideology of our times?

A Telegraph profile of Joanna Shields, the incoming Chief Executive of London’s Tech City Investment Organisation, is an interesting view of how we see economic development and the route to building the industrial centres of the future. Much of that view is distorted by the ideologies of our times.

London’s Tech City is a brave project and somewhat reminiscent of future British Prime Minister Harold Wilson’s 1963 proclamation about the UK’s future lying in harnessing the “white heat of technology.” From Dictionary.com;

“We are redefining and we are restating our socialism in terms of the scientific revolution…. The Britain that is going to be forged in the white heat of this revolution will be no place for restrictive practices or outdated methods on either side of industry.”

Fifty years later a notable part of Wilson’s speech is the use of the word “socialism” – the very thought of a mainstream politician using the “s-word” today and being elected shortly afterwards is unthinkable.

Today the ideology is somewhat different – much of Tech City’s objectives are around aping the models of Ireland and Silicon Valley – which in itself is accepting the failed beliefs of our times.

Based around London’s “Silicon Roundabout” – a term reminding those of us of a certain age of a childhood TV series – the heart of the Tech City strategy lies the tax incentives used by the Irish to build the “Celtic Tiger” of the 1990s and government investment funds to create an entrepreneurial hub similar to Silicon Valley, something also done in Dublin with the Digital Hub.

It’s hard not to think that copying these models is a flawed strategy – Silicon Valley is the result of four generations of technology investment by the United States military which is beyond the resources of the British government, and probably beyond today’s cash strapped US government, while the Celtic Tiger today lies wounded in the rubble of Ireland’s over leveraged economy.

At the core of both Silicon Valley’s startup culture and Ireland’s corporate incentives are the ideologies of the 1980s which celebrates a hairy-chested Ayn Rand type individualism while at the same time perversely relying upon government spending. Ultimately failure is not an option as governments will step in to guarantee investment returns and management bonuses.

Just up the M1 and M6 from London’s Silicon Roundabout are the remains of what were the Silicon Valleys of the eighteenth and nineteenth centuries.

The manufacturing industries of the English Midlands or the woollen mills of Yorkshire revolutionised the global societies of their times. These were built by individuals and investors who knew they could be ruined by a poor investment and managers who retired to the parlour with a pistol if the enterprise they were trusted to run failed.

Today’s investment attraction ideologies – tax discounts to big corporations and grants to entrepreneurs – are in a touching way not dissimilar to Harold Wilson’s 1960s belief in socialism.

At the time of Wilson’s 1963 speech China and much of the communist world were showing that socialism, with its failed Five Year Plans and Great Leaps Forward of the 1950s, was not the answer for countries wanting to harness the “white heat of technology.”

Similarly today’s Corporatist model of massive government support of ‘too big to fail’ corporations is just as much a failed ideology, like the socialists of the mid 1960s had their world views had been framed in the depression of the 193os, today’s leaders are blinded by their beliefs that were shaped by the freewheeling 1980s.

Whether the next Silicon Valley will be in London, or somewhere like Nairobi or Tashkent, it probably won’t be born out of a centrally planned government initiative born out of the certainties of Margaret Thatcher or Ronald Reagan anymore than the 1960s technological revolution was born out of Karl Marx or Josef Engels.

Silicon Valley itself was the happy unintended consequence of the Cold War and the Space Race, which we reap the benefits of today.

Every ideology creates its own set of unintended consequences, those created by today’s beliefs will be just as surprising to us as punk rockers were to the aging Harold Wilson.

Maybe Tech City will help Britain will do better at this attempt to regain its position as global economic powerhouse, but you can’t help thinking that economic salvation might come from some West Indian or Sikh kid working out of a storage unit in Warrington than a bunch of white middle class guys celebrating a government grant over a glass of Bolly in Shoreditch.

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Can Sydney become a smart city?

What are the challenges facing building a down under entrepreneurial culture?

How does a city become smart? That seems to be the question of the moment as countries and cities around the world try to figure out how to catch a little bit of Silicon Valley’s magic.

As part of the 2012 City Talks series, the City of Sydney hosted a discussion on how the city can become a smart city;

Sydney is bursting with talented, creative and forward-thinking people. How can we harness the energy of government, education, businesses, media, and creative thinkers to create space for innovation?

While it’s questionable that a “creative space for innovation” is a worthy objective – albeit laden with buzzwords – it’s certainly true that Sydney, along with other Australian cities, has the components to be a entrepreneurial centre, the question is how does the city harness the various talents across the different sector.

Working to advantages

Rather than aping Silicon Valley, New York or Ireland all cities should be exploiting their natural advantages. Fast Company Magazine recently looked at how Oklahoma City has advantages over its bigger cousins in New York and California.

For Sydney, and Melbourne, those strengths include an educated, multi-cultural workforce with first world legal systems in a similar time zone to the world’s major growth markets.

One of the tragedies in Australia’s marketing over the last twenty five years has been the failure to mention the ethnic diversity of the nation. This is huge competitive advantage that is barely being discussed.

What can governments do?

At the Sydney City Talks event, Lord Mayor Clover Moore said that creating a smart city requires “the same incentive to be given to innovators and creatives as is given to property investors and mining companies.”

That change requires state and Federal governments to change laws and businesses, particularly banks, to pick up on those price and policy signals.

Education too needs reform although this needs real consultation or we’ll end falling for short term fads or copying the damaging anti-teacher jihad that has infected the US.

A welcome change for many Australian innovators would be changes in government procurement policies as currently all levels of government prefer to deal with the local offices of large multinationals. As the Queensland Health Department debacle shows, these organisations are often less competent than local providers.

Making those changes though will require major reforms to policies and laws, something that neither major Australian political party at any level has the courage or vision to do.

That the NSW Digital Action Plan is now in its thirty-first draft speaks volumes about the inertia among the city’s, state’s and country’s political and business leaders.

Ditch the Silicon

Probably the first failure of imagination is the “silicon” tag – US entrepreneur Brad Feld skewers this nicely in his blog post on The Tragedy Of Calling Things Silicon.

Sydney has already has a group called “Silicon Beach” which has spread out to Melbourne and the Gold Coast and it’s interesting that both Google Australia’s CEO and Engineering head want to co-opt the name.

On of the suggestions was “Silicon Banana” a tag which brings to mind the phrase “kill me now please?” to anyone already uncomfortable with the ‘Silicon’ label.

The “Silicon Banana” idea comes from the curved shape of Sydney’s ‘digital heartland’ which curves from Darling Island to the west of the city and curves around the edge of the city centre through Surry Hills across to the film and television facilities at Fox Studios.

Describing Sydney’s centre of innovation as lying within the ‘banana’ illustrates the lack of thinking outside the current app and web mania. It also neglects the bulk of Sydney, particularly those parts of the Western Suburbs where languages such as Mandarin, Cantonese, Korean, Vietnamese, Arabic or Hindi are spoken.

Once again we neglect those assets because they aren’t white, Anglo or living in the prettier parts of the city.

Does it have to be Sydney?

We should keep in mind that the Silicon Valleys of the past haven’t been the biggest cities – Silicon Valley itself is barely a city and San Francisco is not one of the US’ biggest cities.

It’s quite possible that an Australian centre of innovation could be any one of dozens of smaller towns such as Geelong, Wagga or Cairns.

The problem in Australia is, once again, property prices. Compared to the US or Europe, housing and office rents aren’t substantially cheaper outside the big cities unless you’re prepared to move to seriously blighted parts of the country.

Spinning the wheels

Probably the most disappointing thing of the ‘smart city’ discussion is just how bogged down we’ve become – there was little in the City Talk that wasn’t being spoken about five, or even ten, years ago. Things have not moved on.

Creating a smart city isn’t about picking winners among industries, suburbs or groups. To really be smart we have to give the opportunities for clever people to succeed.

Simply jumping onto today’s technology fad or mindlessly aping Silicon Valley is to squander our advantages and not learn from the mistakes of others.

The real worry though is just how little progress is being made in seizing today’s opportunities. It doesn’t bode well for tomorrow’s.

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Distorted priorities

How government subsidies distort industries like film, aviation and motor manufacturing

Every year the bureaucrats of the world’s movie production industry make their way to the Locations Show where governments compete to attract movie producers to their states with fat subsidies.

This year, the preparations for the Locations Show conference are overshadowed by the US government’s struggling with continued subsidies to the Export Import Bank, an organisation going by the wonderfully Soviet name of the ExIm Bank.

While ExIm and screen subisidies aren’t directly linked in the US – the bank being a Federally funded body that finances American manufacturing sales to foreign market while state governments compete for productions – both though illustrate the zero sum game of corporate welfare that leaves citizens poorer in the process.

Delta Airline’s law suit over Exim subsidies to Boeing gives us a real life illustration of how business loses in these battles for government largess.

When Delta Airlines goes to buy or lease a Boeing 777, they have to find funds at a commercial rate of interest. Air India on the other hand gets a subsidised rate courtesy of ExIm bank.

However if Delta chooses to buy an Airbus A330, European governments will offer similar subsidies to the American carrier.

So the subsidy system actually encourages American carriers to buys European jets rather than the US products. Nice work.

This distortion is something we see too in film subsidies, as government funds are siphoned off to support large corporate movie productions.

Nowhere is this truer than in Louisiana where the state embarked in 2009 to capture the so-called “runaway production” market of footloose movie projects that shop around the world for the most lucrative subsidies.

This has worked, with Louisiana based movie production expected to total 1.4 billion dollars in 2011 on the back of $180 million in subsidies.

One of the productions Louisiana grabbed in 2010 was The Green Lantern which came as a surprise to the government of the Australian state of New South Wales who thought Sydney had secured the project.

The Green Lantern loss was the nadir for the Australian film industry that ten years earlier had been overwhelmed with productions like The Matrix Trilogy.

At the time of the Green Lantern loss the industry appeared to be in its death throes, crippled by a high Australian dollar and disadvantaged by relatively lower government subsidies.

You’d have thought that riches to rags story had taught Australian politicians that dumb subsidies don’t work and may have actually damaged the local film industry more than it helped.

Unfortunately not.

Last week the Australian Federal government announced $13 million in support for production of Wolverine. The Prime Minister’s office gushed;

To attract The Wolverine to Australia, the Gillard Government granted the producers a one-off payment of $12.8 million which will result in over $80 million of investment in Australia and create more than 2000 jobs.

The payment effectively provided The Wolverine a one-off investment package equivalent to an increase in the existing Location Offset to 30 per cent.

Without this effective tax offset incentive, the producers of The Wolverine would not have chosen Australia as the location.

In the 1950s, it made sense to invest in the industries of the future such as aviation, movie and car manufacturing industries.

Unfortunately for our politicians in Washington, Canberra, Sydney and Baton Rouge, we don’t live in the 1950s.

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Super connecting cities

How can cities re-invent themselves in the connected economy.

I’m chairing a panel this week in Newcastle for the New Lunaticks on How Cities can Become Super Connected where we’ll look at how a city can develop its broadband infrastructure and how the local economy can grow in a global, connected marketplace.

The challenge for a city like Newcastle is great as in many ways the city’s economy is a microcosm of Australia’s – a massive restructure of the local economy over the last forty years has left the region with a consumer driven suburban society and the massive coal resources of the region have made the city the biggest coal exporting port on the planet.

Much of the wealth flowing out of the port to India and China isn’t being distributed into the city and the Newcastle central business district is suffering from years of underinvestment and neglect by the business community and governments of all levels.

So the rollout of the National Broadband Network offers an opportunity for the city and the local economy to reposition itself. The question on the panel is how?

Waiting for Godot

The first aspect is that waiting for a government agency or telephone company to come to town is risky; recent history shows Newcastle gets no favours from state or Federal governments so expecting the region to be a priority for the National Broadband Network is unrealistic.

Indeed this has proved the case so far with no planned rollout locations for the NBN announced in the Hunter region to date.

At present higher speed Internet access comes through ADSL over the telephone lines and Telstra’s 4G mobile network in the downtown part of the city.

So it’s up to the community to create the conditions and demand for faster broadband.

Building the infrastructure

One way to make Newcastle more attractive to the providers of high speed internet is to make the supporting infrastructure easy to access. The local council can work on this by making streets, building and underground services like conduits accessible and available.

Part of encouraging investment in the local telecoms infrastructure includes an attitude from council that doesn’t put unnecessary barriers in the way of developments.

This isn’t to say local residents’ views should be over-ridden; if a city is going to be successful then it need the support of the residents.

Who funds the network?

While the city waits for the NBN or expanded 4G services to arrive, what happens in the interim? Should local and state governments build a temporary Wi-Fi network to cover the Central Business District?

If so, why just the CBD? Why not key industrial, commercial and shopping centres in the suburbs? Over the last forty years, Newcastle residents have shown they prefer to work and shop outside the city centre.

Of course the biggest question is who is going to pay for such an interim network. Putting the load on already stretched local governments guarantees the project will be strapped for capital.

Open data, open processes

An area where local governments can encourage growth is by being open and innovative themselves.

By making data available they encourage local developer communities and attract entrepreneurs who see a welcoming environment.

More importantly, having open procurement and recruitment processes that encourage local business to apply for government work and suggest innovative ways to work is one way industries in the region can be encouraged.

Connecting communities

Even with the best infrastructure you’re not going to build a vibrant economy without the community working together.

If we look at successful industry clusters such as Silicon Valley or the Pearl River Delta today, or historical successes like Birmingham in the 18th Century, we see industries built around a small core of determined entrepreneurs utilising local resources.

For Birmingham this was access to coal, iron ore, skilled labour and waterways to ship the products out. Silicon Valley’s role developed because of its access to high technology defense spending, good quality education facilities, a highly educated workforce and a free wheeling capital market.

Cities like Newcastle have to identify what the local economy’s strengths are and how these can built upon. It needs government, business and educational groups to be co-operating.

A liveable city

The key to all successful cities is making them attractive to entrepreneurial, skilled and younger workers. In some respects Newcastle has aspects that can attract these groups.

For Newcastle, and other centres, the challenge is to use their advantages to attract the human talent that will build the networks that matter.

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Building a digital economy

How does a state build new industries?

Yesterday the NSW Government hosted the Sydney leg of their Digital Economy Industry Action Plan forum meetings.

The aim of the action plan, one of a series for targeted industries, is to develop “a vision and strategy for the Digital Economy over the next decade in NSW.”

So how do we build a “digital economy industry” in a country that seems to be hell bent on staking everything on China’s continuing demand for coal and iron ore?

Picking winners

One of the things implicit in forums and plans like this is that the government has identified the ‘digital economy’ as a priority for economic development.

To help identify the opportunities the New South Wales plan breaks the sector into various industries;

  • Digital content and applications
  • Information services and analytics
  • Smart networks and intelligent technologies
  • Autonomous systems
  • E-research
  • ICT service innovation
  • ICT biomedical innovation
  • ICT safety and security innovation
  • Locally developed technologies and applications

The underlying assumption is the state has some sort of natural advantage in these areas or the potential to develop into a leader.

If these are the foundations of a region’s digital industries then we have to understand how they were identified as it’s difficult to build an industry if we don’t know what we can do.

The role of government

An important question is the role of government, an unfortunate thing with bureaucrats and politicians is they sometimes over estimate the influence they have on industry and the economy in general.

In NSW the state government’s role is going to be at best marginal, they can establish policies and offer financial incentives but business needs access to essential skills, finance and infrastructure.

Walking the talk

It’s all very well for governments to proclaim they support local businesses but if they prefer to buy from multinationals – even if the big boys are more expensive and have a less than stellar delivery record – then the domestic industry cannot thrive.

To be fair to governments, this reluctance to buy from local suppliers is shared by Australian corporations and on its own is probably one of the biggest obstacles for innovative companies and entrepreneurs to thrive in Australia.

Until this attitude changes among governments and corporations, it’s  difficult to see how local businesses can develop and survive.

Open data

For the digital industries, open data is probably the most important aspects. Unfortunately the current generation of Australian public servants, managers and politicians share an almost Stalinist view about access to taxpayer owned information.

Without making public data accessible so entrepreneurs can develop new applications and existing industries can improve productivity, governments are only giving lip service to building a digital economy.

A good example of this is the expressed desire of successive state and Federal governments to build Sydney as a global financial centre.

To do this, free and open investment information is essential yet company and stock exchange data that is assumed to be public information in the United States and much of Europe or Asia is propitiatory and locked away behind paywalls.

Government and corporate obsessions with controlling information makes it unlikely any Australian state or city can be global centre in the digital economy or the banking sector which the NSW government sees as an other priority sector.

Consistent standards

Another area governments can improve is by having open standards across government agencies so, for instance, land information can be properly matched with health data or public transport details.

Right now policies on data and things like social media or content platforms is fragmented making the cost of government and doing business more expensive and convoluted than it should be.

Promote advantages

One of the weaknesses in Australia’s overseas marketing is the nation is portrayed as a bunch of alcohol swilling beach bums cuddling koalas.

Google Maps founder Lars Rasmussen once said Google’s head office reaction when he suggested establishing a development office in Sydney was “what are you doing to do? Sit on Bondi Beach and drink Fosters?”

A missed opportunity in Australia’s disjointed tourism and investment campaigns is ignoring the nation’s diverse ethnic and skills base. We need more emphasis on the multilingual skills of the state’s workers and less on bikini babes.

Capital Problems

Whenever a group like the forums gather, there’s always complaints about Australian business’ access to capital.

Australia’s taxation, finance and social security system favours speculation on the share and property markets rather than long term investments or taking risks on new business ideas.

Three generations of these policies have a created a population who, understandably, see owning property as the safest way to provide for retirement. The banking system has responded to this and is reluctant to lend for anything not secured by real estate assets.

At the same time we’ve allowed the compulsory superannuation system to be dominated by flaccid ticket clippers who are content to charge working Australians outrageous fees for hugging the stock indexes.

Sadly what should have been a source of capital for innovative businesses largely spends its time lobbying governments for more protection and a bigger cut of workers’ incomes.

The access to capital is a serious problem for Australian business and one that can’t be kicked up the road for ever by Liberal or Labor Federal governments but it isn’t something the states can fix.

Not only do the distorted investment priorities of Australian society damage developing industries, it almost certainly guarantees the dream of making Sydney a global financial centre unattainable.

Education

One of the canards that always pops up at industry development forums is that educators aren’t in touch with employers’ needs.

There’s a certain type of business manager or owner who believes the roles of schools, technical colleges and universities is a sausage machine popping out perfectly formed young workers who can pick up a spanner, hair clippers or a copy of Photoshop and start productive work straight after being shown where the tea room is.

Those business owners are deluded.

None of that’s to say educators shouldn’t be adapting to their times as well as being open and transparent but the idea that the role of schools is to equip kids with the skills we need today would see them unprepared for next decade’s economy.

Equally however, Australia’s universities and training colleges have been encouraged to offer third rate courses to overseas students attracted by the prospect of getting permanent residence in the country. That bums on seats model had hurt the quality of the nation’s education sector and the skill levels of graduates.

Attitudes

The most essential part of building any nation’s industry is the attitude of people – if the prevailing view is it’s too hard, or threatens established interests then it won’t happen.

Probably the best advantage New South Wales, and all of Australia have, is a comparatively young, diverse and outward looking population.

The best thing the government can do in trying to build new sectors, be they in the digital economy or anywhere else, is to fix what they can such as procurement, open data or taxation and get out of the way.

A constant dreams of governments is to build the next Silicon Valley, just as it once was to build the next Detroit or Birmingham.

The era of the big engineering works passed, at least in the Western world, and the age of venture capital driven social media platforms will probably be over soon as well.

Aping someone else’s success – while ignoring the historical factors and accidents that created it  – seems a guaranteed way to disappointment.

The best part to build a digital economy, or any thriving society, is to encourage the risk takers and the inventors. Bring them together, let them loose and you build the next economic powerhouse.

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