Austrade
2.1
The Australian Trade and Investment Commission Act 1985 established Austrade and charged it with promoting, attracting and facilitating trade between Australia and foreign countries, and investment from foreign countries into Australia.
2.2
Austrade is a non-corporate entity under the Public Governance, Performance and Accountability Act 2013, and a statutory authority under the Public Service Act 1999. Austrade is under the Foreign Affairs and Trade portfolio.
2.3
Austrade utilises its extensive global network to facilitate trade and investor relationships and opportunities. Operating across 49 overseas markets in the Americas; North East Asia; South Asia; Greater China; ASEAN-Pacific; Middle East and Africa. This includes a presence in 122 locations around the world, comprising 84 overseas locations, ten Austrade offices and 28 TradeStart offices in Australia.
2.4
Austrade’s purpose and areas of responsibility include:
developing access to international markets for Australian businesses;
promoting Australian education internationally;
helping Australian businesses to attract productive foreign direct investment;
strengthening tourism infrastructure; and
assisting Australians with consular and passport services overseas.
2.5
Austrade plays a pivotal role in Australia’s economic prosperity and growth, particularly through promotion of Australia as an attractive investment opportunity, and connecting industries and businesses with export opportunities and foreign investors. Across its network, Austrade has 105 staff dedicated to attracting foreign investment.
What is foreign investment and what are its benefits
2.6
Foreign investment in Australia is crucial for Australia’s economic growth. These investments are categorised as either foreign portfolio investment (FPI) or foreign direct investment (FDI). FPI occurs when a foreign investor purchases financial assets, such as stocks and bonds in another country. FDI occurs when an overseas individual or business directly invests in a business, purchases an existing business or establishes business operations in Australia.
2.7
FPI investors focus on the acquisition and sale of financial assets, without expecting to exert control or influence, often being temporary in nature due to the liquidity of those assets for profit.
2.8
FDI is considered to be a longer term commitment which ‘may lead to long‑term and steady financing and technological transfers’, and is therefore more beneficial to the economy in which the investment is made. The more illiquid nature of direct investment would suggest this is true, as these investors cannot simply sell stocks and exit from the investment target market.
2.9
The more enduring nature of FDI is crucial to building Australia’s economy and critical infrastructure. The prospects for FDI support of major industry development are significant, and Austrade sets priority industry sectors, in consultation with states and territories, to maximise the potential return from investment attraction. These priorities and their identification are discussed below.
2.10
According to the Organisation for Economic Co-operation and Development (OECD), ‘with the right policy framework, FDI can provide financial stability, promote economic development and enhance the wellbeing of societies’.
2.11
FDI increases competition, productivity and innovation, creating a positive effect for consumers and the wider economy by ‘driving down prices, increasing quality and improving overall economic efficiency’.
FDI in Australia
2.12
In Australia, FDI provides the capital needed to support local businesses, develop infrastructure projects and build regional communities. According to the Australian Bureau of Statistics (ABS), in 2017 Australia attracted $3 266.4 billion in foreign investments, including $849.1 billion in FDI across several industries, ranking mining, manufacturing and real estate activities in the top three. Figure 2.1 shows the distribution of FDI across selected industry sectors.
2.13
A Department of Foreign Affairs and Trade (DFAT) study of foreign-owned businesses operating in Australia in 2014–15, showed that they held $1.9 trillion in assets, employed 966 200 staff, and paid salaries totalling $67 billion. Those businesses ‘made operating profits of $50 billion, contributed 11 per cent of total business tax revenue’, and contributed $222 billion to the economy. This represented a ‘fifth of total Australian business output’ in 2014–15.
2.14
The study also showed that foreign-owned businesses paid higher wages on average than Australian-owned businesses, and that FDI, including minority and majority owned businesses, supported 1 in 10 Australian jobs.
Austrade and Foreign Direct Investment
Activities and strategies
2.15
Austrade’s policy directive focus lies in attracting investments by ‘foreign businesses, joint ventures, partnerships and research collaborations’. Facilitation of these opportunities is generated through market research and data collection for potential investors and by collaborating with partner organisations, including federal, state and territory government agencies, and industry stakeholder associations.
2.16
Market research, industry agreement, and data collection results in tailored resources promoting or explaining investment prospects, such as:
Why Australia: Benchmark Report 2018—presenting data on Australia’s robust economy, dynamic industries, innovation and skills, global ties and strong foundations, as a reason for FDI.
Industry Capability Reports—providing overviews of key industries, and the subset business streams that investors may have interest in, through case studies.
Investor Updates—providing point in time updates to industry and investors on major developments and acquisitions.
Major industry promotions—such as those created in tandem with Tourism Australia as part of the Tourism 2020 strategy.
Investor Map—a real-time interactive map, developed in collaboration with CSIRO and Geoscience Australia, delivering easy access to spatial and other data on Australia (such as climate, water resources and social and economic data) for the information of investors.
2.17
Historically, Austrade has concentrated its promotion and attraction activities in North America, Western Europe and Japan, ‘due to the maturity of their economies’. However, Austrade is widening its activities to include high-growth and emerging markets, such as Greater China, India, ASEAN, South Korea and the Gulf Cooperation Council countries in the Middle East; particularly because these regions focus on ‘[agricultural-technology], resources and energy, major and tourism infrastructure, and technology’.
2.18
In 2017–18, Austrade reports facilitation of 113 inbound investments valued at approximately $4.8 billion across a number of industry sectors, ‘including services and technology, agrifood, and resources and energy’. As a proportion of the total FDI reported by the ABS for 2017, this amount is relatively small, but the impact of that facilitated investment on Australia’s economy is no doubt still significant.
2.19
In addition to the resources outlined above, Austrade proactively markets and promotes investment strengths and opportunities, provides advice to investors about Australia’s regulatory environment, as well as fosters existing investor relationships. Promotion and attraction activities include:
hosting minister-lead business missions, Australia Business Week programs and Northern Australia Investment Forum, to raise awareness of Australia as a potential investment opportunity;
supporting international trade through the Export Market Development Grants scheme, delivering free trade agreements (FTAs) seminars, as well as support to exporters through the TradeStart network, to support small to medium-sized businesses to achieve long-term success in international markets and take advantage of Australia’s FTAs;
implementing Australian International Education 2025 roadmap to develop international education markets, and Tourism 2020 Implementation Plan (2015–2020) to help tourism businesses remain competitive in a changing global environment; and
managing the national branding program, Australia Unlimited; and Austrade’s website and communications, including related market research.
Identifying, setting and acting on priorities
2.20
Austrade works with state and territory governments through the National Investment Advisory Board (NIAB) to set investment priorities, facilitate identified investment opportunities and address identified impediments. The Board, chaired by Austrade, is supported by both the Trade and Investment Ministers’ Meeting and Senior Officials’ Trade and Investment Group, co-chaired with DFAT.
2.21
Through these collaborative processes, Austrade identified five priority sectors for attracting FDI. Austrade notes that the five priority sectors were identified because in 2017–18, 95 per cent of Austrade’s investment leads were dedicated to these key sectors:
1
Tourism infrastructure is identified as a growth industry due to Australia’s ‘unique natural wonders’, food and wines experiences, as well as our proximity to Asia’s growing economies.
2
Agribusiness and food is an industry of focus as the global demand for food and food security increases. Austrade believe Australia is ‘ideally placed to become a premium supplier and a long-term partner of choice for food security’.
3
Resources and energy is another area of focus due to Australia’s diverse mineral and energy resources, equipment, technology and service industry, and proximity to growing markets in Asia, all of which provide a broad variety of investment opportunities.
4
Major infrastructure is identified as an ideal investment opportunity because of ‘Australia’s buoyant economy, increasing trade footprint, growing population and substantial pipeline of projects’.
5
Advanced manufacturing, services and technology is an area of growing investment opportunities, particularly relating to medical and materials sciences and technology—including biotech and pharmaceuticals—and digital technologies. Australia’s flexible regulatory regime and strong intellectual property protection laws, also make Australia an ideal candidate for investment in these areas.
2.22
Austrade has developed specific promotional resources for each sector to attract prospective investors and provide industry-specific information, including industry value, growth areas, sector opportunities, capabilities and innovation, and how Austrade and other key agencies can assist:
Australian Tourism Open For Investment;
Investment opportunities in Australian agribusiness and food and Australian foodtech innovation;
Investment Opportunities in Australian Resources and Energy and Investment Opportunities in Australian Oil and Gas;
Investment Opportunities in Australian Infrastructure; and
Investment opportunities in digital technologies in Australia and Investment opportunities in Screen Production in Australia.
2.23
Additionally, Austrade provides training to government employees through its Winning Investment for Australia course, which informs participants of the importance of FDI and Australia’s investment position, as well as teaching investment facilitation skills and Austrade’s business practices.
2.24
Austrade notes that through this cooperation on investment priorities and training, it and state and territory governments are able to deliver a unified and consistent approach when selling Australia to prospective foreign investors.
2.25
The work of the Regional Development Australia (RDA) and its associated committees, administered by the Department of Infrastructure, Regional Development and Cities (DIRDC), and how it integrates into consideration of state and regional investment priorities is unclear, based on the primary evidence received for this inquiry, or from information in the public domain.
2.26
The primary submission from the DIRDC did not mention the role of RDA; however, in further correspondence to the Committee it was acknowledged that opportunities for improved engagement between Austrade and RDA Committees are being explored.
2.27
The focus of the RDA Committees in building partnerships to deliver sustainable infrastructure and services to their regions, together with local knowledge, would logically present as a feeder into consideration of regional priority projects. This potential is discussed further in chapter 3.
Outcomes
2.28
In its 2017–18 Annual Report, Austrade reported that it met all performance indicators across all purposes contained in its Corporate Plan 2017–18 and Portfolio Budget Statements 2017–18, including the attraction of FDI, based on responses to an Independent Service Improvement Study and follow-up questions to Austrade clients.
2.29
As mentioned earlier, Austrade reports that its efforts resulted in 113 investment outcomes, which contributed approximately $4.8 billion in FDI value to the Australian economy.
2.30
This follows similar results from 2016–17, of 92 investment outcomes reached, at an equal value of $4.8 billion. While the investment value was the same as 2016–17, it had increased from 2015–16, at $3.2 billion.
2.31
Furthermore, Austrade reports that FDI assisted in the creation or retention of approximately 27 588 jobs in 2017–18.
2.32
Submitters to the inquiry pointed out that Austrade has been valuable in attracting and assisting them to attract FDI to their sectors. For example, Tourism Australia advised that, in partnership with Austrade and as part of the Tourism 2020 strategy, more than $2.12 billion in tourism investment projects had been facilitated.
2.33
However, the ultimate reach of Austrade’s facilitation function was questioned by some submitters, especially in relation to the completeness of coordination and collaboration efforts across all levels of government in Australia. This will be discussed in chapter 3.
2.34
Additionally, the Northern Territory Government questioned the level of access to Austrade by individual companies seeking FDI:
The Northern Territory Government further considers that individual companies seeking FDI into their operations may use the Austrade network and account managers to assist in this objective; however, would more likely work with private sector investment specialists such as business brokers or intermediaries such as accountants, lawyers or banks.
2.35
Whether this limited access is due to a government level focus, or a lack of awareness by businesses of Austrade’s role, is not clear, as limited evidence from other sources was tendered on this issue. However, the government‑level focus of Austrade activity will be discussed further in chapter 3.
Austrade’s business improvement agenda
2.36
Changing market forces, investor priorities and pushes to modernise technology and practices have all contributed to an acknowledgement from Austrade that refinement and refocussing of their organisational activity and capability is required for the fulfilment of their corporate purpose going forward.
2.37
Most government departments and agencies struggle to adapt to changing domestic and international pressures to provide services and programs, but as Austrade has a direct market interface with investors, this requirement to be flexible and adaptable is more of an imperative than for most.
2.38
It is for this reason that the Committee notes that recent assessments and strategies, as outlined below, have been developed to allow for these improvements to occur.
Austrade Organisational Capability Assessment
2.39
In 2017, an independent review was undertaken of Austrade’s organisational capabilities. The review included consultation with state and territory ministers and government agencies, as well as Austrade staff. The report, released that October, provides analysis of Austrade’s operational strengths and areas for development. It makes high-level recommendations across nine areas:
1
Strategy and measures of success;
2
Digital and data strategy;
3
Organisational structure;
8
Workforce management; and
2.40
The review made numerous recommendations across all areas, including:
further developing stakeholder relationships, including Commonwealth, state and territory agencies, to share and leverage information and resources, and collaboration on initiatives to ‘reduce duplication, rationalise resource use and maximise outcomes for clients’;
development of a service delivery framework that is ‘responsive to change, capable of continually delivering outcomes for clients with maximum impact, and aligned with the agencies strategic priorities’;
establishing Austrade ‘as an authoritative source of market insight for all stakeholders; and
review of its network operations to enable stronger delivery of client‑focused services and government partnerships.
2.41
Austrade released its response to the report in November 2017, stating that its executive has, in principle, accepted all of the recommendations, with a view to focus on these over the subsequent five years. The response also listed a number of key deliverables for 2018, including:
collaboration with stakeholder partners for seamless delivery of services and leverage strengths and resources; and
building commercial intelligence capabilities to provide market insight to stakeholders.
2.42
As a consequence of the Organisational Capability Assessment, Austrade is continuing to measure and review its operations. To date, this has included undertaking a review of its international network operations and developing its Austrade Strategy 2018–2020.
International Network Review
2.43
Austrade undertook its International Network Review in 2018, considering its size, allocation of resources and operating practices in order to achieve optimal use of its network and client outcomes.
2.44
Following this, Austrade published its Blueprint for Optimisation of Austrade’s International Network, which addresses the findings and recommendations from the review, including agreed actions going forward. Agreed actions outlined to ensure that Austrade meets stakeholder expectations, operational responsiveness and outcomes include:
setting principles and protocols for allocating resources;
growing investment capability across major investment hubs; and
introducing consistent, clear and universal key performance indicators to improve organisational practices.
2.45
These agreed actions are a welcome undertaking from Austrade regarding reform and improvement; however it is noted that there are no clear timeframes outlined for development and implementation, nor performance measures or metrics to evaluate delivery or success. Noting that these may be included in future Corporate Plans or reports, this absence of timeframes, or failure to meet stated deadlines is discussed further in chapter 3.
Austrade Strategy 2018–2022
2.46
The Austrade Strategy 2018–2022 is stated to focus Austrade’s strategic priorities over the next five years. These priorities centre on transforming its operational focus across eight areas, including strengthening client service delivery, stakeholder collaboration, operational agility, and informing government policy through market knowledge and understanding.
2.47
The principles behind these priorities are identified to place clients at the centre of Austrade’s operational focus, ensure resources are appropriately deployed to deliver the best outcomes and concentrating on key sectors and markets ‘where investment will contribute most to economic productivity’.
2.48
The delivery of this strategy is highlighted in a 14‑point transformation plan mentioned in Austrade’s 2017–18 Annual Report. This plan is not currently publicly available.
Committee comment
2.49
The Committee acknowledges the detailed and complex work that Austrade does for the betterment of the Australian economy, including supporting the growing contribution of service-based industries, and commends it on the FDI facilitation successes achieved and the services provided to government, industry and investors alike.
2.50
The detail in this chapter outlines an agency with a proven track-record in achieving government policy goals in a commercial environment, which is never an easy task. Austrade is to be complimented on that front.
2.51
It is evident that Austrade is in a period of review and operational flux. The international market and investment environment has changed significantly since the inception of the Commission in 1985. International markets for capital are almost unrecognisable, with an increased emphasis on China, the Middle East and emerging markets.
2.52
In order to modernise and adapt to the evolving way that investment business in conducted, Austrade must also evolve.
2.53
The business improvement agenda outlined above is only a small part of what is being undertaken by Austrade, but as highlighted, there are areas for improvement that can be identified from the information provided by Austrade and other submitters. These areas for improvement are outlined and discussed in chapter 3.