3.1
Throughout the evidence received for this inquiry, appreciation for the work that Austrade does in facilitating foreign direct investment (FDI) was consistent and evident.
3.2
Submitters from all levels of government and from industry were unanimous in their recognition of the connections that Austrade’s domestic and international networks facilitate and the benefits of this work, as outlined in chapter 2.
3.3
Acknowledging the good work that the agency does, there were some areas where submitters suggest that Austrade could better focus its efforts and resources, especially in relation to cooperative work with other levels of government.
Whole-of-government identity and cooperation
3.4
Austrade has a stated ‘clear and systematic process’ for securing investment, which occurs in tandem with Commonwealth, state and territory government counterparts.
3.5
This process is depicted in Austrade’s investment cycle, replicated at Figure 3.1 below, and described in its submission:
Policies and strategies are developed in coordination with federal and state counterparts, providing direction of our promotion and attraction activities offshore. Having captured the interests of potential foreign investors, Austrade works with relevant Commonwealth, state and territory government agencies to facilitate each investment and provide aftercare to garner further reinvestment in the future.
State and territory governments
3.6
The state and territory governments that submitted to the inquiry all acknowledged the important work that Austrade undertakes and coordinates to benefit their economies. However, there was some commentary on areas where coordination could be improved, either from the specific state or territory perspective, or on a whole-of-government level or across tiers of government more generally.
3.7
The Northern Territory (NT) Government acknowledged the close working relationship that it has with Austrade and the benefits it derives from this activity.
3.8
However, the NT Government is somewhat critical of Austrade’s ‘whole of Australia’ focus, expressing concern that its policy direction can divert from the best interest of its jurisdiction, and ultimately suggesting that a dedicated NT investment unit would counter this.
3.9
Additionally, the NT Government suggests the benefit that emerging companies could gain from FDI attraction though Austrade’s network may be under-utilised, with these companies preferring to use private-sector investment specialists.
3.10
The Australian Capital Territory (ACT) Government outlines that as it does not maintain its own overseas network, the Austrade network is critical to facilitating FDI into the ACT’s ‘knowledge-based services economy’.
3.11
The ACT Government emphasised that Austrade should stay focussed on national outcomes, highlighting the important role the National Investment Advisory Board (NIAB) plays:
While a degree of competition among jurisdictions for strategic investment can spur innovation and regulatory reform, it is also the case that competition and granting of investment incentives create divergence from best national outcomes. The National Investment Advisory Board managed by Austrade is a forum for the exchange of information among jurisdictions and a mechanism for moderating the interests of individual jurisdictions with the national interest.
3.12
This acknowledgment of continued, or even renewed, focus on whole-of-government and multi-level collaboration and cooperation is a key consideration for the future work of Austrade.
3.13
The New South Wales (NSW) government also stated its appreciation for the industry facilitation role that Austrade undertakes, but expressed support for increased coordination and cooperation at all levels of government, especially in relation to forward planning of investment promotion or facilitation missions.
Austrade acknowledgement
3.14
Austrade acknowledges the vital role that cooperation and collaboration with state and territory government plays in facilitating appropriate FDI.
3.15
In its 2018–19 Corporate Plan Austrade identifies an intensification of cooperation with states and territories over the next four years, noting that:
All parties have limited resources, and by working intelligently together, we can avoid duplication and achieve more. This approach will be communicated to our partners, and we will reinforce our internal capabilities in co-design techniques through training. Overseas, all Austrade posts will be required to work collaboratively with the states and territories.
3.16
This acknowledgement is welcome, and as outlined below, the Committee encourages Austrade to quantify its engagement strategy as well as broaden its overall government cooperation.
Commonwealth government partners
3.17
Submissions from the Department of Industry, Innovation and Science (DIIS), the Department of Education and Training (DET) and the Department of Infrastructure, Regional Development and Cities (DIRDAC) provide positive commentary on the partnered role that Austrade has in facilitating FDI in their relevant portfolio industries.
3.18
DET highlighted the work undertaken with Austrade in promoting education services, through the National Strategy for International Education 2025 and the Australian International Education 2025 market development roadmap.
3.19
DET described its policy and strategy responsibilities for international education, but outlined Austrade’s partnership work:
Austrade complements this work through its role in marketing and promoting study in Australia and Australian education and training internationally. Austrade’s Trade Commissioners play a valuable role in establishing and maintaining links overseas and promoting the advantages of the Australian education sector in established and new markets.
3.20
Similarly, DIIS submitted about its working relationship with Austrade:
DIIS works with Austrade to provide integrated assistance for Australian businesses as they pursue a growth strategy in both domestic and international markets. Geoscience Australia works with Austrade to provide knowledge specifically on mineral and petroleum resources to potential investors. This submission provides an overarching Industry, Innovation and Science perspective, with particular reference to minerals and energy from Geoscience Australia and unique nuclear capabilities at the Australian Nuclear Science and Technology Organisation.
3.21
DIIS emphasised the work that Austrade does in tandem with it, other Commonwealth agencies and states and territories; however it also stressed that ‘business readiness and an attractive investment climate must precede investment attraction to ensure these efforts are as fruitful as possible’.
3.22
Central to this climate is ‘[c]reation and maintenance of an attractive business operating environment including regulatory certainty and efficiency, a taxation system that incentivises investment, platform infrastructure, and a skilled and flexible workforce’. This regulatory certainty is a theme raised by other submitters that will be discussed later in this chapter.
3.23
DIRDAC highlighted that the delivery of infrastructure projects in Australia ‘requires active partnerships with state and local governments, private sector investors and construction contractors’. Adding that the benefits from FDI support for infrastructure projects (especially critical transport infrastructure) stretches past the invested industries alone, resulting in reduced travel time, operating cost reductions and improved freight movement.
3.24
Tourism Australia also outlined the work that it had done in 2012 in cooperation with Austrade and the former Department of Resources, Energy and Tourism, to create the Tourism 2020 strategy.
3.25
DIIS highlight a number of areas that Austrade could develop in order to improve investment attraction and facilitation:
enhance policy and strategy facilitation by coordination and connections with other Commonwealth agencies, drawing on shared expertise;
enhanced information and data sharing, particularly regarding feedback on areas of investor attraction; and
enhancing shared policy goals across levels of government.
3.26
In relation to the first point, DIIS highlights the undertaking made in Austrade’s 2017 Organisational Capability Assessment (OCA) (discussed in chapter 2):
Austrade also committed particularly to work with DIIS to provide integrated assistance for Australian businesses, as they pursue growth strategies in international markets. We look forward to working with Austrade to take this commitment forward.
3.27
DIIS’s statement suggests that there has been little or no progress on this undertaking. This is an issue of note to the Committee, and will be discussed further below.
Local government cooperation
3.28
Numerous local government representations were received by the Committee from Queensland, including the Local Government Association of Queensland (LGAQ). These submissions may only represent local government perspectives from one state, but helped to highlight cooperation and coordination as an area for improvement.
3.29
The LGAQ emphasised that greater coordination between all three tiers of government for trade promotion and investment facilitation is needed. The LGAQ proposed professional development of local government trade promoters, and clear delineation of responsibility between the Regional Development Australia and Austrade in attracting investment to regional Australia.
3.30
The Cairns Regional Council acknowledged the need for more whole‑of-government and multi-tier coordination, with vertical-integration required for investment policy development and implementation. Additionally, it also expressed support for development of investment promotion staff employed by the Council, as well as more support for outbound investment missions at a local government level.
3.31
Mackay Regional Council expressed its support for increased collaboration by Austrade with local governments, suggesting a decentralised regional office would aid trade facilitation.
3.32
Finally, the Sunshine Coast Council expressed its support for increased cooperation and work at a local government level, as well as across all tiers of government.
3.33
Of interest, the Sunshine Coast Council makes two recommendations for increasing this cooperation and informing better trade relations:
1
…an annual exchange of strengths/opportunities via an online marketplace whereby Councils and States/Territories could promote projects and opportunities for consideration by Austrade in its investment attraction activities[; and]
2
…Austrade provide an investment report every month on its web site which lists how many investment opportunities (number only), their value and industry category were generated offshore and promoted back to Australia (we understand and respect that this should not be identified by market or investment target/lead). Having this information will provide both States/Territories and Councils with greater awareness of the number and value of opportunities identified internationally and marketed back to Australia.
3.34
There would appear to be merit to both of these suggested improvements.
Committee comment
3.35
The consistency of messaging from submitters regarding multi-tiered government cooperation, and a clearer identity from Austrade as the primary Commonwealth government agency facilitator when dealing with foreign investors, was very evident to the Committee. Austrade identified this as an issue that it is conscious of:
…how do we continue to work collectively and collaboratively across all areas of government? That is a refrain of some [Executive Officers], and some people say they sometimes just get confused with what bit of government to go to. Given we’re part of that we need to take our accountability for that as well. We work very hard to minimise that problem, but it would be fair to say that in some soundings they would say, ‘I just sometimes get confused which part of government I need to get to.’ We need to take on our share of the accountability to make sure that is more seamless.
3.36
The challenges of coordinating strategic policy objectives and outcomes across three levels of government, for investors who interact with one or all three levels is always going to be challenging. However, the evidence received by the Committee appears to indicate that different state, territory and local governments, see their access or opportunities to utilise Austrade’s expertise as limited or not functioning at best levels.
3.37
It is also possible that an increased focus on cooperation at a state and regional level will allow for a greater understanding of the capabilities and gaps existing across the Australian economy, particularly within emerging industries in Austrade’s priority areas.
3.38
These observations do not detract from the fact that most government submitters acknowledge the vital role that Austrade plays in facilitating FDI and the benefits that stem from that.
3.39
Whether particular local focuses may skew what priorities should be pursued in a certain stakeholder’s view is unavoidable, but the ACT Government’s acknowledgment that the best national outcomes being the ultimate goal of Austrade’s work is consistent with Austrade’s role.
3.40
That said, the comments from DIIS highlighting a lack of response to identified priority changes from Austrade’s OCA are of concern. Austrade themselves identify a key deliverable (for the next 6–12 months) in November 2017 as:
…working with our key government partners, in particular the Department of Industry, Innovation and Science, to provide integrated assistance for Australian businesses, as they pursue growth strategies in the domestic and international markets.
3.41
That DIIS identify little has been achieved on this deliverable in its submission of November 2018, and that the only reported and identifiable outcome of the six deliverable is the International Network Review, then Austrade’s commitment to working with Commonwealth agencies, let alone state and territory and local government partners, is an area for potential action.
3.42
The work that Austrade does with all levels of government domestically, as well as throughout their extensive overseas network, is invaluable to Australia’s economy. However, if the observations of submitters are an indication of the depth of engagement, the identity of Austrade as a facilitator and the role that it currently plays, then room for improvement exists.
3.43
Austrade identifies that ‘partnering for success’ is one of their strategic priorities coming out of the 2017 OCA, with identified prioritisation in the next four years. The Committee believes that this priority is appropriate, given the evidence received. This should be further enhanced through improved engagement with all levels of government, especially local government, above and beyond that already outlined in Austrade’s submission.
3.44
The increasing coordination with regional Australia, through Regional Development Australia (RDA) Committees, as mentioned in chapter 2, is an encouraging sign. However local government submitters to the inquiry have identified the need for improved direct communication with their tier of government.
3.45
Whether this increased communication and cooperation comes through the greater role that RDA Committees can play, or by direct means, is a matter for the Australian Government to determine, but the success of the NIAB and RDA Committee structures could help inform developments in this area.
3.46
Additionally, the Committee believes that the suggestion by the Sunshine Coast Council of development of an online marketplace for project promotion and liaison with Austrade and interested investors has merit.
3.47
The Committee recommends that Austrade increase the priority of collective partnering and cooperation with all levels of government—Commonwealth, state and territory and local. This cooperation should build on the success of the current National Investment Advisory Board and Regional Development Australia Committees processes.
3.48
The Committee recommends that Austrade investigate the creation of a virtual marketplace for state and territory and local governments to promote investment opportunities and projects for consideration by Austrade and for promotion to foreign investors through its overseas network.
Data capture and accessibility
3.49
A small number of submitters identified data capture, availability and promotion as a crucial area of support provided by Austrade, and as an area for potential improvement.
3.50
Tourism Accommodation Australia highlighted the importance of data:
To retain its attractiveness as a tourism destination Australia requires investment in tourism infrastructure to meet growing demand. Underpinning this is the need for data investment. Investing in data will ensure benchmarking can be completed, and will paint a full image of the Australian tourism industry, enabling funds and resources to go to where they are most needed.
3.51
Whilst this comment is made in relation to tourism and investment in that sector specifically, the general observations are relevant to FDI opportunities in any industry.
3.52
Additionally, Australian Private Equity and Venture Capital Association Limited highlighted the crucial data capture and availability that Austrade delivers in resources such as Benchmark Reports and tools like the Investor Map.
3.53
This data delivery is central to informing potential investors of the factors that might affect investment decisions. Industry Capability Reports produced by Austrade help, however delivery of real-time data is the goal:
Typically it’s an annual process to update [industry capability reports]. What we’re trying to move to is a much more live feed of data. As an example of that…the investor map…[is] actually a live feed from Geoscience Australia, from Tourism Research Australia and from the ABS in terms of census data.
3.54
Harnessing these data resources and developing with market demands is identified as a strategic priority resulting from Austrade’s 2017 OCA. ‘Developing digital and data strategies, aligning with our agency and ICT strategies’ is identified in both Austrade’s agency response to the OCA and in its submission to this inquiry.
3.55
Additionally, Austrade’s CEO identifies ‘a digital and data strategy and execution roadmap to enable the transformation to a “digital first” agency, including delivery of services digitally, a digital workplace and culture, and reimagining the use of data and insights’ as part of the Austrade Strategy 2018–2022.
3.56
No publically available information exists at the time of the conclusion of this inquiry about progress towards developing and implementing these data strategies or the roadmap.
Committee comment
3.57
The importance of delivering real-time data to investors, as well as reporting on the success or otherwise of investment projects and priorities, cannot be understated.
3.58
The Committee acknowledges the efforts that Austrade is making to deliver the best and most appropriate data to investors and other interested parties along the lines of those projects and strategies highlighted in the 2017 OCA.
3.59
However, the specific strategies and roadmap identified as priority developments are yet to be delivered, so the Committee recommends their reprioritisation and appropriate resourcing.
3.60
The Committee recommends that Austrade further prioritise development and implementation of the digital and data strategies identified as priorities in the 2017 response to their Organisational Capability Assessment, as well as the digital and data strategy and execution roadmap identified in its 2017–18 Annual Report.
The Australian Government should consider allocating appropriate resourcing in forward appropriations to guarantee the development and delivery of these data priorities.
Timing of initiatives and strategies
3.61
While analysing the strategies, responses and roadmaps that Austrade have set for the agency to deliver adaptable change in the future, the Committee became aware that many of the deliverable or actions identified did not have clearly articulated timelines or metrics to measure outcomes or success.
3.62
While Austrade is very forthcoming about its need and desire to adapt, the lack of detail about the manner and timeframes for implementation is an area that the Committee believes could be improved.
3.63
The Committee acknowledges that this is not a unique characteristic to Austrade. But for an agency that works so closely with industry and stakeholders that measure profit and viability of projects on clear timelines, this would appear to be a necessary confidence-building element of operations.
3.64
Setting identified dates for development and implementation of change or improvement projects allows for appropriate measurement and reporting of outcomes, supported by the relevant appropriations and resources required. The Committee believes this should be an imperative for Austrade, to build trust and accountability into their stated reform and strategy agenda.
3.65
To this end, the Committee recommends that Austrade review the suite of actions and deliverables across all of its current strategies, roadmaps and action plans and provide target dates and define clear performance measurements and indicators for their development and implementation. These can then be reported as a separate overarching performance report related to the Austrade Strategy 2018–2022 or reported as part of Austrade’s next Corporate Plan and Annual Report.
3.66
The Committee recommends that Austrade develop a performance report detailing target dates and clear performance measurements and indicators for the development and implementation of all current actions and deliverables from responses to its Austrade Strategy 2018–2022, the response to its 2017 Organisational Capability Assessment, the Blueprint Phase One response to its International Network Review, and all other roadmaps, transformation plans and initiatives outlined in its
2017–18 Annual Report and 2018–19 Corporate Plan.
Environment for investment attraction and stability
3.67
Spread throughout a number of submissions was the theme that policy stability and certainty can affect investor confidence, and the certainty with which Austrade can undertake its promotion and facilitation work.
3.68
DIIS and Geoscience made the following salient point:
The primary focus of foreign investors is on the overall attractiveness of a country’s investment climate and the investment opportunities available. The attractiveness of a country’s investment climate is shaped by factors such as regulatory and policy certainty, and the availability of finance and skilled workers.
3.69
This sentiment and identification of investment ‘climate’ was echoed in a number of government and industry submissions.
3.70
DIRDAC highlighted the attraction from Australia’s stability:
The transparent environment of risk, regulation, and evidence-based decisions for Australia’s major infrastructure projects, creates an appealing environment to encourage foreign direct investment (FDI) in Australia on the world stage.
3.71
The Queensland Tourism Industry Council (QTIC) suggested that budget constraints and pressures, paired with shifting political and policy demands, results in Austrade having to alter its resource allocation between domestic to international activities. According to the QTIC this change in focus, predicated on policy instability, causes challenges for the Austrade, compromising its ability to deliver best outcomes.
3.72
Infrastructure Partnerships Australia outlined that the uncertainty stemming from instability in energy and tax policy, paired with political shifts, affect the investment appetite of foreign investors in infrastructure sectors.
3.73
Medicines Australia identified the impact of policy instability on the research-based medicines industry:
Our industry is highly reliant on a stable policy environment that needs to strongly support innovation, R&D and commercial translation to at least the same levels as competitor nations. Without these policies, there will be limited incentive for ongoing investment into Australia.
3.74
Generally, the sentiment that policy stability, predictability and stability in the investment climate as being crucial to investor confidence is a theme across submissions.
3.75
This issue is also the message promoted by Austrade as part of the ‘Why Australia?’ branding, with ‘Strong Foundations’ and the following list of reasons to trust investment in Australia:
a business environment that is ranked 14th out of 190 economies for ease of doing business;
a robust regulatory system noted for its institutional frameworks and finance and banking regulations;
a stable political system and strong control of corruption; and
a high quality of life that is rated in the world’s top 10.
3.76
This driver to attract and facilitate FDI is central to selling Australia’s economy as an attractive investment destination.
Committee comment
3.77
The Committee is conscious of the potential impact that policy and political stability has on investor confidence, and on the Australian economy as a whole.
3.78
However, as promoted by Austrade, the relative stability of the Australian political system, in a global context, is one of the key messages encouraging foreign investment in Australia.
Concluding comment
3.79
In concluding, the Committee commends Austrade on its good work and achievements to date.
3.80
However, the Committee urges Austrade to critically consider all aspects of its investment cycle processes and how these can be improved through enhanced collaboration and communication. This includes interactions with domestic and overseas partners, both government and industry, with a view to achieving continuous improvement and maximising the benefits to all Australians arising from increased FDI.
Mr Ken O'Dowd MP
Chair
14 February 2019