The Clustering Alliance – Number 10

Rod Brown

October 2000

This newsletter is for 150 + members/friends of the Australia New Zealand Alliance on Clustering (ANZAC). This newsletter previously went under the Silverhawk label.

GLASGOW etc.

The Clusters in the New Millenium Conference in Glasgow, hosted by Scottish Enterprise, was excellent. Three other aussies attended - Tracey Scott-Rimington from Cairns, Steve Arnott from the WA Department of Commerce & Trade, and Dusan Mills who is involved with the IDEA project, a residential/commercial development planned for around Yanchep north of Perth. There were 4 kiwis there too.

I attended the conference with a specific brief to link clusters across countries as a means of addressing R&D commercialisation and to build investment linkages. This is a pretty difficult task, but I am buoyed by the support from various quarters to try and make it work. We have completed a first draft of cluster agendas in A-NZ by industry, by location, with contact details - to be placed on our website in due course.

I also had meetings with the OECD Secretariat who are keen to support our work. I am currently writing up the key themes/issues from the Conference for dissemination to companies involved in the A-NZ clusters.

Scottish Enterprise has also offered to assist with checking the factual references in the report. I have decided to call the report 'Scotland the Brave' - what the Scots are doing, with funding support from the EU, is quite remarkable. Wales are into similar agendas, and we know about the Irish. The Europeans do not seem to get hung up about possible resource misallocation, subsidies, picking winners etc. My report will be around 60-70 pages in length, and I am intent on providing an objective assessment of the situation. The report will be available in 3-4 weeks assuming I can attract some sponsors to meet the printing costs. DISR has offered some funding, as has Playford City Council - please ring me if you are interested in being a sponsor.

MORE CONFERENCES

Ballarat, 20-23 November

This conference is called 'Sustaining Economic Growth for Regional Australia'. It covers all the usual topics - rebuilding the Bush, role of new technologies, taking control etc. I am speaking at the conference re lessons from the Glasgow Conference. Other ANZAC members will be delivering papers on diverse topics. The full program is $875. Contact 07 - 3210 0021 or mansol@bigpond.com

Paris, 23-24 January

The OECD has asked me to bring to your attention the World Congress on Local clusters - Local Networks of Enterprises in the World Economy. Some thirty experiences will be presented at the conference. I believe that Australia/NZ must be part of this, and I asked the OECD to keep a spot free for someone from the Deep South. Someone from Adelaide or Newcastle would be very well received given that they have a track record - noting that Cairns, via Tracey S-R, was represented at Glasgow. Please contact me if you think you could attend on ANZAC's behalf - the registration fee is only 800ff.

Program News

The guidelines for the Regional Solutions Program are due for release around 19-20 October. As advised earlier, this will be an extremely competitive program.

The new water funding announced last week - $700 million from the Commonwealth, to be matched by the States - comes as no surprise. While well short of the amounts expected by unholy alliance between the National Farmers Federation and the Australian Conservation Foundation, it's not a bad start. There are very good opportunities to apply this funding, especially in the Murray Darling Basin.

On a wider issue, anyone looking to access almost any government program is advised to note the significant changes that have occurred in program administration in the last 1-2 years.

The trigger for the new system appears to be the progressive tightening of program administration since the Ros Kelly white board business, the 'bureaucratic witchhunts' during Senator Bronwyn Bishop's reign as the Opposition Protector of the Faith, plus a few subsequent blips with the R&D grants and other programs.

What seems to have happened is that the bureaucrats have put rigorous systems in place. A few of the programs operate as follows:

• applications come into the responsible branch/section
• they are then farmed out to 2-3 assessors in other branches, who mark them against the criteria - very high/high/medium/low/very low.
• A 'coordinator' type then assembles all the information, writes a report, and then passes it up the line for approval- usually by two people.

As you can appreciate, this is a time-consuming process, even for small amounts of money. The system is hardly efficient, but you can hardly blame the bureaucrats who are averse to being hauled over the coals in Senate Estimates.

Another aspect of this is that Ministerial influence in program funding decisions is falling. Two reasons - 1. program delegations are increasingly lying with officials. 2. If the Minister wants to swing a favour, he needs to have a pretty good reason to override departmental advice. Accordingly, the 'wink, wink' stuff is less common.

CONSULTANTS NETWORK

Another of our fraternity, Dr. Howard Harris of the University of SA informs us of their success in winning $1.3 million funding from the Commonwealth for activities associated with a manufacturing management initiative called Smartlink. It's best if you liaise with Howard direct (howard.harris@unisearch.edu.au), but the aims are commendable - to lift the management skills of Australia's manufacturers.

OECD BOLOGNA

In the last few editions we have provided extracts from papers prepared for the OECD for its Ministerial meeting on small business/employment in June. The Australian Minister for Employment, Mr. Reith could not attend, which is unfortunate - but thanks to the old boy/girl network, I have been able to access the key papers. One of the papers sets out guidelines for governments on how they can facilitate clusters. Here's an extract re getting involved in clusters.

1. Initially adopt a low risk/early return focus. It is useful to generate small but evident gains through collaborative effort at the outset. As success develops, higher risk/longer term activities can be introduced;
2. Target real market failures. Initiatives that target specific market failures are most likely to bring benefits to the cluster. The process of identifying and understanding how, for example, under-provision of public goods and co-ordination failure constrain a particular cluster can point toward fruitful areas of public-private or private-private co-operation. An emphasis on targeting market failures provides discipline that reduces the chance that initiatives will become captured by political interests or that public initiatives will stray into areas best served by the market;
3. Use analysis to build urgency in the minds of participants. It is often advisable to present participants with research and analysis on where they stand against competitors from other locations as well as ideas as to how their positions might be improved. (This is very relevant to ANZAC's efforts to benchmark clusters across countries)
4. Seek to lock-in benefits of existing or embryonic clusters by:

• considering land-use planning in a way that will strengthen emerging clusters by facilitating access to accommodation for new and small firms. This facilitation can take different forms, but responds to the widely-reported difficulties faced by small firms, and particularly start-ups, in gaining access to industrial real estate. Essentially, the public role should seek to leverage and reduce risk for corporate property investments in industrial real estate;
• promoting the establishment of suppliers' associations and learning circles, and other forms of collaborative undertaking that are made possible by virtue of physical proximity among firms (such as mutual credit guarantee associations);
• allowing specialisation and local adaptation in university-industry linkages including experimentation in incentive structures that can encourage local linkages to industry;
• ensuring effective technical support and information services. Markets may under-supply some business services and certain types of information, especially to small firms. Policy should address market failures where these are seen to be significant and aim to induce private provision as early as possible;
• ensuring access to specialised infrastructure, communications and transport.

SYDNEY OLYMPICS

I was in Scotland when the closing ceremony was being held - but the goodwill towards Australia was really remarkable - from taxi drivers, barmen, conference delegates etc. We knock ourselves a bit, but we aren't too bad at organising and getting things done. There are some serious spin-offs that we can capture.

Speaking of the Olympics, I am advised that Business Vision 2010 in SA is inviting Tatiana Gregoria, the pole vault sensation of the Olympics, to join their Sports Cluster - tell me it's true, Hugh!

REGIONAL INFRASTRUCTURE

As part of the series on findings from the IIIS workshops, this month we feature the findings from the Townsville and Bendigo workshops.

"From Townsville to Bendigo the majority of comments related to aging and inadequate water, power, telecommunications and transport infrastructure. Many participants said that private investors could not attract a sufficient rate of return from large-scale projects, but were not interested in small projects (less than $20million) unless they were combined. There was a strong view among almost all participants that many projects of economic and community benefit will require Government funding or part-funding…..

The Australian Council for Infrastructure Development maintains that Government has a clear role in funding social and community benefits of infrastructure projects. It advocates a cooperative private/public sector approach to infrastructure development, such as that undertaken in the United Kingdom.

Townsville

In Townsville two transport case studies were discussed. The first involved linking two existing rail lines used to freight coal, and the second constructing an access corridor to the Townsville Port that by-passed residential areas. In both cases the group felt that there was insufficient economic justification to fund the projects. This may have been because all opportunities from making a return from these projects had not been considered, but was more likely that the return on investment as measured under current economic analysis was inadequate, despite the obvious community and social benefit. This raised the issue of how social and community benefits can be capitalised by a private investor and what role the Government has to play in jointly funding infrastructure with a social component

The inter-dependence of many projects was apparent. For example, the Chevron gas pipeline from Papua New Guinea was dependent on the level of demand for gas in Queensland coastal areas. Conversely the development of many infrastructure projects in these areas, including a power station at Townsville, is seen as being dependent on the gas from PNG. There appears to be a role for Government in establishing a national framework for infrastructure and working with industry to identify a catalyst for regional projects.

Bendigo

In Bendigo the amount of paperwork required for projects and the problems associated with the big city approach to assessing projects in regional areas was raised. Proponents were frustrated by the fact that to have any credibility with Government agencies their project required rubber stamping in the form of an expensive analysis by one of large city-based accounting firms.

The Australian Local Government Association addresses this issue by advocating that proponents should not waste time putting together business plans as investors will always want to do their own financial analysis as to a project's viability. The ALGA advocates that proponents spend time and money sourcing investors, assessing the benefits and obtaining the widespread support required - the official and political stages identified by Glenn Withers.(Care needs to be exercised here - potential investors need scoping studies, perhaps a basic business plan, and an indication that the issues have been thought through. They then use these as inputs to their own financial analysis. Silverhawk)

The Bendigo workshop also suggested that the fragmentation of the Government funding process, and the lack of documentation on how funded projects do or do not work, put regional proponents at a disadvantage. This issue came up during discussions on a case study of the proposed Bendigo Telco, when participants recommended that funding should be sought from the Government to develop a working model for investing in infrastructure that could then be applied to other projects.

If you have a contribution to make to The Regional Institute, please email Claire Braund or Roger Johnson on ideas@regional.org.au. (The Regional Institute Ph 02 94204001, Fax 02 94204002)

Chauvinist's corner

A husband and wife were having dinner at a very fine restaurant when this

absolutely stunning young woman comes over to their table, gives the husband a big open-mouthed kiss, says she'll see him later and walks away.

His wife glares at him and says, "Who the hell was that??"

"Oh," replies the husband, "she's my mistress."

"Well, that's the last straw," says the wife. "I've had enough, I want a divorce."

"I can understand that," replies her husband, "but remember, if we get a divorce it will mean no more shopping trips to Paris, no more wintering in Barbados, no more summers in Tuscany, no more BMWs or Lexuses in the garage and no more yacht club. But the decision is yours."

Just then, a mutual friend enters the restaurant with a gorgeous babe on his arm. "Who's that woman with Jim? " asks the wife.

"That's his mistress," says her husband.

"Ours is prettier," she replies.

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Drive safely.
Silverhawk.

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