The Future of Victorian Manufacturing
Nicola Watkinson National Manager, Investment Austrade July 2009
Presentation
• Why do we try and attract Foreign Direct Investment • Recent trends in investment into advanced manufacturing • Where are we likely to attract investment in advanced manufacturing • Investment in the future of Victorian manufacturing – ideas for discussion
Role of Foreign Direct Investment
Austrade works around the world with international investors to bring in new productive FDI into Australia. Our focus is on • filling gaps in the supply chain to deliver more goods and services locally to Australian businesses and consumers • seeding new industries which will provide future employment, growth and exports • attracting in major companies which offer supply opportunities to Australian SMEs and the chance to move into global supply chains to tackle 3rd markets • providing investment capital to help Australia's technology companies to accelerate commercialisation and take their products to the world market.
The US and the UK are the key sources of Australia FDI
Top five country sources FDI stock (A$ Millions)
Source: ABS $120,000 $100,000 $80,000 2006 $60,000 $40,000 $20,000 $US UK Japan Netherlands Switzerland 2007 2008
Year 2006 2007 2008 Total ($m) $330,000 $398,000 $393,000
Source: Austrade, based on confidential ABS data
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Note: In 2008, the FDI stock from China was around $3,000m - 0.8%
Foreign owned firms make a significant contribution to Australia’s economy
% foreign owned firms in Australia account for
60 50 40
50
46 25 14
42
%
30 20 10 0
23
Output or value added
Employment
Source: Access Economics, 2004
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Private capital and expenditure
R&D spending
Value of exported goods
Services exported
Rationale for FDI from investor perspective
Resource / asset seeking Market seeking •FDI is driven by resource endowment of the host country •Eg. seeking raw materials or natural resources •FDI is designed to replace imports to the host country with local production •Aimed at either penetrating new markets or maintaining existing ones. •Can be characterized by mergers & acquisitions
Efficiency seeking
•Hope it will increase their efficiency by exploiting the benefits of economies of scale and scope, and also those of common ownership •Often comes after either resource or market seeking investments have been realised, with the expectation that it further increases the profitability of the firm
Innovation seeking
•Seeking best in class around the world for part of its operations •Tapping into the skills and experience of the host country to grow business.
Recent Trends in FDI in Advanced Manufacturing
• Best in class around the world – global manufacturing sites, consolidation
• Innovation - Access to leading edge research wherever it may be found
• Responsiveness – just in time, reduced need to hold stock, short production runs • Customisation – skills and speed to adapt to consumer trends and adapt to different markets esp large Asian markets • Free Trade Agreements - Production in locations which offer improved access to key markets • Sustainability – certainty of long term regulatory regime around carbon emissions, power pricing
Where Can We Attract Investment Interest (1)
Investment into advanced manufacturing capability and technology to back integrate into manufacturing operations in home country esp in developing economies eg China, India
Example • Geely Automobile acquisition of Drive Train Systems • Access to automatic front and rear wheel drive transmission systems • put DSI’s products and technology into China’s auto industry, Chinese auto companies to provide worldclass automatic transmission products • Safeguarded 160 jobs in Albury, 30 R&D jobs in Springvale
Where Can We Attract Investment Interest (2)
Where we have niche capabilities, creativity and flexibility that give us a competitive edge esp for developed economies eg Germany, USA, Italy Example • Quickstep composite technology • Manufacturing site in WA • Demonstration Centres at National Composite Centre Ohio USA and Manchester UK • Working with EADS in Munich to commercialise technology including prototypes for Airbus. Sharing of infrastructure and research agreement
Where We Can Attract Investment Interest (3)
• Research collaborations eg biomedical polymers with Ciba • Engineering and design services - ability to think ‘outside the square’ eg Ericsson’s Axis of Knowledge, - ‘follow the sun’ eg Bosch, - multidisciplinary approach eg Marand • Testing - desert conditions, humidity, road conditions eg Iveco, Toyota - unmanned aircraft eg Boeing
Attracting Investment to Ensure the Future of Victorian Manufacturing – Ideas for Discussion
Identify Investment Partners for Distressed Assets -where it leads to saving jobs, maintaining the supply chain, access to new markets – a valid short term goal? Identify our Value Proposition - map our unique competitive advantages to identify where to attract new investment eg space, marine, remote solutions – is this picking winners or focusing to deliver the best results? Enhance Clusters – partner rather than compete to gain critical mass to penetrate new markets. Important marketing tool to profile Australian technologies and capabilities and attract international investment. Are there genuine clusters we can foster & promote?
Plan for the Future – look at future trends in manufacturing, where is the growth going to occur, where does this match our strengths, how can we position ourselves to attract investment into areas which will create tomorrow’s jobs. Who is best placed to do this work and how do we take it to the market?