National

HOW DO WE FIND THE RIGHT BALANCE IN DEALING WITH THE VEXED TOPIC OF LOOKING AFTER LOCAL BUSINESS?  

In many ways it is a mystery as to why looking after local businesses is such a difficult concept to grapple with.   Surely it is in the best interests of communities to make sure that those investing locally and employing local people are afforded every opportunity to win work that has local origins.

We hear it so often said that it is not a level playing field anymore when it comes to procurement.   So what is a level playing field when it comes to procurement?  Do we need to pay more to protect the commitment of those investing and employing locally?  More pertinently, if the costs are really greater, are we willing to pay more to protect that commitment?

The focus on supporting local industry and business has been sharpened once more in recent weeks with the massive turmoil facing Arrium and its Whyalla steel operations.  The Arrium situation stoked the hot embers of debate remaining from the automotive industry’s gradual but substantial withdrawal from manufacturing activities in Australia.   At the same time, we are on the doorstep of a new deal with the French to construct our new submarine fleet.

We all remember the global village catch-cry that in some ways ushered in the process of winding back tariff protections to bring cheaper goods and services to consumers.   This was accompanied by new competition policy arrangements that signalled an end to exclusive market access, along with the rise of offsetting Free Trade Agreements to open up markets through reciprocal bi-lateral arrangements between countries.

In a country as vast as Australia, with multiple economic drivers located across the land and not always in sync, we often find the caravans hitched up when work dries up in one location and it’s on to the next venue which often means taking on the locals.   And there’s nothing like the desperation to remain afloat to bring out the pencil sharpeners.   This is where it all gets very willing and often very messy on many fronts.   Just how do you value commitment or, more correctly, how do you price in a lack of commitment?

Right across the land we are seeing governments in every jurisdiction trying to manage their procurement in a way whereby local businesses are offered opportunities that come from being locals.   Those opportunities might indeed involve a range of benchmarks for the ‘out-of-towners’ to meet, at an additional cost, hence flattening out the playing field.  Views are that those benchmarks are either being too easily manipulated or just there for perception and completely ignored.

There is a myriad of views about the benefits or otherwise of weighting procurement to favour a particular outcome.   We’ve heard all the arguments that surface frequently when it comes to cherry-picking industries for support or otherwise.   At one end of the spectrum, the most strident views of those totally committed to free markets is that protectionism of industry is akin to giving an economy a fatal injection. That could equally be the view of those who support subsidising local markets.

The automotive industry in Australia has often been the target of criticism.   The criticism is of an industry in its death throes being protected at the expense of investing in new and emerging sectors that would drive employment, be nowhere near as costly to support and ultimately provide greater returns for the Nation.

It could certainly be argued that there is no comparison between what is currently going on in the steel industry - and before that the automotive industry - and what happens in the construction industry.  One is competing on a world stage and one is about internal competitive tension.   For the very large projects in construction it is a world stage. However – granted -  it is mostly about internal competition.  The comparison does stand in terms of the impacts on local and regional communities.

There is no shortage of emotion in the debate around protecting and nurturing local business.   It is full of complexity - is it about the consumer the business or the future?   Many businesses in all types of industries are set up initially to meet a local need.   Some want to expand, and take on a different outlook as they grow.   Other businesses are more than happy to - and even committed to - just remaining small and continuing to service the local and regional client base.  

The difficulty for the latter is when the views of the local or regional client base - often government - begins to shift and the horizons become larger.   A lot of the original partnerships and loyalties start to fracture and a lot of tension begins to surface.  The stark reality is that in a rapidly changing world, the margins for maintaining the status quo are becoming thinner and thinner.

So how do we find the right balance in dealing with the vexed topic of looking after local business?   Maybe there isn’t a balance: it’s a battle that has been run for a long time and it is a battle that will continue long into the future.   Notwithstanding, it is extremely difficult not to believe that there are many reasons to ensure that looking after local business is good business.

John Miller