Evidence of Weakness in SEQ2001's Economic Vision

No criteria were defined for targeting 'growth' industries for the region:

• What are the characteristics of desirable industries? It appears that growth potential was given priority, but that productivity was not. Attempts to analyse 'strategic' industries elsewhere tend to regard both criteria as important (eg Pappas Carter Evans & Koop, Identifying Priority Sectors, DITR, Victoria, Aug 1989). Further, if Australia as a whole is to maintain the fast economic growth (>4% pa) which is required to reduce unemployment, rapid improvement in productivity will be required to prevent balance of payments problems leading to another 'recession we have to have' (An oversimplified explanation is that imports increase in line with GDP growth, and create a balance of payments deficit unless exports increase as fast or faster. Competitiveness requires increasing productivity if wage and exchange rates are not to be sacrificed. Servicing Australia's foreign debts will increase this requirement when interest rates recover);
• a major focus in both the Industry Location and Tourism papers was on industries which could 'create jobs' without visible concern for whether they would also reverse the steady decline in community affluence. Though wealth creation was identified as a goal, one can not serious expect committees or government or tertiary education bodies to take the lead role (as was suggested). Leading roles must be taken by those who have the detailed market knowledge to detect opportunities early; and can manage commercial risk;
• the Industry Location and Tourism position paper makes use of an input / output analysis to show the employment impact of the growth of various targeted industries, and correlate this with population projections. But this is merely a forecast of what will happen if the economy remains undeveloped, as economic development would change the parameters in any such model. Furthermore, the industries which have good growth and job creating potential depend greatly on how the economy is developed;
• the Industry Location and Tourism position paper discussed the difference between wealth creating industries (assumed to be agricultural and mineral production, manufacturing, tradeable services and tourism) and wealth redistributing industries. In fact all industries are wealth creators, to an extent which depends on their productivity. The basic industries of a region (ie those in which the region competes successfully with other regions) have often been seen those in which it is relatively the most productive. As indicated in Section 5.2, SE Queensland's problem is that its low level of economic development means that its comparative advantages are in relatively low productivity activities;

Some targeted growth sectors appear to require re-consideration:

• education and training (whilst essential) would appear likely to be low productivity sectors in themselves (ie such costs are usually supported by Government subsidy);
• there is a deluge of data about tourism and its growth prospects, though not about factors which enable its strategic value to be assessed. There is no strategic value in an industry with large (and growing) inputs and outputs, unless substantial value added is retained by the community. To date there has been an uncritical emphasis on tourism's growth rates, and foreign exchange earnings without consideration of: the debt service costs on borrowings to earn foreign exchange; or whether the resources could have been used more effectively employed elsewhere if Queensland had really tried to develop its economy. Also (a) mainstream economists do not regard tourism as a basis for economic prosperity (eg Kolson T., 'Conversation with an Ant Economist - Our Trading Partners have it Made', Business Queensland 28/9/92). (b) Analysis of tourist industries in less developed countries show they have less favourable than predicted impacts in terms of: decentralisation; indigenous employment; and income distribution. Critical review of tourism is far more important in a developed economy where there are alternative opportunities (Aislabie etal 'Trends in Tourism Research - An overview' in Tisdell et al, The Economics of Tourism University of Newcastle, 1988, pp1-14). Furthermore tourism appears to suffer various adverse social impacts. It is criticised as intrusive; noisy; often corrupt and authoritarian; and linked with prostitution (Robinson P. 'Behind the Neon Glow of Tourism', Sun Herald, 21/2/93; and a source of health problems (Kennedy F., 'Tourists make Cairns Sex Bug Capital', W.Aust 14-15/8/93). The biggest single event drawcard for overseas dollars is Sydney's Gay and Lesbian Mardi Gras (Robinson P., `Mardi Gras: Minor Victory', Sun Herald, 6/3/94). Tourism is a suspected target for investment of 'laundered' money by organised crime (Robinson P. 'Former NCA Chief warns that Japan's Gangs also Invest', Age, 23/7/88 - quoting Sir Max Bingham). Very large sums are available globally for investment (eg $85bn pa from drugs profits in USA and Europe - Anon, 'Flushing Funny Money into the Open', Economist, May 5, 1990, p91-92). Hawaii has been said to have become dependent on gangster investment, and to be subject to their dominant political influence;
• transport and distribution (whilst essential) may also not be desirable as key growth sectors in themselves because of the case presented by Jacobs (op cit) that cities do not prosper if they mainly act as handling centres for a region's resources. Such functions might best support new highly productive industries, which would provide something economically valuable to transport and distribute. The proposal that Brisbane serve as a trade 'Gateway' for East Australia needs to be considered from this viewpoint (eg by first building high value trade flows to give purpose and direction to the infrastructure rather than just providing facilities for the benefit of those who now control Australia's trade).

Methods proposed to foster economic development lack credibility:

• there was an emphasis on 'recruitment' of industry (eg keys to wealth creation were seen as having vision' and providing information, or as assistance to potential investors, and for business to be welcome). SE Queensland was said to be attractive because of: access to Asia / Pacific markets; transport infrastructure; industrial land; and low business costs. Attachment F indicates that industrial 'recruitment' may no longer be international 'best practice'. Likewise proposals for 'marketing' existing attractions is inadequate, because the economic environment is not yet capable of supporting highly productive modern industries. In addition, recruitment of firms only affects the economy at the margin, whist much greater gains are available from lifting the support available to the 'mainstream' of firms;
• Australia has been sliding backwards in international competitiveness as assessed by organisations such as the International Institute for Management and Development, and the World Economic Forum (eg Dusevic T., 'Australia Slipping Further Behind', Australian Financial Review, 20/6/91). Whilst Australia has good infrastructure and reasonable human resources, it is unattractive in terms of factors such as: international orientation; capability of financial system; management capabilities; and science and technology. These latter issues were not considered by the Industrial Location and Tourism papers;
• 'technology' and value added manufacturing are said to be sectors for attention, but no indication is given of the requirement for their success, or how such conditions could be created. Suggested steps such as clustering to promote productivity and creativity may help, but would not be enough. The attractiveness of the region or of industrial sites from an environmental viewpoint is not sufficient either. As noted previously, technology parks succeed where the commercial and technological climate is right. They do not create that climate;
• provision of industrial sites receives emphasis as a means to promote industrial location, despite the past failure of such emphasis. In the 1960s, Queensland Governments first adopted industrial development as a goal, and a study of the major obstacles revealed a key market failure in providing land. The then Department of Industrial Development chose to provide industrial land directly rather than to stimulate market mechanisms to do so. As a result (a) an industrial estate program was undertaken for decades at great cost (b) the process was affected by political pressures and provided land in the most unlikely and unnecessary places (c) no one really took any notice when academic studies suggested after 15 years that the provision of industrial land did not seem to affect the decision by firms to locate in a region, but merely affected where in the region they would locate (Berryman J. 'Survey of Business on Queensland's Industrial Estates', Planner, June 1981) (d) whatever was the second priority for supporting industrial development in the 1960s never received much attention, because resources were concentrated on industrial land (ie essentially Queensland did not develop at all through these efforts). Though the absence of suitable sites is a real problem, this should best be addressed by a once off program to 'fix' the non governmental machinery which is supposed to provide such sites, rather than by ongoing emphasis on specific site requirements;
• cultural development is seen as a 'soft' issue which has no apparent purpose other than recognition of cultural diversity. However, culture refers to the ways things are done, and to the intellectual basis (ie what people believe) which underpins this. Future prosperity and security require real cultural development towards (say): real Asia literacy (which is much more than just languages and customs); productivity and savings rather than leisure and consumption; and grass roots environmental sensitivity.

The location of economic functions is envisaged to be constructively manipulated by administrators:

• Creating Our Future envisaged that someone (Government?) is able to create jobs in desired growth centres without reference to the development of productive capabilities or the existence of markets. Local / community development can generate enterprises and employment, yet practitioners usually lack the knowledge and mandate to deal with other than marginal and low productivity ventures;
• regional and subregional growth strategies were suggested to be framed by government agencies, yet they are not in touch with the main driving forces of an economy (ie market demand);
• advisory committees are supposed to assess regionally significant industries. Yet competition is the only way in which such priorities can realistically and safely be set (because of the lack of information to 'pick winners', and the risk of capture by interest groups).