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From backroads to Beijing in regional Australia

Six years ago Warrnambool City Council, in south western Victoria, received an unexpected inquiry from a Chinese city almost 100 times its size about building links. Some were concerned it might have been a case of mistaken identity.

But this month council officials and local businesses from aged-care providers to winemakers visited Changchun in China’s north-east as part of what is now a five-year-old relationship – one which may be a role model for regional centres across the country.

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Visit by ASEAN ambassadors to University of Southern Queensland. Photo: Salt Studios/DFAT.

“A lot of people still don’t realise what we are doing here,” Shaun Miller, development officer of what the two cities call their Economic Demonstration Project , says.

"It’s time to think about exporting beyond premium niches. Find efficiencies and compete more broadly in Asia.” - Kwok Fook Seng

“Warrnambool was just big enough to do everything it needed to do (with China). Now I don’t see why we can’t compete with anywhere in Australia.”

While the federal government has a longstanding big picture focus on building economic links to Asia, some regional governments across the country are now creating their own tailor-made connections in innovative and surprising ways.

Beyond the apostles

Warrnambool, on Victoria’s southwest coast, wants more Chinese tourists to venture further along the Great Ocean Road than the famous Twelve Apostles rock formation. But in Toowoomba, 2,000km to the north in Queensland, the ambition is to have more frequent direct fresh food transport links to the world’s booming new middle class.

In Western Australia’s Pilbara, the local regional council wants to ensure that it has its own links to close Asian neighbours that transcend the big company mining boom.

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Visit by ASEAN ambassadors to Wellcamp Airport. Photo: Salt Studios/DFAT.

In August Toowoomba, in Queensland’s Darling Downs agricultural heartland, hosted an unusual gathering of ambassadors from the 10 countries of South East Asia in regional Australia.

That was alongside a board meeting of the Australia ASEAN Council, the first such gathering of one of the Department of Foreign Affairs and Trade-backed bilateral councils and institutes outside a capital city.

Singapore’s High Commissioner Kwok Fook Seng, who has travelled widely in Australia, observed somewhat quizzically at the end of his visits to meat processors, inspections of new farm technology at the University of Southern Queensland and discussions about market opportunities: “This is the first time I have seen (Australian) federal, state and local government in the same space.”

“These are the conversations that need to be had in terms of increasing competitiveness.”

After hearing the new federal government mantra Australia doesn’t have the agricultural production capacity to be the once mooted breadbasket for all of Asia, Kwok offered some the unexpected advice: “It’s time to think about exporting beyond premium niches in more affordable market terms. Find efficiencies and compete more broadly in Asia.”

His colleague from Cambodia Ambassador Kuong Koy backed this sentiment explaining how he had visited shops at home before his posting to be surprised by the number of Australian food products.

“In ASEAN countries we trust the brand, we care where the food is made,” he said. “Australia is a very safe and reliable brand name.”

No fluctuations

This was music to the ears of local agriculture producers like meat company Australian Country Choice, egg producer Sunny Queen Farms and lettuce grower Story Fresh who have all embarked on exporting to Asia when some of Australia’s highest profile businesspeople like James Packer and Kerry Stokes appear to be pulling back.

Steve Laracy, of Larpro, which is planning a milk plant alongside Toowoomba’s new Wellcamp airport, says: “This is a really strong location to manufacture fresh milk not achievable anywhere in the world. We’ve got no seasonal fluctuations.”

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Visit by ASEAN ambassadors to Toowoomba. Photo: Salt Studios/DFAT.

But getting to this point in regions from Victoria’s holiday coast to the edges of the big Pilbara iron ore mines is a challenging task for often insular communities where small rural businesses have little tradition of cooperation to build scale and fund innovation, let alone for export in challenging places like China.

The slowing of the resources boom has increased attention on the prospects for increased agribusiness exports to Asia – especially higher value, more processed or branded food.

Food and farm exports are now valued at about $A50 billion or 15 per cent of total exports. But the regional communities focussing on links to Asia are also trying to build tourism and education links, as well as seek foreign investment.

This recent research from the Grattan Institute has underlined the need for regional communities to look for new sources of growth by arguing that income growth and employment rates are not obviously worse in regional areas compared with cities – it just depends on the sort of economic activity occurring.

“The popular idea that the economic divide between Australia’s cities and regions is getting bigger is a misconception,” the report argues. “Beneath the oft-told ‘tale of two Australias is a more-nuanced story.”

Common themes

The opportunities and challenges in these regions can be quite diverse. But there are also some common themes: the need for new infrastructure, the need for better mutual understanding of the need of different businesses in a community, and focussed training for mostly smaller enterprises with limited back office capacity.

Business training organisation Asialink Business has turned its attention to the needs of regional communities in the past year after an initial focus on the needs of large companies which was reflected in a recent study of the Asian business skills of directors and senior executives of Australia’s top 200 companies.

Chief executive Mukund Narayanamurti says his charter from the federal government was to increase the skills of the whole workforce and the training work in regional communities like Warrnambool and the Pilbara has involved both helping existing industries and identifying new opportunities.

“They all complement each other,” he says of programs at large companies and small rural family businesses.

In Warrnambool, Asialink China training specialist Nick Henderson worked with Miller to create the Warrnambool China Bureau which has become a flexible one-stop shop for local businesses to get feedback on whether they might have export potential in China; it runs information sessions on Changchun and other China opportunities; can provide on the ground assistance finding partners in Changchun; and runs trade missions like the one in September.

“We can just set up a mentoring conversation or we can do in depth market research,” Miller says of a service he would like to have been able to access when he first worked in China in 2008.

He says that while Changchun officials were initially attracted to a Warrnambool relationship because they were interested in the dairy industry, that industry is more able to manage relations with China by itself.

Instead the potentially more productive work from Warrnambool’s perspective has occurred in education links, aged care, wine exports and tourism promotion in China along with capacity building at home.

The Warrnambool city relationship is also now being extended to four surrounding rural councils with a total population of 110,000 and the Great Ocean Road tourism region.

From the sky Wellcamp Airport emerges from the sprawling Darling Downs beef country like a secret military facility on a remote frontier. 

But the privately built, first new airport in Australia for 50 years has become a sort of new frontline in the long quest to reap more value from rural commodities the local farmers have been producing for more than a century.

The Wagner family built the airport in a remarkable 19 months using construction techniques honed in their long established infrastructure business and have created a new supply chain to Asia with a weekly freight flight which goes from Sydney, Melbourne and then Toowoomba to Hong Kong.

Business people and government officials say the airport and the flight have transformed the way many local businesses function because they have a joint vested interest in ensuring the flight succeeds. Those who want more flights to give them regular access to Asia for products like fresh vegetables or milk now need to work with other producers to boost interest in exports.

When the ASEAN ambassadors are shown around the new freight building a 747 aircraft engine wrapped in plastic was in one corner and car in another.

But the row of big white individual temperature controlled cold storage rooms are the key to the new export supply chain for a region which markets itself as one of Australia’s biggest food producers.

Defiance

Wagner tells his visitors: “We are very proud that there had never been a 747 cargo flight in and out of Queensland until we built this airport. So we see ourselves as a major cargo hub going forward.”

His story of defying sceptics by building a new airport with his own money and staffing it with his own employees from the check-in desks to the baggage handling strikes a chord with officials from countries where airport construction is a key constraint to growth.

While Toowoomba mayor Paul Antonio also talks up how the airport has put the local rural producers within 12 hours of half the world’s population, he argues that its real value will only be achieved when it is linked to the proposed inland rail line between Brisbane and Melbourne and a new highway to Brisbane.

A roundtable discussion between the ASEAN ambassadors and local agribusiness representatives on how to expand trade with emerging Asian economies highlighted some key challenges:

  • Better cold storage links are needed to improve high value fresh food exports.
  • Farm businesses need to cooperate more to improve their economies of scale against global food multinationals.
  • Food value adding needs to be rethought so that it is done in different countries depending on skills and competitiveness.
  • Australia needs to work with regional countries on more harmonised biosecurity standards.

Like his Asian-focussed local government counterpart Shaun Miller on the other side of the country, Tony Friday joined the Pilbara Regional Council after a business career in Asian countries.

Now as the chief executive of what is an umbrella business development agency for four smaller councils including Port Hedland and Karratha, he has built links with China and Indonesia with the aim of creating a broader long-term connection in food production and tourism that provides jobs as the iron ore mines become more automated.

Friday concedes that trying to build new connections to Asia in a part of the country where iron ore miners have been doing that for decades might seem unusual, but says the community needs wide-ranging connections than the resources exports.

He says the council’s EastXWest Forums in Jakarta in 2015 and Shenzhen in 2016 have brought investment into the region and encouraged local beef and tourism businesses to better understand the opportunities in these countries.

Friday says Shenzhen was chosen to make the point about how a small fishing village became a booming part of the Chinese economy with a special economic zone to draw in foreign investment.

He argues the long running debate about declaring the entire north of Australia a low tax zone has undermined the possibility of trying the idea out in a place like the proposed new port at Port Hedland to make freight shipment for non-mining produce easier.

Nevertheless, he says, the Shenzhen Forum led to plans for a Chinese movie to be shot in the area, new tourism developments and a Port Hedland office tower development.

But the links to Indonesia may prove more substantial with the Singaporean businessman Bruce Cheung buying Pardoo Station in 2014 with plans to revive live cattle exports from Port Hedland using new breeding stock he is introducing to local beef farmers, as well as his own station.

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Bruce Cheung . Pic: WA Business News

While he welcomes the exports, Friday’s bigger ambition is to woo Indonesian investors into building a beef processing plant in the region, possibly staffed with some Indonesian workers under a more region friendly liberal immigration policy.

“I’ve had discussions with Indonesians on this and while they still like wet markets (at home) these things are changing rapidly,” he says.

He says the fact Cheung is making his new wagyu beef genetic stock available to other producers underlines an important point about how foreign investment is not just about new sources of cash. “Sometimes it’s more about the knowledge and the way its shakes things up and forces change,” Friday says.

Greg Earl writes about economic links between Australia and Asia. He is an Australia ASEAN Council board member and the former Asia Pacific editor of The Australian Financial Review. He co-authored a chapter on food exports to Asia in this report by the Committee for Economic Development of Australia.

The views and opinions expressed in this communication are those of the author and may not necessarily state or reflect those of ANZ.

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