CHAPTER 3
GOVERNMENT INVOLVEMENT IN VALUE-ADDING WITH PARTICULAR
REFERENCE TO THE ROLE OF THE COMMONWEALTH GOVERNMENT
Introduction to Part 2
3.1 The objective of Part 2 of this report is to examine the role
played by Australian governments in supporting value-adding. Various programs, implemented
by both the Commonwealth and State Governments that assisted value-adding activities in
the past, are described in Chapters 3 and 4 along with an assessment of how successful
some of these programs had been in achieving their objectives.Governments play a
significant role in promoting regional development in Australia. Due to this relationship,
Chapter 5, which deals with value-adding in regional areas, has been included in Part 2 of
the report. In an effort to ascertain what role governments can or should play in
supporting value-adding activities, related to agricultural production, a wide range of
issues were examined in Chapters 3 and 4 under the following major heading:
- Government involvement in supporting value-adding activities;
- Role of the Commonwealth Government in supporting value-adding
activities; and
- Suggested strategies and initiatives to be undertaken by the
Commonwealth Government to support value-adding activities.
Government involvement in supporting value-adding activities
3.5 It has been argued that government support for agriculture is:
Now low and is similar on average to levels for Australian manufacturing.
Australian agricultural support is also low relative to levels of agricultural
support in most industrialised countries. [1]
3.6 However, it has also been argued that governments play
significant roles in the establishment and success of value-adding in relation to
agricultural production. According to one observer:
Governments at the national level generally control the economic environment
for new business, the stability of the country, incentives for investment,
development finance, education and training and export market access
- factors which influence the attractiveness of the country for a new
venture. [2]
3.7 According to the Queensland Pork Producers' State Council “Local,
State and Federal Governments hold the key to the whole of question of
value-adding” in Australia. [3]
3.8 It has been alleged that it would be very difficult, if not
impossible, to initiate a new business in Australia or overseas without some assistance
from government. Mr Peter Shearer has stated:
Without some measure of support from government by way of taxation
measures, incentives or creation of a positive investment environment
few if any new ventures would be possible. [4]
3.9 Despite a general recognition of the significant roles that can be
played by all levels of government in Australia in supporting value-adding
activities in agricultural production several submissions to the inquiry
referred to the limited nature of the direct support that governments
should and can provide. The Victorian Government told the Committee that
government in relation to value-adding should be concerned basically with
encouraging improved productivity through the creation of an environment
that facilitates competitiveness and the development of productive and
profitable industries. [5] The Northern
Territory Government saw only a limited role for government in the area
of value-adding. According to the Northern Territory Government any value-adding
activity must be profitable and competitive in itself and “not dependent
upon government assistance” except in the supply of services that
assist in the development of value adding initiatives. [6]
3.10 In response to the suggestion that governments provide
financial assistance to value-adding companies to get started Mr Robert Calder of the
Commonwealth Department of Primary Industries and Energy (DPIE) advised:
I do not think there is a simple answer to say that there is a role
for government or other people to provide a kick-start in all industries.
I think it depends on the particular structure of the industry, where
its markets are and the significance of the industry to the national
economy. [7]
3.11 A background paper prepared for the South Australian
Development Council in May 1995 stated:
Governments have no advantage in processing, marketing, forming strategic
commercial alliances or servicing numerous niche markets, These functions
are best left to the private sector. [8]
Despite this view, the paper went on to stress that “Governments
do, however, have an important role to play in research and development
and in facilitating the institutional structures by which markets work.”
[9]
3.12 The Commonwealth Department of Primary Industries and Energy warned
that governments do not have an “exclusive role in the creation of
a suitable market environment” for value-adding activities. The Department
stated, “industry bodies and statutory authorities also play a role
through coordinating industry strategies ... the success of these strategies
depends on their acceptance and execution by individual firms”. [10]
3.13 The dairy industry saw itself benefiting significantly from a decline
in government involvement in its activities. The Australian Dairy Industry
Council told the inquiry that the dairy industry was becoming a national
industry and that it was in the interests of the industry and State Governments
themselves for such governments “to get out of the business of setting
prices, post-farmgate, for dairy products.” [11]
These reforms were seen as assisting in the development of a national
dairy industry. The Council suggested in evidence that the ending of state
regulation of the dairy industry was a “bit of a key” to the
Australian industry becoming internationally competitive. [12]
3.14 The Murray Goulburn Cooperative Company Limited advised the inquiry
that as a result of “less government interference” in the dairy
industry since the mid-1980's “dairy companies have had to become
more commercial and stand on their own two feet”. The Cooperative
went on to state, “less government interference has certainly forced
the industry to become more commercial and basically to operate in the
real world by themselves.” [13]
3.15 Mr Patrick Curran, Marketing Manager with United Milk Tasmania
(UMT) told the Committee:
It has been my experience that the deregulation (of the dairy industry)
has been nothing but an assistance. With our people who have the responsibility
in the final part of actually selling the product, it has given them
the freedom to use their skills and initiative. I think it can only
benefit the industry. [14]
3.16 According to Mr Patrick Curran the most important role that the
Commonwealth Government can play in supporting the Australian dairy industry is to:
Give us access to markets, then we can get in there and do something.
If we have not got access to the market, it does not matter how good
you are, you cannot do anything. [15]
Conclusions
3.17 The Committee is of the view that it is unlikely that any
value-adding could be successfully carried out in Australia, and the export of value-added
products take place even with some Government involvement, unless it can stand on its own
feet in the medium and long term. On occasions industry groups probably overestimate the
role that governments can play in smoothing the way for their participation in
value-adding, particularly gaining access to overseas markets. The Committee accepts that
governments should only play a role in creating an environment in which value-adding is
encouraged. However, there may be situations where governments can be more active in
encouraging value-adding enterprises in Australia and promoting Australia's export of
value-added products. Occasions for active involvement in supporting value-adding
activities are discussed later in this chapter. Value- adding is in the national interest
and it is therefore important for all levels of government to encourage and support such
activities.
3.18 The dairy industry provides an example of an industry that has
benefited from a reduction in government regulation. The importance of government support
to value-adding activities varies from one industry group to another.
Footnotes
[1] I Roberts, The Future for Australian
Agriculture: Important Issue to 2010, Outlook 96, Vol. 2, Agriculture: collection of
papers delivered at the Outlook 96 Conference held in Canberra 6-8 February 1996,
organised by ABARE, p. 61.
[2] Peter Shearer, A Commercial
Perspective on New Industry Development, Outlook 94, Vol. 3, Agriculture: collection
of papers delivered at the Outlook 94 Conference held in Canberra 1-3 February 1994,
organised by ABARE, p. 63.
[3] Submission, Queensland Pork
Producers' State Council, p. 4.
[4] Peter Shearer, A Commercial
Perspective on New Industry Development, Outlook 94, Vol. 3, Agriculture: collection
of papers delivered at the Outlook 94 Conference held in Canberra 1-3 February 1994,
organised by ABARE, p. 64.
[5] Evidence, Victorian Government,
p. 29.
[6] Submission, Northern Territory
Government, p. 1.
[7] Evidence, DPIE, p. 923.
[8] South Australian Development Council, Value-Added
Food Processing in South Australia, Draft 24 May 1995, p. 5.
[9] South Australian Development Council, Value-Added
Food Processing in South Australia, Draft 24 May 1995, p. 5.
[10] Evidence, DPIE, p. 885.
[11] Evidence, Australian Dairy
Industry Council, p. 121.
[12] Evidence, Australian Dairy
Industry Council, p. 124
[13] Evidence, Murray Goulburn
Cooperative Company Limited, p. 249.
[14] Evidence, UMT, p. 860.
[15] Evidence, UMT, p. 856.