Chapter 4.3
Suggested government incentives to support value-adding activities
4.61 Various incentives that could be provided by governments,
Commonwealth, State or local, to support value-adding activities were suggested during the
inquiry, including:
- direct financial grants or loans;
- moderation or removal of taxes;
- transport subsidisations; [79]
- amendment of zoning regulations;
- subsidisation of power costs;
- the construction of infrastructure such as roads and rail links to
serve value-adding activities; [80]and
- the provision of incentives for research and development activities.
[81]
4.62 The requirement for governments to involve the public and
members of industry in any government strategy to promote value-adding activities was
noted during the inquiry. Mrs Kay Dal Bon, Assistant Secretary with the then Environment
Standards Branch of the Environment Protection Agency, told the inquiry in October 1995:
It is not sufficient for governments simply to develop strategies or
develop standards or regulatory instruments. We need to bring the community
along with us. We need to involve the community in those decision making
processes. [82]
Although Mrs Dal Bon's comments were directed specifically at water
management strategies her views are applicable to virtually all strategies developed to
assist value-adding in agricultural production.
Government involvement in particular value-adding industries
4.63 In the following section of this chapter a number of
agricultural based industries are examined in reference to their association with
governments and their views on what the role of governments should be in relation to their
particular industry. The industries concerned being:
- wool;
- cotton;
- meat;
- tobacco; and
- horticultural.
Wool industry
4.64 Since 1986 the Commonwealth Government has implemented a number
of policies and programs to support wool processing in Australia. The
objective of these initiatives have been to provide incentives for companies
to “restructure, adopt world competitive manufacturing practices
and increase export orientation.” [83] These initiatives and programs, included:
- the 1986 Textile Clothing and Footwear Policy (TCF) plan;
- the Textile Clothing and Footwear Development Authority (TCFDA)
established in May 1988 to oversee the implementation of the TCF plan;
- the Industries Development Strategy (IDS);
- the Incentives for International Competitiveness (IIC); and
- the Raw Materials Processing (RMP) program. [84]
4.65 The Commonwealth Government's “One Nation” statement
in March 1992 set out a package of programs designed to accelerate the rate of change
resulting from the TCF plan. Among the initiatives were:
- the Further Wool Processing Program (FWP);
- the Major Projects Facilitation Program;
- the Development Allowance Program, and
- the accelerated depreciation of plant and equipment. [85]
4.66 According to the International Wool Secretariat, FWP “has been
integral to the recent investments which will effectively see this industry
sector double in size.” [86]
4.67 In April 1995 the following additional Commonwealth programs
were seen as being supportive of wool's early stage processing (ESP) sector:
- the Innovative Agricultural Marketing Program (IAMP);
- the International Trade Enhancement Scheme (ITES);
- the Export Market Development Grant Scheme (EMDG);
- the Investment Promotion Program (IPP);
- the Infrastructure Support Program; and
- the Capitalisation Grants Program. [87]
4.68 In evidence to the inquiry Merino Gold Limited of East Brunswick,
Victoria commented that if government wanted to help businesses it should
provide advice on how they should manage themselves. This advice had to
be provided by high quality consultants. [88]
The Chairman of Merino Gold, Mr Philip Warren, stated:
We have business plans coming out of our ears. They are a dime a dozen.
... What has to be put in place is really the people to manage ... That
is where the problem is. [89]
Cotton industry
4.69 Unlike most other agricultural industries the Australian cotton
industry views possible government involvement in its operations in a largely negative
light.
4.70 The cotton industry is the only Australian agricultural industry
that has no government involvement in the marketing of its crop. Private
merchants compete to acquire cotton from growers. These merchants are
free to sell their cotton domestically or export it. According to Mr Stephen
Wyatt of the Australian Financial Review Australia's cotton industry is
“a genuinely free market.” [90]Mr Wyatt saw government regulation in other
agricultural sectors as being detrimental to these sectors :
The rest of Australian agriculture has regulations of varying degrees.
These regulations distort the “basis”, disallow the availability
of a range of marketing options [91]
4.71 Ms Mary Scott Gilbert, Manager of Marketing and Communications
with the Colly Farms Cotton group of companies stated in February 1996:
Despite the cotton industry's lack of government subsidy, it has not
only remained financially profitable but has thrived in a free market.
[92]
4.72 It has been argued that the rapid expansion of cotton production
in Australia is due “in no small way to our deregulated market.”
[93]
4.73 However, the cotton industry has not totally escaped from
government regulations and controls. The Australian Cotton Foundation claimed that:
Unwieldy Federal, State and Local regulations and legislation ... are
a time-consuming and confusing nightmare to many would-be investors
... In the past three years the cotton industry has seen a number of
would-be investors in new Australian textile mills choke on layer-upon-layer
of red tape and subsequently abandon plans for local investment. [94]
Meat industry
4.74 The AMLC considered that governments should not intervene directly
in meat markets to try to encourage value-adding but “rather should
facilitate the process by removing any impediments to value-adding and
by correcting market failures that are inhibiting the development of value-adding
activities.” [95] However, the Corporation argued that in
the area of tariffs and quotas there was a need for direct government
involvement in cooperation with the meat industry and its agencies so
that overseas barriers to Australian meat exports could be reduced. [96]
4.75 The Australian Meat and Livestock Corporation considered that the
Commonwealth Government had an important role to play in Australia's macro-economic
environment. Government activities impinging on this environment included
the development and implementation of policies which can affect inflation,
interest rates, taxation levels and industrial relations. These areas
were seen as having significant impacts on value- adding activities in
the meat industry. [97]
Tobacco industry
4.76 On 13 December 1994, the Federal Government announced a package
of measures aimed at assisting the Australian tobacco growing industry to become more
internationally competitive. The package, in part, addressed the social and economic
situation resulting from the removal of the Tobacco Industry Stabilisation Plan (TISP) and
the Local Leaf Content Scheme (LLCS). Among the main elements of the package were:
- the removal of customs duties from 1 January 1995 on all imports of
tobacco leaf, manufactured tobacco and tobacco products;
- Australian cigarette manufacturers to make a $10.8 million
contribution to the tobacco growing industry to ensure continuity of Australian supply and
assist in the achievement of the highest quality tobacco at the lowest possible costs.;
- the Governments of the tobacco growing States of Queensland, Victoria
and New South Wales to make payments to assist the restructuring of the tobacco growing
industry, approximately matching contributions made by the tobacco manufacturers; and
- the Commonwealth Government and the Governments of the three tobacco
growing States not to impose any new or additional taxes specifically
to finance adjustment in tobacco growing areas. [98]
4.77 In addition to the package the Commonwealth Government established
a new Tobacco Research and Development Corporation which commenced operation
on 1 July 1995. Philip Morris Limited commented that the establishment
of the Corporation was a recognition of the key role that research plays
in Australia attempting to achieve a more “internationally competitive
growing industry by improving leaf quality.” [99]
4.78 Despite the assistance governments have provided to the tobacco
industry Mr John Scott, Operations Director of Philip Morris Limited told the Committee
that:
Our industry tends really to look after itself and not rely on governments.
We have seen it as our responsibility to get on and produce the maximum
value from the raw agricultural product we start with. [100]
4.79 In relation to the issue of whether the Commonwealth Government
should be concerned with the export of tobacco as a health and moral issue Philip Morris
Limited made it clear that this was one area that it did not believe the Government should
be involved in. The company's submission stated that:
We reject the premise that Australian Government policy should be directed
to discouraging exports and we urge the Government to adopt a position
which does not inhibit the potential for Australian cigarettes to participate
in export opportunities as they emerge. [101]
Horticultural industry
Dried fruits industry
4.80 In its submission to the inquiry the Australian Dried Fruits Board
(ADFB) stressed the importance of government involvement in quality control
in the export of dried vine fruit (DVF). According to the Board “many
overseas buyers place an importance on government control and inspection.”
[102]
4.81 In 1995 the Commonwealth Government provided the following
services to the DFV industry and consumers:
- registration of packing houses to ensure DVF is hygienically
processed and packed;
- fixing grade standards for DVF;
- inspecting DVF during processing and packaging to ensure quality
standards are met; and
- providing assistance in the development and maintenance of export
markets. [103]
4.82 During his evidence to the inquiry Mr Knights of the Australian
Dried Fruits Board expressed appreciation for the assistance provided to the industry by
the Commonwealth Government. Mr Knights commented:
We are getting government assistance and we are very thankful for that.
It is an absolute plus. [104]
Footnotes
[79] Submission, Department of the
Environment, Sport and Territories, p. 2; for information on the importance of an economic
and efficient transport industry to the horticultural industry see John Pendrigh, Wider
Horticultural Policy Issues, 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. 163.
[80] Submission, Department of the
Environment, Sport and Territories, p. 2.
[81] Peter McKerrow, Value-Adding to
Agriculture, Agricultural Science, Vol. 5, No. 2, March 1992, pp. 32-33.
[82] Evidence, DEST, p. 1041.
[83] Wool: Structuring for Global
Realities, Report of the Wool Industry Review Committee, Canberra, August 1993, p. 65
[84] Evidence, IWS, pp.
151-152.
[85] Evidence, IWS, pp.
152-154; see also Wool: Structuring for Global Realities, Report of the Wool
Industry Review Committee, Canberra, August 1993, p. 71.
[86] Evidence, IWS, p. 168
[87] Evidence, IWS, p. 155.
[88] Evidence, Merino Gold Limited,
p. 278.
[89] Evidence, Merino Gold Limited,
p. 279. For information on initiatives put in place by the West Australian Government to
attract investment to that State's wool processing industry see Evidence, West
Australian Government, pp. 688-689, 700-701.
[90] Stephen Wyatt, Agriculture in an
Unregulated Market-the Australian Cotton Experience, 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. 139.
[91] Stephen Wyatt, Agriculture in an
Unregulated Market-the Australian Cotton Experience, 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. 139.
[92] Mary Scott, Future Export Markets
for Australian Cotton, 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.
353.
[93] Bob Dall' Alba, Positioning
Australian Cotton in the World Market, 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. 142.
[94] Evidence, Australian Cotton
Foundation Ltd., p. 437.
[95] Evidence, AMLC, p. 308.
[96] Evidence, AMLC, p. 312.
[97] Evidence, AMLC, p. 315.
[98] Evidence, Philip Morris Ltd,
pp. 642-643.
[99] Evidence, Philip Morris Ltd,
p. 643.
[100] Evidence, Philip Morris Ltd,
p. 677.
[101] Evidence, Philip Morris Ltd,
p. 646.
[102] Evidence, Australian Dried
Fruits Board, p. 223.
[103] Evidence, Australian Dried
Fruits Board, p. 220.
[104] Evidence, Australian Dried
Fruits Board, p. 241.