CHAPTER 5
VALUE-ADDING AND REGIONAL AREAS
Introduction
5.1 Value-adding in agricultural production is viewed as a
significant stimulus to economic development in regional areas. Due to the close
association between regional areas and agricultural production value-adding activities can
be seen as a natural development flowing on from agricultural output to the benefit of
regional areas.The prospects for regional development resulting from value-adding
activities is linked to the role of government in promoting such activities. As a result
of the importance of government in bringing about regional development a significant
section of this chapter is devoted to the role played by government in such development
through the establishment and maintenance of value-adding enterprises in regional area.
The following subjects are examined in this chapter:
- regional areas;
- importance of value-adding in regional development;
- advantages of locating value-adding activities in regional areas;
- role of governments; and
- strategies to support regional development and value-adding.
Regional areas
5.4 Rural Australia has been defined as the “whole of the country
apart from Brisbane, the Gold Coast, Newcastle, Sydney, Wollongong, Melbourne,
Geelong, Adelaide and Perth.” [1]
Based upon this definition the rural population of Australia represents
32 per cent of the country's total population. The majority of Australia's
rural population live in towns of less than 20 000 people. In Australia
there are approximately 350 towns and cities with populations between
2 000 and 25 000 people. [2]It has been
estimated that about 1 200 small country towns can be classified as agricultural
centres. [3]
Importance of value-adding in regional development
5.5 The establishment of value-adding enterprises linked to agricultural
production can significantly assisted the economic advancement of regional
Australia. The Victorian Government told the inquiry that value-adding
represents a “significant opportunity for the economic development
of regional areas.” [4]
5.6 Australia's pet food industry is an example of an industry that makes
a significant contribution to the economic prosperity of several rural
centres. Two of Australia's leading manufactures of pet food, Uncle Ben's
and Friskies, are located in the rural centres of Wodonga, Bathurst and
Blaney. According to the Pet Food Manufactures Association of Australia
(PFMAA) “direct and indirect employment in these areas alone accounts
for thousands of jobs and is a mainstay of these districts.” [5]
5.7 The view has been expressed that agricultural production and the
secondary processing of this production are the “engines” of
economic development providing the fundamental source of regional economic
wealth. Rural economies tend to be heavily dependent on primary production.
For example, the Committee has been told that in the NSW regions of Riverina,
Tamworth, Dubbo, Sunrays and the Central-West, agriculture involves 18
to 20 per cent of the total workforce. These figures compares to the four
per cent of the total NSW workforce involved in agriculture. [6]
5.8 The Agriculture and Resource Management Council of Australia and
New Zealand (ARMCANZ) proposed the following national goal for rural development:
- The sustainable development, in rural areas, of communities, industries
and associated institutions and infrastructure that are capable of meeting
the challenges of environmental, economic and social change. [7]
Advantages of locating value-adding activities in regional areas
5.9 Adding value to agricultural production in close proximity to
the site of production in rural areas offers significant advantages to companies involved
in such value-adding, including:
- substantial reduction in transport costs;
- less spoilage during transport;
- increased opportunities for quality control;
- improved communications between producers and processors; and
- greater opportunities for the environmentally friendly disposal of
waste products. [8]
Role of governments
5.10 Governments at all levels play significant roles in the
establishment and continuing operation of value-adding enterprises in regional areas.
Commentators noted a wide variety of roles that can be played governments in support of
value-adding enterprises.
5.11 The Upper Valley and Dandenong Ranges Authority expressed the
view that:
Governments have a responsibility to provide a stable climate within
which investors can plan and assess projects. There should desirably
be clear guidelines to enable the approvals process to be clearly visible
and the official decision-making should be set to recognised timetables.
[9]
5.12 The Victorian Government stated that the preferred approach to
removing barriers to value-adding was to link value-adding closely to sustainable rural
development. According to the Victorian Government:
Federal policies and programs should be soundly based on a set of agreed
principles covering regional development and the development of value
adding in agricultural production underpinned by sustainable practices.
[10]
5.13 The South Australian Government told the inquiry that through its
network of 15 regional development boards, the Regional Development Unit
of the Economic Development Authority and the State's Regional Development
Task Force “we are well positioned to facilitate, advocate and act
as a catalyst for the development of value adding in agriculture”
[11]in regional areas.
5.14 The West Australian Government advised the Committee that as a result
of the announcement in November 1994 that new policies would be implemented
for the delivery of government services to the agricultural sector “a
new emphasis is being placed on setting objectives which increase economic
activity and business opportunities in regional Australia.” [12]
5.15 In any discussion of the role of government in supporting
value-adding activities in regional areas there has to be an appreciation of the
limitations that apply to government in providing this support. Limitations on the role of
the Commonwealth Government in supporting value-adding activities in regional areas are
discussed below.
5.16 The need for effective and productive coordination between the
various levels of government and industry and between industry groups is a requirement for
the establishment and effective operation of regional value-adding activities.
5.17 Government supported research is seen as assisting value-adding
in regional areas. This issue is also discussed below.
Limitations on the role of the Commonwealth Government
5.18 The document Working Nation noted that in formulating the then Commonwealth
Government's Regional Development Strategy consideration had been given
to earlier studies that had examined regional development in Australia.
These studies included the report of the Kelty Taskforce, Developing
Australia: A Regional Perspective, the McKinsey report, Determinants
of Business Investment in Regional Areas and the Industry Commission
report , Impediments to Regional Adjustment. [13]
5.19 It was stated in Working Nation that the developmental
strategy:
Is anchored in the lesson from these studies, that the Commonwealth
cannot and should not mandate uniform solutions. It will fail if it
takes over and substitutes its efforts for those of local communities.
The strategy is based on partnerships with key local groups and support
for effective regional groupings. [14]
5.20 Mrs Paulette Quang of the then Department of Housing and
Regional Development told the inquiry in evidence in October 1995:
We have a long way to go to bring local government into full partnership
in the regional development organisation. Having representatives on
the RDO is one way of ensuring that every strategic plan being done
by the region is actually being understood and supported by the local
government ... We need to ensure that the local government way of operating,
in fact, is going to be supportive of regional development. [15]
5.21 At the end of the chapter in Working Nation dealing with the
Commonwealth Government's Regional Development Strategy it was noted that “the
regions of Australia will develop best when their development springs from the inspiration
and commitment of the people who live in them” and:
The appropriate role for the Commonwealth Government is to provide
strategic assistance of a kind that will enable the people of the region
to help themselves in their own communities. [16]
5.22 The West Australian Government, in evidence to the inquiry, stated
that although it provided greater incentives for companies to establish
in regional areas than in a metropolitan location there were factors that
strongly attracted value-adding enterprises to cities. Factors favouring
companies locating in or near a city can include lower transport costs,
proximity to a port, access to cheaper communications and easier access
to research facilities. The WA Government commented that industries such
as abattoirs and fellmongers in locating to regional areas, “were
more a question of being pushed out of the metropolitan areas for a number
of reasons rather than drawn to the country”. [17]
Coordination and cooperation
5.23 The need for coordination between governments, the business sector
and the general community to establish and promote value-adding activities
in regional areas was stressed to the Committee during the inquiry. The
Working Group on Development in Rural Areas (WGDRA) in its paper prepared
for the consideration of ARMCANZ's Standing Committee on Agriculture and
Resource Management (SCARM) stated that “individuals and industries,
as those closest to the issues, need to get together and work cooperatively
to plan and to develop strategies for the futures.” [18]
5.24 The Working Group on Development in Rural Areas set out a
number of principles that it saw as having relevance to the development of policies to
achieve the goal of developing rural areas. The principles related to the coordination of
efforts to support value-adding activities included:
- the integration of efforts by government across portfolios - all
sections of government concerned with rural development to integrate their policies and
programs to avoid duplication of effort ensuring agreement on all programs with national
rural development goals; and
- “Coordination between levels of government- government action
on rural development should be carefully coordinated between all levels
of government so that actions and established priorities are based on
improved targeting of government programs.” [19]
5.25 The Victorian Government also highlighted the need for
coordination and cooperation to promote value-adding activities in regional areas when it
told the Committee:
The strong interdependence of regional industries and the neighbouring
rural sector makes a coordinated approach to the delivery of programs
and services important. Where regional approaches are strategic and
based on a sound evaluation of the region's comparative advantages and
resource potential, they provide the opportunity to identify opportunities
for value adding, promote investment and facilitate the operation of
enterprises in the region. [20]
5.26 The Victorian Government went on to stress that because regional
development organisations involve “all sectors at a regional level
they provide an excellent forum for a coordinated approach to the promotion
of economic development and the integration of program outcomes from all
government and non-government organisations.” [21]
This integration was seen as essential due to the reliance of value-adding
industries “on the resource base”. [22]
Commonwealth Regional Development Program and the Commonwealth Programs
Regional Impact Committee
5.27 The Commonwealth's Regional Development Strategy was announced in
May 1994. The strategy was set out in the document Working Nation. The
then Department of Housing and Regional Development told the Committee
that the White Paper on Employment growth set out in Working Nation “is
an integral part of the national approach to reorienting the Australian
economy based on long term structural reform.” [23]According to the Department the Regional
Development Program (RDP), which the Department administered, provided
a “national focus for this strategy.” [24]
Under this program approximately $250 million was allocated over four
years for a range of activities to achieve the goal of economic development
in regional Australia. [25]
5.28 The then Department of Housing and Regional Development considered
that a key aspect of the RDP was the establishment of Regional Development
Organisations (RDOs). These organisations, comprised of key stakeholders,
provided a central body in each region to oversee the process of regional
economic development. The Department stated that the RDOs operated as
“`umbrella organisations' through which a number of sub-groups can
undertake different activities relating to regional development.”
[26] The Committee understands that
a total of 67 RDOs were to be established by October 1995. In addition
to the RDOs, as of 3 October 1995, five comprehensive regional strategies
had been developed and approved. In addition, 12 interim strategies had
been approved by the Department. The Department of Housing and Regional
Development advised that the strategies funded to October 1995 “with
the exception of two from east Melbourne and north Melbourne, have identified
value adding in agricultural production as a priority for regional economic
growth.” [27]
5.29 In its submission to the inquiry the Department of Housing and
Regional Development commented that:
The wide ranging consultative process which is the basis for establishing
RDOs provides the opportunity for industries to provide input to the
development of integrated regional strategies which will underpin regional
economic growth. [28]
5.30 The Commonwealth Programs Regional Impact Committee (CPRIC) was
established to coordinate the delivery of Commonwealth programs in regions. CPRIC operates
as an Interdepartmental Committee and includes all Commonwealth Departments that have an
interest in regional development. The then Department of Housing and Regional Development
stated that:
Improved coordination of Government programs in each of these areas
is expected to contribute to the value adding process through a streamlined
delivery process and the joint funding and support of programs. [29]
Research
5.31 The importance of research in supporting regional development and
value-adding enterprises has been recognised. [30]However,
the extent to which the government should be involved in such research
has been a point of contention. [31]
5.32 An Industry Commission report titled Research and Development recommended
that a reduction in the level of government involvement in research funding
take place. The report recommended that government funded research should
be focused on “areas which relate to the greatest spillover and market
failure aspects of the Australian economy.” [32]The
then Department of Housing and Regional Development expressed concern
that a reduction in funding could have an adverse impact on the level
of applied and regional research. [33]The Department stressed that:
For value adding purposes it is important that research be maintained
at the regional level and that access remain open, to ensure the widest
dissemination of research results. [34]
5.33 The Rural Industries Research and Development Corporation
(RIRDC) told the inquiry:
We endeavour to coordinate as best we can with the many Commonwealth
and state programs at the Canberra end or at the state capital end,
but most of our contact on the regional development has been at the
regional level, where we have been working with groups of producers
and light manufacturers and, indeed, local communities on their development
needs and the research priorities flowing from them. [35]
Footnotes
[1] Australian Meat and Livestock Industry
Policy Council, Submission to Regional Development Task Force, a discussion paper
prepared by a Working Group of the Australian Local Government Training Board Inc., n.d.,
p. 1.
[2] Australian Meat and Livestock Industry
Policy Council, Submission to Regional Development Task Force, a discussion paper
prepared by a Working Group of the Australian Local Government Training Board Inc., n.d.,
p. 1.
[3] Australian Meat and Livestock Industry
Policy Council, Submission to Regional Development Task Force, a discussion paper
prepared by a Working Group of the Australian Local Government Training Board Inc., n.d.,
p. 10.
[4] Evidence, Victorian Government,
p. 31.
[5] Submission, PFMAA, p. 5.
[6] Submission, Mrs Diana Gibbs, p.
2.
[7] Evidence, DPIE, p. 899. For
recent information on initiatives by ARMCANZ to support in the area of food safety see
Greg Taylor, Government-Industry Partnerships to Underpin Clean Food Exports,
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. 117.
[8] Evidence, Riverina Regional
Development Board, p. 977. For information on employment opportunities that would be
created in regional areas as a result of “fresh cut” fruit and vegetable
processing see Evidence, Australian Horticultural Corporation, p. 365.
[9] Evidence, Upper Yarra Valley and
Dandenong Ranges Authority, p. 9.
[10] Evidence, Victorian
Government, p. 32.
[11] Evidence, South Australian
Government, p. 585.
[12] Evidence, South Australian
Government, p. 688.
[13] Working Nation: Policies and
Programs, AGPS, Canberra, May 1994, p. 161 and Working Nation: the White Paper on
Employment and Growth, AGPS, Canberra, May 1994, p. 18.
[14] Working Nation: Policies and
Programs, AGPS, Canberra, May 1994, p. 161.
[15] Evidence, Department of
Housing and Regional Development, p. 956.
[16] Working Nation: Policies and
Programs, AGPS, Canberra, May 1994, pp. 174-175. The Riverina Regional Development
Board told the inquiry that the Working Nation statement is “beginning to have
quite a positive impact in a number of regions.” Evidence, Riverina Regional
Development Board, p. 982.
[17] Evidence, West Australian
Government, p. 718.
[18] Evidence, DPIE, p. 899.
[19] Evidence, DPIE, p. 900. For
information on an integrated framework of policies for rural development see Evidence,
DPIE, pp. 900-903.
[20] Evidence, Victorian
Government, pp. 31-32.
[21] Evidence, Victorian
Government, p. 32.
[22] Evidence, Victorian
Government, p. 32.
[23] Evidence, Department of
Housing and Regional Development, p. 945.
[24] Evidence, Department of
Housing and Regional Development, p. 945.
[25] Evidence, Department of
Housing and Regional Development, p. 945
[26] Evidence, Department of
Housing and Regional Development, p. 946. For comments on the operation of some specific
value-adding projects in regional areas see Evidence, Department of Housing and
Regional Development, pp. 949-950. .
[27] Evidence, Department of
Housing and Regional Development, p. 949; see also p. 955.
[28] Evidence, Department of
Housing and Regional Development, p. 947.
[29] Evidence, Department of
Housing and Regional Development, p. 947.
[30] See Evidence, Riverina
Regional Development Board, p. 980; see also Evidence, DPIE, p. 913.
[31] See Mr B. Curran and others, Selecting
New Rural Enterprises for Investigation and 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. 53; see also Dr Alistair Watson, Further
Processing of Agricultural Productions in Australia: Some Economic Issues, Research
Paper Number 5, 14 December, 1993, Parliamentary Research Service , Department of the
Parliamentary Library, p. 19.
[32] Evidence, Department of
Housing and Regional Development, p. 947.
[33] Evidence, Department of
Housing and Regional Development, p. 947.
[34] Evidence, Department of
Housing and Regional Development, pp. 947-948.
[35] Evidence, RIRDC, p. 1001.