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Monday, 06 June 2005 10:20

The perennial déjà vu of Australian ICT


It is with great sadness and trepidation but, unfortunately, not surprise that we greet the news of a massive ICT trade deficit blowout in 2004 to $19 billion. The greatest tragedy, however, is the deafening silence with which our policy makers have responded.

That hideous $19 billion figure represents a dismal failure on many levels - government, industry and education - to come to grips with a problem that threatens our nation's economic well-being. A visit to the home page of Trade Minister Mark Vaille illustrates the point. In the week that the ICT deficit became public knowledge, the Minister's office issued a media release crowing about how April 2005 had been a record month for exports.

Strong growth in exports of coal, iron ore, live animals and fish, with some help from metals and transport equipment all contributed to halve our monthly trade deficit from $2.6 billion to $1.3 billion. Fancy that, our trade deficit was $1.3 billion and our Trade Minister thinks we had a good enough month to issue a press release! And of course, like a dirty little secret, mention of Australia's technology exports was nowhere to be found in the release.

Actually, Australian ICT exports did amount to a significant $5.4 billion in 2004. The problem is that we also imported $24.4 billion of high tech hardware, software, components and services. Each year that gap grows wider and each year policy makers pay lip service to addressing the issue. Various committees, boards, offices and bodies get established and funded with Government money, some grants get awarded to promising new technology companies and the ICT trade gap continues to grow.

The Government can form committees, boards, offices and issue grants until the cows come home. History shows it won't help the ICT trade deficit. Austrade can continue to entice as many promising ICT companies as it can get to sit on its pretentious stands trying to sell Australian technology at overseas trade shows. The ICT trade deficit will continue grow larger as it always has.

Building our ICT exports with the help of Government programs is of course important. Austrade can also be of aid to ICT companies wishing to make contacts overseas, although the communications and marketing managers don't seem to be all that interested in the Australian technology industry, judging by our limited contact with them these days. However, the real issue is not our exports but the ballooning level of ICT imports.

The fact is we don't make enough technology products in this country. To put it more accurately, the global companies that make ICT products and components don't make enough of those products or components in Australia. Some may argue that Australia is not the ideal location for high tech manufacturing and they would be right. However, the reason has nothing to do with being a high cost location or our remoteness. In fact, the manufacture of high level technology, such as integrated circuits, among other things requires a ready supply of skilled people, a highly developed infrastructure, a clean water supply and close proximity to air and sea ports. At least that's what Intel boss Craig Barrett told our Government seven years ago when the company was looking for a place to locate a semiconductor plant.

Intel, of course, never did build that semiconductor plant in Australia. It did, however, build a number of plants in Israel and Ireland, two small first world countries which now have magnificent, thriving ICT industries that put ours to shame. Other companies that have set up manufacturing or R&D facilities in Israel or Ireland or both include Motorola, IBM, Microsoft, Alcatel, Cisco, EMC and 3Com. The same companies have sales offices Australia, devoted to importing vast quantities products into our country, and very little else.

The reason the Australian ICT industry keeps getting further into the red each year, while Israel and Ireland go from strength to strength as net exporters of technology is that more than a decade ago their respective Governments got real. They realised that if they were going to build viable technology industries they needed the help of the multinational technology giants, in much the same way as Australia needed GM and Ford to establish our auto industry. The Governments of both countries gave key technology multinationals such things as ten year tax holidays and funded a significant proportion of their set up costs in return for a commitment to establish meaningful manufacturing and R&D facilities in the countries.

Intel and other high tech multinationals today employ thousands of highly qualified technology people in both Israel and Ireland. More importantly, however, the high tech multinationals have helped to create expertise in fields that previously never existed in those countries and, thus, spawned thousands of satellite high-tech companies, many of which have grown to become major companies in their own right. Unlike Australia, a high proportion of talented ICT graduates in Israel and Ireland get a chance to become involved in real technology development in their own countries.

The irony of all this is that just over a decade ago, both Israel and Ireland had no serious ICT industries and both countries had elements in their Governments who were fiercely opposed to aiding multinationals to set up big operations. Fortunately for those countries, those negative elements were told by saner heads to go to hell. Unfortunately for Australia, the same sort of negative elements continue to dominate our successive Governments.

The tragedy of this sad tale is that it appears to be never ending. I keep telling the same story each year that news of the ever growing ICT deficit hits the streets and it keeps falling on deaf ears. Unfortunately, unless the message somehow miraculously gets through, I expect to tell the same story again next year.

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Stan Beer


Stan Beer co-founded iTWire in 2005. With 30 plus years of experience working in IT and Australian technology media, Beer has published articles in most of the IT publications that have mattered, including the AFR, The Australian, SMH, The Age, as well as a multitude of trade publications.



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