Thursday, 16 September 2004 11:48

Govt purchasing policy just a band aid


In its latest assault to win the hearts and minds of technology SMEs, the ALP, if its wins office, has promised to introduce a policy enabling local companies to be competitive on bidding for Government contracts.

Coming on the back of its anti-offshoring stance, expressed in previous weeks, Labour's Shadow ICT Minister, Senator Kate Lundy, appears to be building a protectionist technology policy platform that will certainly appeal to the populist and anti-globalisation elements of society. Renewed hope will also spring eternal from SMEs that under a Labour Government they will finally get a fair shake when bidding for Federal Government tenders. If it comes to fruition, it will be very welcome news indeed for our cash strapped small local ICT players.

That said, however, only the very naive will accept that an incoming Labour Government would seriously attempt to put up the fortress Australia barriers and buck the trend toward the globalisation of ICT delivery. All of the major global outsourcers, including the new breed of offshorers, have an enormous stake in getting a share of the Government pie. They all have substantial presences in Australia, employing considerable numbers of people, notwithstanding the amount of work they send to cheaper offshore locations. It's very easy for a party in opposition to spout platitudes about tilting the playing field to favour the disadvantaged. In practice, however, both major political parties whenever they have come to power have been forced to face the harsh realities of the global ICT economy.

Attempts at fostering the growth of local technology through Government protectionist measures in ICT purchasing have been tried the past and were dismal failures. During the 1980s and 1990s, we saw offsets, corporate citizenship, local content levels and a whole host of other supposedly innovative protectionist schemes successively consigned to the scrap heap as it became apparent that they were simply unworkable. The unfortunate fact of the matter is that if a Government agency needs an ICT job done and, in a competitive tender process, it determines that the cheapest and most effective solution will be provided by an offshore outsourcer, then the job will go to the offshorer no matter which party holds office.

If the ALP really is serious about reducing the $14.4 billion annual ICT deficit - and the same goes for the present Government - then how about fostering the growth of local technology by devoting some of that whopping $8 billion surplus our Government has socked away to building the industry in the way countries like Ireland and Israel have. How about providing real tax incentives for companies taking the risk to do local R&D. Under a previous Howard Government, we saw the tax incentive for R&D expenditure decreased from 150 per cent to 125 per cent, while countries like Singapore provided incentives of 200 per cent. The Irish and Israeli Governments were prepared to pay Intel billions to set up local semiconductor fabrication plants in the mid-1990s. As a result their ICT industries flourished. Meanwhile, our Government presented with the same opportunity from Intel, simply shrugged and turned away, shunning the idea of spending substantial Government funds on developing a real local industry. The same Government baulked at the idea at putting in $1 billion to establish a very fast train service connecting Canberra and the eastern seaboard capitals. If our post war Governments thought the same way, we wouldn't have an automobile industry in Australia and cars like the Holden, Falcon and Magna wouldn't exist.

One final sobering thought is that our $14.4 billion annual ICT deficit happens to be about two thirds of our total current account deficit. Take way the ICT deficit and our books would be solidly in the black and the nation's economy would be rocketing. It is a tragedy that a clever and prosperous country like Australia, which has an undoubted wealth of educated talent at its disposal has not succeeded in producing even one really global ICT player. Despite this, all we ever get to hear from Governments and oppositions around election time is platitudes about helping SMEs win Government contracts, promoting Australia's ICT capability internationally, continuing to fund ICT incubators, encouraging cooperation between ICT centres of excellence and SMEs and promoting ICT as a career path for women, who happen to be leaving it in droves. There is an old saying that if you keep doing the same thing over and over again, you will get exactly the same result. No doubt, this is the reason that every time a new election rolls around that ICT deficit just keeps on getting bigger.


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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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