Business leaders see potential

Diversifying Western Australia’s economy to reduce reliance on mining and resources has been a goal of successive governments, but recent evidence shows the state is losing ground in key areas.

The state has suffered a sharp fall in its share of both international tourists and international students, while manufacturing has been in long-term decline.

Business News recently joined four Perth entrepreneurs who have built successful businesses outside mining and resources to get their thoughts on this challenge.

Peter Prendiville, Rod Jones, Gordon Martin and John Rothwell have all been selected as champions of entrepreneurship in the EY Entrepreneur of the Year program.

At a lunch hosted by EY, they agreed tourism and international education were two sectors with high potential, if they attracted the right focus.

“Because of the strength of the economy through the mining construction boom, we displaced all our holiday and leisure sector,” Mr Prendiville said.

“It’s still tough and it’s going to be tough for another two or three years, but in my opinion we will come out of it stronger and better.”

As chairman of Prendiville Group, which owns multiple hotel properties across WA, Mr Prendiville has direct exposure to the sector’s waning fortunes.

He said his big investment in upgrading the Rottnest Hotel signalled his longer-term optimism.

“I have confidence in that destination to drive a really good outcome,” Mr Prendiville said.

“It’s going to be expensive, but I’m a countercyclical buyer and we’ve got a really great future.” 

Mr Jones, who was the founder of global education services business Navitas, has recently started as chairman of StudyPerth, which is charged with promoting Perth to international students.

“There is huge opportunity in international education and we’re way behind,” Mr Jones told the forum.

“We’ve gone backwards dramatically, particularly in the last three or four years.

“There’s been no focus on it, there’s been no money put towards attracting international students, and that’s not just government, it’s the institutions themselves.

“There’s been no coordinated effort to promote the state and build the pie.”

Mr Jones said WA accounted for between 6 per cent and 7 per cent of all international students in Australia.

If WA lifted its share to 10 per cent, that would bring an additional 35,000 students.

“That is worth $1.5 billion in revenue to the state and 5,000 jobs,” Mr Jones said.

“There is a big task, and to be fair the government is recognising it, but there is no money.”

StudyPerth has an annual budget of about $1.7 million, a fraction of the amount spent by other states.

The state government has also committed $2 million over five years to implement an international education strategy for WA, which is currently being developed.

Mr Jones is hoping for a lot more, including by leveraging the $425 million allocated for tourism marketing over five years.

“We need to link into tourism, that is critical,” he said.

“People don’t really understand the really strong symbiotic relationship between tourism and international education.

“For every international student, an average of three visitors, parents and friends, come to Perth.

“Part of my new role is to bring the institutions together and getting them to contribute funds, linking with tourism and sharing funding and resources.”

Mr Prendiville said the $425 million funding commitment was one of several big positives for the tourism sector, along with the doubling in the number of hotel rooms in Perth.

He added that Perth was a rebuilt city, with Elizabeth Quay, Yagan Square, extra convention space in new hotels and Optus Stadium, which he described as an enormous enabler.

“It’s a game changer to have things like Manchester United and Chelsea, the Bledisloe Cup, the State of Origin, things that were never on the radar for WA.”

Mr Prendiville said improved airline services to Perth, particularly from China, were critical.

“Getting China Eastern into Perth, and linking Beijing and Shanghai to WA, has got be a priority,” he said.

Another priority was to ensure tourists had things to do and appreciate WA’s points of difference.

“Fremantle, the Swan Valley, Margaret River, Rottnest Island, Broome are going to be the major beneficiaries of all the new infrastructure we have.”

However, Mr Prendiville was concerned the state government did not have the skill set to seize this opportunity.

He was speaking after the state government sacked Stephen Wood as director general of the Department of Jobs, Tourism, Science and Innovation, citing unhappiness with the way tourism was being managed.

The ‘mega department’ was created last year as part of a process that involved the amalgamation of multiple agencies.

“The dialogue has changed, that’s really good, but unfortunately sometimes process gets in the way of a good outcome,” Mr Prendiville said.

“Tourism Western Australia should have a chief executive, it should have an executive director of marketing if you are going to deploy $425 million.”

Mr Martin, who built Coogee Chemicals into a major industrial business, said high labour costs, slow approvals and an inflexible workplace regime were challenges in WA.

Despite this, he noted the rapid growth in the lithium industry and opportunities for value-added processing.

“There are some real value-add manufacturing opportunities in Australia right now,” Mr Martin said.

“Natural gas is a prime raw material.

“We have got the resource, we are major players in the world resources sector.”

Mr Rothwell, who founded shipbuilding company Austal, said he was fairly sombre about its WA operations.

He said Austal as a listed company was performing well, with most of its revenue sourced from defence contracts in the US.

However, it had failed to win work on the Australian government’s naval projects, after foreign companies were selected as head contractors.

“I’d say if others can do it cheaper, let that be the case,” Mr Rothwell said.

“This is far from that, it’s the other way around.

“How this came about absolutely confuses me.”

In light of this setback, Mr Rothwell was cautious about the local operation.

“I have a large bunch of very loyal, long-serving employees at Henderson,” he said.

“My personal wish, and I’ll probably get my way, is to keep a level of it going in WA just to keep those people employed and hope we can score an occasional defence contract for another country.

“Frankly it isn’t a very optimistic vision that we have.”