THEY may be accidents of history, geography and geology, but Western Australia's long-term economic future is all the more rosy because of its tremendous resources, located near the most important growth markets in the world.
THEY may be accidents of history, geography and geology, but Western Australia’s long-term economic future is all the more rosy because of its tremendous resources, located near the most important growth markets in the world.
While this is not a recent phenomenon, the economic rise of China in the past decade has turned theory into reality.
Quickly on its way to becoming the world’s biggest economy, the Middle Kingdom has gone out of its way to recognise the special relationship with a state that has much of the minerals and energy needed for that transition to superpower.
Premier Colin Barnett was attentively received on a recent trip to China. Chinese companies are spending big in WA and many have set up their Australian headquarters in Perth.
This is a largely undocumented development, which reflects similar activity from other national and corporate players from around the globe.
Oil and gas companies have, naturally, gravitated to Perth as their Australian or regional HQ as the state’s energy resources have been rapidly developed.
There are also more subtle changes, such as Rio Tinto’s appointment of its Perth-based international iron ore CEO Sam Walsh as head of its vast Australian operations.
This quiet change is on top of a more public growth pattern in listed companies.
Perth has emerged as the most important second-tier player in the nation’s listed environment, stepping up as a clear third to Sydney and Melbourne in terms of the number of ASX companies based here, according to research by University of WA geographer Matthew Tonts and his colleague Michael Taylor from University of Birmingham published recently by the Committee for Perth.
WA is now host to 63 of the top 300 companies in Australia, about half that in Sydney and closing in on Melbourne, which has shrunk to 71. It is well ahead of Brisbane with 25.
Taken on market capitalisation, the gap is much more heavily weighted towards the east coast capitals of Victoria and NSW, which both have around 40 per cent of the top 300 by value compared to Perth which has grown to around 8 per cent. However, Perth is still more than double its nearest rival and almost as much as the rest of Australia put together.
This is a substantial economic shift. The corporate hub is a recognised development that has many spin-off benefits for the wider community.
Mr Tonts and Mr Taylor write that while the growth of corporate headquarters was undoubtedly due to Perth’s strategic location in providing access to major oil, gas and mineral resources, there was more to the story.
“Research in other parts of the world suggests that access to skilled labour, the presence of similar or synergistic firms, political and regulatory environments, and a range of socio-cultural and environmental attributes all influence the decisions of companies to locate and/or continue to operate in particular places,” they wrote.
Whether this is the chicken or the egg driving economic development, it clearly has momentum.
UWA has recognised the opportunities for WA in its geological riches and geographic location with its heavily promoted ‘In the Zone’ conference, which is aiming to highlight the importance of our position at the southern end of a dynamic region that shares the same time.
Two businessmen involved in the conference and strongly linked to UWA, Michael Chaney and Rod Eddington, both see the growth of WA’s skills as important to both the state’s current economic growth and its future.
“I thought for decades that WA is in a pretty unique position being in the same time zone, within four hours of South-East Asia and more readily able to access the rest of Asia, right up to China, better than the cities of Sydney and Melbourne,” Mr Chaney said.
“Mining has made Perth’s importance more obvious.
“Progressively, people have moved their operations here and I see that trend increasing.”
Mr Chaney, the chairman of local oil and gas player Woodside Petroleum, believes Perth’s positioning means that not only are corporate HQs being established here because of the time advantages, but also just to be seen to be part of the region.
He also believes WA is not just seen as Asia’s quarry. Skills in building and managing sophisticated, value-adding processes such as LNG are recognised by our northern regional neighbours.
Mr Chaney cites the advantages of lifestyle (despite our “ludicrous” restrictive trading hours), health and education, which help underscore the state’s geographic credentials.
Mr Eddington, a Melbourne-based member of UWA’s alumni, who is a leader of the university’s fund-raising efforts, believes that Perth has to build on the skills it already has to boost its economic future.
“There is another piece to that jigsaw,” Mr Eddington said.
“Increasingly Australia’s economy has a substantial service element to it.
“One of the questions is: what are the opportunities for WA in the services sector?
“The answer to that includes education.”
Both Mr Eddington and Mr Chaney dismiss concerns about the loss of major project design work offshore – but for subtly different reasons. Mr Chaney believes there are plenty of local skills opportunities despite large amounts of high-end work going overseas.
Mr Eddington simply believes we need to be more competitive by doing things better.
“I have lived in Hong Kong for many years and I am a huge fan of Singapore,” he said.
“You only have to look at rents in those places, they are not cheap places to do business, they are competitive, ferociously competitive.
“We should not count ourselves out from competing in these spaces.
Mr Eddington said the pursuit of excellence was the key objective, be it in education or business, in areas where we already had strengths.
“The focus (should be) on achieving world-class results,” he said.
“The real question is, what areas of expertise do we have enough critical mass in, in WA, to build top-notch facilities.”
“If we only mine things and sell to China and we don’t grow the areas that are related to that we’ll only go from living off the sheep’s back to Asia’s mine.”
