The Good Oil by Rod Brown *
The public sector must continue to explore smarter ways of engaging private sector investment – and this specially applies at the Local Government level where finances are limited. This is the message of a recently released OECD study that also identifies the critical success factors for public-private investments.
Outlined below are its key recommendations (plus my comments in brackets).
- Understand the market, the players and the intervention. There is a need to think creatively about the strengths and weaknesses of different sectors, the limits of private sector involvement, and to communicate the market opportunities and the nature of potential returns. (Important roles for local development agencies.)
- Show political will, vision and commitment – otherwise the private sector will not be convinced. (Hard to disagree.)
- Create partnerships. The private sector needs to be involved from the beginning, rather than being presented with a fait accompli. (It is amazing how often this advice is ignored.)
- Concentrate on pre-investment to get things up and running. (Key role for Local Government)
- Show professionalism, risk taking, entrepreneurship and work to commercial timetables. (There are graveyards full of Councillors and Council CEOs who tried to become risk takers and entrepreneurs, but left themselves open. Working to commercial timetables is also sound advice.)
- Understand what cities, localities and regions own and what their assets are to catalyse private sector investment. Public authorities often have under-used assets such as land and buildings. (Very good point, infrastructure audits need to be totally objective.)
- Have a champion or strong leadership. (No argument.)
- Join up public sector departments to prevent a project being blocked or reduced in its impact. Strong partnerships are required within the public sector. (A dream. Formal mechanisms to achieve this rarely work because Ministers and Departments must continually justify themselves – but successful examples can occur if politicians and officials can arrive at a win win opportunity.)
- Evaluate efficiency and effectiveness of initiatives. This also facilitates public sector leverage. Evaluation should also include the wide range of social returns. (True – but evaluations must be sufficiently rigorous and not self serving.)
- People need to know what others are doing in the field in order to coordinate resources. (Absolutely – conferences are valuable. Local Government Focus is also a great source of market intelligence.)
The report is titled Private Finance and Economic Development – City and Regional Investment (Local Economic and Employment Development, OECD 2003) and is available for purchase at www.sourceOECD.org
Wind Energy
Some of the OECD advice might be heeded as regards public-private investment opportunities surfacing in wind energy. The world wind turbine market grew at 40 per cent per year during the 1990s, and is forecast to maintain strong growth (in the 20–25 per cent range) in the current decade.
While a key driver is now the Kyoto Protocol, its gestation period began in the late 1980s when the UN and other multilateral agencies began pushing for the development of environmentally friendly forms of energy. Government policy has thus been a critical factor in the wind power industry’s growth – and will continue to be.
There are some 40 wind turbine manufacturers worldwide, and half of world turbine production is supplied by Danish manufacturers. Australia, mainly Victoria, Tasmania, South Australia and Western Australia, has the potential to develop a world class wind energy industry. However, it will involve intelligent alliances with the foreign manufacturers, while also dealing with the dark side of wind energy developments.
For example, Tim Le Roy, spokesperson for the Tarwin Lower (Vic.) Coastal Guardians claims that “Australia is swarming with foreign windmill salesmen and ‘green shoe’ developers quick to grab a big share of a $2 billion consumer funded renewable energy honey pot called the mandatory renewable energy target.” (MRET). He claims that the wind energy industry is inefficient, expensive and totally reliant on subsidies to be viable.
Tim Le Roy’s views are naturally countered by wind energy experts who argue that the MRET is environmentally and economically logical. They have also indicated to me that investment opportunities exist for Local Government. There are numerous cases in Europe where local Councils and private investors have funded wind turbines in their localities, and generated revenue streams as a result.
We have identified a Federal Government program that could be accessed to lower the investment costs. Contact us if you are interested.
Winter in Canberra
On a completely different subject, Canberra is pretty chilly at present, and it’s not just the weather. There are only two issues that seem to matter – fiscal and monetary policy, and security. Is Australia in danger of losing its egalitarian principles? The signs are there – the scaling down of the national health system, a public education system on the ropes, and a refugee policy that is simply astounding.
Insiders at both ends of the political spectrum agree that the Federal Government has gone into hibernation in non critical areas due to the Treasury’s market orthodoxy and small government mentality, as well as more pressing issues, such as national and international security.
I sense that bureaucrats have also gone into ‘receive mode’ – the failure of our intelligence agencies to flag concerns about reports of African uranium sales to Iraq is yet another example. On the bright side, waves of bright young graduates are moving up to fill the vacuum left by senior bureaucrats.
Although the next election is not far off, the Labor Party is rarely discussed in the context of an alternative government, particularly after the Beazley belly flop into the Labor pool. Could Mark Latham be their lifeguard? Seriously though, there is a lot of talk around about Australian society being at a dangerous cross road due to the lack of countervailing pressure on the Federal powerbrokers.
The Labor held State Governments can only provide checks and balances at the margin. As raised in earlier editions, there is a window for Local Government to negotiate a New Deal with the Feds. Lobbying by the ALGA for the continuation of roads funding is understandable, but there are some very big agendas where the Feds would welcome support at the grass roots. Funding should obviously come with it.
* Rod Brown’s Canberra based consultancy group, Australian Project Developments Pty Ltd, specialises in industry/regional development and government liaison. For further information telephone (02) 6231 7261 or email apd@orac.net.au
