Submission to RBDA panel
24 October 2002
This submission is a commentary consistent with ALGA's general position of support in principle for enterprise zones. Regrettably due to time constraints the submission has not been fully considered by ALGA Executive and therefore should in no way be taken to reflect ALGA's formal position on the matter of enterprise zones.
Executive summary
Local government has a long-standing commitment to economic development. It is charged with nurturing the economies of its respective areas yet it has limited tools to provide substantial remedies.
Local government through its state and national associations has become focussed on the realities of market failure in regional Australia, including population loss and accepts that new economic development tools are needed, otherwise market forces will continue to drive performance downward.
The widespread use of enterprise zones, principally in the U.K., USA and Europe attracted the attention of ALGA and many in local government. While not a single 'magic bullet' for regional Australia, ALGA considers it is a substantial tool, which must be made available to stimulate business activity and to counter the effects of market failure.
There is a sense that involvement in regional economic development has attempted to stimulate forces beyond realistic spheres of influence through the use of very low key mechanisms. There have been a plethora of reports, conferences and taskforces over many years. In a number of cases recommendations for change, desired by regional communities, from government commissioned studies have been ignored.
Local, state and federal government and regional areas cannot substantially control the decisions of individual businesses. They can however create a climate within their area of responsibility that encourages investment. Each level of government has specific abilities to do this and also has limitations. The Federal Government could initiate a whole of government approach (the three tiers) to create such an environment, but it has to be a new approach geared towards the needs of business. We have to move beyond rhetoric to the realities of the business world.
Local government at its grass roots level is faced with economic development issues and is increasingly concerned that much of what is offered by way of solutions is promotional, rather than addressing the issue of why the private sector is generally disinterested in regional Australia. We must develop new and powerful economic development tools to positively influence the private sector's interest in transacting business in regional Australia.
There are significant barriers that have contributed to lack of private sector interest in regional areas. Some are perception based but others relate to genuine concerns that returns on investment are low, and that distance, costs, staffing, skills shortages and lack of rewarding activities mitigate against regional areas as a desirable location.
In developing new economic tools it is important to objectively analyse likely areas of success. There are areas where government can be strong and others areas where it will be weak. New legislative powers via the enterprise zone model typically practised overseas, can substantially influence the likelihood of success.
The notion that 'regional areas' can somehow organise themselves as regions to substantially reverse the effects of market failure is mistaken. Currently there is no facility to do this in Australia. International precedent on the other hand shows that enterprise zones and similar can provide the stimulus for areas to combine, knowing they will have some real tools for their future.
ALGA offers additional resources not covered in the literature review in support of the proposal for government to take a more assertive approach rather than the passive market based approach at present. It is difficult to find a modern democracy that does not use mechanisms similar to those in enterprise zone models.
Enterprise zones offer a way forward for regional communities on the basis that their benefits to businesses in approved areas are not a gift, but subject to communities making a concerted effort to present themselves as progressive having prospects, and capable of growth. In that way enterprise zones would support the Federal Government's desire for increased local and regional responsibility.
Objections have been raised in respect of enterprise zones but these exist we believe, due to the fact that the idea was virtually unknown in Australia before 1999 and the concept is widely misunderstood. There are a wide range of models and mechanisms that Australia can use to design a model acceptable for our circumstances.
ALGA has based its proposal for the way forward by suggesting a new type of economic tool for Australia. We look to business to increase investment and jobs but a market forces based approach has not been successful. ALGA's proposal is based on the successes of overseas regional areas and we commend it to the Panel.
See also Regional business development full submission
