tag:theconversation.com,2011:/id/topics/australian-business-473/articlesaustralian business – The Conversation2024-03-20T19:02:57Ztag:theconversation.com,2011:article/2260182024-03-20T19:02:57Z2024-03-20T19:02:57ZCompanies vying for government contracts could soon have to meet gender targets. Will we finally see real progress?<figure><img src="https://images.theconversation.com/files/583045/original/file-20240320-16-fm9yug.jpg?ixlib=rb-1.1.0&rect=0%2C0%2C4624%2C2666&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/businesswoman-standing-leading-business-presentation-female-681211267">Jacob Lund/Shutterstock</a></span></figcaption></figure><p>The Australian government wants to make sure its contracts – worth almost <a href="https://www.finance.gov.au/government/procurement">A$75 billion annually</a> – don’t just deliver taxpayers value for money, but also promote gender equity.</p>
<p>Under <a href="https://www.theguardian.com/society/2024/mar/07/labor-gender-equality-targets-government-contracts-katy-gallagher-national-press-club-speech">proposed procurement policy changes</a> announced earlier this month, large companies that wish to bid for government contracts will first have to meet some gender equality conditions.</p>
<p>How exactly will these measures work across Australia’s huge private sector, and what kind of an impact could they have?</p>
<h2>Not a new idea</h2>
<p>Federal tender processes – the way we try to award government contracts to the best possible providers – currently follow a set of <a href="https://www.finance.gov.au/government/procurement/commonwealth-procurement-rules">Commonwealth procurement rules</a>. </p>
<p>They must provide value for money, encourage competition and ensure that public funds are used in an “efficient, effective, economical and ethical” way.</p>
<p>Using tenders as a lever to achieve gender equality isn’t a new idea. It’s been recommended around the world, including by the <a href="https://www.oecd-ilibrary.org/docserver/5d8f6f76-en.pdf?expires=1710753868&id=id&accname=guest&checksum=FBD77B99061A635D9246913C75E5D286">OECD</a>, the <a href="https://www.adb.org/publications/gender-responsive-procurement-asia-pacific">Asian Development Bank</a>, and the <a href="https://blogs.worldbank.org/governance/gender-and-equality-public-procurement#:%7E:text=Only%201%25%20of%20the%20%2411,and%20costliness%20of%20procurement%20processes.">World Bank Group</a>. </p>
<p>The idea is for the government to use its “<a href="https://www.theguardian.com/society/2024/mar/07/labor-gender-equality-targets-government-contracts-katy-gallagher-national-press-club-speech">purchasing power</a>” to incentivise – and in effect pressure – companies to take bolder steps toward achieving gender equality. </p>
<p>It’s a way to make sure the government’s direct efforts to <a href="https://genderequality.gov.au/">promote gender equality</a> aren’t being contradicted or undone elsewhere in the ways taxpayers’ money gets spent.</p>
<h2>Existing requirements for Australian companies</h2>
<p>In Australia, companies with at least 100 staff are already required to report to the Workplace Gender Equality Agency (WGEA) on <a href="https://www.wgea.gov.au/pay-and-gender/6-gender-equality-indicators">six gender equality indicators</a>. These indicators cover: </p>
<ul>
<li>workforce composition</li>
<li>board composition</li>
<li>the gender pay gap </li>
<li>the availability of flexible working arrangements</li>
<li>employee consultation processes</li>
<li>policies on sexual harassment.</li>
</ul>
<p>Bidding for some government contracts also requires companies to prove their compliance with the WGEA’s reporting processes. This involves <a href="https://www.wgea.gov.au/reporting-guide/ge/eligibility-compliance#:%7E:text=For%20organisations%20that%20have%20reported,Insights'%20tab%20within%20the%20Portal">downloading a certificate</a> from the agency’s website. </p>
<p>Under the <a href="https://www.theguardian.com/society/2024/mar/07/labor-gender-equality-targets-government-contracts-katy-gallagher-national-press-club-speech">proposed changes</a>, large companies with more than 500 employees will have to go beyond just reporting their numbers. If they want to remain in the running for government contracts, they will need to set and achieve measurable targets for their organisation across at least three indicators. </p>
<p>As Senator Katy Gallagher, the minister for finance, women and public service, explained while <a href="https://ministers.pmc.gov.au/gallagher/2024/national-press-club-address-working-women-national-strategy-gender-equality">announcing the measures</a>: </p>
<blockquote>
<p>We in the government believe that shining a light on what’s actually happening in workplaces will put pressure on employers to rethink how they hire, promote and remunerate their staff.</p>
</blockquote>
<h2>Concerns about implementation</h2>
<p>There are concerns around the practicality, market effects and reach of such a large-scale procurement policy. But there’s reason for us to be optimistic that Australia’s proposed design goes some way to mitigate these concerns. </p>
<p><strong>1. Companies might not know how to conduct this analysis</strong></p>
<p>Some might say there’s a risk these new requirements will be overly burdensome for companies not already conducting this kind of analysis. Such companies may lack the resources and technical knowledge to undertake extra steps.</p>
<p>It’s a fair concern. <a href="https://www.oecd-ilibrary.org/docserver/5d8f6f76-en.pdf?expires=1710848416&id=id&accname=guest&checksum=4A37780D3D8773D8E00A60BEDF27F7F7">OECD research</a> shows that a lack of clarity around “what to do” is the main challenge with gender equality procurement practices globally.</p>
<p>But a key strength of Australia’s proposal is that it leverages existing data collection processes that companies have already invested in, not adding burdensome extra demands.</p>
<p>There’s evidence for the effectiveness of this approach at a state level. In a 2022 pilot, the Western Australian government introduced a new requirement that bidders for its contracts prove their compliance with WGEA’s existing reporting procedures. An <a href="https://www.wa.gov.au/government/document-collections/gender-equality-procurement#evaluation">evaluation</a> of the program found the new criteria made a big difference in sharpening businesses’ awareness and understanding of gender equality.</p>
<p>To further mitigate this risk, the Australian government can invest in providing informational guidance to businesses on what will be required of them. Victoria’s Commission for Gender Equality in the Public Sector has already done this for <a href="https://www.genderequalitycommission.vic.gov.au/applying-gender-impact-assessment-procurement-policy">state government tenders</a>.</p>
<p><strong>2. Less competition for tenders?</strong> </p>
<p>If an extra layer of requirements squeezes out potential contenders in the business community, there’s a risk it could lessen competition for government contracts. </p>
<p>Economists have good reason to worry that weaker competition could push up the price of the products and services on offer, a loss for taxpayer value. </p>
<p>But Victoria’s <a href="https://www.buyingfor.vic.gov.au/introduction-social-procurement-framework">social procurement framework</a> helps us navigate this concern, prompting us to consider the ways “value for money” can mean more than just getting the cheapest price. </p>
<p>A broader definition of “value” would include progress toward social goals that provide significant benefit to the community – such as women’s equality. </p>
<p>Gender equity practices themselves are an often overlooked source of extra value, through the broader ideas, innovation and skill sets that diversity brings. These measures mean that a new pool of businesses can join the competitive mix.</p>
<figure class="align-center ">
<img alt="woman wearing hardhat works on an engine" src="https://images.theconversation.com/files/583053/original/file-20240320-27-i05mki.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/583053/original/file-20240320-27-i05mki.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/583053/original/file-20240320-27-i05mki.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/583053/original/file-20240320-27-i05mki.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/583053/original/file-20240320-27-i05mki.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/583053/original/file-20240320-27-i05mki.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/583053/original/file-20240320-27-i05mki.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Gender equity policies have a tangible value, enriching the workforce with new ideas and skillsets.</span>
<span class="attribution"><a class="source" href="https://www.pexels.com/photo/woman-wears-yellow-hard-hat-holding-vehicle-part-1108101/">Chevanon Photography/Pexels</a>, <a class="license" href="http://creativecommons.org/licenses/by/4.0/">CC BY</a></span>
</figcaption>
</figure>
<p><strong>3. Limited reach</strong> </p>
<p>For companies that don’t have to vie for government contracts, there’s a good chance these new measures won’t carry much weight. However, the government has other ways to put pressure on them. </p>
<p>Already, the WGEA has the power to publicly “<a href="https://www.wgea.gov.au/what-we-do/compliance-reporting/non-compliant-list">name and shame</a>” companies that don’t comply with legal requirements to submit their gender equality data. </p>
<p>Following the public spotlighting of companies with the biggest gender pay gaps, the “non-compliance” list calls out companies that aren’t even submitting their data at all.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/qantas-pays-women-37-less-telstra-and-bhp-20-fifty-years-after-equal-pay-laws-we-still-have-a-long-way-to-go-223870">QANTAS pays women 37% less, Telstra and BHP 20%. Fifty years after equal pay laws, we still have a long way to go</a>
</strong>
</em>
</p>
<hr>
<p>There are some widely known names on the <a href="https://www.wgea.gov.au/sites/default/files/documents/Employers-named-as-non-compliant-under-the-Workplace-Gender-Equality-Act-for-2022-2023-Gender-Equality-Reporting-March-2024.pdf">latest list</a>: General Motors, Manly Warringah Sea Eagles Club, Sofitel Sydney Wentworth, and several Melbourne-based McDonald’s stores.</p>
<p>It’s unclear just how much <a href="https://www.chathamhouse.org/sites/default/files/publications/research/Gender-smart%20Procurement%20-%2020.12.2017.pdf">being named on this list</a> – or being deemed ineligible for government contracts – matters to these companies, or to their customers and clients.</p>
<p>It’s these companies – slipping through the cracks and outside of the scope of government contracts – that we will still need to focus on.</p>
<p>Procurement is just one lever in a multi-pronged strategy to achieve gender equality. <a href="https://link.springer.com/article/10.1007/s11187-018-9997-4">Evaluations</a> suggest some procurement strategies are unlikely to boost women’s bidding success unless the <a href="https://www.tandfonline.com/doi/abs/10.1080/01446193.2019.1687923">other deeper barriers</a> that limit women’s involvement are also broken down. However, Australia’s existing investment in data collection means they could still be a powerful tool.</p><img src="https://counter.theconversation.com/content/226018/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Leonora Risse has undertaken research for WGEA and made a submission to the review of the Workplace Gender Equality Act. She serves as an Expert Panel Member on gender pay equity for the Fair Work Commission. She receives research funding from the Trawalla Foundation and the Women's Leadership Institute Australia. She is a member of the Economic Society of Australia and the Women in Economics Network.</span></em></p>Businesses with more than 500 employees will need to meet targets against at least three gender equality indicators.Leonora Risse, Associate Professor in Economics, University of CanberraLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1380132020-05-06T07:14:09Z2020-05-06T07:14:09ZPolitics with Michelle Grattan: Nev Power on the role of business in a post-coronavirus world<p>Nev Power, former head of “Twiggy” Forrest’s Fortescue Metals Group, is now the Chairman of the government’s National COVID-19 Coordination Commission.</p>
<p>The commission, set up by Scott Morrison in March, is working on mitigating the effects of the virus on jobs and businesses, and exploring opportunities to help get the country moving again in the post-virus future.</p>
<p>This week the national cabinet was briefed on its preparations for the COVID-safe workplaces.</p>
<p>It is also looking towards the big ideas.</p>
<p>With many calling for reform, Power advocates “tax benefits to companies that invest here in Australia”.</p>
<p>“If there are opportunities to incentivise companies to do that, and to accelerate that process, I think that would be very positive. </p>
<p>"This would be some form of investment allowance, or investment tax concessions that reward companies for investing directly in Australia rather than across-the-board tax reductions for those companies.”</p>
<p>Power sees a longer-term role for the national cabinet: “I think the national cabinet has been very successful and the results speak for themselves… I believe that there’s a great opportunity to keep it in place to help us accelerate the economy and to put through all of the changes that we need to make sure the economy comes back as quickly as possible.”</p>
<p><a href="https://itunes.apple.com/au/podcast/politics-with-michelle-grattan/id703425900?mt=2"><img src="https://images.theconversation.com/files/233721/original/file-20180827-75984-1gfuvlr.png" alt="Listen on Apple Podcasts" width="268" height="68"></a> <a href="https://www.google.com/podcasts?feed=aHR0cHM6Ly90aGVjb252ZXJzYXRpb24uY29tL2F1L3BvZGNhc3RzL3BvbGl0aWNzLXdpdGgtbWljaGVsbGUtZ3JhdHRhbi5yc3M"><img src="https://images.theconversation.com/files/233720/original/file-20180827-75978-3mdxcf.png" alt="" width="268" height="68"></a></p>
<p><a href="https://www.stitcher.com/podcast/the-conversation-4/politics-with-michelle-grattan"><img src="https://images.theconversation.com/files/233716/original/file-20180827-75981-pdp50i.png" alt="Stitcher" width="300" height="88"></a> <a href="https://tunein.com/podcasts/News--Politics-Podcasts/Politics-with-Michelle-Grattan-p227852/"><img src="https://images.theconversation.com/files/233723/original/file-20180827-75984-f0y2gb.png" alt="Listen on TuneIn" width="318" height="125"></a></p>
<p><a href="https://radiopublic.com/politics-with-michelle-grattan-WRElBZ"><img class="alignnone size-medium wp-image-152" src="https://images.theconversation.com/files/233717/original/file-20180827-75990-86y5tg.png?ixlib=rb-1.1.0&q=45&auto=format&w=268&fit=clip" alt="Listen on RadioPublic" width="268" height="87"></a> <a href="https://open.spotify.com/show/5NkaSQoUERalaLBQAqUOcC"><img src="https://images.theconversation.com/files/237984/original/file-20180925-149976-1ks72uy.png?ixlib=rb-1.1.0&q=45&auto=format&w=268&fit=clip" width="268" height="82"></a> </p>
<h2>Additional audio</h2>
<p><a href="http://freemusicarchive.org/music/Lee_Rosevere/The_Big_Loop_-_FML_original_podcast_score/Lee_Rosevere_-_The_Big_Loop_-_FML_original_podcast_score_-_10_A_List_of_Ways_to_Die">A List of Ways to Die</a>, Lee Rosevere, from Free Music Archive.</p>
<p><strong>Image:</strong></p>
<p>Lukas Coch/AAP</p><img src="https://counter.theconversation.com/content/138013/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Michelle Grattan does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Michelle Grattan talks with Nev Power, the chairman of the government's National COVID-19 Coordination Committee.Michelle Grattan, Professorial Fellow, University of CanberraLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/944832018-04-27T02:02:11Z2018-04-27T02:02:11ZBudget policy check: do we need company tax cuts?<p><em>In this series - Budget policy checks - we look at the government’s justifications for policies likely to be in this year’s budget and measure them up against the evidence.</em></p>
<p><em>In this piece we look at the need for company tax cuts.</em></p>
<hr>
<p>Business investment in Australia declined steadily for four years after peaking in 2013. In early 2016, the Turnbull government settled on a series of company tax cuts as their preferred policy to reinvigorate business investment and the economy. </p>
<p><a href="http://www.copsmodels.com/elecpapr/g-260.htm">Our modelling shows</a> that a cut to the company tax rate for large businesses will indeed lift foreign investment in Australia, driving an economic expansion and an increase in pre-tax wages, but there is more to the story. </p>
<p>Like many policy changes, there are winners and losers. The give-and-take nature of the tax cut means that the <a href="https://theconversation.com/big-business-doesnt-want-to-talk-about-it-but-smes-lose-from-a-company-tax-cut-57965">“losers” from the tax cut</a> will be Australian-owned businesses and the Australian government. We find that despite the expansion in GDP, the average income of the Australian population (a more suitable measure of the material welfare of the population) will fall.</p>
<h2>Do we need investment to maintain jobs and economic growth?</h2>
<blockquote>
<p>The jobs growth figures last year – we all know now, more than 1,100 jobs a day – that’s had a really big impact on our economy and we can expect that to continue and now lead to – I would expect – better wage outcomes as long as businesses keep investing and businesses can keep remaining competitive.</p>
</blockquote>
<p><em><strong>- Treasurer Scott Morrison</strong></em></p>
<p>More investment creates more buildings, equipment and intangible assets that enable workers to be more productive and, in theory, earn higher wages. </p>
<p>If investment is weak for a prolonged period, job opportunities are reduced and wage growth will weaken. </p>
<p>In a well-functioning economy, population growth and technological progress naturally attract investment. When investment only keeps pace with population or employment growth, wages stagnate. For wages to grow, investment needs to be above this level. This happens when there is technological progress, generating the higher returns which attract the level of investment needed. </p>
<p>Australian investment depends largely on foreign finance, so world economic conditions, including rates of corporate tax in other countries, also play a role.</p>
<p>In reality the link between investment and wages is not always clear cut. If unemployment or underemployment is high, investment may lead to growth in jobs without wage growth. </p>
<p>Businesses might also make profits in excess of a “normal” rate of return. These profits exist when new businesses struggle to break into a market dominated by a few large players, and can be an impediment to wage growth. </p>
<p>Even if you do accept that higher investment does lead to higher wages, giving tax cuts to companies to stimulate investment is not justified on this basis. </p>
<p>If company taxes are cut there will be significant costs to government revenue that amount to a “windfall gain” to the (mostly foreign-owned) investments that have already been made on the basis of the 30% tax rate. On balance, the positive impact on growth and wages is not enough to justify the loss of this revenue.</p>
<h2>Is there a problem with business investment in Australia?</h2>
<blockquote>
<p>Business investment is critical to economic growth. When firms are empowered to invest in new productive capacity and technology, it supports innovation and helps create new opportunities and employment for Australians.</p>
</blockquote>
<p><em><strong>- Treasurer Scott Morrison</strong></em></p>
<p>Business investment is now showing signs of picking up. <a href="https://www.rba.gov.au/speeches/2017/sp-dg-2017-11-13.html">In a speech</a> late last year, Reserve Bank deputy governor Guy Debelle saw “signs of life” in investment growth, particularly in the services sector and in infrastructure projects completed by the private sector on behalf of the public sector.</p>
<iframe src="https://datawrapper.dwcdn.net/YZHhR/2/" scrolling="no" frameborder="0" allowtransparency="true" width="100%" height="400"></iframe>
<p><a href="https://grattan.edu.au/report/stagnation-nation/">A Grattan Institute report</a> identifies four very good reasons for the four-year decline. These include a return to “normal” investment following the mining boom and an overall decline in the amount of money needed to create capital goods in most industries. The report also points to an ongoing shift towards households spending more on services such as retail, cafes, and professional services and slow economic growth overall.</p>
<p>Viewed in this light, there are plausible and benign reasons underlying the decline in investment. These suggest that it is not a large enough problem to justify “repair” in the form of a costly tax cut.</p>
<h2>What’s the verdict?</h2>
<p>Certainly business investment has weakened over the last five years, and along with this we have seen weak wage growth. It would be foolhardy to argue against the need for more business investment. Jobs and growth underpinned by a healthy level of investment are essential aspects of a modern society. </p>
<p>But cutting the company tax rate is not the way to go. It may deliver more business investment and economic activity, but by forgoing taxation revenue from existing investment, it comes at a cost to the average income of the Australian people.</p>
<p>To reap the benefits of strong business investment without a costly tax giveaway, Australia must continue to play to its strengths. Reducing the government revenue base through a cut to company tax will undermine the sort of stable, prosperous society that underpins the world-class environment that we strive to offer all investors.</p><img src="https://counter.theconversation.com/content/94483/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Janine Dixon does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>To reap the benefits of strong business investment without a costly tax giveaway, Australia must continue to play to its strengths.Janine Dixon, Economist at Centre of Policy Studies, Victoria UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/790372017-06-28T07:39:51Z2017-06-28T07:39:51ZBorn in China: a new type of Australian business<figure><img src="https://images.theconversation.com/files/175105/original/file-20170622-13649-75cf5f.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Almost 3000 Australian small to medium enterprises have established businesses in China.</span> <span class="attribution"><span class="source">AAP Image/Paul Miller</span></span></figcaption></figure><p>A certain type of Australian small business is emerging, but these businesses haven’t got any presence on home soil. Instead they are setting up solely in China to take advantage of a rapidly expanding Chinese market. </p>
<p>China’s growth provides opportunities which don’t exist in the slowly moving markets of developed countries. When China opened its doors to international trade and investment in the <a href="https://www.brookings.edu/book/how-china-opened-its-door/">1970s and the 1990s</a>, Australian manufacturers moved their operations to China to manufacture products more cheaply. At the time the Chinese market was small and of little interest to these business, and they shipped their products back to Australia and overseas.</p>
<p>Stepping forward 20 years; <a href="https://www.wto.org/english/thewto_e/countries_e/china_e.htm">China joined the World Trade Organisation</a>, its economy had developed and the <a href="http://english.gov.cn/news/top_news/2016/07/06/content_281475387387607.htm">Chinese market became attractive</a>. Australian companies started to setup operations in China to service this new market.</p>
<p>Now, some <a href="http://www.smartcompany.com.au/finance/economy/australia-china-free-trade-agreement-finalised-winners-and-losers-revealed/">3,000</a> Australian small to medium enterprises have established businesses in China. We interviewed the owners of 35 of these businesses to learn more about why they chose China.</p>
<h2>Foreign advantage</h2>
<p>There’s something about the foreignness of these entrepreneurs, that provides them with a particular type of <a href="https://www.ama.org/publications/JournalOfMarketing/Pages/pr-jm.10.0033.aspx">legitimacy</a> — important for business success in China. As one business owner said:</p>
<blockquote>
<p>Just being from Australia, you have a certain reputation for the quality of your product and I think that helps us to set us apart from some of our competitors around the world.</p>
</blockquote>
<p>The businesses set up in China specifically to provide financial advice and arbitration services find Chinese customers have more faith in foreigners from countries where these services have existed for longer than they have been available in China.</p>
<p>Those working in the food industry have a similar experience – repeated <a href="https://www.theguardian.com/sustainable-business/2015/may/14/china-middle-class-organics-food-safety-scares">food contamination scares in China</a> mean the Chinese market has more faith in foreigners from countries with strong food safety records. Some of these businesses even found that their main market in China is foreign companies. </p>
<p>The lack of demand in China for many <a href="http://www.chinaeconomicreview.com/chinas-workforce-faces-tough-year-shifting-gears-manufacturing-services">services common in western countries</a> means foreign businesses are often the only providers of those services in China. These services are in high demand from foreign companies operating in China that do not have the capability to provide them themselves. </p>
<h2>The challenges of starting in China</h2>
<p>One of their biggest challenges of operating solely in China is a lack of capital for growth. It is difficult for these businesses to attract business funding because of their foreign status in China. One small business owner said:</p>
<blockquote>
<p>You can’t get loans here. We’ve had banks in here and their risk managers and explained to them what we do and they listen, then they go away and they’ve still got no idea how we make money.</p>
</blockquote>
<p>These entrepreneurs told us the banks did not appreciate their foreign approach to business and would not approve a loan. </p>
<p>The nature of the Chinese market means the businesses we studied needed to constantly restructure and refocus their operations. Even businesses that offer specialised services for long-term markets, such as construction and resources, face the risk that large companies will step into their market once they have developed it. </p>
<p>One technology company reported that whenever they developed a new market in China with a new superior product, they would suddenly loose their large customers. These customers would move their business to a large Chinese company that had entered the market with a copy, even in the middle of a contract.</p>
<h2>What it takes to succeed</h2>
<p>Chinese business conditions have caused larger and globally successful companies such as <a href="http://www.cultofmac.com/22672/forbes-details-apples-china-mistakes/">Apple</a> and <a href="https://www.businessinsider.com.au/why-uber-failed-in-china-2016-8">Uber</a> to fail in China. These companies did not take the careful market focused approach of the ones we studied and instead attempted to compete directly with large and well established Chinese organisations. </p>
<p>The competitiveness of these big companies was also based on systems that they had developed for other markets. This meant they were unable to adapt to the different regulatory system and customer demand in China without losing their competitiveness. </p>
<p>A fast pace of change and evolution is a normal part of business in China. Companies in China find different ways than in the west to grow and scale-up. The entrepreneurs we spoke with described their businesses as hard work, but many of them claimed there were many like them in China and that they enjoyed the stimulation of being surrounded by entrepreneurs. One said:</p>
<blockquote>
<p>China has an enormous amount of opportunity for foreigners coming in because you’re exposed to stuff you would not be exposed to otherwise. </p>
</blockquote>
<p>Networks, clever business systems and good staff helped them to grow their businesses by transforming, dividing and moving into new markets. </p>
<p>Its a competitive environment, so these entrepreneurs were very cautious managers — tightly controlling their businesses, being careful about who they employ and constantly planning. </p>
<p>The key to success in China is being highly specialised and attuned to local market conditions. One business owner described this as:</p>
<blockquote>
<p>It’s got to be a complete disruption to the way that it’s being consumed and done.</p>
</blockquote>
<p>This specialisation also means these businesses could only be successful in China. With no choice but to keep the business in China, the entrepreneurs who set them up became very skilled at identifying new opportunities as they appeared. </p>
<p>One entrepreneur we spoke to, who builds social media outlets, operates a number of these at the same time. The entrepreneur then sells these outlets to competitors after a few years. </p>
<p>The outlets are turned over in a staggered manner so that the portfolio is comprised of new, maturing and ready for sale outlets. This enables the owner to constantly introduce new outlets as opportunities arise. </p>
<p>China offers opportunities to small and medium Australian businesses that they would never experience elsewhere. Taking up these opportunities is not without its risks – competitors, the need for constant change and difficulty in accessing capital are all significant challenges.</p>
<p>The Australian businesses we studied respond by being innovative and using their foreignness as a competitive advantage to grow their businesses. However, a new market in China today will be a market filled with competitors tomorrow, and these businesses constantly need to change and adapt to stay ahead.</p>
<hr>
<p><em>Paul Hunter, chief executive of Strategic Management Institute, contributed to this article.</em></p><img src="https://counter.theconversation.com/content/79037/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Stuart Orr received funding from the Australia China Council in support of the cost of collecting data for this project. He may receive author royalty payments in the future from the book mentioned in the article.</span></em></p><p class="fine-print"><em><span>Jane Menzies receives funding from the Australia China Council, Department of Foreign Affairs and Trade. </span></em></p><p class="fine-print"><em><span>Mike Donnelly does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>A new breed of company has appeared as Australian entrepreneurs create successful small businesses in China.Stuart Orr, Professor in Strategic Management, Deakin UniversityJane Menzies, Senior Lecturer in International Business, Deakin UniversityMike Donnelly, Honorary Professor of Management, Heriot-Watt UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/291652014-07-15T19:54:22Z2014-07-15T19:54:22ZCarbon tax repeal raises long-term risks for Australian business<p>The bill to repeal Australia’s “carbon tax” is poised to pass the Senate, potentially leaving Australia without a working price on carbon.</p>
<p>In the short term, the repeal may provide some relief for businesses and households as electricity bills fall — <a href="https://theconversation.com/carbon-tax-axed-how-it-affects-you-australia-and-our-emissions-28895">although possibly not as much as official estimates</a>. But in the medium to long term repealing Australia’s carbon price leaves Australian business unprepared if the world gets serious about reducing carbon emissions. </p>
<p>A global agreement to reduce carbon emissions — in an attempt to prevent climate change of more than 2C — could come as soon as the end of 2015 at global talks in Paris. And several economies — including the <a href="http://ec.europa.eu/clima/policies/ets/index_en.htm">EU</a>, <a href="http://www.arb.ca.gov/cc/capandtrade/capandtrade.htm">California</a>in the USA, British Columbia in Canada, and pilot programs in seven <a href="http://www.ieta.org/assets/Reports/EmissionsTradingAroundTheWorld/edf_ieta_china_case_study_september_2013.pdf">Chinese cities</a> — already have explicit or implicit prices on carbon. </p>
<h2>Why is a price on carbon important?</h2>
<p>A price on carbon allows businesses to factor the costs that they will have to pay for their carbon emissions into business decision-making. It means that executives can make decisions to switch technology, invest in different technology in other companies, or to do business in a different way to reduce their emissions. </p>
<p>This is a very old principle in dealing with environmental issues. We’ve done it before for sulphur dioxide, nitrous oxide and for chlorofluorocarbons to help prevent acid rain and halt the destruction of the <a href="https://theconversation.com/topics/saving-the-ozone">ozone layer</a>. We put a price on pollution as a way to remove the incentive to keep polluting.</p>
<p>If we don’t have that price in place then companies are able to emit as much carbon dioxide as they like without cost. This is traditionally what has happened. The real opportunity that is lost is that there is then no real incentive to move to new, renewable technology or to roll out existing renewable technology. </p>
<p>The carbon price is fundamental in both stopping emissions and helping organisations switch to low-emission technology and business practices. This will help them compete in a world where carbon is constrained. </p>
<h2>High stakes for business</h2>
<p>Having no price on carbon could have significant impacts on Australian business in the short, medium and long run. </p>
<p>First, there are fewer incentives for business to continue to develop low-emission technologies. Other incentives exist, such as the Renewable Energy Target, and institutions such as the Clean Energy Finance Corporation and Australian Renewable Energy Agency can assist businesses and households to change to low-carbon processes. However, the price on carbon is a direct incentive to change the most heavily emitting processes, and to implement new technologies.</p>
<p>Second, Australian business will continue to depend on fossil fuels to generate energy and profitability. If our major trading partners, such as the US and China, move towards low-carbon economies, they will find it increasingly difficult to work with high-emissions businesses in Australia - from a compliance and a corporate social responsibility angle. </p>
<p>Those countries, despite reducing carbon emissions within their borders, would in effect be supporting continued emissions by working with Australian businesses that have not taken up low-carbon processes. We are already seeing companies like the US retail giant Walmart push sustainability up and down their supply and value chains because they don’t want to be associated with <a href="http://www.worldwatch.org/node/6200">high-carbon business</a>. </p>
<p>We have seen something similar in the moves against using sweat shops or child labour — and the same could potentially happen with carbon. International businesses are starting to take responsibility for their actions, with a nudge from policy and a push from the public.</p>
<p>Third, without a price on carbon, Australia will continue to rely on coal as a major energy source and export product. Under a global agreement to deal with climate change and reduce carbon emissions, it is likely that much of this investment in coal — <a href="https://theconversation.com/australias-coal-industry-needs-to-prepare-for-global-climate-action-28547">particularly for electricity</a> — would become <a href="https://theconversation.com/unburnable-fossil-fuels-set-to-leave-investors-stranded-13611">“stranded”</a>. </p>
<h2>An end to carbon pricing?</h2>
<p>Although repealing the carbon tax might appear to leave Australia without a price on carbon, it may still leave options open. </p>
<p>The Coalition’s <a href="https://theconversation.com/topics/direct-action-plan">direct action policy</a> with its centrepiece, the <a href="https://theconversation.com/topics/emissions-reduction-fund">Emissions Reduction Fund</a>, could provide an effective price on carbon, although not as it currently stands. </p>
<p>The plan could effectively be a price on carbon if the penalties are strict enough to regulate companies’ emissions effectively.</p>
<p>The trouble for business is that without certainty on what that price or penalty will be, it is extremely difficult to take any real action to deal with carbon emissions in an economically sensible way.</p>
<p>Around the world, it has been difficult to understand what the price on carbon actually is. So businesses run analyses on what the price on carbon could be under a range of future scenarios. The problem with direct action is we don’t yet know how much businesses will be penalised. All that says to businesses is that you might have comply, but we’re not going to tell you how much it will cost. </p>
<p>Rationally, companies will therefore wait as long as possible to do any work on reducing their emissions. And, depending on the penalty, it may be better just to take the hit than actually change business practises or embrace new technologies. </p>
<p>Direct action as it stands doesn’t do what it is meant to do — either to deal with climate change, or help businesses switch to low-carbon profitability at scale. It could achieve this, but it needs to be ambitious and assist in creating low carbon innovation opportunities.</p>
<p>The longer we wait to take action on reducing carbon emissions, the steeper the reduction curve has to be. If we start to make reductions now, we can make more gentle reductions, working on it steadily and efficiently, and then go for bigger ambitions when we know we are on the right track. </p>
<p>But if we wait and wait, we get to a crunch point where we know we have to reduce emissions quickly, and it becomes really painful. It’s like cycling up a hill — if you’re riding up a gentle slope it’s not too much effort, and you can take your time to look around and enjoy the ride. Giving yourself a mountain to climb is a lot harder and a lot more more painful. </p><img src="https://counter.theconversation.com/content/29165/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Adam Bumpus receives funding from University of Melbourne. He is affiliated with the University of Melbourne and the Sauder School of Business, University of British Columbia.</span></em></p>The bill to repeal Australia’s “carbon tax” is poised to pass the Senate, potentially leaving Australia without a working price on carbon. In the short term, the repeal may provide some relief for businesses…Adam Bumpus, Senior Lecturer, Environment & Development, The University of MelbourneLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/21092011-07-01T00:10:47Z2011-07-01T00:10:47ZShould foreign investment rules be reviewed?<figure><img src="https://images.theconversation.com/files/2033/original/mining.jpg?ixlib=rb-1.1.0&rect=9%2C1135%2C2144%2C1865&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Concerns have been raised over the levels of foreign investment in Australia, including in the mining sector AAP</span> </figcaption></figure><p>The purchase of <a href="http://www.theaustralian.com.au/news/nation/chinese-mine-giant-snaps-up-43-nsw-farms/story-e6frg6nf-1226082387428">43 farms</a> in northern NSW by a state-controlled Chinese mining company has prompted calls this week for tougher restrictions on foreign investment.</p>
<p>Greens leader <a href="http://bob-brown.greensmps.org.au/content/green-dividend-senator-bob-browns-national-press-club-address">Bob Brown</a>, independent Senator Nick Xenophon and Nationals Senator <a href="http://www.abc.net.au/am/content/2011/s3257183.htm">Barnaby Joyce</a> have all called for a review of foreign investment rules. The Coalition has <a href="http://www.liberal.org.au/Latest-News/2011/06/30/Establishment-of-Coalition-Working-Group.aspx">announced</a> its own investigation into the issue.</p>
<p>But in a speech last night, Treasury secretary Martin Parkinson <a href="http://www.abc.net.au/am/content/2011/s3258126.htm">called for caution</a>, arguing that “the issue around whether foreign ownership, whether it’s of the mining sector or of agricultural sector, has to be handled quite carefully.”</p>
<p>Large foreign investments, and those involving entities controlled by foreign states, are assessed by the <a href="http://www.firb.gov.au/content/default.asp">Foreign Investment Review Board</a>, which determines whether the transaction is in the national interest.</p>
<p>However, critics of the FIRB continue to argue its decision-making process is opaque and the definition of what complies with the national interest test is difficult to pin down.</p>
<h2>Do the rules need to change?</h2>
<p>Foreign direct investment is being undertaken in a rapidly changing and uncertain global environment where the regulatory framework for global investment itself needs reviewing. This is shown by the ongoing issues relating to the global financial crisis, and ever-increasing environmental pressures.</p>
<p>Accordingly, Australia needs to review its own foreign investment rules. Regulation in Australia of foreign investment remains ultimately at the discretion of the Treasurer, and stands out as discriminatory by contrast with other OECD countries. </p>
<p>Yet apparently, overall direct foreign investment in Australia is little impeded by regulation.</p>
<p>Australia should recognise that its relatively small economy and resource intensity present it with specific problems in regards to the consequences of foreign investment, particularly in terms of cultivating industrial diversity and competition in markets, and natural resource sustainability issues.</p>
<h2>What changes should be made?</h2>
<p>A starting point would be to lower the threshold (currently $231 million for a non-government buyer) at which private investment bids are scrutinised and bring the thresholds for public and private foreign investment into line. </p>
<p>This would help address the issue of the role of foreign governments in investment regardless of whether it is apparently private or public. The benefits of the increased scrutiny required are likely to outweigh the administrative costs. </p>
<p>The National Interest test is currently pretty arbitrary and vague, however, it is not clear that a stricter set of criteria would be any less subject to (geo) political considerations in the long term as governments come and go. </p>
<p>Benefit could come from the onus being moved to the potential investor initially to put the case for the investment being in national interest and not contrary to it. This is counter to the current situation in which the government decides if the investment is contrary to the national interest. </p>
<h2>The need for greater transparency</h2>
<p>The existing secrecy should be replaced with transparency regarding the reasons for the decision. This would help future investors in offering more certainty with regard to the success of investment proposals. It is also the least the Australian public should expect.</p>
<p>The purchase of natural resources including land merits scrutiny particularly from the point of view of sustainability. </p>
<p>The scrutiny should include a full evaluation of all input requirements and possible end uses, whether from agriculture or mining, and both local and national impacts. We have to ensure that benefits of investment are not mainly captured elsewhere leaving Australia to bear the costs. </p>
<h2>The need to be sustainable</h2>
<p>As natural resources are largely semi or non-renewable, close attention needs to be paid to the property rights implied by acquisition and ownership, whether foreign or indeed domestic. Policy may be seen as unfolding in this area. </p>
<p>A principal argument for a resource price is that it should capture the loss of benefits to future generations which would result from exhaustion. This needs to apply to land also. </p>
<p>The property rights should include responsibility for sustainable land and environmental management that addresses the market failure.</p>
<h2>Domestic and international: is there are level playing field?</h2>
<p>The issue of the allocation of resource rents applies regardless of whether the resource ownership is domestic and or international. </p>
<p>The concern, in the first instance, is that all the conditions that apply to domestic ownership also apply to foreign ownership. </p>
<p>There should be a level playing field for resource owners, and this includes land ownership. </p>
<p>In practice the concern is that domestic ownership comes with much greater information and fiscal and other control than is available with respect to international ownership. </p>
<p>This inequity is not insurmountable, and need not deter foreign investors. </p>
<p>I doubt that it would deter Chinese or other foreign investor interest. The interest in Australia is due to its unique position in terms of natural resource abundance, geographical location and its relatively high level of human capital.</p><img src="https://counter.theconversation.com/content/2109/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Margaret McKenzie does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>The purchase of 43 farms in northern NSW by a state-controlled Chinese mining company has prompted calls this week for tougher restrictions on foreign investment. Greens leader Bob Brown, independent Senator…Margaret McKenzie, Lecturer, School of Accounting, Economics and Finance, Deakin UniversityLicensed as Creative Commons – attribution, no derivatives.