MULTINATIONALS: FRIEND OR FOE IN THE AUSTRALIAN ECONOMY
Australian Business Foundation's latest report Friend or Foe? Leveraging Foreign Multinationals in the Australian Economy, provides for the first time, information on the degree to which multinationals influence, either positively or negatively the growth, capacity and skills of Australian firms.
Authors Dr Lyndal Thorburn, Dr John Langdale and Prof John Houghton, conclude that multinationals are more friends than foe.
"The presence of multinationals in Australia provides, for government and business, opportunities to build an economy that has access to global knowledge and skills and contributes to global product and service development", said Dr Thorburn.
"However, Industry policy must focus on attracting more beneficial inward investment like centres of excellence, rather than regional headquarters which can be subject to arbitrary decisions concerning location", said Dr Thorburn.
Australia can benefit from the presence of multinationals by refocussing investment attraction programs on areas such as ICT, biotechnology and pharmaceuticals, banking and finance, food and education; leveraging and building the strengths of our business culture; encouraging creation of centres of excellence; and capitalising on multinationals as demanding customers.
The study was conducted during the first half of 2001 and was based on interviews with 30 foreign MNCs and a written survey of 56 smaller suppliers who had both foreign MNC and Australian customers.
The report highlights three key areas of impact:
- Building Australia's capabilities and critical mass;
- Extending Australia's global reach; and
- Building skills and knowledge
Multinationals are improving suppliers' product and service standards, providing improved market standing for suppliers selling to other customers and in some cases improving the efficiency of Australia's marketing system by working with suppliers in researching and understanding the market.
Strategic alliances between multinationals and their suppliers/customers are producing significant benefits including increased international exposure.
Multinationals which have developed centres of excellence in Australia, developing new products and services for the global firm, are more anchored in Australia than sole regional head quarters as they emphasise technology development and draw on external services.
The presence of multinationals and their position within the corporation world-wide can result in access to global knowledge to flow through to Australian suppliers, improving product and service quality and exposure to new management skills.
As foe, multinationals do little R&D in Australia, with the majority focused only on product modification and the intellectual property is registered off shore. Many sales and marketing multinationals have limited links to Australian firms, leaving restricted impact beyond employment. In addition the report indicated that many multinational respondents were reducing manufacturing capacity and had restricted clustering with suppliers.
"The report enables Government and business to better understand how multinationals interact with local firms, beyond the usual economic measures of direct investment and employment, highlighting how Australia can boost capabilities and global competitiveness", said Ms Narelle Kennedy, Chief Executive, Australian Business Foundation.
Australian Business Foundation, sponsored by leading industry organisation Australian Business Limited, is an independent, private sector think tank founded in 1997 in response to concerns about Australia's declining position on world competitiveness benchmarks and fuelled by the urgency for fresh insights and practical intelligence to boost Australia's capabilities and global competitiveness.
For further information contact:
The Australian Business Foundation on (02) 9458 7553 or www.abfoundation.com.au
