Have you been following the recent debate about Australia becoming a branch plant economy?

Australian corporate icons are deciding to merge with off-shore interests, moving headquarters and listing overseas.

Successful home-grown businesses are becoming likely prey to foreign take-over bids with their increasingly undervalued share prices.

The declining Australian dollar, despite Australia's decade or more of sound economic fundamentals, seems to be making us less attractive for global investment and diminishing Australia's claim as a credible international financial and business centre.

The blame is variously placed with Australia's competition laws inhibiting efficiency gains through global mergers and acquisitions. Others point to our burdensome and uncompetitive tax treatment of profits and turnover generated overseas by Australian companies.

From another angle, some business leaders bemoan the lack of incentives to boost private sector R&D or the obstacles to introducing widespread Employee Share Ownership Schemes which effectively puts Australia out of the race to recruit and keep the best people.

Also part of the mix are the more popularist, anti-globalisation pleas, coming from both political and business quarters. These voices reflect a backlash against global, open and free trade policies which are seen to result in disproportionate economic loss for those involved in Australia's traditional industries and to those living in the suburban fringes and in regional and rural Australia.

But, could these fearful "branch plant" commentaries be a case of looking through the wrong end of the telescope?

Perhaps what we need is a perspective on globalisation that brings the world closer to Australia, allowing our business enterprises to secure a sustainable place in international value chains. A vision where Australian firms themselves can create reputable global brands. In fact, we need to "play above our weight" when it comes to our share of world capital markets, customers, investments and attracting the attention of the average multinational CEO.

I noted some reflections on how an Australian-based company can be a genuine global business in the 2001 Warren Centre Innovation Lecture recently delivered by Peter Fogarty, the CEO of the Perth-based ERG Group, an IT systems solutions company for fare collection and smart card technology.

ERG has achieved a compound sales growth rate of over 40% for the past ten years, with operations in Asia, Europe and the Americas, as well as Australia. It has increased its turnover from A$600,000 in 1986 to A$416 million in 2000 and ranks in the Australian Stock Exchange's Top 50 Index. It continues to be the recipient of leading edge e-commerce and information technology awards globally.

While claiming ERG is still very much a work in progress, Peter Fogarty's assessment of the crucial factors in operating a global business from Australia centre on four key elements:

1. Reinventing the business to ensure an increasing percentage of recurring revenue. This involved ERG moving from fare collection and telecommunications equipment manufacture and supply to being a provider of software and systems solutions, necessitating the creation of an expert in-house software engineering capability.
2. A long-term but totally adaptable vision and business strategy, where global customers and sensitivity to shifting markets are the life blood of the enterprise. Treating global customers as partners not only drives continuous innovation and technical excellence in the business, but it also brings international recognition and working showcases. Both are vital ingredients to an Australian company being accepted and achieving global status, says Fogarty.
3. Growing the company through successful, hard-won alliances with many multinational corporations, starting notably with Nokia and Philips and now numbering 18 global enterprise alliances. These have been the source of organisational learning within ERG, as well as a crucial means for more rapid acceptance and market penetration than a remote Perth-headquartered company could otherwise expect.
4. Serious ongoing investment in research and development at between 8% and 15% of revenue is a commitment that is bringing strong returns to ERG over time. Fogarty says innovative Australian companies that are succeeding globally show a consistently high level of investment in R&D. In ERG's case, in addition to generating new commercial technological breakthroughs, R&D investment allows ERG to maintain a lead over their competitors and builds and maintains the skills base vital to the company's performance.
   To avoid the worst fears of Australia being a branch plant economy, it is clear we need to multiply the ERG story a thousand-fold.

That's the challenge that must be put before Australia's political leadership in this Federal Election year. Getting the answer right on this one will do more for the living standards of ordinary Australians than any amount of fiddling with the prices of petrol and beer.