Abbott's Northern Australian idea: grand vision or folly?

Today, Northern Australia is a vast relatively unpopulated region of undisturbed savanna, desert, mangrove coast lines, and tropical rain forest, spanning from Karratha in North-Western Australia, across the Northern Territory, and incorporating far North Queensland.

At a press conference last Friday 21st June in Townsville, North Queensland, Opposition Leader Tony Abbott released his 3rd major policy statement for the upcoming election in September this year. In this press conference Mr. Abbott outlined a vision for developing Northern Australia in what could be considered a carefully thought out response to the Gillard Government's Australia in the Asian Century White Paper released late last year.

In the coalition vision, if elected as the Government, a promise has been made to produce a White Paper on developing Northern Australia, as a strategic link to South-East Asia. Although the announcement is little more than a roughly thought out vision, which traditionally the conservative side of Australian politics likes to do, this vision has injected some form of purpose into the national debate again, after a number of unimaginative White Papers on Asia, security, and defense launched by the Gillard Government over the last six months or so.

The Coalition's 2030 Vision for developing Northern Australia is only an idea paper highlighting the possibility that population from the south can be attracted north through tax breaks and infrastructure developments, and the moving of some government departments and military north as well. The policy has identified agriculture, energy, tourism, education, and health sectors as potential drivers of development. Through the export of Australian expertise and Asian investment in the region, northern Australia can become the gateway to the rapidly growing Asian economies to the north.

Central to the plan is to develop a northern Australia as a 'food bowl'. However the Ord River Scheme that involved great infrastructure expenditure on dams and irrigation projects is considered by many to have failed. Cotton, rice, sugar, Asian vegetables and fruits, and essential oils have all been tried as industries with little success. Furthermore, a 2009 report Sustainable development of northern Australia, prepared for the Northern Australia Land and Water Taskforce clearly states that there is little factual evidence and infrastructure to support the feasibility of developing the North as a 'food bowl'. The 'food bowl' concept has also been attacked by the Wilderness Society and farmers across Australia who believe their regions should be further developed rather than any big efforts into the north, which has already failed.

Even the concept of energy as a driver of growth has massive hurdles to overcome due to extremely long distances to cover over land and water to service potential customers in Southern Australia and Asia. There are many technical issues to solve, where logistical considerations will require massive investments with questionable financial viability.

However, if one looks at the spirit of the Abbott announcement without going into the detail, his statement at the press conference that "We are determined to break the ongoing deadlock that has held Northern Australia back so long" is a rally call to the Australian imagination. After all Abbott's announcement is only a commitment in the first year of his Government to prepare a White Paper. Specific projects are not mentioned, only ideas.

Skeptics of this announcement would point out that the vision of developing the north is more than a century old, where the last proposal to do this was by former Prime Minister Malcolm Fraser as he faced defeat from Bob Hawke in the 1983 election campaign. Mr. Abbott claims that this initiative would drive Australian growth in the next decades when the mineral boom is over, although critics argue that Mr. Abbott is just pandering for the support of mining magnate Gina Reinhart and voters in Northern Australia to prevent any leakage of votes to the Katter Party and Clive Palmer's United party.

The extent of the coalition proposal is for the government to act as a facilitator through a Northern Australia Strategic Partnership made up of the Prime Minister and Premiers/chief ministers of Western Australia, Northern Territory, and Queensland, who would coordinate a set of policies to broaden the economic bases of Darwin, Cairns, Karratha, and Townsville.

Although a future coalition government will invest in a number of identified infrastructure projects, move north some government departments, and provide tax incentives, it would not anticipate being a direct participant in any commercial aspects. The policy outline indicates that the coalition in government would rely upon government to government relations rather than take any corporate approach. This would be left for private sector where the coalition hopes would capitalize on the existing natural advantages of the region such as the north only being 1 to 5 flying hours away from most Asian cities, natural deep port facilities in Darwin, abundant natural resources, railway and proposed road upgrade links to the Southern parts of Australia. These natural advantages would assist private enterprise develop opportunities within the region that are coming from more prosperous Asian population, increasing demand for food, education and tourism, and an aging population in parts of Asia requiring world standard health care, etc.

Given the coalition's stand above, there are many technical issues to overcome. First there is a danger that the whole concept will come down to a government web of tax breaks and subsidies, without anything really being developed. Thus northern development will be a vision on paper. This brings a further complication in today's Australia, where any discriminative taxes and incentives can face challenges in the High Court for being unconstitutional. The next issue is that the northern development policy may not attract the desired number of the people from Southern Australia and numbers may have to be bolstered through immigration, albeit through some special forms of investment/settlement visa categories valid for migration to the north of Australia, also legally challengeable. Next is the issue of finding funding to develop new infrastructure in a climate of budget deficits over the last decade. And finally there is the perplexing problem of how Northern Australia can constructively engage the region with something of real value.

Perhaps some of Mr. Abbott's concept has some flaws that on face value make the idea appear to be only akin to wishful thinking. This is particularly the case in agriculture, however the coalition policy paper has indicated consideration about niche markets in aquaculture which may be viable. On the issue of energy, there are just too many questions to answer about technology and logistics at this point of time. Education and health care have also become very competitive industries inside South-East Asia, and opening up shop in the north will be by no-means easy. Any education and health sector, even if competitive, will still have to undertake 'hard on-the-ground marketing' to succeed.

Thus maybe the first question that needs to be asked is; How can Northern Australia become integrated with the growing economies of Asia? Any White paper has to answer this question by showing where Australia can provide value to these Asian economies.

This may be best undertaken by studying how the successful countries of the region developed competitive economies. One of the best examples may be Singapore, as at independence in 1965, the country had no natural resources and was cut off from its natural hinterland by political circumstances, thus forced to develop in relative isolation, in some ways not dissimilar to northern Australia.

The Singapore strategy was to pick industries that had value to the region. Across the border in Malaysia, one can also see how Air Asia has expanded Kuala Lumpur International Airport as a major air hub, where 10 years ago the airport authorities had to wave landing fees to attract airlines.

Direct foreign investment into Northern Australia may only be extractive from the region. The Chinese perceive Northern Australia as a source of minerals, where the US see the north as a military platform, which may not bring the type of investments that will rapidly develop the region. This will leave Australian business with the role in creating value for the region, say for example, partially relocating ship building and repair from Adelaide to Darwin, building a low cost airline hub into the region, develop a regional financial centre as an alternative to Singapore, develop retirement settlements for wealthy Japanese and Singaporean retirees, and develop Halal supply chain and shipping services, etc. However Singapore had a sovereign investment fund to develop the industry it needed, which Australia does not.

Thus short of any radical policy overhaul by any future Australian Government, the private sector will have to be the movers and drivers of development, where the government only facilitates.

So if the ultimate aim is to integrate Northern Australia with Asia, much deeper thinking will be required during the White Paper preparation process, although the vision itself is a good start. A Green or discussion paper is needed beforehand on such an important issue to canvass various development strategies. One of the major faults of the Australia in the Asian century paper released last year by the Gillard Government, was that it relied upon poorly defined Cultural and diplomatic strategies to engage the Asian region without necessarily offering any new value.

Australia will have to go back to this basic question about what value Northern Australia can offer Asia, and go from there. This may not be the largest capital project any Australian Government has embarked upon, but it will be the most intellectually challenging. If successful, it would cement Australia's place in the region for the rest of the century.