The world is in the throes of a revolution more powerful than the industrial, the computer or information technology revolutions.
The researchers, academics, businessmen and investors in the front line of this new revolution speak with an almost missionary zeal about the possibilities. They believe that the profound possibilities inherent in the biotechnology revolution will change the wealth of nations. John Arbouw reports.
In 1966 more than $US4 billion was raised on the US stock market for investment in biotechnology. In 1997, the US chemicals and plastics giant Dupont paid $US1.7 billion to buy 20 percent of a company called Pioneer Hi-Bred, a large seed company based in Iowa. Two years later Dupont bought the rest of Pioneer for $US7.7 billion and told the market that from now on life sciences (biotechnology) would be its main business. Monsanto, another chemical giant invested $US8 billion into a new company called Solutia with the sole purpose of investing in biotech and seed companies. Other chemical companies such as Novartis, Dow Chemical, Zeneca and Schering-Plough have also plunged into the seed business. In the US, the AMEX Biotech Index was up 75.2 percent for the year (2000) while the Nasdaq Composite Index was down nearly 30 percent. Some 350 biotech drugs are now in human clinical trials and more than 100 are close to coming on market. Biotech is big business and countries that want to remain economically relevant are investing billions in their biotech research and development. The motivation is simple. The winners in the next century are those companies and those countries that "grow" new products rather than manufacture them. It's the reason the seed business is booming.
So, how does Australia stack up in this biotech revolution? None too well according to Harvard University's Juan Enriquez and Jonathan West who gave directors attending the recent AICD Annual Conference in Hobart a no-holds barred assessment of Australia's position. They told directors that advances in genetic research are setting off an industrial convergence that will have immense implications for the global economy and, unless countries such as Australia get up to speed, they will be left behind. Enriquez has served in various positions for the Mexican and American governments. He has held several positions at Harvard University and has authored numerous Harvard Business Review articles and books. West, born in Hobart, teaches operations strategy at the Harvard University Graduate School of Business Administration. He is currently investigating the sources of superior performance in biotechnology research and development, comparing the performance of companies in the US, Japan, Europe, Singapore and Taiwan.
They represent the new breed of academic/businessmen who feel equally at home in the lecture theatre, writing a book or advising multi-national corporations or governments n business strategy. Their message for Australian business and government is simple and profound. The recent successful mapping of the genome as a symbol (see story on Page 17) will herald a change as world-altering as Columbus' discovery of America in 1492. However, they also sent out a warning that unless Australian boards and governments spend money to ensure that Australia becomes a producer of biotechnology companies, rather than a consumer of its products, Australia's economic position will deteriorate. "Australia threatens to be in a position where it has no participation as a producer in something even more important than the industrial revolution," says West. "Australia risks being excluded from what might be the greatest technological revolution of all time. "This is a big statement but everything that I see points to that being valid. Just as Australia is still grappling with the previous technological revolution (information technology) along comes a technological change that is even greater.
"And we are in a much worse position than we were going into the computer revolution. Australia was a leader in the technological revolution that began in the second part of the century when huge changes created the cities, created the industries and created the urban population. "Australia was a leader in that technological revolution and still is. Australia was a major participant in the industrial technology of the 20th century. It built a steel industry. It built an automobile industry. This has created the economic prosperity that we see around us today. "However, we faltered at the information technology revolution. We don't produce any hardware but we produce some software. What we need to do to be part of the life sciences revolution is much more important than what's happened with information technology. "When Treasurer Peter Costello was asked why our dollar had fallen and whether this was due to the fact that Australia had failed to build a position in the high-growth industries driving world growth, he said it didn't matter. He said you don't need to be a producer of high technology – only a good consumer of high technology.
"This assumption is patently false for the life science revolution and it is important to understand the distinction. "The life science revolution is different on two very important respects. First of all, the biotechnology revolution is an industry that will replace technology. The new materials for the life sciences future will be organically grown. It will be extracted from living organisms to produce the material. Companies such as Dupont will source their plastic not from petrochemicals but from plants." According to West, the life sciences revolution will not enhance existing industries it will replace them – including defence, health, industrial materials and energy. This represents around 70 percent of GNP. The other implication is the labour market. The bulk of the value-added occurring in various technology markets is captured by wages. In information technology wages capture about 15 percent of value-added. In life sciences wages captures between 2 and 5 percent. Unless Australia improves its position in this life sciences market – not just as consumers or workers but as the owners of the intellectual property – the country will be excluded from this technological revolution, West warns.
He points to examples such as Burma, one of the richest countries at the start of the century and now one of the poorest. The reason is that Burma chose not to be involved in the technological revolution of the 20th century. As an adviser to the Singapore Economic Development Board, West was told that Australia was not one of the countries Singapore considered as a rival because of the belief that "Australia had opted out of commercialising its technology". Singapore is spending between $6 and $10 billion to build a position in the life science revolution. A $16 billion venture capital fund is being established. Singapore provides 50 scholarships a year to its top science graduates each of which is funded to the level of $US500,000. West says Australia has the brain power and the expertise, but fails badly in the one area that really matters – business expertise. Australia needs to find the companies that can build up equity in life science companies. One of the key factors in improving Australia's global competitiveness is the need to improve the education system. The Government recognised the importance of this in its innovation policy it released in February.
West says that the Australian higher education industry has done itself a disservice by trying to be partially commercial. "When I was in Singapore, there was page after of advertisements from Australian schools touting for students to come to Australia and study. I asked my hosts whether many Singaporeans took advantage of this. They said that you would only go to Australia if you couldn't go to the US or England or to the top university in Singapore." West also pointed to Australia's abysmal savings record as a reason for the country's poor performance on a number of levels. In comparison with other countries, Australia's savings performance was one of the worst in the world. While much of what Enriquez and West had to say to company directors is depressingly familiar there was undoubted enthusiasm among those gathered in Hobart for finding a way forward. In the past, the first port of call has been to have the government do something, but West says governments can only do so much. He believes that only the Australian business community and the directors on company boards can provide the impetus to give Australia a place in the global biotechnology world. It comes down to investing in ideas rather than products.
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