By any standards Western Australia is a resource-rich state. Unfortunately its ability to tap this potential wealth has often been stymied by a lack of infrastructure on many levels.
WA’s new Premier Dr Geoff Gallop is determined to break this nexus. In this interview with Company Director he outlines new Labor’s vision for the state.
Geoff Gallop's mantra is that he heads up a thoroughly modern Labor Government with modern solutions to today's problems. The Premier says his "new Labor" Government is determined to bury the old ideological battles between left and right. Gallop's vision is to create a modern, globally focussed, technology driven economy that is environmentally sustainable. And while first-year fights over industrial relations reform and business taxation would indicate that the ghosts of old Labor are not yet dead and buried, there have been some encouraging signs for business. Gallop's Government has taken the axe to a bloated public sector, set about cutting red tape for major project approvals and has won strong industry backing for its enthusiastic approach to electricity market reform. Dr Gallop (who received his doctorate from Oxford University, where he forged his political philosophies and his friendship with a young Tony Blair) was considerably upbeat about Western Australia's future when he spoke to Company Director.
The new goldrush Driving his optimism is his belief that the State's booming petroleum industry will be to 21st century Australia what gold was to the nation in the late 19th century. "The Burrup Peninsula will become synonymous with oil and gas in the way that the Pilbara is with iron ore," he says. "The Burrup has enormous potential and will be the engine room of our economy for many years to come. "We are a State with a small population so we need to leverage our exports into the world markets, we need to be globally focussed. That means creating an outward looking, progressive economy that can help create new markets for WA businesses." Gallop says that vision needs to be underpinned by an investment in research and development and new technology. "Our strength in the resources field is not just because we have kept our cost structures competitive, but because of our innovation. Technology is now a leading driver of the economy. "There are a huge range of manufacturing and service industries that have sprung up to service the resources sector. Many of these are now exporting these products and services overseas."
The Burrup Peninsula is proof of what Gallop is saying. Home to the massive North West Shelf project – Australia's biggest single resources project – $1.6 billion alone is being spent on the fourth LNG processing train, which will create 10,000 jobs. Other large-scale projects in the Burrup Peninsula include methanol plants proposed by Methanex and GTL Resources, and Burrup Fertilisers' $630 million ammonia plant. The Premier points to the proposed gas-to- liquids plant on the Burrup Peninsula as an example of the kind of downstream, value-added industry that will help shape Western Australia's future. The plant, which utilises the latest in gas-to- liquids technology, will generate about $2 billion in revenue for the North West Shelf partners. "The window of opportunity that's been provided by the development of gas-to-liquids technology puts the Burrup right on the world stage," says Gallop. The gas-to-liquids technology is also seen as the key to unlocking the $4 billion potential of the huge Gorgon gas reserves.
Gallop says his Government is specifically helping develop the Burrup in two key regards – firstly, in providing $136 million worth of common-user infrastructure on the peninsula, and secondly in supporting negotiations with the Chinese Government in trying to win a $1 billion a year supply contract to the Guangdong LNG project in China. Trade and tourism links with Asia are crucial to WA's future success, says the Premier. "WA is very much part and parcel of the Asian region," says Gallop. "We have shown that we can be successful in markets like Japan and south-east Asia. Now we want to replicate that success in areas like China. Success with the Guangdong deal would add another important dimension to already significant resources trade relations with China." Gallop is also enthusiastic about Western Australia's blossoming relationship with the United Arab Emirates. Last year, he secured an agreement with Emirates Airlines to fly non-stop from Dubai to Perth and more recently announced plans to open a trade office in Dubai.
WA's trade with Dubai is currently worth $470 million a year – a figure the Gallop Government hopes to double. Dubai is also seen as a gateway to new markets in the Middle East, Africa and Europe.
Helping business With an eye to business scepticism towards Labor after the disasters of WA Inc, Gallop makes his views very clear. "The role of government is to facilitate business, not to be in business," he told Company Director. "It's primary job is provision of infrastructure. If there's one thing you can do for business it's to provide the proper infrastructure. Another top priority for any government must be that business can work effectively within the government system. "We have focussed on public sector reform, infrastructure and the approvals process to make sure WA is a good destination to invest in and is friendly to business. "Businesses have felt for many years that when you came to WA there were far too many government departments and agencies to deal with." To tackle this, the Gallop Government reduced the number of ministers from 17 to 14, set about halving the number of departments from 46 to 23 and consolidating other agencies. Travel and consultancy budgets were also slashed. The Government also set up a review aimed at streamlining the approvals process for major projects and moved to replace the previous government's litigious approach to native title with an agreements based framework.
Gallop, a former energy minister in the government of Carmen Lawrence, has also embarked on an ambitious electricity market reform agenda, which is likely to lead to the break up of Western Power and the introduction of full retail contestability. The reform is music to the ears of local industry, which has long suffered from the highest power prices in Australia. Business groups point out that Labor has taken a more aggressive approach to electricity reform than their Coalition predecessors. Gallop is well aware of the huge task ahead in electricity reform but says it is a crucial to creating a good environment for business. "I don't think anyone would argue that the model we have now is sustainable," he says. "Energy reform has been contentious all over the world but we are looking at some of those problems that have emerged and will try to incorporate solutions to those problems into our model. "The bottom line is that we will reform the electricity market and we will provide a better basis for business to operate."
While business has sung the praises of Labor's approach to electricity reform, its tone has been much more hostile on other issues. Labor's roll-back of the previous government's industrial relations reforms has placed the biggest strain on government-business relations. The WA Chamber of Commerce and Industry sees the roll-back as putting unions back in control of the workplace. Relations reached a low point when chamber boss Lyndon Rowe and the Premier exchanged sharp words in public at a business breakfast. Business is also wary of the Government's budgetary approach, suspecting that for all its "new Labor" rhetoric, it is in reality an old-fashioned, high taxing government. Gallop rejects this, saying Western Australia is more than competitive with other states in terms of business tax rates and that a review of business taxes will further improve that situation. He also remains firm on his Government's industrial relations agenda. "Our critics on industrial relations underestimate the degree to which there was a build-up of resentment behind the previous system," he says. "We are trying to get a better balance between employers rights and employees rights. Our system allows for individual agreements in a way that is not hugely dissimilar to federal workplace agreements. It is a matter of rebalancing the system, making it more sustainable."
Finally, Gallop had some good news for business. The AICD has led complaints about the Government's new Tax Administration Bill, which makes company directors liable for tax debts. Gallop told Company Director that in light of the concerns expressed, those contentious provisions of the legislation will be reviewed when the Bill gets to the Legislative Council. "We feel that the measures we have introduced should not provide problems for company directors," he said. "But we will listen and rather than hold up the whole Tax Administration Bill we will push off those clauses to a committee and seek advice from the AICD, among others."
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