By: Kate Tilley
June 14, 2013
MELBOURNE, AUSTRALIA — Australia’s “inconsistent, complex and costly” regulations, unattractive capital investment location and rising gas costs are stunting the plastics and chemical industries’ growth, a trade group says.
The Plastics and Chemicals Industries Association (PACIA) in Melbourne, the industries’ peak representative body, released a strategic industry roadmap at its national conference in June.
The 16-page document outlines key issues. It is based on two reports by Australia’s national science agency, the Melbourne-based Commonwealth Scientific and Industrial Research Organisation. The reports were co-funded by PACIA and the federal Department of Industry, Innovation, Science, Research and Tertiary Education.
Ross Pilling, PACIA board member and managing director of Melbourne-based chemical company BASF Australia Ltd., said the plastics and chemicals sector can either “continue down the business-as-usual road and inevitably face industry contraction” or choose “a road to sustainable growth.”
“Australia must be more than a commodities exporter and value-added products importer,” Pilling said.
The roadmap report said the plastics and chemicals sector has reached a “critical tipping point” and calls for urgent action. Australia has many traditional competitive advantages as an investment destination, including abundant natural resources for feedstock and energy; a skilled, capable workforce; good health, safety and environmental performance; and stable financial and political systems.
But those advantages are increasingly offset by three main “roadblocks” — costly and complex regulations; a lack of capital investment; and uncompetitive natural resource prices, including gas.
The report said Australia’s regulatory environment has endemic complexity, hampers new product introduction, adds costs and makes the nation uncompetitive with major trading partners.
Despite multiple regulatory reviews since 1996, “little meaningful reform progress” has been made. In February 2006, Australia’s peak intergovernmental forum, the Council of Australian Governments, identified chemicals and plastics as a “hot spot” for regulatory reform and, in October 2008, agreed to implement regulatory and competition reforms. “In May 2013, many regulatory reforms have not been achieved,” the roadmap report said.
It said plastics and chemicals companies must significantly invest in plants and equipment to compete with more modern, larger plants, especially in Asia and the Middle East.
The roadmap said Australia’s abundant energy, mineral and water resources, which are essential feedstocks for the plastics and chemicals sector, should be a major competitive advantage. But the gas market’s “broken” regulatory regime “poses a serious risk” to industry viability.
“This invaluable industry is at the crossroads. The time for reviews has passed; now it is time for action,” the report said.
The plastics and chemicals industries must work with governments to remove roadblocks, innovate and take advantage of new markets and opportunities, it said.
Australia’s plastics and chemicals sector has an annual turn¬over of about A$40 billion (US$38.1 billion) and contributes A$11.6 billion to the country’s gross domestic product. It is Australia’s second-largest manufacturing sector, directly employs more than 60,000 people and supplies 109 of Australia’s 111 industries.