Inquiry into a More Competitive Victorian Manufacturing
Industry - The Knox Submission
Introduction
Knox City Council welcomes the opportunity to make a submission to this timely and
important Inquiry. Knox City Council in collaboration with the following industry partners the
Victorian Centre for Advanced Materials Manufacturing, South East Melbourne Innovation
Precinct, and GlaxoSmithKline are pleased to commend this submission to the inquiry.
Creating an environment in which modern manufacturing capacity can flourish, and with it
the community, is a priority for Knox. Manufacturing makes up 20% of GRP here and the
area is home already to some of Victoria’s leading-edge companies including
GlaxoSmithKline, Siemens, Nintendo, Cadbury, Amcor, Electrolux, Universal Bio Sensor,
MiniFab, Small Technologies Cluster and Davey Water Pumps. It is further supported by
Swinburne University of Technology and the Victorian Centre for Advanced Manufacturing
Materials. Knox is an increasingly important locus of enterprise in the manufacturing
heartland of Melbourne’s south-easti.
The fact that the new government has initiated this inquiry at the start of its administration
indicates that the commitment to manufacturing is a priority we both share.
Our commitment and intent is to work in partnership with the State Government,
neighbouring councils, other public bodies and the private sector in our strategically
important part of Melbourne.
Our aim: to turn a shared aspiration into not just a ‘forward looking strategy for the future
development of an internationally competitive manufacturing sector in Victoria’ but delivery of
this vision on the ground.
New thinking, new action: Knox and economic renewal
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New thinking is certainly required, as the consultation document recognises and our
submission provides. But also new action.
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Our responses and approach to the questions raised by the Inquiry document are
based on rigorous analysis of the Knox economyii, extensive and ongoing
consultations with a wide range of private and public sector organisations and
grounded experience with what works through both policy and practice. We believe
our analysis will help the Inquiry shape interventions which will achieve better
outcomes for the Victorian economy.
We are already working to this agenda through our innovative approach to working with
companies and creating an environment which will support the growth of a prosperous and
modern Knox economy.
As an example the approach taken to unlocking the value of strategic locations and precincts
such as the 200 ha Knox Central precinctiii recognises that emerging advanced
manufacturing organisations:
(i) are critical to enabling the change required to develop resilient cities and
communities, and significantly;
(ii) will prosper in those environments that provide alignment and integration with the
appropriate infrastructure.
Knox Central therefore will be progressively built around significant clusters of advanced
manufacturing and related business services. It will enhance the productive relationships
which already exist in the environment to create a globally competitive precinct at the heart
of a sustainable regional economy that is one of the nation’s strongest.
With the right guiding principles, strategy, ways of working and partnerships, we can help
realise the unique potential of this area at this time to deliver the economic outcomes –
wealth generation - sought for the state by the Victorian government.
Knox already generates over $8 billion annually to Victoria’s Gross Regional Product, a large
proportion of which comes from manufacturing activity. With the right policy levers and
investment in place, to reinforce the momentum underway towards Knox as a place in which
advanced manufacturing enterprises will cluster and thrive and their employees live and
learn, we estimate that the contribution this area makes to GRP will increase by up to 100 %
in 20 years. With the help of the changes in policy this Inquiry can bring about, we can play
our significant part in the economic renewal of Victoria.
Structure of the Knox submission
The Knox Submission in sequence deals with initial issues from the preamble and first
chapter of the consultation document, then answers the main questions raised.
It concludes by raising issues which the Council believes need addressing in any final
strategy.
The Council also extends an invitation to the Inquiry to visit Knox to discuss how we might as
a local government, in partnership with the private and higher education sectors, and as a
community help you develop this critical agenda for manufacturing. We would welcome the
opportunity to present and discuss with you the unique approach that is being taken in Knox
through its effective relationships with business and its emphasis on advanced
manufacturing, education, skills and appropriate housing. We believe this approach is not
just of local importance but will result in a significant contribution to the regional profile and to
State economic performance and employment.
Initial issues
1. The Council broadly approves the terms of reference, coverage, context and scope
set out in the issues paper document and endorses the importance of the initiative
(pp 2-5).
2. We have only two provisos. One relates to the omission, in the terms of reference
and scope of the advantages of critical mass and clustering of successful industrial
sectors, well supported in the academic literature. Scarce public investment and
targeted interventions should in our view focus on places where modern, competitive
capacity will locate.
3. This links to our second proviso concerning the reference in the ‘scope’ section (p3)
to ‘the challenges and opportunities for building a competitive manufacturing sector in
rural and regional Victoria and whether a differentiated approach to supporting
manufacturing is warranted in rural and regional locations’(p3). Our support for a
‘differentiated approach’ and the policy itself needs to be put in the right context. All
research shows that companies are more productive on average in cities because of
their agglomeration effects and because the density of skilled labour is higher. High
productivity and economic momentum are generated in urban areas and this is not
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going to change. Of particular relevance is that companies in the knowledge-based
economy are more mobile and tend to move to places where they can find a large
supply of highly-trained employees. That means cities.
4. The recent State of Australian Cities 2010 reportiv supported this analysis while
indicating that Melbourne needed to further increase its labour productivity if it were
to continue to play its role as an economic engine of the state and indeed for
Australia. Improved transport linkages, increasing employment densities within
existing employment clusters and expanding the area of employment clusters can all
boost productivity. This productivity boost is brought about in a number of ways such
as economies of scope and scale, access to skilled labour, knowledge transfer and
human capital development. This is what agglomeration means. This is what only
cities can provide. This is what Knox Central will do. Manufacturing policy needs to
reinforce agglomeration not dilute it in an ‘All Must Have Prizes’ approach.
5. In agreeing that the Inquiry should ‘have regard’ for the EDIC report and endorsing
the EDIC recommendations accepted by the Victorian Government, Knox City
Council believes that more consideration should be given to one EDIC
recommendation ‘not supported’. This is that the Government establish a brokering
service to assist both manufacturing companies and researchers ‘explore
opportunities for collaborative partnerships’ (p8). Although there can be discussion
about the form such a service might take and what precise role state or local
government should play, brokering collaborations will be at the heart of successful
private – public cooperation on advance manufacturing and will not happen through
the market alone.
Main questions
Four fundamental questions are raised in the Issues Paper:
1.
What is manufacturing? (p10)
2.
Is there a need for a completely different approach to Government policy for
manufacturing in Victoria. If so, broadly what form should it take? (p5)
3.
What principles should guide the development of manufacturing policy? (p18)
4.
What actions should the Victorian government take to improve competitiveness,
productivity, investment, jobs and export growth in the manufacturing
sector?(p18)
In answering the first question, Knox stresses the need for clarity about the diversity within
‘manufacturing’ and the differential public policy and interventions required.
This underpins the Council’s decisive ‘yes’ to the second question for innovation in
approach to manufacturing policy in Victoria.
As to the principles guiding the development of policy, they should be pragmatically derived
from what has worked here and in other dispensations. They should reflect a determination
to:
- create the policy and investment opportunities to support the growth of modern
manufacturing and to dismantle any barriers to it;
- enable Melbourne to become Australia’s leading exporter of advanced
manufacturing goods and services; and
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improve the image of manufacturing to allow it to attract talented workers.
The actions required are wide-ranging and require an ‘all of government’ approach that links
urban policy, education, infrastructure, regulation and communications with industrial policy
in a concerted effort to modernise the manufacturing offer in Victoria.
Question 1: What is manufacturing?
The manufacturing industry in Victoria has changed beyond all recognition in the last
few decades. Though the popular perception may be dominated by images of assembly
lines, low skilled employees, big factories and loud machines the reality is now very different.
Manufacturing is becoming ever more complex and sophisticated and has moved away
from large vertically integrated firms which off-shore lower value production, towards clusters
and networks of SMEs that are local and connected to national and international value
chains. This model is at the heart of innovation and the knowledge economy in Victoria.
Manufacturing is also the biggest single source of investment in what are called
‘intangible assets’ such as research and development, knowledge transfer, design and
brand equity. Today’s manufacturing company typically spend three times as much on these
as on physical assets.
The ‘advanced manufacturing’ emerging from this trend is about far more than production
and assembly activities. Product development, design and branding – knowledge
intensive processes are becoming increasingly important as sources of value to
manufacturers. As part of this process modern manufacturing has moved beyond just
making things to combing goods and services into packages – the so-called ‘manu-services’
which are real areas of growth and non-technical innovation in the Victorian economy though
largely un-acknowledged.
Manufacturing as a knowledge and service industry has very different locational
consequences from the traditional model with a premium on where an increasingly
sophisticated workforce chooses to work.
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In office-like spaces not factories;
In mixed developments with retail and residential facilities close to jobs: ’liveability’ is
a core value of the environments sought by skilled employees in advanced
manufacturing and knowledge economy; and
From homes in city suburbs supplied with the latest broadband capacity but also
cheek by jowl with higher education - not commuting to the inner city or freeway
junctions.
Echoing this last point modern manufacturing thrives in urban areas which link
attractive environments with clustered research activity. Knox City Council is a
committed partner of the South East Melbourne Innovation Precinct (SEMIP) initiative
that aims to improve connections between businesses and researchers. The Precinct
assets include major pieces of globally unique research infrastructure, for example, the
Australian Synchrotron, Melbourne Centre for Nanofabrication, Monash University and the
CSIRO. A manufacturing strategy for Victoria needs to include how best to un-tap the
enormous potential that lies within such publicly funded research organisations and exploit
the close proximity of these institutions and the synergies they enable.
Knox believes and all research shows that good urban policy and good
manufacturing policy are two sides of the same coin – and that it is no coincidence that
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two thirds of high growth companies can be found in city locations. Reinforcing this cityeffect and investing in the infrastructure which supports it will have more benefit for the state
economy than diluting it and diverting resources to regional Victoria.
Question 2: Is there a need for a completely different approach to public policy for
manufacturing in Victoria ?
Yes. Public policy has been slow to grasp and engage with this massive shift. It requires a
strategic response and an investment in change across a wide policy front. Essentially the
new approach advocated will both modernise manufacturing policy and align it more
effectively with urban policy. This city flourishes – and performs its economic functions for
the state and indeed Australia - when those twin pillars of policy combine well.
In our view that means deploying public policy and investment to support places
where modern manufacturing has the environment, infrastructure, connectivity, high
skilled workforce, business support, clusters and networks of companies on which it
will thrive. That view underpins our own integrated drive towards a prosperous and modern
economy for Knox. A new effective approach to public policy for manufacturing in Victoria
will in our view need to be integrated, linking policies on business support, the growth of
business clusters and knowledge transfer and the development of skills and capabilities with
appropriate investment in both soft and hard infrastructure, public amenity and indeed
housing. Cities enable such integration which is why they are such engines of growth. This
is where a new policy for manufacturing in Victoria needs to focus its effort.
Question 3: What principles should guide the development of manufacturing policy?
An understanding of the drivers of economic change in Victoria which are re-shaping the
nature of manufacturing and its requirements for relevant skills and capabilities and focusing
it in new activities and new urban locations. This entails a new, more holistic, set of
interventions by government.
An understanding that modern manufacturing policy does not mean subsidising a
single sector, training employees for one occupation, or attempting to ‘back winners’. It is
about understanding and promoting the broad-based modern skills and knowledge required:
In mathematics, science, design, ICT and the new enabling technologies emerging which
have potential applications in a wide ranging number of sectors and industries such as
digitisation, micro electronics, nano technology and nano-materials, industrial biotechnology,
photonics and advanced materials.
A commitment is also required to work in partnership with local government and its
partners to enable a better balance between more localised solutions and centrally driven
approaches. In saying this, Knox Council is not promoting local government self-interest.
With the introduction of economic development units into local government since the mid
1990s a significant capacity has been developed in understanding and working with
businesses at a local level. In the modern era, smaller dynamic smaller companies so
central to success will yet have little time or capacity to engage with or understand centrally
driven initiatives and the large bureaucracies. Their voice often goes unheard. In this
context, an effective state government manufacturing policy and approach will in our view
see partnership with local government as a real strength. It will create opportunities to work
productively with and through local government – where the form-filling culture associated
with so many centralised ‘business support ‘initiatives is less evident and where more
effective relationships with business are built. That partnership, we believe, will deliver value
for money and effective support services and programs on the ground in ways which really
resonate with and assist local enterprise.
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Above all, there is a need for policy to be underpinned by a commitment in principle to
advanced manufacturing as a priority. Not for historical reasons or tradition but because it
offers the greatest potential for ensuring this state’s economic growth.
In the words of the Manufacturing Renaissance Council of Chicago – ‘a city which has really
got to grips with this agenda – advanced manufacturing represents our society’s ‘most
dynamic intersection of science, technology, research, innovation, entrepreneurial spirit and
human talent and the highest possible fusion of public and private interest’. It is also where
products and solutions for the environmental challenges left by the first industrial revolution
will be created.
Question 4: What actions should the Victorian government take to improve
competitiveness, productivity, investment, jobs and export growth in the
manufacturing sector?
The actions required of the Victorian government are less about new resources than
better use of existing ones. Less about acting in isolation than partnering with local
government and private industry, and above all less about Treasury ‘programmes’ or
‘business support’ intervening narrowly in a sector. What is required is cross-government
alignment in support of the capabilities and skills, the environment and infrastructure, the
partners and places, essential to modern economic success for Victoria. A holistic,
integrated and concerted approach, focusing public resources where they matter.
The key actions need to be rooted in an understanding of the factors that hinder or
accelerate the growth of advanced manufacturing and a determination to use all state
government levers and partnerships in an aligned and whole of Government approach.
Critical factors in the success of advanced manufacturing include :
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innovation and knowledge transfer
take up of new technologies
accessing skills and training
access to finance
exporting
regulatory issues
inter-sector capability transfer
Relevant actions are:
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the nurturing of relevant skills and capabilities;
the linking of tertiary education with modern manufacturers in the development
and exploitation of products and services;
a modern communications network connecting entrepreneurs with each other
and with new markets, both virtually and physically;
a reduction of regulatory burdens and of barriers to government procurement
which particularly impacts on SMEs, the key drivers of the new manufacturing
economy;
business support which doesn’t sell one size fits all services but brokers
relationships and supports networks, helps knowledge transfer, the
commercialisation of IP and innovation and intermediates for and on behalf of
SMEs;
an approach which recognises the irreplaceable role local government plays in
bringing together the public and private sectors at the local level; and
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an approach which, crucially understands that advanced manufacturing thrives in
certain environments and not others;
working with leading edge companies and local partners to showcase Victoria’s
manufacturing excellence and the attractive working environments in which it is
achieved
setting out a new narrative based on the importance of advanced manufacturing
for Victorians and of Victoria’s export economy for Australia, on the radical shifts
underway from brawn to brain and on what that means for people and places.
The final Knox answer is to a key question raised in the form of a statement in the Issues
Paper, that ‘the inquiry will consider where there is a case for government intervention’(p16).
Knox answers ‘yes there is’, decisively. There are things which government can do to
increase the comparative advantage of Victorian manufacturing companies. They just aren’t
the things which have previously been done. The key is to focus policy in support of city
districts which integrate liveability for residents with a rich employment pool. As an
illustration, we would like to highlight our approach to the development of Knox
Central where we are taking forward an urban regeneration program through activation of
an advanced manufacturing sector. Knox Central is poised to play an important role in
linking strategic business/manufacturing locations in our city and the broader region. These
include Bayswater Nth, Scoresby Rowville Employment Precinct and key areas in our
neighbouring municipalities of Maroondah and Greater Dandenong positioned along the
north – south Mitcham to Frankston corridor, which is stimulating new investment patterns
and industry relationships in this sector.
We stress that as a local authority exercising leadership in the development of our own place
we are already moving this project from analysis to delivery. But it will happen best in
partnership with state government and other public bodies who invest in, have land or take a
strategic interest in our area.
Knox Central: strategic investment and partnership
Knox Central is a 200 hectare urban renewal project promoting a new model of
sustainable suburban development with a globally competitive advanced
manufacturing hub at its core. With the right partners, investment and approach Knox
Central can create up to 12,000 jobs and 40,000 sq foot of modern space for office,
educational and advanced manufacturing use in a modern, mixed use environment. This
would make a serious contribution to state economic performance .
The Council’s approach, based on extensive research on markets and development models
and a policy process which embeds strategic economic objectives in spatial planning, has
been termed a ‘first for local government in Australia ‘ that will ‘re-define the urban
investment and development landscape’. What makes it different is both the primary
objective and the approach. The objective is wealth creation for the region in a production
economy built upon business, industry and links with an entrepreneurial tertiary sector.
This contrasts with the more conventional ‘consumption economy’ dependent simply on
residential, retail and leisure development. While these elements will be in the mix of this
new community, we are determined to ensure that Knox Central makes its formative
contribution to the state economy by prioritising advanced manufacturing and related
business services. With the support of state government, we can achieve this.
The difference in objective is matched by the approach. Instead of public owners of land in
Knox Central – the Council, Swinburne University, the Department of Primary Industry –
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selling off their different pieces for short term speculative property development , we seek a
partnership aimed at promoting wealth generation as the cornerstone of any urban
settlement. We believe such a partnership would attract high quality investment from
institutions such as AMP, taking a longer term interest in this place and its future.
The future of manufacturing in Victoria: “Made in Knox”
In initiating this consultation the new state government has shown its desire to be a major
advocate for and sponsor of the advanced manufacturing base of this state. It has within its
gift to also be an investor in the future of manufacturing by virtue of its stewardship of the
soon to be vacant DPI site in Knox. We believe that future will be ‘Made in Knox’ if the
government adopts the approach to manufacturing advocated in this submission and the
offer of an alliance to make aspirations concrete in this dynamic part of Melbourne. Our
vision set out in our Economic Development Strategy was for an ‘internationally competitive,
inclusive and dynamic economy’v. In seeking to achieve that by our own resources, support
from partners and the right public policy we can deliver that vision for Knox and for Victoria.
In conclusion we commend this submission to the Inquiry and to the Minister. We also
extend an offer to the Commission team to visit Knox. Come and see the potential. Meet the
officers, politicians and our partners in industry and academia who are committed to this
agenda. Let us have a new kind of dialogue on the future of manufacturing in this area.
Work with us in new effective ways of creating and delivering policy and change in an
innovative collaboration between state and local government. We are up for it.
Submission Author
Dr Tim Williams – Consultant Industry Strategist
Submission Contributors and Industry Partners
Peter Chaffey Coordinator Economic Development, Knox City Council
Mark Holdsworth Program Manager Partnerships and Alliancing Knox Central
Dr Ingo Kumic Coordinator Place Program, Knox City Council
Dr Shaun Smith Executive Director, South East Melbourne Innovation Precinct
Ian Ralph Enterprise Development Manager, Victorian Centre for Advanced Materials
Manufacturing
Phillip Leslie Business Strategy Manager, GlaxoSmithKline
Endnotes and references
i
Regional Economic Development Strategy for Melbourne’s South East 2003 – 2030
Regional Analysis and Economic Development Framework, Knox City Council, August
2009; Knox Economy Futures Study – Draft Report, Knox City Council, April 2011
ii
iii
iv
v
Various reports, but in particular: Knox Central Investment and Development Program,
Knox City Council Report, November 2010
State of Australian Cities 2010 Report
Knox Economic and Development Strategy: 2008 - 2018
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