By Tim Harcourt*

When I was at ACTU, everyone was there wanting to be the Prime Minister one day (or at least get into Parliament). In fact, the then ACTU Secretary Bill Kelty told us that there were a few potential future PMs amongst us when we had the rare staff meeting (usually after an election). This is not surprising the job as I had at the ACTU as the research officer had originally been filled by Bob Hawke who became a very successful PM and Ralph Willis, who became Treasurer. ACTU Presidents Simon Crean and Martin Ferguson are currently in Parliament and Cabinet (Jennie George also made it to the green leather) and two potential Labor PMs Bill Shorten and Greg Combet also distinguished themselves in the trade union movement before running for Parliament and also becoming Cabinet Ministers.

But in hindsight, when I think about it, instead of looking to Parliament some of us young ACTU research officers should have been thinking about trying to join another powerful and influential institution in Australian civic life – the Australian Football League (AFL).

You only have to look closely at the evidence and the data (and not just the on field footy stuff Bruce McAvaney quotes) to see how important the AFL is in the Australian Economy and Society at large.

Here are just a few examples of the influence of the AFL and the leadership it brings to Australian economic life.

Firstly there’s a matter of membership numbers (as Graham Richardson says, give me the numbers any day).

According to the AFL, there are now 707,621 members which have risen every year since 2001 (with the only drop in the last two decades being in 2000 during the Sydney Olympics). Collingwood leads the way with 72,688 one eyed members followed by Hawthorn on 60,841 and West Coast on 57,377. According to the AFL’s Phil Martin, 1/33 Australians belong to an AFL Club, with significant corporate and community influence on top of that.

Secondly, there’s the business impact of the AFL. When I was with Austrade I once helped the AFL set up a game between the Crows and Collingwood in the United Arab Emirates. Why? Partly the game was to service the expatriate market (Dubai and Abu Dhabi have lots of Aussie residents).  And partly to support Emirates who sponsor Collingwood and Toyota who support the Crows (with the UAE and Saudi Arabia being major export markets for the Toyota Camry).

It works the other way too. Foreign investors who want to get some profile in the Australian market look at the AFL for its national reach. Companies like Hyundai (who have sponsored Carlton) Kaspersky (Melbourne) and of course Emirates, have seen sport – particularly the AFL – as a great way to get their brand known in Australia.

Thirdly, the AFL has shown it has the ability to recruit in new territories – recruiting in the non traditional areas that have been typically rugby league dominated. In this sense, the AFL has set a good example to trade unions and political parties suffering from declining membership.

Take the AFL’s recent ’Northern Exposure’ expansion teams the GWS Giants and Gold Coast Suns. They haven’t won many games on the field yet but the business impact regionally has been immediate (although GWS did produce 8 rising stars this year – an AFL record).

On the Gold Coast, the Suns have recruited just 11 000 members in their second season and have averaged 13,700 per game at their new state of the art ground, Metricon Stadium. According to the Suns, during Metricon’s first year of operation 110,000 of those who attended Suns home matches were visitors from outside of the Gold Coast and the team brought in almost 165,000 over nighters during their first year of AFL competition.  This was much needed given the flat state of domestic tourism after poor weather conditions in South East Queensland. With great support from the Gold Coast City Council, the Suns have been excelled off the field with the team surpassing its economic contribution target to reach almost $50 million from inception. There have been added benefits of the Suns to the Gold Coast community including support for the arts such as the ‘Bleach – Surfing the fringe festival’ run by the dynamic Louise Bezzina, and the use of Metricon for concerts by the Foo Fighters ($5.5 million impact with 38,000 attendees) and of course the opening and closing ceremony track and field events at the 2018 Commonwealth Games.

In western Sydney, the GWS Giants have recruited over 10,000 members in their first year and have achieved average crowds of 11,000 per game in both Sydney and Canberra (including an aggregate of 60,000 for both Sydney ‘derbies’ against the Swans). GWS achieved $20 million in extra media exposure in month leading up to first game, with some innovative techniques introduced by Coach Kevin Sheedy and GWS Corporate Affairs head (the former Channel Nine and ABC journalist and AFL Official) Nick Johnston. Having Sydney journalists in the box with ‘Sheeds’ and having injured players commentate for the ABC have shown how open and accessible the GWS Giants have been to the Sydney, Canberra and national media. Corporately the GWS have made a splash under the leadership of CEO Dave Matthews with a $65 million investment in Skoda stadium. Another major ‘capital injection’ has occurred with the GWS commitment to Canberra with the inaugural Prime Minister’s Cup match against Julia Gillard’s beloved Western Bulldogs. The GWS have attracted some major heavy hitters in Sydney business and media circles too such as Steve Waugh, Sunrise’s Melissa Doyle, and GWS chair is also the chair of the powerful Business Council of Australia, Tony Shepherd.

Fourthly, the AFL does its bit for international diplomacy by building international links. Recently AFL’s Phil Martin hosted the Latin American Ambassadors at an event in Melbourne to introduce the likes of Brazil, Argentina, Chile and Uruguay to the great Australian game. Many trade and diplomatic delegations get treated to a game when they are in Australia and even GWS Coach Kevin Sheedy and yours truly spoke at an even ‘Look West – Western Sydney and Western China’ to the  Australian China Business Council. Sheedy’s work in the corporate world in Sydney as well as in the western Sydney communities has been phenomenal.  The AFL has organised an international AFL competition with teams from Ireland, PNG, and Denmark etc. And in a rare example of football diplomacy they sponsored a joint Israel & Palestine Peace Team coached by Dipper. (It was great to hear someone yell out at the game “C’mon umpire give Peace a chance”). On the field too, there have been NAB Cup and exhibition games in the UAE, South Africa, China and now the game between St Kilda and the Swans across the ditch in Wellington for premiership points next ANZAC Day.

Finally, the AFL plays an important role in civic leadership and social issues. The AFL has taken a strong role on equal opportunity whether it be promoting female membership, running campaigns about anti-racism messages, anti-homophobia and indigenous rights. Indigenous players, who make up nearly 12 per cent of the AFL player roster, have been an important part of the AFL’s international efforts with Indigenous legends like Michael Long and Mick O’Loughlin taking Indigenous team (the Boomerangs) to the townships of South Africa as well as working with local communities. The AFL has been an important player in building Reconciliation and respect between people within our nation too.

So as we wait for another classic AFL Grand Final, all you young aspiring Prime Ministers on all sides of the political spectrum, do you really want to go into Parliament or do you want to have real influence – by running the AFL? ACTU Secretary Bill Kelty didn’t run for Parliament, but became an AFL Commissioner instead. Bill always was an astute sort of fellow! Whether it came to economics, politics in issues like superannuation and football, Bill was always ahead of his time.

*Tim Harcourt is the JW Nevile Fellow in Economics at the Australian School of Business, UNSW and author of The Airport Economist: www.timharcourt.com He played amateur league for the Adelaide University Football Club with the legendary Bob Neil.

Thanks to Phil Martin,  Shannon Gill & James Tonkin of the AFL, Dave Matthews, Nick Johnston and Kevin Sheedy from the GWS, Jason Sintome of the Gold Coast Suns, and Ross Giudice of the Gold Coast City Council for their assistance.

by Tim Harcourt*

I met Tim Harford by accident. I got a call once from a journalist asking my views on the economics of sexual activity. As a trade economist expecting a call about exports I was a bit surprised but in the true Aussie spirit I thought I would ‘give it a go’. But as I was trying to answer the questions about teenagers and oral sex, the journalist said to me “hang on you don’t sound very English.” I replied: “Well, No because I am Australian.” The journo said: “Aren’t you Tim Harford the author of The Undercover Economist? From London” I replied “No I am Tim Harcourt, the Airport Economist, based here in Sydney.” The perplexed journo realised the mistaken identity but with some adaptable lateral thinking he decided to write a feature on both of us, the two Tims, The Undercover Economist and The Airport Economist with similar names though from separate sides of the world. As a result, Tim (Harford) saw the article, found out about his almost namesake and got in touch with me when he came to Sydney. We had a beer in The Rocks and we’ve been friends since and hence this blog. And as they say the rest is history.

Ironically, in a way that life sometimes imitates art, the Harford-Harcourt chance meeting over a beer is central to the theme of Tim Harford’s excellent new book Adapt. Accidents do happen and we can benefit from them. And not only that, if we over plan things they may not and we may get an even worse result. Adapt teaches us that it is ok to fail, it is ok to experiment safely and lives and enterprises that are over-planned, over managed and over measured are bound to fail. Adapt is good news for creativity and bad news for management consultants. Adapt gives great examples of this occurring everywhere from Xerox to the Soviet Union and World War Two. Along with the book by John Kay, Tim’s colleague at the Financial Times, titled Obliquity, I think Adapt is one of the best business books you’ll ever read.

A great example of the Harford thesis in Adapt comes from my own travels experienced in The Airport Economist (I travelled to study 56 countries in 5 years to study their economies, hence many airports and the title!). In the first chapter Everybody loves Raymond I tell the story of Singapore and the saga of their ‘Be Creative” drives engineered by Cabinet Minister Raymond Lim. Singapore thought it had a ‘problem’. Whilst it was economically successful and produced lots of people with technical and financial skills, like engineers and superannuation fund managers, it felt let down on the ‘left hand side of the brain’ department and thought it needed to produce more poets and ballet dancers. As a result the Government decreed: “We must all be more creative. So everyone must report to creative classes between 10am and 12 noon sharp on Saturday mornings. They are compulsory. As from now on, in Singapore we take fun, seriously.” Funnily enough, the compulsory creative classes didn’t work so well but by accident a Singaporean student knew John Bell, from Bell Shakespeare and brought him over to teach civil servants a bit about Shakespeare. This worked a lot better than the compulsory classes. And Raymond Lim, decided he’d fuse Singapore’s technical skills with international multimedia (attracting the likes of National Geographic) and built a new Opera House ‘The Durian’ (ok, it’s not the Sydney Opera House but it’s not bad).

The Singapore episode demonstrates the lessons in Adapt. Accidents do happen and if you adapt and leverage them good things can come. And if you force things like innovation and creativity and control things, you might produce an opposite result. I think many of us in our business lives – in both the private and public sectors – have seen the adverse impact of managerialism with management – speak, like mission statements, performance management, brand-nazis and other forms of ‘McKinseyitis’. As Adapt shows, people want mentors not managers, and need the space to create and adapt instead of being planned and ‘outcomes-driven’ out of existence.

So I met Tim Harford by accident and thanks to some quick thinking (Adapt style) by a journo, and the universal interest in sex by all, The Airport Economist-Undercover Economist, partnership was born with Freakonomics soon to make up a unique trifecta (you’ve seen the three tenors, wait until you see the three economists!).
And if you loved The Undercover Economist you’ll love Adapt (and Tim’s performance at the Sydney Opera House**). And you can trust me on that one; after all I am an economist….. called Tim.

**For details of Tim Harford’s performance at the Sydney Festival of Dangerous Ideas see:
http://ideas.sydneyoperahouse.com/2012/guest-op-ed-harcourt-on-harford/

*Tim Harcourt is the JW Nevile Fellow in Economics at the University of New South Wales and author of The Airport Economist www.theairporteconomist.com

By Tim Harcourt*
Brazil and Australia are two great southern lands that are vast, diverse and for their founders, considered to be far, far way. And for many years out of sight meant (hopefully and maybe even by design) out of mind.
One land Australia was settled as a gaol, a great public private sector partnership (ppp) but it really became three societies, the gaoled, their gaolers and the dispossessed local indigenous populations.
Somehow, despite these humble beginning and tensions, the society did get on thanks to great natural resources, wheat, wool and a gold rush or two, and eventually free settlers from the old world joined the gaoled and the gaolers and over time outnumbered them.
The country was also successful due to great national leadership by Bob Hawke, a trade union leader, who had been to Oxford as a Rhodes Scholar, and who as Prime Minister led a Government that decided to change the habits of a century. The dollar was floated, tariffs reduced, trade unions and employers reconciled, and the nation embraced its neighbours to the north in an economic partnership. ‘The Tyranny of Distance’ was replaced by ‘The Power of Proximity’. As a result, today this land is now one of the most successful economies in the world, having survived an Asian financial crisis just over a decade ago, and the recent global financial crisis (GFC) with barely a scratch. The society is better integrated, more globally engaged, and in some ways more confident in its global outlook.
The other land Brazil wasn’t settled as a gaol in the same way, but under the burden of slavery. The other land is vast too but geographically very different. This land also had its issues with its indigenous people, it too relied on immigration for its human capital and it too has vast natural resources that the world wants. It too had issues with its neighbours but for the most part avoided conflict and according to local economists and historians this made it relatively parochial and mainly focussed on internal issues within its borders except for a quick trip next door for a tango lesson.
This land also had its economic issues to contend with the impacts being felt even as recently as a decade ago. For much of its recent economic history, it didn’t have double digit inflation and unemployment to contend with but it had much worse problems, with hyperinflation, labour market dislocation and mass poverty. Its financial system was not so much antiquated but dysfunctional, there were problems with exchange rates, interest rates and debt burdens and there were not just strikes but widespread social unrest impacting on its very democratic stability.
However this land also had a trade union leader, Lula. He hadn’t been to Oxford, but was from the poor north east of the country, had been gaoled for his trade union activity and ran for president three times before being elected. He too reformed the country’s economy whilst maintaining strong social justice programmes (many of whom were started by his predecessor who was a well-known professor of sociology before coming to office). As result this land is now also economically well positioned to deliver resources to rest of the world to generate prosperity and raise living standards for its citizens. It seems a long time since its difficulties, especially those of the 1970s and 1980s.
Of course, these two lands, Australia and Brazil have their similarities but we still don’t know much about each other. From an Australian point of view when we thought of Brazil we mainly thought of sand, soccer and samba. We didn’t know much about Brazil although we all knew about Pele. In my hometown of Adelaide, when Pele famously visited he received the biggest local reception since the Beatles in 1964. And even when I joined Austrade in 1999, when I asked to head of Austrade at the time, permission to go to a conference in Brazil, he laughed and said I just wanted to go to the beach in Rio, and said Brazil (and South America in general) was of little importance to Australia. Furthermore, he didn’t believe that there was a conference in Brazil for me to go to and asked me for the paper work. So I got the conference organizer to send me twenty-five pages in Portuguese, with my permission slip on top. He signed it without managing to get past the first page!
But this was 9 years ago. And people’s perceptions of Brazil are changing. And it’s not surprising given Brazil’s solid rate of economic growth (7.5 per cent in 2010, post-GFC, with a follow up of 4.5 per cent anticipated if inflation risks are contained), accommodating fiscal and monetary policy, impressive export growth (thanks to China) and importantly strong increases in education retention and reductions in absolute poverty. I was told by local Brazilian economists that over 33 million people have been lifted out of poverty and 49 million have managed to reach upper middle class and middle class status since my first visit. In fact, I was told by one of my Rio hostesses that the Brazilian exchange rate is so strong “that even my maid is taking her holidays in Buenos Aires to do some shopping”. (I wrote about my first visit to BA in my article “Don’t buy from me, Argentina.”).
Of course there are issues in Brazil. We can’t ignore them as they need to be managed. There’s fear of inflation, fear of bottlenecks in infrastructure (with the 2014 World Cup and 2016 Olympics coming up), education and productivity issues, and of course the challenges of climate change. Some of these issues we face in Australia, too but on a much smaller scale. But many offer great opportunities for Brazilian-Australian close collaboration.
Collaborators or Competitors?
Brazil and Australia, the two great southern commodity exporters were sometimes seen as natural competitors. But increasingly we are doing more things together.
For instance, in education. Brazil’s growing middle class and its citizens who are being pulled out of poverty are hungry for education. Brazil’s human capital needs are Australia’s opportunity. Accordingly, our universities are doing more together particularly as many Brazilians now study in Australia. For Australia, Latin America now makes up just over 5 per cent of total enrolments, with Brazil ahead of the pack with just over 16,000 enrolments (followed by Colombia on 10,000, Peru on 2,200, Chile 1700 and Mexico 1500). And with Brazil leading the pack much vitality is added to our universities particularly in the schools of economics and business, the environment (e.g. marine biology), architecture and design which makes the typical Australian campus a much more attractive place to be nowadays.
In fact, education is one reason I have been recruited by the University of New South Wales (UNSW) in Sydney as the first JW Nevile fellow in Economics at the Australian School of Business. I am now teaching International Business Strategy in Asia, for UNSW’s Australian Graduate School of Management’s MBA programme, and I have been asked to build up a similar programme for South America. UNSW naturally is keen to have more South American students from Brazil, Colombia and Chile. In the 1980s we opened up our campuses to Asia, in this decade it will be the age of South America at our Universities. In addition, the UNSW and the Federal University of Rio de Janeiro (UFRJ) are supporting me and the Lowy Institute in co-authoring a book on Brazilian – Australian economic opportunity to be published in the lead up to Brazil’s ‘double header’ of the FIFA World Cup and the Rio Olympics. So Brazil can expect to see a lot more of me over the next 5 years or whether Brazil likes it or not! This will also provide great research for my future book The Airport Economist Goes to Rio.
In climate change, Australia’s Senior Trade Commissioner in Sao Paulo, my fellow South Australian Greg Wallis has been heavily involved in investments in water and clean energy. Given Brazil’s strong environmental credentials and Australia’s capabilities, we can both put green back into the green and gold of both countries!
And last but by no means least, sport, culture and recreation, the World Cup-Rio Olympics double will be the opportunity of a life time for so many in Brazil and also here in Australia.
On this point let me finish off two myths once and for all.
Firstly, sport is not frivolous; it’s a real business and increasingly a global one. Sydney had its moment with the Olympics in 2000, and many Australian companies got their break then. Austrade’s own Business Club Australia generated $1.7 billion in trade and investment from sports networking between Sydney 2000 and Beijing 2008 alone and they’ll be more to come in London in 2012. Brazil knows this too – that its ‘country brand’ will be on display in the lead up to 2014/2016 World Cup-Rio Olympics double – and they will be wanting to make the most of their time in the sun. (Something that I know Brazilians are very good at!). And from Australian point of view, its great news to see my mate Craig Foster, SBS Chief Football Analyst leading sports business missions to Brazil, following on from the great work that he and Les Murray did for Business Club Australia in South Africa at the FIFA World Cup in 2010. As everybody knows, Fozz is a passionate and dynamic individual and just the sort of person we need leading the charge in Brazil.
The second myth to bust is that if you like sport you can’t like the arts and vice versa. And I have got to say this is one that applies to Australia and not to Brazil. I have always loved the way Brazilians are so proud of their unique musical, artistic and cultural traditions as much as they are of Pele and Garrincha, Socrates and Ronaldo. It makes Brazil unique, a country of culture and charisma, which can never be replicated or manufactured. Australian historian John Hirst famously said that with cultural integration in Australia, in 2030 or so, Australia will be a ‘beautiful people.’ Well on that score, I think Brazil has got there already.
So in conclusion, Brazil and Australia, the two great southern lands, despite taking very different journeys in the past, are growing together in the future. And as we approach 2014 – 2016, as the whole world goes nuts for Brazil, I am sure Australia will be on board all the way from Freo to Rio, and we’ll play our part in the further success of this dynamic, charismatic and fun loving nation.

*Tim Harcourt is the first JW Nevile Fellow at the Australian School of Business, UNSW and author of The Airport Economist and The Airport Economist Goes to Rio. www.timharcourt.com

Tim Harcourt*

It is more than 30 years since I went to high school in Toronto At the time there was a minority Conservative Federal Government in Ottawa being forced to an election by the Opposition Liberals.

In 2012, the Conservative government is now in majority under Prime Minister Stephen Harper and it is Australia which is experiencing the perils of minority government. In Canada, an unusual situation has also developed where the traditional third party, the New Democratic Party (NDP), has replaced the Liberals as the official Opposition. The NDP has often governed at provincial level, initiated important reforms like universal healthcare, but has never formed government in Ottawa.

In recent years there have been enormous changes in the Toronto skyline and on the waterfront which has been re-developed for commercial maritime pursuits and recreational sailing. The city is also full of new Opera Houses and theatres as well as a range of research centres like the MaRS Discovery Centre near the University of Toronto.

Canada and Australia have a lot in common. Both are federal, geographically dispersed, continental sized countries, with Westminster systems of government and a similar standard of living. The two countries have placed a high priority on developing transportation, industrial infrastructure and social and health services for populations clustered in urban centres.

The historical ties are also strong. There were Canadian diggers at Eureka, a Canadian commander at Gallipoli and cricket was Canada’s national sport at the time Canada became a nation in 1867 (Australian tours to Canada include Don Bradman’s team in 1948). And some French Canadian rebels sent to Australia in convict times set up Sydney’s, “Canada Bay”.

Yet as Glenn Stevens, the Governor of the Reserve Bank of Australia (who is a University of Western Ontario graduate) points out: “It is surprising that Australians and Canadians do not spend more time comparing notes, given the things we have in common.”

Canada like Australia is remarkably diverse. In Eastern Canada, mainly Quebec, the economic focus is east to Europe, in Western Canada in British Columbia and Alberta, the focus is on the Asia Pacific (particularly China and East Asia), whilst the whole country has an eye on the US across its border.

At the Australia Canada Economic Leadership Dialogue that I attended in Toronto recently, the dilemma facing Canada was its closeness to the low growth economies of Europe and North America, whilst Australia by contrast was better connected to the high growth economics of Asia and the emerging world.

But despite our different geographical and trading positions there are clear similarities. The strength of our comparative banking systems left us in good shape during the global financial crisis. Canada and Australia have also experienced similar housing booms and corrections (it’s remarkable how Calgary mirrors the experience of Perth), and Canada’s terms of trade performance has also benefited from commodity price rises in the 2000s.

But what about Australia and Canada’s direct trade relations? Canada is Australia’s 22nd largest trading partner (worth around $3.2 billion in value in 2012) with a strong focus on wine, nickel ores, veterinary medicaments, food and beverage (Capilano Honey and Bakers Delight are success stories) and tourism (Wotif.com and Flight Centre are big in Canada). Major Australian companies with investments and major operations in Canada include Worsley Parsons, Plenary Group, Macquarie Infrastructure Group and Transfield. In fact, on the plane to Calgary workers on their way to Fort McMurray in Alberta’s north (a cold version of the Pilbara) told me Aussies made good bosses based on their experience with Transfield.

At the Toronto dialogue there were suggestion the relationship should be spiced up with minor tariff eliminations, non-tariff barrier reform, an air services agreement and changes to encourage more labour mobility. But the most contentious reforms were the changes to foreign investment, particularly as the Chinese oil giant CNOOC Ltd announced they would take over Nexen in Alberta in a deal worth over $15 billion. The discussion prompted Resources Minister Martin Ferguson who was at the dialogue to say that if the deal went through, then Australia expected a welcome mat to acquire Canadian uranium and also prompted some advice from former Prime Minister Kevin Rudd (a surprise key note speaker on the first day) on handling Chinese foreign investment. It appears Australia could do worse than observe Canada as a test case for foreign investment in the resources sector.

*Tim Harcourt is JW Nevile Fellow in Economics at the Australian School of Business, UNSW and the author of The Airport Economist www.theairporteconomist.com

He studied at Jarvis Collegiate in Toronto and played full back for the Ist XV Rugby team but still can’t skate well enough to play hockey.

Australian business goes for gold behind the scenes at London 2012
By Tim Harcourt*
There’s been lots of hand wringing about how many medals Australia has been winning at the London Olympics – at one stage we were behind New Zealand and are still behind Kazakhstan – but it’s looking much better now. ‘Super’ Sally Pearson in the hurdles, ‘Go’ Anna Meares in cycling (sorry Austen Tayshus) and the sailors are making sure we now have a respectable tally. And in any case if we did a “coaches” medal tally – taking into account all the Australian coaches who have coached Chinese swimmers and British athletes of various sports – we’d have a pretty good haul.
But for all the medal talk on the track, in the pool and in the velodrome, there are some real ‘quiet achievers’ at the Olympic Games too that are worth winners and examples of Australian excellence abroad.
Take for example, the Olympic flame itself. A South Australian company, FCT Flames was responsible for the amazing cauldron highlighted at the opening and closing ceremonies and the 204 small flames that made up the spectacular Olympic flame.
The creative capabilities of Australian architects are again on display, with architects like PTW (headed by ‘rock star architect’ John Bilman of Beijing Watercube fame) and Populous having built and designed many of the key facilities.
And there’s more. The polymer pitches for the Hockey (‘Smurf Turf’) have been produced by Advanced Polymer Technology Australasia, a Melbourne based manufacturer, the equestrian starting gates are manufactured by Adelaide Hills exporter Steriline racing, the rowing oars by Taree company, Croker Oars, and even the stadiums and venues are being cleaned up by Spotless (Cleanaway). Security is key to this Olympics given the fears of terrorist attacks and Australian business Intelligent Risks have played a key role in keeping the games safe.
And of course, the Olympic village itself was built by Lend Lease and the Olympic Precinct is dominated Stratford Westfield. Frank Lowy’s vision has been to lead a strong legacy in the form of a new town centre and shopping complex to help a depressed part of East London into the future after the carnival is over.
Many of these companies are veterans of Sydney Olympics in 2000, where many small and medium sized enterprises (SMEs) got their start, Beijing in 2008, and no doubt will play an important role in Rio in four years time. In fact I was having a look at the data, and of the 56 companies that worked initially on the Sydney Olympics in 2000, 43 have been at London 2012, and a further 17 have commenced work on Rio so far. And then there’s the FIFA World Cup, Rugby World Cup, Commonwealth Games, Asian Games, Pan American games to contribute to as well.
By chance, Kym Fullgrabe, Australia’s Senior Trade Commissioner in London will take up his new position in Sao Paulo after the games are over. So there’s nice continuity there for Australian exporters who want to go to Rio can take the London Bridge. So bring on Brazil with Rio 2016 (as well as the FIFA World Cup in 2014 in a unique ‘Samba double header’) and let’s see Australian business excellence match a strong sporting performance in four years time.
*Tim Harcourt is the J.W.Nevile Fellow in Economics at the Australian School of Business, UNSW and author of The Airport Economist: www.theairporteconomist.com
He visited London in his new role as Adviser – International Engagement to the Premier of South Australia, Hon Jay Weatherill, MP.
He has won 0 gold medals, 0 silver and 0 bronze at Olympic level.

Burmese Days – the economics of sanctions

By Tim Harcourt*

The world economy is used to surprises – usually on the downside. But one on the upside over the past year has been the reforms in Burma and the lifting of economic sanctions. The surprise reforms of the new Burmese government of President Thein Sein, the election of Aung San Suu Kyi to parliament and the latter’s call for Burma to open up to trade and investment have been monumental changes given Burma’s recent past. Australian Foreign Minister Bob Carr was one of the first foreign politicians to visit Burma since the new developments and other western nations have lifted sanctions and made (tentative) moves to invest in and trade with Burma under the new regime.

But what is the economic impact of sanctions and what happens to economies after sanctions are lifted? The economic evidence is mixed when looking at trade sanctions against South Africa, Southern Rhodesia (now Zimbabwe), Cuba, Fiji and now recently Burma. According to Yale University economist Philip Levy the economic sanctions against South Africa were more ‘psychologically hurtful’ to the apartheid regime than economically damaging, although there is evidence that disinvestment by major institutions like Chase and Barclays had more of an impact than trade sanctions. As in the case of Cuba and Southern Rhodesia, trade sanctions did not have as much impact as restrictions to foreign investment and in any case the economic distortions in the domestic economy (like South Africa’s apartheid labour market distortions) were as damaging as external sanctions. Levy believes that the collapse of the Soviet Union was the key factor in enabling the white minority government to start negotiating with Nelson Mandela and the African National Congress, making South Africa a ‘special case’ in terms of effectiveness of sanctions.

But what about Burma? Will it be a special case? It is clear that Burma has some big mountains to climb economically given the long days of military rule, isolation and the fact that it is a very poor and populous country. As the world’s leading Burma expert economic Professor Sean Turnell says: “Burma is paradoxically a resource rich but economically poor country.” One reason has not just been the isolation due to sanctions but also the enormous economic distortion of maintaining such a large military presence with no external defence purpose. According to Turnell, Burma kept “300,000 men under arms” (i.e. almost the population of Canberra) despite there being no obvious “genuine external threat”, which is similar to the economic burden placed upon South Africa of the vast bureaucratic apartheid apparatus (not to mention the ethical burden). The defence overhang for Burma has put its fiscal policy under serious strain and created inflationary issues dissuading investment. Maintaining the military apparatus in Burma has also created bureaucratic distortions, sucking away resources from much needed infrastructure, health and education and handicapped Burma’s human capital development (creating too many idle low skilled soldiers and not enough farmers, teachers or other skilled workers).

The military overhang is the most pressing constraint on Burma’s return to any form of economic normalcy. But now Thein Sein has made some moves in the pro-democracy direction, what can Burma do straight away economically? Turnell has identified ‘low hanging fruit’ such as providing visa on arrivals for tourists, eliminating export taxes and import licences, allowing banks to lend to farmers, and deregulating interest rate ‘caps’ and other financial regulations. But at the end of the day, economic development must come in the agricultural sector and in resources and Burma needs to develop institutions in areas like banking and finance where there is almost no viable sector to speak of. And that’s all dependent on the capacity of Burma to reduce the military presence in the economy and society and create ‘room’ for other sectors. In a country where the armed forces have had so much control for so long, that’s a big ask.

So can Australia play a key role? Bob Carr gave Aung San Suu Kyi a strong assurance that Australia was willing and able to play an important role in Burma’s return to democracy and long term economic viability. Australia has a big role to play in infrastructure given the need for roads, rail, ports and telecommunications to serve its 62 million plus population, BHP Billiton can help in the development of oil and gas, and ANZ can play a similar role to its Pan Asian banking strategy in neighbouring Vietnam, Laos and Cambodia, and Australia’s education institutions can help with human capital development. But most of all Australia’s comparative advantage in agriculture, as well as our expertise in education and tourism, means we are well placed to help with Burma’s capacity building in the same was as we’ve helped the developing economies of Burma’s neighbours in the Mekong Delta. But it will be gradual and ‘softly, softly’ as the world investment community monitors the progress of the pro-democracy reforms.

It will take years to recover from what has happened in Burma since the 1960s, economically, politically and psychologically, but the lifting of sanctions and some luke warm (but positive) responses from investors and exporters (including from Australia) may signify some small steps to recovery on the new road to Mandalay.

*Tim Harcourt is the J.W.Nevile Fellow in Economics at the Australian School of Business, UNSW in Sydney and author of The Airport Economist: www.theairporteconomist.com

Colombia’s Premium blend
By Tim Harcourt*
There’s been a lot of research around now about the economics of country ‘brands’ and how they affect a consumer citizen’s perception of a country in the same way they may view a consumer brand like Apple, Coca Cola or Qantas. Simon Anholt, one of the most famous brand ‘gurus’ and many of his colleagues have been engaged by different countries’ trade and tourism boards to shape how the rest of the world. Even the Australian Government got in on the act with their ‘Australia Unlimited’ campaign. The research, they say, is very important as we only think about other countries for a brief moment of time in our lives. And unless they are a superpower or a close neighbour (and sometimes more of an enemy than friend hence the importance of paying attention to them) we spend very little time thinking about other places at all. It was brought home to me at the APEC Leader’s Summit in Sydney in 2007, when all the APEC heads of government gathered in the harbor city. The Russian President Vladimir Putin, who was the first ever Russian head of state to visit our shores, was asked “What do you think of Australia?” and he replied: “I never think of Australia.” And in some ways we shouldn’t be surprised by Putin’s remarks, as it’s not possible to go everywhere in one life time (even if you are an airport economist!) let alone think about every place in depth. At the end of the day, we have a brief impression or perception of most countries, and they are just the ones we’ve heard of. That’s we’re the country brand research plays an important role.
And for those who say that a country’s ‘brand’ doesn’t matter, they should look at the case of Colombia. For years the country’s image was dogged by images of cocaine wars and drug cartels. The high point (or rather low point) of Colombia’s poor image took place during the 1994 FIFA World Cup in the USA, when one of Colombia’s players, Andres Escobar was gunned down by drug lords after scoring an own goal and putting the highly fancied national team out of the finals.
But on an airport economist tour of Colombia perception could not have been so different than reality. On arriving in Bogota international, I exchanged friendly comments with the immigration official in both Spanish and English, who asked me “How Lleyton Hewett was going”, and the conferences around Bogota were enthusiastic and lively with leading business people and government officials having a positive view of Australia’s economic capability and a keenness to engage in Pacific rim institutions (such as APEC) where Australia has a good reputation with strong multilateralist credentials. Sandra Salamanca Rosa, the Director of Colombia’s National Business Association (ANDI) who hosted me in Bogota explained: “Australia is an emerging investor in Colombia’s resources sector, with major players like BHP-Xstrata, Ludowici Range, Cerromatso (BHP’s Nickel Division), Sedgeman and Downer EDI all playing a major role in Bogota along with Orica, Qantas and QBE.” Salamanca Rosa, speaks fluent Mandarin and her savvy business and language skills were on display as she showed leading Australian business delegates around Cartagena, on the Caribbean coast of the country, at a major oil and gas investment conference.
But it was really in Medellin, where you could see the new Colombia in action. Medellin in the centre of Colombia and was the centre of the drug wars. Medellin has a very young population and a large reserves of human capital, with a highly education, service orientated professional workforce. On a helicopter ride around Medellin and the surrounding historical town of Santa Fe, the 35 year old head of the state department of Productivity and Competition, (in the state of Antioquia) Maximilliano Valderrama, explained: “Colombia’s main resource is our people. Given the past and its impact on our national image, we have to work twice as hard as everybody else to show what we can do. Many Colombians do MBA and other higher degrees in Australia, USA and Europe but they all want to come back to Colombia to build a new society.”
Valderrama’s observations are supported by empirical research by Maria Beamond, a Colombian born Brisbane based researcher who looks at human capital migration between Latin America and Australia. Beamond says: “there is a preference that the preference for Latin American graduates, including Colombians, after finishing their studies, is to work for one to two years initially in Australia, preferably with a company with business operations in their home country in the hope of subsequently being transferred to the company’s office in their home country. “

In fact, symbolically, Medellin was the home town of Andres Escobar. I was taken to his home club where he was a feted local hero. Valderrama, explained: “we have created a major sports and recreation complex in this area. During the days of the drug wars, kids were scared to get out of their house, now they can put that energy into sport. And after what happened to Andres, we wanted to honour his memory giving his people a chance to play football, run, swim, and engage in outdoor pursuits whilst they finish school.”
In fact, education is a big part of Colombia’s relationship with Australia, along with mining and professional services. There are now around 10,000 Colombian students in Australia which makes it the second most important source of students from South America after Brazil. And UNSW has a fare share of those bright young Colombians. I noticed it after getting back from Colombia on campus at UNSW but more what made me think about it was that famous Colombian service culture that Maximilliano Valderrama talked about. You see it in the shops of Bondi junction and Sydney’s eastern suburbs as many Colombian students at UNSW work part time in the local retail industry.
As Maria Beamond points out, “from the beginning of 2000, Australia became popular as a
destination to study as Colombia was confronting an economic and political crisis so therefore, professionals that were retrenched from their companies and wealthy parents decide to invest in higher education in Australia. Colombians are resilient because people have had to experience hard security circumstances that have made them to be tough
and spirited. It has made that Colombians help to bridge the gap between both countries as demonstrating to be good performers at work, and easy adapt to new work environments. Most of us, the professional Colombian cluster; know that we are the ambassadors of our country in Australia, in order to change the perception of Colombia in this country, which is also our home.”

Australia’s new interest in Colombia has been crystallized by the appointment of experienced diplomat Crispin Conroy to a new Austrade office in Bogota. Conroy sees Colombia was one of the new emerging markets in Latin America that is ripe for Australian investment. Conroy emphasised that whilst “the security issue is not resolved but it has changed significantly and the Australian brand’s strength in Latin America is at its highest in emerging markets like Colombia and Peru, just as it has been in Chile.”
So whilst we may have been thinking about Colombia for the wrong reasons a few years back, the new opportunities may enable Australia’s to think about Colombia in a different way in future. When it comes to country branding, perception matters as well as reality, and a new generation of Colombians (many of whom will be Australian educated) have a chance to put it right on the world stage.

*Tim Harcourt is the JW Nevile Fellow in Economics and an adjunct professor in International Business Strategy for Asia and South America at the Australian School of Business at the University of New South Wales (UNSW) in Sydney. He is also the author of The Airport Economist www.timharcourt.com.
Tim would like to thank the Council of Australian-Latin American Relations (COALAR), the Department of Foreign Affairs and Trade (DFAT), Austrade and the Government of Colombia for assistance with his visit to Colombia. Australia Latin America Business Council (ALABAC) is leading a mission to Colombia in September.

By Tim Harcourt*

A recent visit by a pop icon can demonstrate the vast cultural diversity of the region we simply lump together as ‘Asia’ despite its amazing mix of ethnicities and cultures. When Lady Gaga visited Japan, she was the first high profile foreign female to visit the country after the twin natural disasters of the Earthquake and the Tsunami. Her visit was considered good for morale for a grieving Japanese public in aftermath of the disasters that shook the community literally and psychologically. In fact, Australian Prime Minister Julia Gillard also visited Japan after the disasters and was the first foreign head of government to spend some time there (then French President Nicholas Sarkozy only touched down briefly).

But Jakarta is not Japan. In Indonesia Lady Gaga was gagged and concerts cancelled. Is this surge of political nationalism related to the upcoming elections and parties jockeying for position? Several foreign observers of Indonesian politics say it isn’t anything to do with elections but just the need to respect the values and mores of the world’s largest Muslim population. And in any case many touring acts come through Indonesia and the rest of South East Asia without incident.

But political nationalism is one thing what about economic nationalism? With elections coming up, Indonesia is no different than any democracy with parties calling for tariff changes and protection of local industry. This is important for the Australia-Indonesian economic relationship too given our strong trade and investment links in Indonesia. I realised how important the bilateral ties were when I was recently the co-host of the the distinguished Australian Alumni Awards in Indonesia with Frida Lidwina, the host of Metro TV in Jakarta, and saw how many Indonesian business and political figures were Australian educated and very close to Australia. In fact, this was at the time of the live cattle issue on Four Corners, and one of Indonesia’s most famous Australian alumni was the Mahendra Siregar, Vice-Minister for Trade (now Finance who went to Monash), and there was plenty a tension in the room. But the Vice Minister was gracious in his remarks and it took a very skilled and professional performance by Australia’s Ambassador to Jakarta, Greg Moriarty to steer us through the issue. If anyone ever wanted to see the skill and professionalism of our diplomatic corps, I’d point to that performance by Ambassador Moriarty and his team in the Embassy in Jakarta as a great example of excellence.

But despite the headlines of Lady Gaga and live cattle, when I interviewed Australian businesses in the country most have found Indonesia to be quite accessible with a prosperous, growth story despite the political economy challenges of dealing with such a massive population on a diverse archipelago. For example, in financial services, according to the ANZ’s Joseph Abraham, the Bank has expanded from “2 to 28 branches in 4 years, which would be harder to do in alternative markets like China and India.” Abraham describes Indonesia as “a good growth story, with high rates of return, estimated to be around 30 per cent higher on average than other markets.”

Justin Collings of Leightons in Jakarta agrees. “Rates of return are healthy in Indonesia, there are risks but you must understand the risks and put a value on it,” he explained. Collings, whose operation with Leightons is 80 per cent in mining, is also building crucial rail and road infrastructure, does refer to changing governance in Indonesia but says that: “Regulations change a lot and are a challenge, but they can be managed effectively and the negative aspects minimised.”

Collins points to strong education levels as important to business practice in Indonesia. “Many of our Indonesian staff are Australian educated, and/or trained in Australia. For managers, the International schools in Jakarta are excellent, including the Australian and New Zealand schools.” Collins says that “they know you are living the life of a contractor because your kids are sick and your furniture is broken, but we’ve has none of those issues here in Indonesia.”

Another Australian executive in Indonesia, Greg Patching, of Orica, also regards education relationship between Australia and Indonesia as crucial to the business expansion that Orica is undertaking in Indonesia. “We regularly send Indonesian staff to Australia for technical and cross cultural career development, they learn a lot there and we certainly learn a lot from them as a result.” Patching, a Fremantle Dockers supporter and currently on the playing list of the Jakarta Bintangs Australian rules football club (a notable fixture of the club was the late Craig Senger, a wonderful Australian trade diplomat in Indonesia and friend of the author), says that “life does have its moments in Indonesia, but it’s nothing like the hardship of following the Fremantle Football Club.”

Speaking of football, another Australian business figure in the region, Andrew Glynn of agricultural company Agspec Asia, has forged a partnership with the world famous Liverpool football club’s International Academy and Soccer Skills to bring sport and recreation to rural Indonesia. Together with the Liverpool Football Club International Academy and Soccer Schools (Indonesia), Agspec has set up a community programme for the kids of farmers in the poor rural parts of West Java. According to Glynn, “I grew up in rural South Australia, near Mount Gambier, so I wanted to do something for farm kids here in Indonesia who really do do it tough. The generosity of the mighty reds – the legendary Liverpool Football Club – is making it possible for these kids to reach their potential.” Indeed, Liverpool legend Bill Shankly would be proud.

So Lady gaga is not in Indonesia, but Liverpool is in, along with many Australian businesses. Given its still only a decade on from the Asian crisis of 1997-99 which saw IMF intervention and real problems for the nation, Indonesia has performed solidly. Indeed, with its new found robust democracy and economic growth rates, Indonesia continues to surprise us on the upside. But cultural sensitivity still matters on the world’s largest Muslim nation. So to think, probably the only thing Lady Gaga had to succeed in Indonesia, which should not have been too much of an effort, was to put on some pants.

A version of this blog post recently appeared in the Australian Financial Review.
 
*Tim Harcourt is the JW Nevile Fellow in Economics and an adjunct professor in International Business Strategy, at the Australian School of Business, the University of New South Wales (UNSW) & author of The Airport Economist: www.theairporteconomist.com
He recently co-hosted the distinguished Australian Alumni Awards in Indonesia with Frida Lidwina, the host of Metro TV in Jakarta and an Australian graduate in Finance (at Curtin).