Spotting global growth opportunities: Gottliebsen

At each Hayman Island leaders’ retreat, I’m always on the look out for industries or regions that are headed for growth and areas where there appears to be structural decline. In 2010 there were some standout candidates, leaving aside the standard China growth story.

My candidates for 2010 growth stories are – green products, including electric cars; Indonesia; and ‘teleface’ communication. The Australian industry that will be in most trouble is vocational and tertiary education where the institutions rely on foreign students.

The Chinese are very proud of what they are doing in carbon reduction measures and equipment development. The early leaders in this sphere were the US and Europe but neither has developed sufficient momentum in their home market to be global leaders.

Japan is also well placed, but the Japanese at Hayman bemoaned the fact that in Japan there is a high price for failure so there is a great reluctance to take risks and the Japanese environment skills are not well honed for export.

China plans to reduce its carbon power generation from 90 to 85% with massive investment in nuclear, wind, solar and hydro power generation. They are also replacing dirty coal mines. But despite that investment, the increase in China’s total power generation will mean that carbon energy generation will continue to rise in China. But this green investment at home means that they are headed towards domination of global green technology.

The Indians moved through the GFC as well as Australia, and have a wonderful growth story, although they have well publicised political problems. They would like to have a bigger stake in the green market and would welcome Australians who want to joint venture with them.

Australia’s problem is that there is enormous uncertainty at home given the stance of both political parties. China is in the early stages of imposing an emissions trading scheme which prices carbon. Although there is no serious intent at this stage, the Chinese can see a day when they impose taxes on carbon imports that come from countries that have no carbon tax. Australia is their biggest supplier of carbon.

Of course in the case of China, they are motivated not just by the long-term fear of climate change, but the immediate fear of the effects of their highly polluted air.

The electric car revolution, which is Australia is being driven by Evan Thornley and groups like Lend Lease and RACV, makes wind and solar power economic. Australia is going to be hit by much higher power prices in the next few years because of wind and solar power’s increasing share of the electricity supply market.

These sources of power should be used to drive cars because the economics of automotive travel is not sensitive to power prices. But Australia probably needs to follow China with some elementary carbon pricing so that decisions can be made on base-load power in all our states.

When Australians think about Indonesia they think of Schapelle Corby, drug mules and refugees. That’s a shame because the stability that the Indonesian President has delivered to the Indonesian political scene and economy has transformed the growth outlook for the nation.

It is planning a massive investment in roads to make the transport of goods and people much more efficient. Once our nearest neighbour develops forward momentum, it will be a rapidly developing market for Australia. It is looking for help in education and while Indonesian students are coming to Australia, the exchange rate differential makes Australian education expensive.

India is one of the biggest sources of foreign students and while that’s likely to continue, the Americans are wooing the Indians with easy visas and lower prices. Add to that the higher Australian dollar and security concerns and you have an industry facing massive decline.

The Indians need much more education as their young population moves through. Much of that education is vocational but Australia did not sufficiently regulate the quality of its vocational institutions some of which offered sub-standard product.

What the Indians want is for Australian institutions and educators to go to India. Australian tertiary education bodies are looking at reductions of between 20 and 40% in foreign students. These students subsidise Australian students, so Australians will have to pay more either via student fees or government revenue. Alternatively a great many tertiary teachers and professors will be out of a job.

In telecommunications, one way or another Australia must join the world in providing low cost broadband communication that duplicates personal contact. If Abbott wins and the National Broadband Network is abandoned, my guess is that Telstra will cherry pick the city markets which will leave rural Australia out in the cold.

As I pointed out yesterday, the independents can secure broadband for rural Australia by getting Abbott to understand the Hayman paradigm or going for Gillard. The people in Hayman say there will be an enormous boom in mobile devices, but that will not interfere with the duplication of personal contact via broadband.

This article first appeared on Business Spectator.