1995 Global Cultural Diversity Conference Proceedings, Sydney
Economic Aspects of Diversity
Removing the Barriers: Evolving Patterns of Industry and Investment
Senator the Hon. Peter Cook
Minister for Industry, Science and Technology, Australia
Introduction
It would be easy, in the context of this conference, to be overwhelmed by the dimensions of our topic. In this session, we are charged under the umbrella of global cultural diversity with discussing: The Internationalisation of Industry. More specifically, I'm to address the topic of Removing the Barriers: Evolving International Patterns of Industry and Investment.
I am obliged then to range very widely today. Doing so I speak from two perspectives. The first is as a Minister charged with fostering the internationalisation of Australian industry. The second perspective is that of a member of one of the world's truly multicultural societies. These perspectives are inextricably linked.
The Australian Government has worked to put in place a policy framework that is appropriate to Australia's transformed industrial base. It was linked for most of its history to the economic ties of Britain and the provision of raw materials to the northern hemisphere. Now it recognises the geographical truth. It's an economy firmly positioned in the Asian Pacific region, working with our neighbours, and producing a more diverse range of goods and services. And, having come through a decade or more of transition from a protected, domestic market, Australia is becoming a player in the global marketplace.
The second perspective, as I mentioned, is as a member of a society which values the benefits and richness that multiculturalism delivers to the social fabric, lifestyle and welfare of our country. For me, these values are reinforced by the conviction that countries which are comfortable with diversity within their national borders, will have advantages in dealing with global cultural diversity. So I have faith that Australia is well prepared for a world where technological change in transport and telecommunications, is removing the barriers to diverse cultural interactions.
Globally, cultural diversity is an increasingly important element in the internationalisation of industry. As structural and technical barriers are removed, cultural diversity assumes a pivotal role in global economic progress-it can provide both challenges and opportunities.
Once more technical trade and investment barriers have been removed; the lack of understanding of cultural differences can be a barrier to economic interaction and trade. But much more significant, in my view, is the role of cultural diversity in the market place. It is causing a variety of demand in different markets, thus driving product development, design and innovation.
As a result, these days, value is associated less with volume and economies of scale, and more and more with differentiation in design and quality. So cultural diversity is actually stimulating growth in production and trade. The growing middle class in increasingly affluent Asian markets demonstrates this. The different cultural values and different ideas of aesthetics of these middle class consumers dictate a whole new world of design and product presentation.
Nature of the Global Economy Emerging
A globally-integrated economy is already being shaped by the reduction in barriers to trade and investment, and the deregulation of financial markets. Like tectonic plates, the major economic regions of the world are on the move.
The Asia Pacific, as an economic region, continues to expand dramatically and has become the powerhouse of world economic growth. It houses 40% of the world's consumers and accounts for more than 50% of world production.
In the Asia-Pacific, goods and services are moving more readily across borders and business is transcending domestic confines. Governments are increasingly convinced that a more liberal trade and investment environment means more business activity, not less.
Trade and foreign investment are making substantial contributions to world economic growth increasing the size of the cake for all countries. World trade has increased in recent years by about twice the rate of world output. And the proportion of world output being exported has steadily risen in most countries
Foreign Direct Investment is also growing faster than the rate of growth in domestic capital formation in national economies. Indeed, investment has come to resemble trade in goods and services, with substantial flows in both directions.
The technical barriers of communication, co-ordination and transport are also falling, driving the globalisation of companies and industry. These patterns are likely to continue.
For example, the World Trade Organisation aims to achieve progressively higher levels of trade liberalisation in services markets. Negotiating rounds starting no later than the year 2000, are to cover telecommunications, financial services and business services. The emphasis will also move to encompass non-tariff barriers such as customs procedures, government procurement and the harmonisation of standards.
A further stimulus to globalisation will come as developing countries undertake further trade and investment liberalisation, including on a regional and unilateral basis. We can then, be reasonably satisfied at the performance to date in removing barriers to the internationalisation of industry. We can also be optimistic about the future.
This is not to suggest we should ignore the potential for setbacks in areas where readjustment to a global economy presents problems, and possibly revives protectionist tendencies.
The Global Firm
But by and large, national economies are not only becoming more interdependent, but are increasingly comfortable with doing so. These patterns of industry and investment, coupled with the revolutionary impact of information industries, make for a small world. Technology is also forcing the pace of globalisation of industry. In the newly evolving system of integrated international production, different parts of the production process are spread around the globe.
Cultural diversity is being matched by diversity in industrial capability. This can mean product design in Italy, component manufacture in Thailand and high-tech assembly in Australia. It's now possible for software writers in Sydney and Silicon Valley to do joint work, even if local market programs then have to be specially tailored in-country.
Many large companies are embracing the concept of the borderless firm. This is in a climate in which culture and language are as much key factors for business, as an understanding of the linkages between industries within regions and globally. How business perceives these factors determines whether they are, for them, challenges or opportunities. If business sees difference as a negative, then it will be a barrier, an impediment to their growth. If difference is seen as a positive if embraced it will become an advantage. The wellspring of innovation is the recognition and use of difference.
One manifestation of the diversity dilemma for the multinational is the clash between global standards and local requirements. Standardisation on a global basis can cut costs by 20 to 30 per cent. But policy imposed from a distant headquarters which doesn't take account of local factors can lead to failure. As the Economist said last year:
"local knowledge can help Davids slay Goliaths; and ignorance can fell Goliaths, even if there are no Davids around".
Hence the "multicultural multinational" is one name given to the new global company, which seeks to make a virtue out of diversity.
Asea Brown Boveri (ABB), the Swedish-Swiss electrical engineering firm is an example. It has moved to be a truly global company by embracing cultural diversity. ABB has eight directors from four different nationalities and an executive of eight people from five countries. It has English as its corporate language and its financial results are reported in dollars.
So, while governments work to reduce structural and technical barriers, the business world must face the implications of operating in a global economy. In global firms the management of diversity is as important as information, human resources and innovation. A global multicultural economy requires interaction, management, negotiation and compromise with people from different cultures. As such, cultural diversity will be one of the biggest issues international business faces in the 90s and beyond.
The Australian Experience
Australia's experience brings the relationship between the global economy, industry, our human resources and cultural diversity into sharp focus. We've been engaged in the adjustment to a global economy and the consolidation of our own multicultural existence.
A major program to restructure the economy has been undertaken to lift Australia's global competitiveness. Australian exports of elaborately transformed manufactures and knowledge-intensive services have grown dramatically. Industries which were once highly protected are finding competitive niches in world markets and achieving rapid export growth .
Australian enterprises are becoming an integral part of regional and international manufacturing, and others are operating globally in their own right. Australian firms are investing abroad, establishing networks with foreign entities and setting up manufacturing and service centres overseas.
Culturally and economically Australia was tied for most of this century to Britain and the northern hemisphere. Now East Asian economies account for around 60 per of our exports and the broader Asia-Pacific region accounts for 75 per cent. But this change of focus is also reflected in the change in Australia's cultural makeup. Migrants coming from Asia-Pacific countries have added to Australia's multicultural character.
Multiculturalism
We now have people from 160 different ethnic origins, speaking over 100 languages. Forty-two per cent of the population were either born overseas or have at least one parent born overseas. Almost a quarter were either born in a non-English speaking country or have at least one parent from such a country.
Australia then, is a microcosm of global cultural diversity. Yet a study some years ago commissioned by the Office of Multicultural Affairs pointed to the failure of Australian business to maximise the skills of migrants. One of the ways we have sought to grapple with this issue and changes in the international trading environment is through the concept of Productive Diversity.
Productive Diversity
The policy was announced by the Australian Government in 1992. It is, in short, an amalgam of Australia's economic imperatives and cultural realities. It stems from the need for a still more competitive and diversified economy with a strong export base. An economy which is absorbed in the new global economy. But it recognises the cultural affinities Australians have with virtually all the countries with whom we want to do business.
Our human resources are a cultural reflection of the globally diverse marketplace. In practical terms then, Productive Diversity becomes a policy to encourage the best use of the diverse language and cultural skills and networks of Australians. It reflects the fact that the world lives and works within Australia.
It's also a decision that our human resources are a source of creativity and comparative advantage, as we seek to compete more cleverly in the global marketplace. There the value of local knowledge and relevant cultural and linguistic skills, become as important as expertise in marketing and distribution. It's vital to have personal knowledge of the tastes, cultures and languages of the target market. Information about particular customs, as well as law in business and government must be reliable.
Productive Diversity makes use of four key assets of a multicultural workforce, the obvious being language, as fluency in second languages becomes increasingly important this is particularly so, as we move towards more service-based exports and sales requiring cleverer marketing and negotiation.
A multicultural workforce also provides cultural experience and sensitivity skills. It enables the building of relationships with other culturally diverse customers or business partners.
Immigrants also bring a knowledge of business and networks in their home countries. And overseas born employees have highly prized market knowledge enabling identification and response to consumer preferences.
Productive diversity at work, means in Australia, for example:
- multinational companies such as Novell and American Express putting their regional operations in Australia because of the availability here of speakers of the region's languages;
- an Australian-Vietnamese lawyer helping an Australian legal firm, do business in his birthplace; or
- using Australian chefs with a variety of cultural backgrounds at Qantas to make foreign customers happy.
All these cases demonstrate the use of difference as an opportunity to create an advantage.
Conclusion
The global marketplace will, over the next twenty years, see the largest change in economic strength since the industrial revolution. Three billion people in Asia, Latin America and Eastern Europe will engage more vigorously with the current industrialised world's one billion. It will be a time of unprecedented opportunity. While adjustments may be necessary in some economies, attempts to prevent change through protectionism will be self-defeating for those concerned.
The increasing interdependence of economies will tie economic fortunes together. And in that context, I am pleased to announce that in July, I will be leading an Australian automotive industry mission to Asia. It will be a new style of mission designed to reflect the increasingly interdependent nature of this industry in the region. With representatives of Australian automotive and parts firms, instead of visiting individual markets in an isolated way, we will visit Japan, Korea and Indonesia. We will be seeking to better understand and capture the interlinkages developing between production bases and markets, in what is becoming a regional industry rather than a collection of national industries. We will be seeking to promote a better understanding in the region of where Australia's strengths are in this industry and where our firms can lock into broader regional strategies.
Let me wind up by saying that the impact of the information revolution as well as freer trade and investment will bring people into ever closer contact. This will highlight the reality of cultural diversity. And the truly globally diverse company will have to deal with it. It will require an end to indifference, insularity and ignorance. It will mean recognising and embracing difference.
Used productively, diversity is a means of competitive advantage. Much will depend upon attitudes. So as the borders of nations break down, we must be careful that we do not erect new barriers of the mind.
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