Monday, 24 October 2011

Opportunity knocks for local business

If you reckon five-year plans went out with the Soviet Union, think again. They're still surprisingly popular in Asia's fastest growing economies. Ambitious five-year plans have come into force in one-party states, China and Vietnam, this year.
Even in staunchly democratic India, the country's powerful planning commission is busy crafting its 12th five-year plan to replace the 11th, which finishes next year.
India has moved away from the highly centralised and regulated economic model that held sway for decades following its independence in 1947. The government admits its central five-year plans are now more ''indicative'' than in the past. But they are still taken seriously and the commission that prepares them has great influence over economic policy. A new paper by Commonwealth Treasury officials Ben Ralston, Wilson Au-Yeung and Bill Brummitt has drawn attention to some of the massive investments foreshadowed in India's next five-year plan and opportunities for Australia.

The plan will highlight the country's overwhelming need for infrastructure. It anticipates a staggering $US200 billion each year needs to be spent to sustain India's growth - double the average of the current plan. That means about $US1 trillion in public investment and private initiatives over five years.
India's planning commission says a large number of public-private partnerships will be essential if this is to be achieved. So far, most PPPs in India have been for transport infrastructure, especially roads. They have also been used to deliver airport facilities in Delhi, Mumbai, Hyderabad and Bangalore.
But India's planning commission says ''efforts are needed'' to mainstream PPPs in power transmission and distribution, water supply and sewerage and railways as well as in social sectors like health and education. It wants to modernise India's PPP frameworks and attract more foreign capital and know-how.
Australian businesses and governments have had significant experience in the finance and construction of PPPs and the opportunities for collaboration are significant.
India's planning commission also has an ambitious training agenda.
Just 11 per cent of the nation's 17-23 year olds are pursuing higher education and the level of unmet demand for university places runs at around 4.7 million places each year. To supply the necessary places, India plans to set up around 1500 new higher education institutions.
''The opportunities for Australian universities, whether in terms of partnering with Indian institutions during this growth phase or attracting more Indian international students to Australia are clear,'' write Ralston, Au-Yeung and Brummitt.
The needs are even bigger in vocational training, says Chandrajit Banerjee, director general of the confederation of Indian industry, who is visiting Australia with a business delegation. ''India requires something like 500 million people to be trained in vocational skills by 2022,'' he said. ''It's a huge investment opportunity for Australia.''
Mr Banerjee says this will require Australian education providers to deliver training in India.
Ralston, Au-Yeung and Brummitt also point out India's demand for agricultural commodities and processed food. India's agricultural sector is likely to remain heavily protected because of the political influence and poverty of many agricultural workers.
But changing patterns of consumption among India's middle class is expected to translate into growing markets for Australian produce like processed foods and wine.
Australia's merchandise trade exports to India rose by nearly 800 per cent from 2000 to 2010, driven by minerals and energy. The Treasury analysis puts some numbers on how lucrative markets in other sectors could be.
Last month the Prime Minister, Julia Gillard, announced that former Treasury boss Ken Henry will prepare a white paper on how Australia can make the most of Asia's economic transformation. But she said the report will not be made public before the middle of next year.
The numbers mooted for India's five-year plan suggest Dr Henry's advice can't come quickly enough.

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