The big urban shift

A beautiful great outdoors and knowledge industries draw people to Boulder, Colorado.

Wooing businesses and individuals to spread jobs and growth to regional areas is no simple task.

Leah Mansfield plucked up the courage and embarked on a tree-change two years ago.

She wanted to spend less time stuck in Sydney’s city traffic and more time with her family. She also dreamed of living in a bigger house. So she and her family moved 250km west from Sydney to Orange, a regional centre of around 40,000 people.

“Sometimes in Sydney I felt like I was just wasting my life in traffic, commuting to and from work, and by the time the weekends came along we were too exhausted to enjoy what Sydney had to offer,” Mansfield explains.

“Now we suddenly have time to do things; we’ve been to the Dubbo Zoo and an Elvis Festival [in Parkes]. We are so close to the country, we can get out and see more of New South Wales.”

In Sydney, Mansfield worked at the Department of Primary Industries and was lucky enough to get a transfer to Orange.

Her husband, Tony, an engineer, found a job with Nestlé in the nearby town of Blayney. The family has bought a four-bedroom house with a substantial backyard, big enough for a trampoline, which would have been impossible in the inner-city terrace house where they used to live.

Her children – now aged six and nine – can walk to the local school, a blessing in comparison to battling peak-hour traffic back in Sydney.

While there is a small but constant migration of families to regional areas in Australia, 66 per cent of the nation’s population live in capital cities.

And these urban areas are growing much more rapidly: Greater Melbourne is the leader, while some Sydney suburbs, particularly in the north-west of the city, have almost doubled their population in the past five years, according to figures from the Australian Bureau of Statistics.

A few regional areas, supported by government initiatives, are also slowly expanding after being hit by the closure of mining and manufacturing ventures.

But many others – including Broken Hill in the far west of New South Wales (NSW), and about a third of regional Victorian towns – are still facing population decline.

In September 2010, the NSW Government launched its Evocities (Energy, Vision and Opportunity) scheme to encourage Sydney residents to move to one of seven inland NSW towns (including Orange). It was seen as a way to support the needs of the community and business in these regional centres, and to hopefully start relieving pressure on Sydney’s overburdened infrastructure.

"It was local government – a proactive, imaginative and enabling local council – working well with solid private partnerships that made this happen."– Susanne Brackley

However, in four years the scheme has induced just 1300 families to shift from Sydney, says James Treloar, Evocities spokesman and a former mayor of Tamworth in north-western NSW. This is despite jobs being readily available – there were more than 13,000 job vacancies combined in these regional centres in the four-year period – and an offer of up to A$10,000 to families that relocate (conditions apply).

Gathering more information on how to develop regional areas was a component of CPA Australia’s Pre-Budget Submission, released in January this year.

CPA Australia urged the Australian Government to allocate A$5 million to examine labour mobility and to develop and pilot a program which consolidates the existing government relocation and retraining programs.

“Australia needs to create incentives and remove existing disincentives for the reallocation of labour and capital to growing areas of the economy,” CPA Australia states in the submission.

“Such policies could include funding for training programs aimed at developing the skills required by growing industries, particularly knowledge industries.”

So what is the secret to developing and sustaining business in regional areas and attracting more people to move there?

Several academics argue that overseas examples such as Reading in the UK, Boulder in the US and the Eastern Seaboard in Thailand, could provide some valuable lessons.

Some of the characteristics that make these regional hubs flourish include proximity to a capital city, an effective transport network, and a significant connection with a university to develop research into commercial ventures. In many cases this has led to successful regional business clusters.

Reading's Oracle shopping centre by the banks of the River Kennet.

Reading's Oracle shopping centre by the banks of the River Kennet.

UK: Reading – the gold standard

Professor Roy Green, the dean of the Business School at the University of Technology, Sydney (UTS), says clusters of business in regional areas, especially in Europe, are nothing new.

In the late 17th century, six rural towns in England’s Midlands, the Staffordshire Potteries district, became the centre of the country’s ceramic production. Today they make up the city of Stoke-on-Trent.

There are examples of successful modern regional business development in Ireland, Finland and France’s south.

But one gold standard is Reading in southern England, where many national and multinational companies have established their British headquarters or key sites, including Microsoft, Oracle, Prudential, Cisco, Bang & Olufsen, Xerox, Intel, BG Group, ING Direct and Symantec.

With a population of 155,000, Reading is a hub for companies in finance, information technology (IT), biotechnology, bio-pharmaceuticals, retail, transport and logistics, green technologies and energy.

What makes Reading attractive to people who can’t afford or don’t want to live and work in London is its unrivalled proximity to a major international airport and rail link. Heathrow Airport is just 40 minutes away, while central London is only 25 minutes by fast train (58km to its east and serviced by 200 trains daily).

The local government and university have contributed immensely to the city’s reason for being.

Susanne Brackley, the economic development manager of Reading UK Community Interest Company (CIC), says the business hub was in large part a local government initiative.

“It was local government – a proactive, imaginative and enabling local council – working well with solid private partnerships that made this happen,” she says.

“We’re proud of the fact that our growth has been organic and market-driven. Success tends to breed success but it also means our growth is sustainable.”

The University of Reading plays a major role in the research, development and innovation that the town attracts. Knowledge-intensive business services make up 40 per cent of all central Reading businesses. It topped KPMG’s Tech Monitor Report 2013 as a UK tech employment cluster.

The university’s Science and Technology Centre accommodates technology start-ups and larger small-to-medium entities within the campus.

In 2003, the university and the South East England Development Agency (SEEDA) opened the Reading Enterprise Centre, a business incubator, especially to attract IT, bio-tech, life science and environmental technology companies.

PricewaterhouseCoopers ranked Reading as number one, along with Bracknell, of 36 British cities and towns for economic success and wellbeing in its Good Growth for Cities 2013 index.

Reading is also ranked 10th most lucrative location for foreign direct investment in Europe in the Financial Times’ fDi European Cities of the Future 2014/2015.

US: Boulder – where lifestyle rules

Boulder, in the US Rocky Mountain state of Colorado, is a lifestyle haven compared with the state capital of Denver, just 40km away.

A snow sports playground in winter, with hiking, mountain biking and rock climbing in summer, and with a university and a nearby international airport, it’s easy to see why Boulder has become a hotbed of activity and business innovation.

A Gallup poll in April found that the city has the least obese and healthiest population in the US. Coincidentally, it is home to much of the US health food industry.

This year, Inc. magazine rated Boulder the most innovative and entrepreneurial city in the US. An August 2013 study by the Ewing Marion Kauffman Foundation says the town has six times more high-tech start-ups per capita than the national average and twice as many per capita as San Jose, California.

True to the success of regional hubs, the University of Colorado Boulder has fostered world-class aerospace, IT and photonics industries and contributed to creating substantial regional clusters.Nearly one third of Boulder’s population are university students.

The Boulder Economic Council says an average of 10 bioscience companies are formed each year because of the research done at the university. Its Innovation Center of the Rockies has developed a low-cost, effective model to commercialise university technology and create new companies, attracting nearly US$100 million in new capital investment since 2006

The city’s knowledge industry is six decades old, and can be traced back to President Harry Truman’s decision to decentralise sensitive research and development outside of Washington DC to avoid the “communist menace”.

In 1949, Boulder became the home of the National Bureau of Standard’s Radio Propagation Laboratory, and later a 27-building nuclear weapons manufacturing facility at nearby Rocky Flats was built, drawing on expertise from Colorado University. A hub of aerospace expertise was also developed at the university, which led to the development of the National Center for Atmospheric Research.

The second wave of Boulder’s development was in the early 1990s and 2000s with software, bioscience and aerospace industry growth that continues apace today.

Thailand: Eastern Seaboard powerhouse

Outside of China, one of the largest regional industrial growth areas is Thailand’s Eastern Seaboard. It’s Asia’s prosperous “little Detroit” says Tim Harcourt, an economist from the Australian School of Business at the University of New South Wales (UNSW). He says the region’s success is due to public and private partnerships.

With a joint Japanese and World Bank-funded Eastern Seaboard Development Plan, the area drove Thailand’s rapid industrialisation from the mid-1980s to mid1990s. In the past seven years, the Thai central government has also invested heavily in transport infrastructure projects, including railway links with Laem Chabang port (the 20th busiest port in the world) and a motorway connecting the area with Bangkok and the new Suvarnabhumi Airport, 90 minutes away.

The area, which encompasses Chon Buri, Chachoengsao, Prachinburi, Samut Prakan and Rayong provinces, is a cluster for car manufacturers including Toyota, Suzuki, Mitsubishi, Honda, Nissan, Isuzu, BMW, GM, Ford and Chrysler. Factories there produce the components as well. The region is also a hub for logistics and petrochemicals, plastics, polymers, electronics and packaging industries.

Despite the devastating 2011 floods, the area is flourishing. It is one of the fastest growing economic regions and the second-largest contributor to the Thai economy. In the past financial year, foreign investment – particularly in this area – was the highest in a decade. The Japanese are by far the biggest foreign investors; more than 383 projects were approved in the second half of 2013.

The Thai cabinet also wants to extend special economic zones to provinces adjoining the Eastern Seaboard to attract more foreign investment. Much of the area already has some of the most favourable investment incentives in Thailand, such as corporate tax holidays of up to eight years.

Australia: Geelong – hope or despair?

Geelong, 75km west of Melbourne in Victoria has always attracted people who want all the attributes of a city without the busyness. With a population of 181,000, it’s close to famous surf beaches, with a thriving arts scene, a burgeoning food and wine industry, and more affordable real estate than much of Melbourne.

Geelong was one of Victoria’s fastest growing centres in 2012-13 with a population gain of 4800 people according to the Australian Bureau of Statistics.

The town’s industrial heritage has been intertwined with Ford Australia and Shell. Ford set up production there in 1925, establishing a plant to assemble the Model T. Shell opened its refinery in 1954 and supplies about 70 per cent of Victoria’s fuel and 30 per cent of neighbouring South Australia’s fuel.

But in May 2013, after nine decades in Geelong, Ford declared that car manufacturing was no longer viable in Australia, citing a A$600 million loss over the past five years. About 600 workers in Geelong and another 600 in Ford’s Broadmeadows plant in Melbourne will lose their jobs by October 2016.

Shell also announced it was pulling out, but 450 Geelong jobs were saved when the company sold its Corio Bay refinery to Swiss company Vitol in February this year.

There’s been more bad news than good, however. Boral Cement shed about 100 jobs last year and retailer Target cut 260 staff from its Geelong headquarters.

In February 2014, aluminium producer Alcoa announced it was closing its Port Henry smelter and its rolling mills in Geelong, losing 980 jobs.

Another 300 jobs will go when airline Qantas closes its maintenance facility at nearby Avalon Airport later this year.

Associate Professor Giles Hirst from Monash University’s Department of Management believes Geelong’s early manufacturing success spelled its downfall.

“Paradoxically, if the government had the foresight to encourage high-tech industries here, too, instead of the reliance on manufacturing, then the current situation could have been avoided,” he says.

In the near term, the Geelong Region Innovation and Investment Fund (GRIIF) will distribute grants for projects that diversify and strengthen the region’s economic base. Money for the A$24.5 million fund is coming from the state and federal governments as well as Ford. The minimum amount given to a business will be A$50,000.

One company that is thriving in the city without any government incentives is the Cotton On clothing group. Nigel Austin established the company in 1991, choosing Geelong as its headquarters because it was his home town.

The company has “grown completely organically”, says its spokeswoman Greer McCracken. Cotton On’s products are made in Asia, but over two decades its Geelong head office has accrued 1100 staff with another 728 in the main distribution centre.

With Ford, Shell and Alcoa closing their doors, Cotton On will become the town’s single biggest employer and it plans to hire a further 500 people over the next five years. The company employs 19,000 people in 18 countries and has just expanded into Brazil.

Further reading

  • Access the following CPA Library items online at cpaaustralia.com.au/regionguide
  • “Report says Labour Mobility is the Key to Prosperity”, by A Hepworth, The Australian, 2013.
  • “The Relationship Between Regional Trading Blocs and Globalization”, by N Wang, International Journal of Economics and Finance, 2010.
  • “Regionalization, Performance Management and Software Technology”, by S Biriescu, Revista De Management Comparat International, 2013.

Contact CPA Library on 1300 737 373 or email cpalibrary@cpaaustralia.com.au

This article is from the June 2014 issue of INTHEBLACK.


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