Cut above the rest

Australian manufacturers in the textile, clothing and footwear (TCF) industry face significant challenges in remaining competitive in a global economy. Kerryn Caulfield questions whether the recent review into Australia's TCF sector will help businesses rise to the challenge.

The rapid advancements in low labour cost countries such as China and India have had a profound affect on the textile industry. Trade liberalisation, and thus increased competition, has seen comprehensive changes to markets worldwide as the process of globalisation has taken hold.

Factors that include the global rationalisation of markets and supply chains, the trend to internationalised operations, shortened product lifecycles, the rapid price rises in oil-based raw materials, and an increasingly constrained environmental framework, are impacting significantly on the industry's sustainability.

The technical and nonwoven sector is a sub sector of the greater TCF industry. While they play a much more important role than is commonly acknowledged, technical and nonwoven textiles often go unnoticed as they are produced for functional properties rather than aesthetic or decorative characteristics.

They are frequently used in a range of downstream applications in other manufacturing and service industries and, thus are not highly visible at the retail level. A non-exhaustive list of end-uses includes aerospace, industrial, marine, military, safety, transport and civil engineering.

In the recently released report on the review of the Australian TCF industries Professor Roy Green confirmed today's Australian TCF sector is a high-tech creative industry. He noted that through a commitment to innovation, Australian manufacturers are reducing production costs, investing in technology and implementing the organisational changes required to respond quickly to customers' demands and requirements.

There is no doubt that global demand for technical and nonwoven textiles will continue to rise. However, future growth in the Australian manufacturing sector is dependent on a stable investment environment based on a supportive governmental policy platform. 

International competitiveness is now governed by technology, innovation and human capital factors rather than by static comparative advantages and/or factor endowments of a nation. Knowledge and innovation are critical to generate wealth. Manufacturing businesses are more likely to undertake innovation than businesses in most other sectors.

Future investment in developing new, specialised, technical products is therefore vital to enable the Australian technical and nonwoven textile industry to become a global leader in specialised niches, and to remain competitive with larger fibre and textile-producing nations.

There is no question the future of the technical and nonwoven textile industry in Australia will depend heavily on new or improved technology and the application of that technology to generate new products and cost savings. The TTNA expects the federal government to deliver on its election promise to build a culture of innovation and to focus incentives for business to promote global competitiveness, delivering the best outcomes for domestic consumption, exports and economic growth.

We welcome the review's proposal to introduce a new 'TCF Innovation Assistance Package 2009 to 2015', and for this program to have as a priority the improvement of R&D performance in Australian TCF firms, especially technical textiles, both through individual projects and through broader innovation partnerships and networks with research and educational institutions.

The previous government provided the Strategic Investment Program (SIP) that assisted many Australian TCF manufacturers to transform their businesses through investment in plant, equipment and technology; and research and development. However, the transition due to the "competitive pressures" identified in the report is not yet over and continued investment is crucial for the industry's long term success.

It is widely believed by TTNA members that an investment and development program strategically and directly targeted at the sector is necessary to provide the industry with confidence to invest in new capital expenditure and innovative processes despite the magnified risks facing the industry over the next few years.

The TTNA is encouraged by Senator Kim Carr's acknowledgment the industry is critical to Australian employment, exports and innovation. Adoption of many of the review findings will provide renewed energy and enthusiasm across TCF industries. Providing the means to take advantage of new technologies and research and implement strategies to effectively compete in the global marketplace is an important role for government policy.

While the details and the value of the program are yet to be negotiated (at the time of writing) particularly encouraging is the TCF Review's recommendation to develop a TCF Innovation Capability Program (TCF ICP) to support the development of innovative capability in the TCF industries at the enterprise and workplace level for the final transitional period of tariff reductions between 2010 and 2015.

There should also be an opportunity for TCF firms and organisations to access programs resulting from the Review of the National Innovation System which was conducted in parallel with the TCF Review. This document analysed the 125 per cent Research & Development (R&D) Tax Concession program, the criteria for which was viewed by The Productivity Commission as a major limitation.

It noted "Australia's current suite of business support programs could be improved to target more effectively the research activity with high social benefits." The TTNA agrees with this reviews proposal that a non-refundable tax credit of 40 per cent be introduced to support all R&D activity undertaken in Australia to replace the 125 per cent R&D Tax Concession, the Tax Offset, the 175 per cent Premium, and the International Premium.

It proposes further that smaller firms get access to a refundable credit at a rate of 50 per cent. Further it proposes that the Australian Government dramatically lift the threshold beyond which firms are classified as large firms ineligible for the refundable credit.

The Australian TCF industry is at a crucial stage in its evolution and needs the federal government to continue to provide programs that will drive and assist Australian manufacturers to realise future trade and growth potential.

By Kerryn Caulfield