Suitors rejected at farm gate
Australia is the most difficult place in the world to start a new agribusiness project even as demand from Asia's middle class surges, says Deepak Saxena, who just completed one of the largest greenfield agribusiness projects in Australia.
With foreign suitors eyeing businesses such as Warrnambool Cheese & Butter and GrainCorp, Dr Saxena said the intense competition for Australian agricultural assets was partly due to the difficulty in getting new projects off the ground.
"I can laugh now but I used to cry," Dr Saxena said of his experience in investing more than $150 million in an oil-seed crushing and refining facility at Wagga Wagga in NSW.
He blamed red tape at a state and federal level as well as a "silo mentality" among planning authorities as among the biggest hurdles in getting projects done on time and on budget.
"There is a lot of focus on the process and no focus on the outcome," he said. "There is no integration [in approval process] and there is no single window of clearance, no real cohesiveness and everybody works in silos."
Dr Saxena, who spent decades working as a senior executive at companies such as Unilever, said Australia could learn a lot from countries such as China and Singapore about facilitating investment.
The Singaporean government for one appointed project officers, whose jobs were to clear hurdles for investors and question bureaucrats' responsiveness.
"They sit on your side of table and get things done for you," Dr Saxena told BusinessDay.
His Riverina Oils and Bio Energy was repeatedly delayed due to demands from planning authorities to modify the project. The delays cost him an extra $50 million.
"They changed the scope of my entire project," he said.
"You are not building a three-bedroom house; you got to build an underground basement as well," he said. "You can't just have a heater ... it needed to be solar heated as well."
Australia's high labour cost was also mentioned as one of the factors behind the budget overrun.
"I had to pay $250,000 a year for a gas fitter and some of the unions behaved like Mafia," he said.
Prime Minister Tony Abbott's top business adviser, Maurice Newman, a former chairman of the ABC and the Australian Securities Exchange, this week lashed out at high wages.
"We cannot hide from the fact that Australian wage rates are very high by international standards, and our system is dogged by rigidities," Mr Newman told a Committee for Economic Development of Australia conference on Monday.
Local bankers were also cool on providing financing for the $150 million oil-seed project, forcing Dr Saxena to turn to lenders from India and China.
"I have no respect for Australian bankers," he said. "I don't think they are comfortable with greenfield projects. Australian bankers are more maintenance oriented than developing new projects."
Despite the setbacks in getting the project up, Dr Saxena was very optimistic about the future of the Australian agricultural sector.
"If these challenges could be addressed, can you imagine what the opportunity spectrum is like?"
Dr Saxena said Australian farmers and businesses should invest more in "value-added" activities. "Our mentality is trading focused ... we just dig it up and ship it away and we don't add value," he said.