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Advantage Australia: harnessing our comparative advantage in resources
and the METS sector
Phil Edmands, managing director, Rio Tinto Australia
Austmine 2015, Brisbane
19 May 2015
**Check against delivery**
Distinguished guests, ladies and gentlemen and industry colleagues.
Good morning and thank you for inviting me to speak here today.
I want to start by respectfully acknowledging the Traditional Owners of the land on which we gather, and
pay my respects to their Elders both past and present.
Today I want to lift my gaze from the day to day, and instead examine the strategic positioning and
competitiveness of the METS sector in Australia.
It is generally accepted that Australia should leverage its comparative advantage in mining to enhance
comparative advantage in METS. The objective is to protect and strengthen the METS sector in the
domestic economy, and as an export champion.
There is both a challenge, and a problem, though.
The challenge is other foreign competitors, and not just ones with large mining industries. London, for
example, is one of the most significant mining services centres in the world, and yet the United Kingdom
has a small domestic mining industry. London succeeds because it has a wealth of intellectual capital,
and is the premier global hub for mining finance.
Similarly many parts of Asia could increasingly be competitors of Australia in the METS sector. One such
locality is Singapore. Another is China. A third is India. This is leaving aside more established competitors
in Asia, and worldwide, like Japan, the United States, the United Kingdom, Scandinavia and Germany.
That then is the challenge. The problem though is how we take the initiative and ensure that we capture
the METS opportunity available to us.
In answering that question it is useful to consider some of the barriers and issues we face.
As we know, Australia is a high cost economy. More particularly, though, it has been shielded from the
effects of that in the past because of a number of advantages that are falling away. So it needs, at a
macro level, to become more competitive. But it also needs to leverage every comparative advantage it
can get - and in a high cost economy a prime way to do this is through the enabler of technology and
innovation.
Leveraging technology and innovation will require that Australia address some cultural issues. Amongst
those are low levels of collaboration, and a history of research that is technically excellent but often lacks
an eye to commercial application.

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Australia’s educational system is also not emphasizing basic STEM skills, that is, Science, Technology,
Engineering and Mathematics. And when people are being highly trained this is often training them to be
clever rather than smart – in other words it is training them to be technically excellent but not necessarily
practically focused.
Finally the METS sector in Australia is comparatively young. It is dominated by SMEs, many of which
have great ideas and applications, but find it very difficult to break into supply chains - particularly global
ones or those of the major miners with global reach. By contrast the global METS sector is relatively
dominated by long established and very large multinational companies.
But believing that the Government must fix everything is misconceived. Unlike in the United States, there
is often an expectation in Australia that the Government will step in and fix the problem. That default
position needs to change. The Government can and should only do so much - it can set the framework,
but it is the market participants that need to do the heavy lifting. And it is absolutely in the interests of both
industries - mining and METS - that they do so.
We hear all the time about how Australia is a high cost economy. Whilst costs are coming down, it will
remain a high cost economy. But the real issue is whether Australia through high productivity and high
end application can remain value for money.
Historically one of the insulators has been barriers to entry. And one of those has been technology, and
its unequal distribution around the world. Technology remains a differentiator, but there is an increasing
need to stay ahead of the curve, and to ensure that it is driving productivity. Technologies can
increasingly be disruptive because they can be so quickly applied worldwide. Nowadays everyone can be
an entrepreneur, and goods are increasingly made, not in one place, but in the world.
So Australia, as a highly developed economy, cannot rely on its historical technological advantage to stay
competitive. It is not the barrier to competitors it used to be.
Another barrier that is falling away is the relative stability of Australia – not because Australia is becoming
less stable, but because, despite all the strife in the world, competitor jurisdictions are becoming more
stable.
Stable democracy, social harmony, strong institutions, the rule of law, property rights, and importantly
investor friendly policies, are advantages that can be priced. However, they only achieve their true
potency by comparison.
Many African countries, for example, have ample mineral wealth but could never traditionally compete
with Australia because they were just too risky to attract the requisite scale of investment. In some
instances, where the investment was made, the sovereign risks proved too great, and investors had their
fingers badly burned.
But Africa, and other non-OECD competitors, are changing. They are frequently enhancing political and
social stability, countering systemic corruption, strengthening legal institutions - in short, they are rapidly
eroding the previous disincentives that repelled investment.
That is not to suggest that Australia should seek to hold back or fear the progress of for example Africa -
far from it. What I am suggesting is simply that we cannot price our stability and attractiveness to
investors in the same way we could historically - we need to find other supports to keep competitive.
Assuming we do, Africa is no threat - rather it presents abundant opportunity for Australian mining
companies, but also for Australian METS companies.

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Our METS sector is significant and, albeit young, has been growing strongly.
But there is no such thing as perfect stability - things are either going up or they are going down. So the
METS sector needs to continue to grow if it is not to wither.
As mentioned, some of the structural issues that face the sector are macro issues that face all sectors in
Australia - and I do not propose to canvas those at length.
But there is one area which is important to highlight - and that is workplace reform.
And in that context I want to make a few simple observations at the outset. Creation of jobs, and
maintenance of high employment and low unemployment, must always be prime objectives of
policymakers. So should the need to maintain an appropriate safety net - both generally for the
population, and as applicable to terms of employment.
But labour market inflexibilities, and seeing new technology and innovation through the prism of the threat
to jobs, are both self-defeating. Sometimes the alternative to job reduction is no jobs at all because,
without the productivity improvement, there is no viable business. In these circumstances, ironically, the
reduction of jobs is sometimes an exercise in job preservation - namely preserving the ones that remain.
Similarly, it is short sighted to block quick uptake of new technologies through slow and complicated
workplace relations processes. The decision to implement new technology is a management decision.
The true workplace relations issue is not to decide whether new technology should be deployed but to
ensure that, if it is, workers are treated fairly.
Yes, new technologies have historically lead to a reduction in traditional jobs, but we are in an
environment where productivity improvement is a constant imperative because of cost pressures.
Necessary technology improvements need to be capable of quick application to be effective at raising
productivity – nimbleness is required.
But, whilst new technologies may reduce traditional jobs they open up the opportunity for higher end jobs.
And to the extent there are fewer of those than the jobs displaced that simply highlights the need to grow
METS and so grow the whole pie.
Turning to issues at the level of the METS sector itself, one of the most pressing is the fact that many of
the METS participants are SMEs, and it is difficult for them to push through into supply chains.
I will use an example to illustrate what I mean.
Most of you are probably aware that our operations are continuous, which means that we require
considerable lighting for our pits. Traditionally, the industry has utilised metal halide based mobile lighting
plants for flood lighting night works. Some of our employees at our Hunter Valley coal operations recently
suggested we convert to LED lights instead of using traditional bulbs. As we all know, LED lights last
longer than standard bulbs - in fact that difference is 50,000 hours against 5,000.
The problem was our existing supplier was still offering traditional halide globes which are standard use in
the mining industry, and other suppliers indicated that they couldn’t assist.
Just when it looked as though we weren’t going to find a solution, a small scale supplier of ours from the
Hunter Valley agreed to work with us. Together we developed and trialed LED lights that could meet all
the specs for our diesel operated mobile lighting plants.

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The result? We now have mobile lighting plants with globes lasting 50,000 hours instead of 5,000, and
consuming less diesel fuel.
Encouragingly, this supplier is now able to market this lighting specification more broadly.
So turning back to the question of how we do this.
First the nature of the problem, and the nature of the challenge, has to be articulated. The Government
has clearly done this in its Industry Innovation and Competitiveness agenda. The Government has
identified the METS sector as a separate sector, one in which Australia has a comparative advantage,
and one where effort needs to be directed at developing the sector.
The second issue is how to address the lack of collaboration in Australia, and the poor record of
commercialisation. Australia ranks 12
th
in the world on research citations but only 81
st
on
commercialisation of research, and last (33
rd
) in the OECD on collaboration between business and
research institutions on innovation.
Going back to my London example, collaboration is key. London has a large number of research
scientists, mining services professionals, finance experts, and premier educational and research
institutions in one place. You can source in abundance any type of service you want at the highest level.
It has also become an increasing centre of collaboration and entrepreneurial application.
The Government is addressing the issue of collaboration in promoting Growth Centres - including one for
METS.
The concept is to bring together participants so that they can engage in strategic thinking about how to
promote business opportunities, and in order that collaborative platforms can be established. And
although the funding is modest, by aligning other government research efforts around Growth Centres the
Government is amplifying bang for buck.
There are three potential aspects here however. First, the fairly limited Growth Centre itself, secondly the
epicentre of the industry, and, thirdly, a virtual element.
Like London we need in Australia one or more physical locations - ie cities - where for example at least
10,000 researchers are working on developing new technology and innovation applications in METS.
There are cities that have that critical mass in the METS sector - for instance Brisbane or Perth, or indeed
Melbourne.
The METS Growth Centre the Government is pursuing will presumably be located in one of those cities
with necessary critical mass.
But then there needs to be a matching exercise - ie collaboration - and it needs to speed up. Currently it
takes five years between idea generation and practical application. This is too long. We need buyers and
sellers to be linked, researchers to be linked with one another, finance providers to link with those that
need finance, and those with strong technical and research expertise to be linked with providers of
commercial services to develop and market their ideas. And we need all this to happen more and more
quickly.

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A useful adjunct to a physical Growth Centre would be something virtual that could assist in and speed up
the massive matching exercise that needs to occur – thereby assisting in driving this cultural change
toward greater collaboration.
One idea I would like to propose is what I will call a METS Innovation Hub. The concept borrows from the
related concept of the Infrastructure Hub being established in Sydney for sharing of world’s best practice
in Infrastructure, and the Queensland government’s Innovation Hub for Queensland government
departments to solve complex problems.
The concept is of a very small secretariat (notionally the Growth Centre secretariat) that would monitor
and maintain the METS Infrastructure Hub, and screen entries on it. Ideally the Hub would have the
endorsement of the Federal and State Governments, mining companies, the METS sector, universities
with a research interest in this area, commercial service providers, research institutes, researchers, and
financiers.
Those seeking a match would post on the Hub. So, going back to my earlier example, Rio Tinto would
have posted its LED lighting challenge on the Hub to attract expressions of interest.
METS companies with good ideas could likewise post details on the Hub. They would effectively be
advertising on the Hub. A Rio Tinto would not have to decide whether to meet them following a cold call.
Rather, because it would be a supporter of the Hub it would have someone monitoring everything posted
on it, and if it saw something of interest it could follow it up.
Researchers wanting to conduct commercially relevant research could review problems posted on the
Hub to get research ideas. Alternatively they could post their own ideas on the Hub, or contact mining or
METS companies that have posted on the Hub, seeking to collaborate on a good research topic.
Finally commercial providers and financiers could connect with Hub participants needing their services or
finance.
Obviously protocols would be required to protect proprietary information. Posts would be vetted by the
secretariat so would not make the Hub if not at least in concept credible. There may also be an
accreditation process to get access to the Hub.
Fundamentally the idea would be to match faster and more effectively than is now happening.
Assuming we can drive greater collaboration in Australia, though, we still need the people to do the
research, and work on its application.
I have already referred to areas where we need policy intervention in our education system, but business
also needs to step up to the plate. We need to engage more with educational institutions in curricula
development, and in work experience opportunities. We also need to advocate for development of STEM
skills learning, and we as an industry need to partner more with the tertiary sector in developing METS
applications.
And more than this, we need to make our sector attractive. The image of the mining and therefore the
METS sector is under serious challenge. Yet METS is an area where Australia really can promote and
offer high end, high technology manufacture and services. But we need to attract the best minds to our
sector. And if mining has a poor image they will be reluctant to come.
There are two elements here. First, some think that mining is largely logistics - moving rocks from one
place to another. Actually it is hugely more than this. It is the highest of high tech in many instances - in

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our own case driverless trains and trucks, big data analytics to drive process improvements and predict
maintenance requirements, cutting edge environmental rehabilitation technology and techniques, our
operations centre in Perth from which we control 15 mines and a complex rail and port system, our cutting
edge scheduling system for our trains - the list goes on.
But a second issue is the general image of the mining industry. Take coal as one of the most attacked
sectors within that industry. Coal switches on the lights for countless millions of people, and in doing so
improves, and indeed saves, the lives of millions. We should not be embarrassed to produce it.
But we can acknowledge that coal is also a high carbon emitter, and that these emissions are
increasingly a problem in relation to climate change. We can also acknowledge that these emissions are
a significant pollution issue in Chinese and Indian cities. Addressing these emission issues is of
paramount importance. India cannot lift the next 400 million people out of poverty without coal, but it has
some of the most polluted cities in the world, and so it desperately needs clean coal.
Potential new researchers could take the view that the last thing they want to do is work in the coal
industry - particularly when they could work say in medical research saving lives. Or they could reflect on
the good that could be done if Australia could crack clean coal technologies. Substitution of Australian
and other clean coal for the coal currently, and prospectively, in use would be the single biggest
contribution Australia could make to reduction in global warming.
There are always at least two ways of looking at everything, and the mining and METS sectors need to
work out better ways to persuade people to see the good side of their industries.
I want to conclude, though, acknowledging the positive. We have a world leading mining sector. We have
some of the best research institutions in the world. We have some of the best research in the world. We
have world leading educational institutions. We have one of the biggest capital markets in the world. We
have a vibrant and growing METS sector, and we are a can do nation. So as another nation - the
Americans - might say:
“Let’s do this thing.”
Thank you.

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