Melbourne in Australia is regularly ranked as one of the world’s most desirable cities in which to live, but quality of living isn’t the only thing working in favour of the capital of Victoria state. The state’s economy is supported by strong export growth and good retail sales, and therefore the business community also wants to take credit for part of the accolade.

Though the local economy is weathering the global economic downturn relatively well, it is unclear how levels of FDI will be affected in the future as they are dependant as much on conditions elsewhere as on Australia’s economy, says minister for industry and trade for Victoria, Martin Pakula. But the state government has a range of powers at its disposal to ensure the best business environment.

“We’ve cut payroll and land tax and workers compensation premiums, so there are a range of levers state governments can pull,” says Mr Pakula.

International focus

The state government also has $8.64bn-worth of infrastructure spending in the current state budget, which will not only create the conditions to attract further foreign investment, but also involves tenders won by international companies.

Hong Kong metro operator MTR and private sector French transport group Keolis have just won a joint tender to run Melbourne’s tram network, for example.

Inward investment in the state originates primarily from Europe and North America but the government is actively seeking investment from other regions, including Asia. In May, Australia’s federal government agreed a bilateral trade agreement with China which the Australia China Business Council said would boost Australia’s GDP by A$146bn ($119bn) over 20 years.

Seeking high value

The state government is courting high-value investments and sees one of its strengths as having a strong R&D base in immunology. In May, Australia’s government announced a 40% R&D tax break as part of a 10-year gov­ernment strategy to boost the country’s innovation capacity and performance. “IP protections and tax breaks are commonwealth issues. At state level we offer full practical assistance,” says Mr Pakula.

Victoria has always been the manufacturing hub of Australia and Mr Pakula is convinced it will retain its position despite the downturn. The state is committed to helping the automotive industry make more efficient cars. Australia has three major automotive manufacturers, two of which, Ford and General Motors, are based in Victoria.

But despite a strong automotive sector, Mr Pakula says the state’s diverse component manufacturing industry needs to consolidate and be more export focused if the sector is to continue to thrive.

Growth sectors

Food and dairy production remain important sectors while growth sectors include pharmaceuticals, export of education services, tourism, renewable energy and defence manufacturing; BAE Systems has just announced the creation of 450 jobs in Williamstown, Melbourne, to build an air warfare destroyer.

Victoria has had to fight hard to attract and retain such investments amid competition from other global locations. “We’ve just seen the world divide into good General Motors and bad General Motors and luckily Australia was good, but we have to be constantly vigilant that our General Motors facility remains competitive,” says Mr Pakula, who sees attracting big business as an ongoing challenge which he and his administration are meeting head on.

Curriculum Vitae

Martin Pakula

2008State of Victoria, Australia

Minister for industry and trade and minister for industrial relations

2007State of Victoria, Australia

Parliamentary secretary for roads and ports

2006State of Victoria, Australia

Legislative council member for western metropolitan region, parliamentary secretary for transport