Andrew Liveris, Dow Chairman and CEO
2011 ATSE Clunies Ross Awards, Brisbane
May 19, 2011

Remarks as prepared for delivery

Thank you, Peter. 

And thank you, Martin Albrecht, for inviting me to speak to you tonight.  Your Excellency, Governor General, members of the Academy of Science, my gratitude to you as well.

And congratulations to tonight’s award winners! 

It goes without saying, but I am extremely disappointed not to be with you in person tonight.  Brisbane and Queensland are home, and even though I have been overseas for quite a few years, I like to stay as connected as I can both to the University of Queensland and, of course, to my family, some of whom are in the audience tonight.

And so I would much rather be there with you than here in New York, but as is often the case in my job, I have an urgent and unavoidable conflict that demands my presence here.  Even so, I feel especially grateful to be with all of you tonight if even via satellite.

These awards are named for one of the most important members of the scientific community in Australia’s history.  Sir Ian Clunies Ross was a giant.  He was a true visionary who understood the promise and possibilities of science, and helped our country to strengthen its scientific infrastructure.  We stand today on the foundation he built.

In his honor, these awards are meant to highlight the hard work and deep commitment required, not just to produce new innovations, but to commercialize them.  To take that important next step that makes science and technology—and chemistry in particular—not just an element, but a genuine driver of commerce.

That is the business of Dow, and in different ways, it is the work of all of you gathered there.

It takes little more than a cursory look at the global economy to know that this is the work that will create growth and prosperity for developed and developing nations alike;  that this is the work that will produce solutions to some of the world’s greatest challenges.

Tonight I’d like to spend some time talking about Australia’s role in providing those solutions.  We have a unique perspective.  We have particular gifts… remarkable assets.  If we put them to effective use, we can transform the future—for Australia and for the rest of the world.


 

AUSTRALIA AND THE GLOBAL ECONOMY

Australia is already an engine of global commerce.  Its economy is vibrant and strong. It was able to avoid the global recession, even while remaining connected to the global economy.  In the face of crisis, Australia’s unemployment rate is nearly half that of America’s.  Quality of life is high.  Quality of work is high.  In the age of globalization, we have become, without question, a model for success.

Brisbane, in particular, is a hub of multinational commerce.  It is home to industries ranging from pharmaceuticals to agriculture, renewable energy, and information technology.  It is home to top-notch research centers, modern infrastructure, and a diverse, well-educated workforce.  All told, Australia’s “new world city” is fast becoming a key gateway for companies like Dow to do business in Asia and beyond.

That is the near-term view, and it is a good one. 

But if we take the longer view, it is clear that our nation is at a crossroads.  There are big challenges ahead, and with them, big opportunities.  As globalization continues to reshape business and commerce, as it puts an even greater emphasis on Australia’s connectedness to the world, we need to ask ourselves:

What will we make of it?  To what purpose will we use it?  To what greater good?

This century will be defined, in many ways, by the rise of powers like China, India, Russia and Brazil.  These countries are building a massive middle class and opening valuable markets for our exports.

It will be defined, too, by environmental change and a skyrocketing demand for energy.  It will be a century defined, in many ways, by scarcity.  The scarcity of energy.  The scarcity of water.  And of other finite natural resources.

And it will be defined by social and demographic shifts.  Urbanization.  Immigration.  Relocation.  The flow not just of commerce, but of workers and cultures and ideas into our cities.  Economies are becoming ever more dependent on that kind of mobility, and on continued population growth.

Big challenges require tough choices.  Are we up to facing them?  Do our political institutions have the capacity—or our political leaders, the will—to act?  Do our business leaders have the strategic sense to orient their companies toward these emerging megatrends?

These are the questions Australia must answer.

THINKING LONG TERM

The urgency of these questions is real—but not everyone feels it.

As I said before, life in Australia is pretty good for most people.  We are lucky that way—and in so many others.  The sort of churn being experienced in the United States right now—due to high unemployment—Australia has been spared a crisis of that magnitude. 

Australia has its challenges, of course.  But there’s no “burning platform” that forces us to rethink big things—what we’re doing and why.  Australia is marvelous at handling adversity—just look at the response to the recent Queensland floods—but not as adept, perhaps, at handling success.

Well, you might ask: why mess with success?  If the resources boom has created essentially full employment, why rethink things at all?

The rise of China provides a perfect example why.

China’s meteoric rise is of incredible value to Australia.  We provide the coal and gas that fuels their growth.  We produce the minerals that build their cities and infrastructure.  They will continue to grow, and both countries will continue to benefit.

But we should take pause.  We must not accept our current arrangement as the limit… the end game… the only game in town.  We must not accept it at the expense of seeing—and seizing—smarter, better opportunities down the line.

Let me explain.  Of course, we know that much of Australia’s future growth—like its present growth—will derive from its vast resources.  Indeed, Australia should do more to unlock those still untapped resources.  It should invest in rail connections, gas pipelines, electricity transmission and port capacity—the infrastructure required for resource-driven growth.

At the same time, we know that commodities markets are cyclical, and volatile; and though our resources are diverse, we are not immune from outside forces.  We know we are lucky to have been blessed with such abundance, but we know, too, that a country—however lucky it is—cannot rely solely on luck.

That fact of life should be reflected in our stewardship of the resources we do have, whether that means building infrastructure that helps us access them, as in the case of coal… or building a better management system to conserve them, as in the case of our key river basins, the Great Artesian Basin, and other aquifers.

But I think we must go further than that.

We have to ask ourselves:  do we want our economy—and our relationship with emerging powers like China—to be entirely resource-based? 

Are we satisfied being the world’s quarry and China’s miner?

And if not, what should we do instead?  Or in addition?

I believe Australia’s resources below ground can be equaled—or exceeded—by our resources above ground.  Our intellectual resources… our innovative capacity… our ideas.

I believe we can build an economy that is far less dependent on the prosperity of others.  One that won’t just make us the envy of nations, but a leader among nations.

What I’m describing is a balanced economy.

What I’m describing is an innovation economy.

What I’m describing is Australia at the forefront of the solution space.

That means a greater focus not just on resources or services, but on a robust advanced manufacturing base… on creating higher value-add products.

By advanced manufacturing, I mean a sector that takes any inputs, combines them with intellectual capability, and adds value to a functionality the world needs—pure water, fuel-efficient transportation technologies, faster and more effective smart phones.

The kind of economy that will generate sustainable growth and long-term prosperity. 

The kind of economy that will allow us to tap our talent and to turn our ideas into innovations that can solve the biggest challenges we, and others, face.

CULTIVATING INNOVATION

As someone who has dedicated his life to innovation, I would venture to say:  we have never needed it more than we do today.

The world’s most pressing needs will be met—and mastered—by innovation.  Innovation of the sort that happens in your laboratories… and, if I may say, in ours at Dow.  Chemistry is at the core of these solutions.

Let us look briefly at one of those challenges: energy.  We could just as easily pick food security… or human health… or water use.  But energy, I think, speaks most powerfully to Australia’s chance to truly change the world for the better.

Our energy challenge is defined by dueling imperatives.

The first imperative is economic growth.

Developed nations need to keep growing, and developing nations need to get their economies off the ground.

In both cases, there is a need for more energy—more resources.  Global energy use is expected to rise 70 percent by 2050.  And today, obtaining more energy means burning more fossil fuels, which, of course, means emitting more carbon.  Which puts our planet more and more under threat.

That brings me to the second imperative: environmental conservation.

CO2 emissions and deforestation are causing temperatures—and sea levels—to rise.  Our natural treasures—like the Great Barrier Reef—are threatened by pollution and climate change.  The time for debate is over: these problems are man-made.  And we need to do something about them.

Of course, that’s where these two imperatives seem to be at odds.

Many people assume that if we want to prosper, then forests are just going to have to make way for our fields and our roads, the oceans are going to have to make room for our refuse, and the atmosphere has to contain more greenhouse gases.  The price of progress. 

Some of these problems are especially acute here in Australia—one of the most carbon-intensive countries in the developed world on a per-capita basis.  A continent that is dry, and in need of sustainable sources of water for residential use, agricultural use, industrial use.

We understand abundance, but we also understand scarcity.  And vulnerability.

And so the choice seems to be grow the economy… or protect the environment.  One or the other.  A zero-sum game.

But here’s the thing: This is not a zero-sum game.  This is not win-lose.

It’s lose-lose.

If major cities are underwater in 50 years, the global economy will be, too.

And if we can’t raise the standard of living for the billions of people who weren’t lucky enough to be born in a country like Australia, then environmental protection will be seen as a luxury we cannot afford.

So we can’t choose between these two.  We have to find a sustainable way to do both.

And we can.  Through science… through chemistry… through innovation.

This is the International Year of Chemistry, and for good reason.  To solve these challenges, we will need to tap the tremendous promise and potential chemistry offers.  Time and again, the great scientific innovators have created products that have changed our world, and the way we live in it.  They will do so again.

Through innovation we can make transportation more efficient, and buildings more efficient, and in doing so, lower our energy usage.  Through innovation we can develop safer and more efficient sources of energy—like solar and wind and state-of-the-art batteries—and make them more cost-competitive.

That is something that Dow engineers and scientists are working very hard to achieve.  And it’s making a difference. Whether it was the creation of our solar shingles or roof tiles that can be installed on any roof by any roofer… or of adhesives that allow wind turbines to be bigger, lighter, and more efficient… we see the potential of innovation to change the energy equation.

We know, from our own experience, that science can ignite a true energy revolution… and we know that Australia can lead it.

Australia should want to lead it—very much indeed. 

If we do, this country will have more tools to advance its long-term prosperity.  Our centers of innovation will become hubs of commerce.  They will attract the best and the brightest.  They will attract business investment.  They will attract manufacturers, who can commercialize products coming down the pipeline. 

All told they will create a virtuous cycle of economic activity, a supply chain of sustainable jobs, and the wealth of high value-add products.  In some cases, they will create entire new markets and entire new industries.

But this will not happen by default. 

If this is the future Australia wants, it will take a heavy dose of determination.

It will take more than just the innovation in your labs.  It will require innovation in business models and business practices, and innovation in public policy. 

We’re already making some progress.  Between 2007 and 2008, the number of firms investing in innovation in Australia increased nearly 20 percent.  Dow is one of those companies. We have strong partnerships in Australia, and we believe that exciting new advances will be created and delivered by our scientists here.  And Australia has taken important steps, where it has been able, to increase its gross expenditures on R&D over the last decade.

So here we see the public and private sectors each advancing innovation.  But research and development is at its best when it is supported by private and public organizations working not in parallel but in partnership, united by a common purpose.

Last week’s federal budget rightly recognized the need to invest more in Australia’s skill base.  But we must go further.  We should see this spending not as a cost, but as a critical investment with substantial returns.

I was sorry to hear that there were cuts made in the collaborative research center programs, particularly in the Science international linkage program. Simply put, Australia needs more public/private partnerships, not fewer.  Between business and government, and between academia and CSIRO.  And it needs government to facilitate this.  Government can be doing more, far more, to help identify the sectors that are vital to Australia’s future.  It can be investing more, far more, alongside the private sector in developing and scaling up these industries.

Brisbane is a city that McKinsey & Co. has rightly labeled a “hot spring” for innovation.  Australia needs more Brisbanes.  More centers of cross-sector collaboration… of cross-pollination between chemistry and commerce, between scientific development and product development.

That intersection can be Australia’s future.

THE CHALLENGE OF BUILDING A BALANCED ECONOMY

But again: I am not talking about swapping out Australia’s current economy for a brand new one.  What we’re seeking is balance.  We have many strengths.  We ought to enhance them—instead of resting on them.

I’ll give you one key example of how that could work.

Let’s start with my home town of Darwin.  Every year, 3 million tons of natural gas come on shore.  How much of that is available domestically to Australians?  Virtually none of it.

Because prices are high right now for oil and gas, the market dictates that all this natural gas should be liquefied and sold and shipped to other countries.  And so it is.

Never mind that other nations take that same LNG and use it to create high-value products and jobs, and that countries like Australia import these same products at very expensive value-add premiums.

For Australia, this is a missed opportunity of massive proportions.

Don’t get me wrong:  exporting gas is important to Australia.  But so is using it to develop advanced manufacturing—by attracting businesses and industries that take commodities like natural gas and turn them into high-margin products… like the materials that make electronics run faster or the high-tech products that help farmers yield better crops on fewer acres.

I am not calling for sector protection.  What I am calling for is a government framework—one  that encourages investors to think creatively and in concert with the policymakers to add value to Australia’s resources.  I am calling for the creative thinking that I have seen by many governments around the world who are attracting investors in sectors that add value to their economy.  Look at Singapore as an example, or Thailand, or Germany.

This is not a theoretical issue for me—because this is Dow’s work.

Queensland is where natural gas was first discovered in Australia, and it proved to be an ideal site for Dow Australia’s gas and oil program.  In 1967, Dow signed a contract for 71 billion cubic feet of natural gas near the Brisbane River, which helped to fund construction for the Roma to Brisbane pipeline.

In the years since then, gas has become a key asset for manufacturing in Queensland, an important factor in the region’s economic growth, and a significant resource for our efforts to expand our supply chain into the Asia Pacific.

Why does Dow care about petrochemicals?  Because they are our feedstocks—the building blocks of everything we do, everything we create.

As this audience knows, the screen you’re watching me on, your table and chairs, the building itself, all come from petrochemicals and other products of chemistry from indigenous resources.  In the process of breaking them down and making new compounds, we create chain reactions not just in the chemistry, but in the economy: we stimulate local investment, create high-paying jobs, attract top scientists and engineers, put money back into the education system, and strengthen the industrial and economic base of the nations where we do business.

Consider just one of our many value chains.  We take oil and gas, add heat and pressure and a variety of different technologies and processes to it.  The end result is a key molecule called propylene. It’s a vital component in products as varied as high gloss paints and diapers.  Do a little more chemistry and you make propylene oxide, and ultimately polyether polyol, a technology-rich and extraordinarily useful product that’s used in a wide variety of products from cars to airplanes to refrigerators.

Now just from that process, we’ve created value.  For every pound of propylene and propylene oxide, we’ve added 10 high-tech and high-paying jobs to the economy.  For every pound of polyol, another 10 jobs get created.  

This is how you create value.

In the U.S., the chemical industry used about $60 billion worth of hydrocarbon feedstocks last year, and had a direct output of $720 billion—that’s a 12 times value add.

If Australia dedicated some of that liquefied gas to feedstocks instead of selling it off, it could expand the size of its chemical industry—an industry that directly employs 85,000 people already in this country.  It would take just a few simple steps to dramatically increase that number. And as a general rule, every one job inside a chemical manufacturing plant creates five jobs outside the plant. 

Keep more gas at home, build research partnerships with our world-class universities, and you can create thousands of high-paying jobs—jobs that will last through commodity price cycles, all while balancing the economy and attracting long-term corporate investment.

But to get this kind of industrial policy, we’re again going to need government leadership, and again need a collaborative approach between the public and private sectors on key issues such as tax reform, energy policy, regulatory reform, and associated costs of doing business.  Every piece is essential to creating a globally competitive manufacturing sector that adds value to Australia’s indigenous resources.

You do not have to be a businessman to see this is a good deal for Australia.

IMMIGRATION AS INNOVATION POLICY

There is one final, essential element I would like to mention before I close.

We cannot achieve any of what I’ve just described without sufficient human capital.  Australia has a small worker base.  To build an economy run by the best and the brightest, we not only need an education system that can produce them, but an immigration system that can attract them.

Let us be frank: We need population growth to fuel that future.

We are, and have always been, a nation of immigrants.  About 40 percent of Australians were born abroad, or are the children of immigrants.  People have come here from more than 200 countries to start families and build lives.  At times, that makes an otherwise isolated island feel like the center of the world.

But over the next century, immigration will be important to Australia not solely for the culture and diversity it brings.  We need to find the right people with the right skills to do the work our economy demands.  We need to ensure we have enough population growth to sustain our economic growth.  I believe not in a small Australia or a big Australia, but in a great Australia.

CONCLUSION

This perspective is not new or unique.  I am not the first to talk about it, nor will I be the last.  But there is, of course, a difference between talking about a problem, and mobilizing to solve it. 

Australia is the envy of nations.  It has wealth.  It has a high quality of life.  It has a vibrant democracy, a vibrant society.  But does it have the will not just to be the envy of nations, but the leader of nations?  That’s the question I have posed to you tonight, and the question I think this country should take up.

If Australia can build up its manufacturing and innovation capacity in its economy, I believe it can be at the forefront of solving the world’s greatest challenges.  That is a role I think we should embrace.

Doing so will take courageous leadership—and an abiding commitment.  The kind of commitment on par with fighting a war or seeking to put a man on the moon.  A commitment of conscience and a commitment of resources.

If Australia does these things, we will become the world’s greatest laboratory. 

We will lead in the export of ideas. 

We will set an example for the global community to follow. 

Is that too ambitious?  I don’t think it is.  For other nations maybe.  But not for Australia.

We can be the great leaders of the world.  But that’s going to require a choice.

A choice we alone can make.

Thank you and enjoy the rest of a great evening.