Niels Marquardt – CEO, AmCham Australia
The CEO of AmCham Australia, Niels Marquardt discusses the evolution of bilateral relations between the two nations, as well as how current macroeconomic conditions have affected US investment activity in Australia’s oil and gas sector. He also describes the type of value American companies are contributing to the growth of this sector, while highlighting the cross-synergies between American and Australian business culture.
Where do trade relations stand today between the two nations, and how does AmCham Australia stand out?
The US is not just a key trading partner for Australia, but also one of the most, if not the most important economic partner. We have a diversified trade relationship with regards to the goods Australia sells to the US; it’s not just one or two commodities, but a range of agricultural products, sophisticated advanced manufacturing, and consumer goods. China is the largest trading partner with Australia, but that’s almost exclusively iron ore and coal, and increasingly LNG.
The US is Australia’s only formal ally. The combination of the economic partnership and the strategic relationship makes the United States unique for Australia. In a lot of ways, Australia is unique for the United States—as the former Prime Minister John Howard said, the US is an outpost of Western civilization in the Asia Pacific region. There are a lot of discussions regarding the potential of China or India, in addition to a focus on countries such as Israel for innovation or Germany for the advanced manufacturing. But you shouldn’t lose sight of the fact that the US is the big kid on the block. Every major American company has been represented across Australia for a very long time. The foundation of that relationship is simply unparalleled compared to other US allies.
Why is Australia such a favorable destination for American companies?
The US invests more in Australia than any other country in the entire region. A lot of the attention goes to emerging markets, but none of them are on the same scale as Australia. The fundamentals in this country have always been solid. The cultural affinity between American and Australians is a starter—you don’t have that with any other country in the region. The other advantages include Australia’s political stability, the rule of law, the sanctity of contracts, and the fundamental honesty of Australians. Looking back at my former role as US Consul General in New South Wales and Queensland, I had never witnessed any commercial problems arise between American and Australian entities which required diplomatic intervention—which starkly contrasts many other countries that I’ve worked in. And perhaps underpinning all of these characteristics is the sheer scope of market opportunities laden throughout Australia—a land mass equivalent to the continental US and consisting of over 23 million people. Especially in this resource abundant country, Australia has never had enough indigenous manpower to do it all themselves, and as such, has been historically welcome to foreign direct investment—particularly by Americans.
Do you see investments in the country growing?
When I came here six years ago, there was this enormous pipeline of specifically resource investments coming from the United States—roughly approximating USD 200 billion awaiting final investment decision (FID). Today, there is no pipeline. The projects that received FID around the time that I arrived are now in their final stages of completion, and currently there’s this great sense of uncertainty given the current economic climate. There’s been a big push by policy makers to make the environment here more attractive—especially when investors are evaluating opportunities in Australia against markets such as East Asia, Africa, South America, or Russia.
What areas of the oil and gas sector do you see American companies getting most involved in?
American companies, considering their dominance in the sector, will remain active across the board. The current price trends are global, so there’s nothing unique about that in Australia. Though, especially after COP21 in Paris, coal and other fossil fuels are exhibiting downward pressures as a result of geopolitical discussions and the imperative to tackle climate change. There’s also a corresponding uptake in wind, solar, and other renewables—all of which Australia possesses. So, relatively speaking, we’re starting to see more activity in these areas, as opposed to the traditional oil and gas segments.
Certainly, no American companies are considering leaving, but the internal argument about why they should invest the marginal dollar in Australia is becoming harder and harder—especially considering the high costs of doing business in this country. Unpacking this characterization, we see that there’s simply less qualified and readily available labor in this market, which is further exacerbated by the diminishing presence of expats as a result of project completions and general macroeconomic downturn.
On top of the labor costs, taxation is also increasingly becoming an issue. Australians are currently facing a fiscal challenge, and as they look for sources of revenue to return to budget surplus by 2022, they may look to a more stringent tax regime—particularly focused on multinational companies. As such, many of our members are expressing concern about the singling out of foreign taxpayers and the risk of further deterring the foreign investments that have supported this industry for so long.
What do you believe to be the value proposition that American companies bring to the table?
Several features include the absence of corruption, cost efficiency, and, perhaps foremost, technological excellence. Looking at Curtis Island, the three main projects are all using ConocoPhillips technology to compress and liquefy gas. While there are real challenges with preventing cost blowouts, American companies probably have a better track record than anybody else. There are also some more fundamental advantages such as familiarity with the culture and willingness of Americans to relocate.
Are there any challenges with regards to the Australian business culture?
In certain sectors, the union influence is much stronger, but not always more constructive. There’s a particular union called the Construction, Forestry, Mining, and Energy Union (CFMEU), which has developed a reputation of being rather difficult to deal with. American companies doing business here can sometimes be surprised at just how demanding a unionized workforce can be.
Having been in Australia for almost six years now, Niels, how did your initial expectations of Australia match up with the realities?
When I came in 2010, it was absolutely at the peak of the boom. Nobody was worried about anything, with many becoming quite complacent given the prosperous environment and influx of investments. The US dollar was below parity. There were efforts back then to alert American citizens on the wealth of opportunities available in Australian. Now, it’s almost the opposite. A lot of our efforts have now focused on helping Australians understand how to go work in the United States where unemployment rates have fallen dramatically and employment in energy has stayed resilient. Ultimately, however, Australia is still an incredible place to live, work, and do business. We continue to work at AmCham to attract Americans—we see it as the ideal place to jumpstart a career abroad.