Figure 2: Top 10 Countries by Incentive Value and Deal Count iii
When breaking down value of incentives by sector, the top four included:
• Automotive OEM( US $ 16.906 B)
• Semiconductor( US $ 13.07M)
• Electronic Component( US $ 11.61 B)
• Alternative / Renewable Energy( US $ 5.27 B).
The largest individual incentive awarded to a company was to Intel, who received an estimated US $ 11 billion in subsidies from the German government for a new semiconductor plant estimated to create 3,000 high tech jobs.
A CHANGING GLOBAL ECONOMIC LANDSCAPE Since the COVID-19 pandemic, the global economic order has been reshaped by ambitious industrial incentive policies. During his presidency, Joe Biden signed three major pieces of legislation to repair infrastructure, boost semiconductor investment, and expand green energy. Together they included the American Rescue Plan Act, Inflation Reduction Act, and CHIPS and Science Act which aimed to reshore manufacturing jobs in the U. S. with significant investments in semiconductors, EVs, and public transportation valued at over US $ 126 billion. iv v
For all the headlines and rhetoric, President Donald Trump ' s re-election in 2024 appears to largely continue Biden ' s industrial policy of“ Buy America”, albeit with an increased focus on weaponising tariffs to protect U. S. industries and force countries to the negotiation table. vi
The current reshaping of the global economy away from the globalised, free trade ideology of the 1990s-2010s towards more protectionist policies has profound impacts on Australia’ s economic future. It also clearly highlights the importance and power that economic development incentive policies can have in radically reshaping business and trade. The Australian labour government ' s proposed $ 22.7 billion Future Made in Australia plan is a response to the new economic order and aims to attract investment in renewable energy, industrial innovation, and natural resources. vii Overall, there exists significant potential for EDOs to experiment with incentive policies to help support and attract businesses within emerging growth industries.
FINANCIAL INCENTIVES: A MISSED OPPORTUNITY FOR AUSTRALIAN MUNICIPALITIES Australian Federal and State governments often use incentive based economic policies to attract investment and support local firms, recognising their power to influence behaviour. However, local governments appear to be less willing to explore this tool. Why?
A 2018 report by the Victoria Auditor- General’ s Office attempted to answer this question by assessing Victorian councils’ economic development activities and their impact at improving the economic viability and sustainability of their municipalities. viii The report found that while many councils developed well-aligned economic strategies, they often fell short of achieving their goals. This misalignment is partly due to limited use of powers granted under the previous Victorian local government act, such as entrepreneurial powers and special rates. The report noted that councils tend to be reluctant to use incentive-based powers, fearing they may promote private interests over public ones.
ESTABLISHING AN ECONOMIC DEVELOPMENT INCENTIVE POLICY: A STEP-BY-STEP GUIDE Global bodies are increasingly concerned about poor governance and transparency in global incentive schemes, leading to misallocated public funds. Issues include inadequate monitoring, poor governance, hidden taxpayer costs, and incentives acting as subsidies for existing business activities. ix
Despite the risks associated with financial incentives, EDOs should not be afraid of experimenting with designing incentive schemes to serve their communities. The following section outlines a high-level
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