2001 ANNUAL REPORT - Back to Contents Page

Message from the Chair
Following the Innovation Summit held in early 2000, the government released its innovation strategy, Backing Australia’s Ability, in January 2001. As a central pillar of government policy, it has focused attention on what is needed to revitalise Australia’s economy and to ensure that we have the capacity to meet our aspirations for economic, social and environmental outcomes into the future.
The discussions of innovation centred on the new economy - built on information and communication technologies, on biotechnology, and in the future, on nanotechnology. As well as creating the new economy, these technologies will change the way business is done in the old economy, and they have the advantage of being light on resources and waste.
The challenge RIRDC faces - as a rural research funder - is how best to link emerging and established rural industries with the new economy and other opportunities. Despite a low Australian dollar which favours exporters and generally good commodity prices, many farm families are still struggling to achieve their income aspirations. They need to generate more consistent surpluses to begin to address significant problems of resource degradation, and to diversify in ways which offer a more rewarding future in the long term.
In November 2000 RIRDC published a report investigating the potential for new pharmaceutical, nutraceutical and industrial crops, as a first step to identifying new industry opportunities based on the production of health rather than food products.
Many existing products in which RIRDC has research investments - including honey, tea tree oil, essential oils and herbs, already add value through their incorporation in health products.
We see this area of health and nutrition as being one of the new opportunities for products that can return value greater than is associated with traditional commodity products, and where new economy technologies will play an increasing part.
The RIRDC Board has been actively considering this area and other ways in which it could make more strategic investments to improve the impact of our research funding. A continuing frustration for the RIRDC Board is the difficulty of keeping the new industry program momentum moving forward.
During the year, a study on the benefits and costs of rural R&D corporation investment was conducted on behalf of the Committee of Chairs of the Rural Research and Development Corporations. It highlighted that the total budget of RIRDC, which is predominantly an allocation by government (similar to that of Land and Water Australia), has not grown proportionately with the budgets of the commodity research and development corporations where levies on an increasing industry GVP have been matched by government funds.
The development of new industries is a slow and risky process. Not all new industries grow and survive as long term components of the Australian rural sector. Maintaining research support throughout this process of growth and testing is necessary, as premature withdrawal of funds or early pressure on the new industry for significant funding contributions could stifle research efforts before they have a chance to bear fruit. Effectively this ties RIRDC’s funds into the areas of historical investment at the expense of subsequent opportunities.
In addition, the three year time span of most projects results in the overall program being substantially committed in the first out year and roughly one third committed in the second out year. Both these factors impose limits on the rate at which change can be introduced.
Although RIRDC is usually a marginal funder, it is also clear that RIRDC funding priorities do affect the research and staffing priorities of research providers, requiring careful consideration before a decision is taken which would result in loss of research capacity for a particular industry or industries.
How have we addressed these issues?
The Board has introduced modest budget reallocations between programs and sub programs based on workshops with senior management, examining the relative priorities and likely impacts of investment across Programs 1, 2 and 4. These reallocations will be more significant as the impacts of lower and higher budget allocations accumulate over two or more years.
We have also asked management to ensure that all the government allocated funds in RIRDC’s Core Account work harder. In other words, our aim is to have all of these funds invested in projects and to carry minimal reserves in this account from year to year. This has imposed much greater discipline in the management of cash flow than had previously occurred, and the difficulties of managing this tightly are significant because research expenditure is lumpy and irregularly timed.
I am pleased to report that managers have done an excellent job in ensuring that all of these funds are at work in good projects. Slight reductions in funding in many subprograms in 2000/2001 compared with 1999/2000 reflect a return to "normal" funding levels after a one-off increase to utilise the small cash reserve which was held in RIRDC core.
We have also continued to seek synergies which expand the impact of our investments. The Joint Venture Agroforestry Program is a long standing and successful example of this approach. We have also sought to maintain strong links with the New Industries Development Program ($21.7m over 5 years under Backing Australia’s Ability) and the Farm Innovation Program ($18m under the Agriculture - Advancing Australia Package within the AFFA portfolio).
Both the latter programs have considerably more funds for annual allocation than are available in the related sub programs of RIRDC. It makes sense to be sure that we are not duplicating activity or undertaking work which could be funded from other sources.
We are also re-examining our Commercialisation Policy, with a view to increasing the rate of adoption and impact of the outcomes of RIRDC’s investments.
Many of the projects we support have public rather than private good outcomes, and do not lend themselves to the development of commercial goods or services in the
short term. Nevertheless, we are looking for appropriate and more rigorous ways of ensuring the rapid impacts from each project, and for maintaining a stewardship interest where RIRDC has an interest in IP on an on-going basis. We have delayed completion of the process until 2001/2002 to accommodate the Besley paper on commercialisation of public sector research, prepared for the Prime Minister’s Science, Engineering, and Industry Committee.
The Board is able to focus greater attention on the strategic directions of the Corporation and to request tight cash flow management because we are confident of the Corporation’s ability to meet its accountability requirements.
This is due to the competence and enthusiasm of RIRDC’s staff. They have a strong sense of participation in the future of the industries they work with, and I would like to acknowledge their ongoing contribution.
Excellent ratings of the overall performance of RIRDC were captured in the latest Client Survey (February 2001) which followed previous two-yearly surveys.
Leadership is a key factor in this success, and I would once again like to acknowledge the outstanding leadership which has been provided by the Managing Director, Peter Core.
Peter has endless enthusiasm and energy, and a wide range of skills, but I would like to particularly note his contribution to a Gold Medal for last year’s Annual Report and to the maintenance of excellent relationships with our key clients.
These relations include the Parliamentary Secretary overseeing rural research, Senator the Honourable Judith Troeth, and the leaders of rural industry with whom we interact, ranging from the NFF to the small local groupings in many of the new industries.
The Dried Fruits Research and Development Council activities left RIRDC to form part of Horticulture Australia from 1 July 2001. This move allows the marketing and R&D responsibilities for the dried fruits industry to exist in close collaboration, with the opportunity for operating efficiencies.
I would like to take this opportunity to extend good wishes to the industry for its future success. This realignment of industry institutions to suit changing times is a reminder that in RIRDC we need to consider new options.
The question we must ask is how can we deliver better outcomes from rural research in the face of new technologies and shifting industry pressures.

Beth Woods
Chair

The Managing Director's Review
2000/2001 was another year of endeavour by the Corporation, its industry partners and the researchers who undertook the contracted projects. Elsewhere, the Annual Report sets out the year’s highlights and the details on each area of the Corporation’s work.
This Annual Report is full of facts and details and it is because we have important obligations to be open and transparent to those that provide the funds to us. This transparency is obviously not a once-a-year event but our Annual Report is the key response document where all the threads are drawn together in an operational and financial sense.
As a management team we have striven to give ‘value for money’ and, to do that, we work with industry to identify the right priority areas for research, researchers with a track record for quality and delivery and to make the results of the work known widely to existing and potential industry participants.
This is not the place in the Report to dwell on the micro, although it is my view that our performance will be judged on our attention to detail – getting it right, each time, everytime. And by ‘it’, I mean everything.
In this year’s review, I want to spend some time addressing a broader issue – and it is this. If you read this Report, you would be right to say that our work in 2000/2001 was not much different to that in 1999/2000 or, for that matter, earlier years. At first blush you could come to a view that the program components are stable – perhaps too stable. But underneath that veneer of stability, there is, in my view, constant change and constant striving to position the R&D effort to the changing needs of our respective rural industries.
R&D is obviously not a short-term investment but decisions are taken by the Corporation each year which tilt the aggregate effort towards the changing needs of key stakeholders and industry partners.
If this Corporation looks back over its past ten years, the pressures from key stakeholders to re-prioritise the research dollar have been enormous. To be blunt, key stakeholders are seeking to push the research effort away from production agriculture – broadening it to take in post-harvest handling, food processing and food safety; and environmental issues such as land degradation, salinity and climate change.
Our program priorities have changed as a result. Our largest single sub-program is now agroforestry – a land use with commercial output and significant environmental benefits. In rice, one of the key research efforts is to lift water use efficiency. Also, large parts of Program 4 ‘Future Agricultural Systems’ are directed to a public research agenda, significantly broader than ten years ago. The list goes on.
But there is an emphasis that I have given this Corporation over the past five years of stewardship. And it is that, yes, our agenda is rightly broader than production agriculture but we can’t respond to all the demands of interest groups. Our funding base has been held constant in real terms over recent years and, in my view, we have to ‘stick to our knitting’ which is a ‘more profitable, dynamic and sustainable rural sector’.
Over the past five years, the Federal Government has put in place major programs like the Natural Heritage Trust, the Australian Greenhouse Office with its program of gas abatement, the recently announced National Action Plan for Salinity and Water Quality and its associated R&D component, and AFFA’s Farm Innovation Program. These programs are, in aggregate, having hundreds of millions of dollars spent on them each year. There is no way that RIRDC, with its $11 million in core funds each year, can be a significant player in that game. To try to would, in my view, spread us too thin, damage our credibility, and challenge our charter to foster new and emerging industries.
As the reader looks through our ‘Summary of Operations’ starting at page *, you will see a portfolio which has a strong focus on production agriculture and one that is cognisant of the broader agenda. Our agenda, whilst not turning its back on basic research, has its primary focus on applied research of more immediate benefit for the rural sector.
I recognise that this stance is debatable, with legitimate alternative views but, in my stewardship, I have sought to position the Corporation to be realistic and recognise that our efforts have to focus on a particular segment of the public research agenda.
We have to recognise that the Federal Government – and its State counterparts – are responding and that that the private sector is becoming a much more substantial provider of agricultural research. This can be found particularly with post-harvest and input research on fertilisers, herbicides and pesticides. Private investments in plant breeding, veterinary and pharmaceutical research are now, more than ever, being underpinned by intellectual property rights for biological innovations. While the data for agriculture is not available, private companies’ share of the total R&D spend in 1999 was nearly 50 per cent for Australia. The comparable figure for the US was closer to 70 per cent. The private sector is a significant research player here in Australia and our portfolio needs to be complementary to these emerging trends.
2000/2001 saw a renewed focus on innovation in the public agenda. In January 2001 the Federal Government released Backing Australia’s Ability which was a $3 billion package over five years in addition to the existing $4.5 billion spent in 2000/2001. Now the debate is shifting towards the details of the framework for an ‘Innovation-Driven Economy’ and rural industries must position themselves and participate in this framework or they will inevitably be left behind. In terms of research, the focus is about connection, collaboration, excellence, networks and clusters with knowledge becoming an increasing driver of the economy.
In a RIRDC context, we have an absolute focus on making reports resulting from our contracted research accessible. Nearly all of our reports are at our website (www.rirdc.gov.au) and usage is now close to 200,000 hits per month – with much of the focus on final reports.
Our website has grown into our central communications hub and, increasingly, it will be used by us with our stakeholders, including the farming community.
But, having said that, we need to acknowledge that many of the current challenges facing rural industries will not be resolved by research results alone. Even in the context of the Web, we can’t assume that all of our stakeholders are e-literate. Many are not and there is an emerging debate about the need for broadbanding if rural industries are to really be on an equal footing. The point is that much lies in the political arena but hopefully some of our work is providing a basis for better informed policy dialogue for rural industries.
In signing off this part of the report, I would like to thank the Board for its support and all the staff for their commitment in contributing to our successes in 2000/2001. More broadly, I want to record my sincere thanks for their friendship over my time with the Corporation. It is the inherent quality of our people that enables us to pursue a more profitable, dynamic and sustainable rural sector.
Peter Core
Managing Director

How Stakeholders Rate Performance
Every two years the Corporation surveys its stakeholders on our performance. The latest survey was carried out in February 2001.
The full report of the survey is at our website (www.rirdc.gov.au/2001survey), but, in essence, the survey shows that our stakeholders continue to view the Corporation’s performance as strengthening over time. On the key question of ‘overall performance’ the results for 2001 compared with earlier surveys are as follows:

More than 80 per cent of survey respondents rated our overall performance as good or excellent and the 2001 survey confirmed a trend towards improvement over the last three surveys.
Program Management was rated very highly which is mostly attributable to the constant interaction between the Program Managers and the research providers.
The range of programs currently serviced by the Corporation demands close attention from the Program Managers to ensure the variety of needs, stage of industry development and relevant stakeholder issues are understood and reflected in activities.
Communications between the Corporation and stakeholders continued to improve according to the survey.
The website has become a functional tool for researchers and allows a good knowledge of program priorities and reports. The access of reports and electronic newsletters via the website was also highly regarded by many stakeholders.
There is always room for improvement and the 2001 Survey pointed to the following areas that we need to work on:

Greater use of our Advisory Committees as a bridge to producer needs and as a communication mechanism.

The application of improved ‘e-metrics’ to build a greater integration between the content of our website and customer usage.

Greater integration of our database systems so that the information held regarding stakeholder needs and access is used to improve our management of relevant and tailored information distribution. The database of stakeholders can also be viewed as an asset of the Corporation on which we seek to maximise returns.
Returns on Investment
2000/2001 saw us continue the program of ex post project evaluations. In that period a set of projects from Program 4 ‘Future Agricultural Systems’ was evaluated and, with that, the Corporation now has data from each of its four program areas. This data is summarised in the graph below.

These ex post project evaluations are outsourced to the Centre for International Economics and, in 2000/2001, cost $100,000. Around $75,000 was spent on each of the three previous evaluations.
While the Corporation recognises that only a limited number of projects were evaluated and that the focus of the project selections was on those with tangible, near market outputs, the conclusions from the project evaluations are remarkably similar after the four year cycle.
The only conclusion that can be reached is that the return of the research dollar is high. It is unrealistic to expect all research investments to be profitable. That is a benchmark you would not apply elsewhere. However, our evaluation process and similar exercises elsewhere demonstrate clearly that while research is inherently risky, most investments have a higher return than mainstream investments.
In the broader context, the Corporation recognises that these returns will be maximised if:

there is a significant effect at the front end of the investment process on project selection and employing the most competent research to do the contracted work

individual projects are selected as part of a broader productivity / competitiveness / sustainability agenda for the articular industry

there is a clear cut focus on having the research outputs adopted by industry participants.
Methodology used to evaluate the impact of our research
The methodology used in the ex post evaluation involves:

Identifying what the technical and economic outcomes of the R&D were and why such outcomes were achieved.

Assessing the welfare effects of the R&D compared with the level of welfare that would have arisen in the absence of the research project.
The process adopted was developed in collaboration with GRDC and is illustrated in the following chart. It uses the welfare economics based concept of economic surplus to evaluate the impacts. This methodology has been accepted as the most rigorous available and has been adapted extensively for use for agricultural R&D over the last forty years. Full details of this methodology are provided in Guidelines for Economic Evaluation of R&D, CIE/GRDC/RIRDC

Next Year
The first full four year cycle of evaluations has been completed. RIRDC will continue these evaluations to build a niche set of investment information. In 2001/2002 we will focus on in-depth evaluations of one or two sub-programs. We will choose Agroforestry in the Emerging Industries area and possibly Rice from the Established Industries area.

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