The idea that a federal Industry minister would champion a large public investment into a foreign technology company and then hold that investment up as a signature project in government’s Future Made in Australia ambitions is shocking.
But that seems to be where the Australian industry has found itself – being gaslit by its own minister.
The secret process of engagement by the federal government with the US-based quantum hardware startup PsiQuantum paints a grim picture – of lobbyists and their mates, and of California jazz-hands and Captain’s picks.
Advice to government outlining risks involved in the investment have apparently gone unheeded. The process stinks and will undermine public confidence in the multi-billion-dollar investments that will be made through Future Made in Australia initiatives and the National Reconstruction Fund in the coming years.
You don’t need a colour-coded spreadsheet to see this.
If this is an example of how the ‘Future Made in Australia’ will work, then Australia taxpayers should be very worried indeed.
The Australian industry, no matter how good its technology, should now realise that success or failure may depend on their ability to hire a Labor-aligned lobbyist to push their case, and to commission a friendly economic impact study from a Labor-aligned consulting firm.
Because that’s the process. That’s what works. This is not how industry programs are supposed to run.
Australian quantum companies have been up in arms since the Industry department issued a ‘secret’ call for Expressions of Interest in August last year. The way the EoI had been written appeared to favour a particular technology being pursued by PsiQuantum.
All participants in the secret EoI were required to sign onerous non-disclosure agreements, making it difficult for outsiders to unpick what has happened. But local quantum companies spoken to by InnovationAus.com have made clear they smelled a rat from the start.
They say the timeline of events points to a decision being made, and then a process being put in place to reverse engineer that decision.
It has long been known in the industry that more than a month prior to the EoI process, PsiQuantum was making claims to its investors and stakeholders that the company was in advanced negotiations with the Australian government, and that it was confident that an investment or other commercial arrangement would proceed.
This raises serious questions about why this Californian company had advanced notice that government was planning a large-scale investment in a single quantum outfit.
If the government was about to issue an EoI to test the market and assess what capability we have in this country, why was PsiQuantum claiming it was already in advanced negotiation with government over a substantial investment of public money?
The sum being discussed is thought to be around $200 million (although the Queensland government is said to be in negotiation with PsiQuantum and would fund a minority proportion of this sum).
But the idea that Australia, having spent tens of millions of public research dollars on quantum research over decades, would drop $200 million or more on a foreign quantum startup that has made no investment in this country and no commitment to this country seems unhinged.
For Australia’s quantum companies, it would be a disaster. It would have a crippling effect on the ability of Australia’s quantum hardware pioneers’ ability to raise venture capital in international markets.
Every conversation with the specialist quantum VCs in the world would start with trying to explain why your own government would make a signature NRF or Future Made in Australia investment into a US company, rather than any kind of investment in your own company.
The Australian government is the largest and most powerful organisation in this country, better resourced than anyone to conduct due diligence. So why did it overlook your company in order to invest in that overseas company, potential international investors will ask.
Why the secrecy? Surely an open, transparent and competitive process would serve the interests not only of Australian taxpayers, but also all of the 30-odd companies that responded to EoI.
When Industry minister Ed Husic announced via the government’s National Quantum Strategy a pledge to build the “world’s first error-corrected quantum computer in Australia”, most reasonable people took this to mean investing in Australia’s leading quantum companies.
Apparently not. Committing to building the world’s first error-corrected quantum computer in Australia was crazy-brave – it’s not like much bigger and better resourced countries all over the world aren’t trying to do this also – but why would we invest Australia’s scarce resources into a foreign company at the expense of our own? Bragging rights?
None of the quantum companies contacted by InnovationAus.com objected to PsiQuantum setting up in Australia. Or meeting with government officials or seeking incentives to set up here.
But there is dismay – and real anger – that the process has given clear advantages to a foreign competitor at the expense of the local industry.
At every point, the government has chosen secrecy over transparency in relation to this quantum process.
The Industry department only acknowledged that a quantum EoI had even taken place in February through Senate estimates. This was more than five months after the EoI was initiated.
The department and minister’s office have declined multiple freedom of information requests related to the EoI on grounds ranging from national security to public interest to commercial in confidence.
The mid-year economic and fiscal outlook published in December included a line item to fund the National Quantum Strategy – but was marked ‘nfp’ or Not for Publication this financial year, and blank over the forward estimates.
There are many questions that remain. For example, has the government entered into an commercial or financial arrangement with PsiQuantum? And if it has – either directly or through the National Reconstruction Fund – how much has been invested?
And how was it assessed? Was it based on responses to the call for Expressions of Interest? And if it was, why was PsiQuantum telling investors and stakeholder that it was in advanced negotiations with the Australian government?
Incidentally, PsiQuantum has now engaged three lobbyist firms, each now listed on the federal register.
The first, Brookline Advisory, is operated by Defence minister Richard Marles former chief of staff Lidija Ivanovski and former Labor staffer Gerard Richardson. It has lobbied on behalf of the PsiQuantum since May last year, a couple of weeks after the release of the National Quantum Strategy.
The second is Akin Agency, a Canberra-based lobbyist and media consulting outfit, engaged in November last year, around the time the secret EoI was first reported in the media.
In addition to PsiQuantum, Akin counts the Robyn Denholm-chaired Tech Council of Australia among its clients. There are multiple layers of conflicts of interest here, given the Tech Council includes among its members a whole bunch of Australian quantum companies, and that Robyn Denholm is the operating partner at PsiQuantum investor, Blackbird (the Australian VC).
And finally, appointed just two weeks ago, is PsiQuantum’s third lobbyist, the Liberal-aligned CT Group, now a global political consultancy founded by Lynton Crosby and Mark Textor. On its website, CT Group is highlighting its new ‘AUKUS Advantage’ service.
Do you know more? Contact James Riley via Email.
Hmmm. I’ve heard a lot lately about the Government using NDCs in its consultation processes. In the case of an EOI like this the Government could easily rgue – and genuinely believe – that the purpose of the NDCs is to preserve the confidentiality of the quantum developers. It is also possible that the Departmental officers working on the FOI requests believe it is the private sector firm’s “commercial in confidence” material being protected.
While there is plenty to question in doling out $200M to an offshore firm to come onshore just to attempt to break a record, that in itself is not a breach of the principle of A Future Made in Australia. Sometimes the investment requires bringing in a foreign partner (Think Anglo-Persian Oil to start the Commonwealth Oil Regfinery or General-Motors to create Holden). The problem is there is NO MECHANISM for Government to deal with “unsolicited offers”, the only way to respond to them under Finance’s rules is to write a tender spec that only the offeree can meet and then award them the tender.
There was another far larger Government project that got right royaly screwed up from the outset by the tender rules – the National Broadband Network. The offer of government support to build the single access network created an ideal opportunity for industry collaboration, but being a tender the Department found itself creating “bidding tension”. Instead of Telstra, Optus, AAPT and others coming together it resulted in the chaos of the “others” only able to win on the assumption of mandated access to Telstra assets and Telstra determined not to let that happen.
So while there looks to be plenty to criticise Indusrty here for, it looks like Finance processes may be as much to blame.