Remarks by Australian Ambassador Rod Smith
ANZCHAM Annual General Meeting
10 March 2009, Sofitel Philippine Plaza
Let me start by extending my congratulations to the newly (re)elected members of the ANZCHAM Board, and on behalf of all of us in the Embassy acknowledge the contribution you make to advancing Australian trade and economic interests in the Philippines – not only that but also in a broader sense contributing to an important part of the fabric of the bilateral relationship.
When I had the opportunity to address this group in the middle of last year, just a few months after I arrived in Manila, I outlined in broad terms the current state of relations and the sweep of our interests in the Philippines. I don’t want to traverse the same ground again but it’s worth reiterating a few points to set the scene before I move on to some more recent developments. Bear with me if you’ve heard this before.
We have substantial interests here and are a significant bilateral partner - more so in fact than is generally recognised:
- We are the second largest grant aid donor to the Philippines, with a bilateral program worth A$109.3 million this financial year – supporting Philippine development interests in priority areas of education, infrastructure, economic governance and human security
- We are the Philippines’ second largest defence cooperation partner, and are investing considerably in cooperation in law enforcement, counter terrorism, transport and border security. Much of this is capacity building and training, and on the defence side we expect it to develop further following the entry into force of the Status of Visiting Forces Agreement, which remains before the Philippine Senate awaiting ratification
- Politically the relationship is very good, reflected in the very positive tone and outcomes of the Ministerial meeting last year – which I’ll talk about in a minute
- We have strong and growing people-to-people links, built on the very sizable Filipino community in Australia which numbers in the vicinity of 200,000. The numbers are trending upwards, with the Philippines now our fifth largest source country for permanent migration and third largest source country for skilled temporary entry. Visitor arrivals in both directions are also increasing
- Our education relationship continues to grow. In 2008, visa applications to study in Australia increased by 40 per cent over the previous year, albeit from a low base. This is a sector with good potential for further growth
- And of course the commercial relationship has been in particular focus with the signing last month of the AANZFTA – an issue that I will return to shortly. Despite an obviously uncertain international climate there are signs of strong growth and interest in for example oil and gas and BPOs, and a healthy number of inward trade missions to the Philippines, covering mining, multilateral procurement, professional services and education, as well as buyer visits to Australia led by Austrade.
These are our enduring interests and account for much of the work that we in the embassy are involved in taking forward. Let me turn now to two recent significant developments – the PAMM and the AANZFTA.
PAMM
The Philippines Australia Ministerial Meeting – or PAMM – held in Manila last October, was a meeting that brought together the Australian Foreign and Trade Ministers and their Filipino counterparts for a discussion on the dimensions and trajectory of the relationship.
Joint meetings of this nature are not routine features of Australia’s international relations – not least because of the difficulties associated with getting four ministers in the same place at the same time – and are only held with our more significant bilateral partners.
The discussions recognised the significant expansion in relations in recent years and the extent of our common interests bilaterally and regionally. Many of the key outcomes were in the areas of trade and investment, which both sides acknowledged are significantly “underdone”, to use the expression of choice of Trade Minister Simon Crean.
In agreeing to target sustained growth of trade and investment over the next five years, Ministers committed to a number of specific steps. These include:
- Exploring scope for further cooperation in the mining sector
- Taking steps to enhance opportunities for increased exchanges in the field of nursing, a profession in which the Philippines is well placed to meet Australian skill shortages
- Exploring and promoting opportunities to strengthen cooperation in educational and vocational training, including through bridging courses and other institutional cooperation such as twinning arrangements between the Philippine and Australian universities and training sectors.
Ministerial commitments like these of course are the beginning, not the end, of the real work, and the challenge we have is how to translate the commitments into real gains. On this I’m pleased to say we are making progress.
On nursing and vocational education and training, we have had extensive discussions with a number of state government regulatory agencies and TAFEs and are looking to organise an expert mission from Australia to identify ways we can assist in upgrading training and streamlining regulatory requirements. The issues are surprisingly complex and the financial crisis has contributed to a degree of caution as its full effects on workforces are being assessed. But in the medium to long term the potential here is very good.
On mining, I’m also pleased that with strong support from Australian companies we are moving ahead with discussions on a scholarships program and building institutional linkages between Australian and Philippine mining schools.
It’s important that I acknowledge here the contribution that ANZCHAM is making to this process through its trade policy, mining and education committees. Thanks in particular to the committee chairs (Rob, Jerry and Mela) and to all the members who donate their valuable time.
And as a final point on the PAMM, I’d like to highlight the fact that the Joint Ministerial Statement made specific and well deserved reference to the significant contribution of ANZCHAM and the PABC and APBC to promoting trade and investment. A number of you participated in the business dialogue or met Stephen Smith and Simon Crean during the meeting and they certainly were appreciative of that opportunity.
ASEAN Australia New Zealand FTA
Let me move on now to what is without question the most significant step forward in our commercial relations, and that is the free trade agreement or FTA between Australia, New Zealand and the ten countries of ASEAN.
The FTA was signed at the end of last month. It is our most comprehensive free trade agreement and it will eliminate tariffs and other barriers to trade in goods, services and investment across a region that is home to more than 600 million people and has an annual GDP of A$3.2 trillion.
It is also the first free trade agreement signed since the onset of the financial crisis. It sends an important signal to the world that Australia, New Zealand and the Philippines, as well as the other ASEAN countries, are committed to keeping markets open in the face of the crisis. That will help keep trade in the region flowing, increase growth and give a much-needed boost to confidence.
Like all FTAs, the negotiating process was a complex one which sought to strike a balance of interests for all signatories. This FTA does that. It will generate significant new opportunities for business on all sides.
The agreement itself is complex, with specific liberalisation undertakings which are phased, allowing a longer implementation period for developing country signatories like the Philippines. I’d encourage you to look at the details to see what implications it will have in sectors where you are doing business. But a few highlights.
For the Philippines, one of the most important gains will be in the movement of natural persons – essentially improved labour market access to Australia.
Filipino workers, particularly nurses and tradespeople, will benefit from a new commitment on their eligibility to apply for extendable temporary work visas. Filipino business people will also benefit from new categories of business visas, longer periods of stay, while spouses of long term entrants will now have full working rights.
New opportunities will open up for Filipino exporters, who will face zero tariffs across the board within ten years and on most tariff lines either on entry into force or within five years. Exporters of industrial products; motor vehicle parts; and processed and canned agricultural products in particular face substantial tariff reductions.
Importantly for Philippine exporters, the FTA places the Philippines on a par with its neighbours, and ahead of most of the rest of the world, in terms of access to the Australian and New Zealand markets.
We hope too that the agreement will raise the Philippines’ profile and attractiveness as an investment destination – the so-called head-turning effect. Mining and automotive are two sectors likely to benefit. This is an important advantage in a period of economic downturn and tight credit markets.
The FTA also includes an economic cooperation program of up to $25 million to assist ASEAN countries to implement the FTA and take advantage of its opportunities. The program will be implemented over five years from entry into force.
Australian exporters to the Philippines will benefit across a number of sectors, including in vehicles, fashion and aluminium products. Wine, beef, milk, dairy and and citrus and nuts will mostly face zero tariffs – after previously facing tariffs of up to 10%.
Over time, Australian service providers and investors will probably be some of the key beneficiaries of this agreement. The FTA agreement locks governments into guaranteeing basic protections and transparency for investors, and into providing a more certain operating environment for businesses. While it won’t remove all regulatory and other impediments for all business immediately, it is a constructive start.
Australian service providers in the Philippines likely to benefits include those in: banking; telecommunications; professional services; mining and energy; and education. While in some of these areas, such as mining and energy, commitments on foreign equity levels don’t change, they are now in effect bound and can’t be made more restrictive.
New commitments on education, including guaranteed foreign equity limits, and renewable temporary entry for experts will also be important steps towards a closer education relationship. Australian business people will also benefit from new commitments on business visas, longer periods of stay, and for engineers and accountants, a guaranteed right to practice.
The agreement requires ratification by Australia, New Zealand and four ASEAN countries to enter into force, which we expect to take place before 1 January 2010. The Philippine government has yet to ratify the agreement. Early ratification will be important to ensure the Philippines can benefit early from this agreement as well as from the economic cooperation fund.
Let me conclude just by noting that one of our key priorities this year will be to ensure that Australian, New Zealand and Philippine businesses and other stakeholders are aware and positioned to take advantage of the opportunities this FTA has to offer. We’ll keep working closely with ANZCHAM, which I believe has a key role to play on this.
Thank you for the opportunity to speak tonight and thanks again to the Board and all members of ANZCHAM for your continuing support and cooperation.