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"Australia in the Asian Century"
Address by Ambassador Bill Tweddell
at the Asian Institute of Management
19 June 2012
Thank you Dr Kenneth Hartigan-Go for that kind introduction.
Ambassador Delia Albert, Former Foreign Secretary and Philippine Ambassador to Australia. It is truly daunting, Ambassador Albert, to be addressing a topic of this nature in the presence of someone of your erudition and experience!
Assistant Secretary Lesley Jeanne Cordero of the Presidential Communication Operations Office.
Dr Kenneth Yu Hartigan-Go, Executive Director of Dr Stephen Zuellig Center for Asian Business Transformation.
Representatives from the business sector, various non-governmental organizations, and the media.
AIM students, alumni and faculty.
Thank you for this opportunity to talk to you this afternoon about the rise of Asia – the “Asian century” as it’s being called – and the questions, the opportunities and the challenges that it brings for Australia.
This, ladies and gentlemen, is a topic which is dear to my own heart.
In the nearly 37 years since I joined the then Australian department of foreign affairs in 1976, I have served in eight of Australia’s diplomatic missions overseas.
No fewer than six of these have been in Asia: in Bangladesh (1976-78), India (1986-91), Sri Lanka (1995-96), Hong Kong (1999-2001), Vietnam (2005-08) and now the Philippines (since 14 January 2012).
The exceptions were Greece (1981-83) and Britain (2002-05). So my two ventures outside Asia have been to the home of democracy and to the country to which Australia is indebted for some of its strongest institutions, our parliamentary democracy and our legal system among them.
In periods back in the department of foreign affairs and trade in Canberra – enduring what is known in our trade as capital punishment! – I have also headed the sections of our foreign ministry responsible for relations with south Asia and Hong Kong, Macau and Taiwan.
I mention these personal details not in order to claim some sort of huge individual expertise. Nor, for that matter, to remind others and myself of my advancing years! Though it is true that I have been able to witness in the field, as it were, some of the big changes in Asia in recent decades – the “curves and arc of our region’s rise”, as Australia’s Prime Minister The Hon Julia Gillard MP has put it.
Rather, my purpose is to illustrate that a focus on Asia is not new in the Australian foreign service. Many of us, and not just the younger generation of diplomats, have for some time both talked the talk and walked the walk, in terms of an Asian the focus in our careers.
And this focus reflects the reality of Australia’s long history of engagement with Asia, and the increasing “Asianisation” of Australia’s population through immigration patterns over the period since World War II.
Indeed, it was way back in 1934, that Australia’s very first diplomatic mission to Asia occurred. Then-Deputy Prime Minister John Latham travelled to the Dutch East Indies, Singapore and Malaya, French Indochina, Hong Kong, China, Japan and – I am pleased to say – to the Philippines.
To put this in some historical perspective, it was only in 1935, the year after this mission, that Australia established a separate foreign ministry, then known as the department of external affairs.
Today, of course, eight out of Australia’s ten biggest diplomatic missions are in Asia – with Manila the eighth biggest in our overseas network. Which, by the way, demonstrates our commitment to relations with this country.
Now, more than 2 million Asians call Australia home. According to new figures from the Australian bureau of statistics (ABS), the number of people of Asian origin in Australia has almost doubled in a decade, from 1.03 million in the middle of 2000 to 2.1 million in the middle of 2010.
In 1947, only 0.3 per cent of Australia’s population had been born in Asia. But their numbers have roughly doubled with every decade since, rising to 2.5 per cent of the population by 1981, 5.5 per cent by 2000, and 9 per cent by mid-2010.
And in 2010-2011, four Asian countries are among the top five source countries for migrants to Australia (they were China, India, Vietnam and the Philippines). Notably, the number of permanent migrants from China, India and the Philippines has doubled over the last decade : and as of July last year, five Asian countries contributed almost 60 per cent of all international student enrolments in Australia.
Magnitude of Asia’s change
Ladies and gentlemen,
Asia’s rise since the end of World War II has, by any measure, been remarkable. And now, the dramatic emergence of China and India will define this century in entirely new terms.
These changes will have profound effects on Australia - indeed, we are feeling them already. If we in Australia wish to continue to enjoy economic success and social harmony we need to do a number of things:
- to recognise that change is occurring;
- to identify the opportunities and risks that come with that change;
- and, lastly, to ensure that the country is positioned to take advantage of the opportunities and minimise the risks.
At this point, it is worth illustrating the sheer scale of a few of the changes in Australia’s relations with Asia since the 1950s.
Two decades of rapid post-war growth and industrialisation in japan making it the world’s second largest economy by 1968; the emergence of the “Asian Tigers”; then regional countries like Vietnam opening their markets and pursuing export-led growth; and now what I referred to a moment ago as the emergence of China and India.
- as recently as 1990, the Australian economy was larger than the ten economies of ASEAN combined. Today, our economy, as robust as it is, is about two-thirds the size of ASEAN’s economies, in market exchange rate terms.
- on the eve of Australia’s long period of economic growth, before our two decades of reform-driven prosperity in the 1980s and 1990s, ours and China’s were economies of roughly comparable size, in market exchange rate terms
Now, and despite the fact that Australia has enjoyed uninterrupted growth for twenty-odd years, China’s economy has grown so rapidly that it is today close to four and half times bigger than ours.
- over the past two decades, China and India have grown so fast they have almost tripled their share of the global economy, and increased their absolute economic size almost nine-fold.
These two countries have grown from less than a tenth of the global economy to almost a fifth
And over the next two decades, both countries combined are projected to grow from a fifth to a third of the global economy.
This incredible economic growth in our region is driving not only economic but also strategic changes in our world.
Asia has never been of greater global significance as economic and strategic weight shifts from west to east.
And, as this occurs, global institutional frameworks are having to reflect these changes.
The emergence of the G20 as the premier global economic forum, one where Asia has its rightful place, is a prime example of that.
The existing habits of co-operation within our region are deepening.
New institutions have emerged and new issues are discussed at them.
And a new shape of interconnections is emerging too.
This is creating friendships and partnerships considered unlikely in the recent past, as rivals and even former foes combine to drive regional change.
As Prime Minister Gillard has said, these are changes of type, not of degree.
Australia has not faced such a strategic environment before.
Today, in contrast to the past, our largest export market and trading partner – China – is neither a democracy nor part of our alliance system.
It is a nation whose economic transformation is, in turn, transforming the economic and strategic balance of our world.
India is an English-speaking democracy with 1.2 billion citizens, rising to find its place in the world and our region and on an ocean, the Indian Ocean, whose shores Australia shares.
How much it has changed since I served there in the mid-1980s to early 1990s but even then its potential seemed to me to be enormous.
Indonesia, with the world’s largest Islamic population, living in the world’s third largest democracy, a remarkable and too little remarked-upon country, every day disproving the millions of words which have been spent arguing that Islam and democracy are incompatible.
And, as these new powers are rising, the power relativities are changing too.
It is certainly true that the US’s absolute lead in military power will remain clear for some time to come. And it would be a mistake, in Australia’s view, to underestimate the power of the American economy to innovate and adapt.
Those predicting the eclipse of the United States are yet to be proven right.
So too with our friend and close partner, japan. By any measure, a major power, the third largest economy in the world - its industry synonymous with quality and innovation.
Yet for all the strength and resilience of japan and the us, we are now seeing the most profound rebalancing of global wealth and power in the period since the United States emerged as a major power in the world.
To give just one example of that shift: it has been predicted that as early as 2025, the emerging and developing world could well be a net foreign investor, while developed countries become net foreign borrowers.
Yet, while so much is new, many old tensions remain: we need look no further than the Korean peninsula for an example of that, where a rogue state poses a threat to its neighbours and to the region as a whole and, above all, to its own captive people.
Australia, like the Philippines and every other country in our region, is touched by the changes.
And the changes affect some of the most central elements of our national policies.
Much is written in Australia, for example, about the potential tensions inherent in our economic relationship with China and our alliance ties with the United States.
However, the Australian government’s approach comprehends the challenges and the risks.
Certainly, as Julia Gillard has affirmed, these relationships will not manage themselves and we are far from complacent about them.
But neither are we pessimistic.
Because there is nothing in our alliance relationship with the United States which seeks to contain China, something which Australia would regard as neither viable nor desirable.
Indeed, a growing, successful China is in the interest of Australia, and, we believe, of the region.
Australia can stand strongly in our changing region; as a mature and confident player.
As our Prime Minister has put it, “strong in the Asian century – with an ally in Washington and respect in Beijing.”
Ladies and gentlemen,
For Australia and our people, the implications of this Asian century are profound.
They bring strategic, social, even environmental, challenges.
But, for Australia, the economic opportunities are how the Asian century begins.
The historic boom in mining investment in the Australian economy is fuelled by Asian demand.
The increase in commodity prices has lifted our terms of trade to a 140-year high.
This is driving the biggest resources boom since the 1850s gold rush.
Since 2004, mining investment in Australia has increased five-fold.
Asian demand is creating historic change in Australia and historic opportunities as well.
In the Asian century, what used to be considered Australia’s traditional disadvantages – our reliance on natural resources, our location in the world – become great new strengths.
For much of the post-war period, Australia, frankly, was seen as an ‘old’ economy.
Our economy was considered overly dominated by primary industry, heavily reliant on extraction for export, through a long period when commodity prices were on a steady but continuous decline.
But, since 1970, close to four hundred million Chinese have moved to cities, with another two or even three hundred million expected to do the same in the next twenty years.
To fit our country for contemporary challenges arising from our resources boom, the Australian government has an ambitious agenda to modernise the Australian economy – through investment in skills and tax reform, for example.
That much-used word “urbanisation” describes a muscular, industrial reality.
It does not mean a person moving to a new town, it means a nation building new cities.
And you do not build cities without commodities – without a lot of iron and coal.
A typical Chinese apartment needs six tonnes of steel.
A kilometre of railway needs about seven and a half thousand tonnes.
Each tonne of steel needs more than one and a half tonnes of iron ore and more than half a tonne of coking coal.
Australia has plenty of both and we are reaping the benefits accordingly.
No longer an old economy and no longer subject to what has been termed the ‘tyranny of distance’ either.
Asia has turned this tyranny of distance argument on its head, giving us what the economist magazine has neatly termed “the advantage of adjacency”.
For the first time, we in Australia are closer to the fastest growing and most economically dynamic region of the world than our competitors.
And it is not only in natural resources where we stand to be beneficiaries of our adjacency to Asian growth.
Ladies and gentlemen,
There is a paradox in this:
Yes, Asian growth and Asian demand is driving a rise in the Australian dollar and the rise in our terms of trade which put sectors under pressure.
Education, tourism, parts of retail, and manufacturing in particular.
But, while Asian growth is creating new conditions, new competition, it is creating the future demand as well.
Because, naturally, the new Asian middle class lives in apartments and catches urban trains built with Australian coal and iron.
But they will do more.
They will fill those apartments with high-end manufactured goods, dine on clean, high quality produce and drink premium wine.
They will look to countries like Australia for tertiary education and for technical skills, they’ll travel in new ways, seeking new custom-made holiday experiences, not the package tours of former years and, through life, they will want sophisticated financial advice and the benefits of world class medical services as well.
And, in doing all this, the new Asian middle class will give Australia an opportunity to make our whole economy strong.
For all these are areas of Australian excellence.
The challenges for Australia are significant, the structural adjustments imperative and the economic opportunities enormous.
Taking advantage of the Asian century
Ladies and gentlemen,
The Asian century has begun and the Australian government has set for itself the task of guiding the country around the challenges and towards the opportunities which that brings with it.
Conscious of the imperative of maintaining economic openness to sustaining growth in our region, Australia is working in the g20 to deal with structural imbalances, at APEC to open the region as a whole, and through an ambitious free trade agreements agenda to deepen country-to-country economic ties. These are the keys to growth in the region and the key to jobs growth.
And supporting that agenda there must be effective regionalism.
Groups with the right membership and mandate to address the full range of security, political and economic issues facing the region. Making the east Asia summit (eas) process a sustainable success, for example.
Ladies and gentlemen,
For Australia, strong bilateral relations with our key regional partners will need to be maintained.
We will need to strengthen new relationships while nurturing existing ones.
A strong Australia-United States alliance will remain key.
So too will a continuing, strong stabilising role for the United States in our region, the vital role it has played now for sixty years.
All this is the usual business of government – but, in the Asian century, business as usual is not enough.
Because what we know now is that there is not a single aspect of government policy and national planning that will not be touched by the great changes to come.
Food security and foreign investment, immigration and education, stock market structures and financial regulation, energy policy and environmental standards.
This is a vast landscape of change.
Some parts of this landscape we can see already, and the challenge there is to set our course, while some parts are uncharted still.
Now, perhaps that is no surprise.
The growth and change in Asia is something really new. To adapt an expression from another century, this is a change of “world-historical” significance.
When Great Britain industrialised, it took seventy years – the whole period from 1830 to 1900 – for its economy to quadruple in size.
It was an industrial revolution which changed almost everything.
It redrew the map of Africa and painted half the atlas pink, as the British Empire, later and still known as the British Commonwealth, spread.
It created industrial politics and defined the essential outlines of the democratic structures Australians live with today.
It remade private life, changing everything from the shape of the family home and the layout of cities to the experience of childhood and what it meant to be a woman.
Now, that happened when the economy of Great Britain, a nation of millions, grew by a factor of four over seventy years.
The astonishing fact is that in the last twenty-five years, the economy of China, a nation of 1.3 billion, has grown by a factor of twenty!
Already the world’s largest manufacturer, the world’s largest exporter, the world’s largest consumer of energy, already the world’s second largest economy, and, on some projections, on track to be the world’s largest in twenty years.
India is rising too.
India is set to surpass the US economy in size by the middle of the century, in purchasing power terms.
These are enormous economic changes.
At these rates, China doubling the size of its economy every eight years ... India every eleven years and Indonesia every fifteen.
Enormous economic changes – human changes too – creating enormous opportunity.
Millions of people leaving absolute poverty absolutely behind.
While Asia now has a large and rapidly growing middle class.
Within a few years, it will be bigger than that of the rest of the world combined, North America and Europe included.
Now, when a new member of the middle class - wherever they are - first gets a car, a computer and a mobile phone, it changes their life.
When hundreds of millions of people first get these things, it changes the world.
Rapid growth in Asia – or most of it – will change the social, economic, strategic and environmental order of our world.
Preparing for the future
Ladies and gentlemen,
These vast changes have barely begun – but they will define our future.
That is why the Australian Prime Minister, Julia Gillard, commissioned a White Paper on Australia in the Asian century.
Its objective is, as she put it, to ask and answer the great national questions through this period of great national change.
There is the intellectual task of the White Paper itself: to comprehend fully the implications of the Asian century - to describe in detail its opportunities and risks.
There is the public task of the White Paper’s development and discussion: to ensure these implications are understood across Australia.
And there is the task to set the pattern for more work over time. The White Paper should generate a set of general propositions to guide policy development over the long term.
It will guide preparations over the next five years for policies and for projects which would become reality over the next ten to fifteen.
In that vein, much has been said about the need for further domestic reform – targeting structural change to our economy – in order to position Australia best for this Asian century.
Reform particularly focused on improving our efficiency, productivity and competitiveness, for example labour market flexibility, cutting red tape and ongoing taxation reform.
The White Paper will provide analysis and understanding to ensure that every part of government is working towards the same goal.
It will offer information and advice which allows every part of Australia’s business community to make the most of their ability to prosper and profit in this new world.
Indeed, as part of ongoing public consultations on the White Paper, just last week in my hometown of Brisbane, Prime Minister Gillard held an economic forum, drawing together senior business leaders, to discuss the challenges and opportunities ahead for Australia.
Overseeing the drafting of the White Paper is Dr Ken Henry, one of Australia’s most senior public servants, and a former head of the Australian treasury.
The White Paper has included an intensive process of consultation with the Australian community, business, academia and international partners.
A series of public consultation fora have been held and the process has included receiving submissions from interested parties.
We expect the White Paper will be released in the coming month or so, after having been considered by the full cabinet of ministers.
I hope that my remarks this afternoon have given you a sense of how Australia is going about preparing itself for the great changes now underway in our region.
A sense of how serious we are about ensuring Australia adapts and reforms to maximise the opportunities and minimise risks brought about as a result of these changing realities around us.
As will be clear from my remarks, Australia doesn’t yet have all the answers on how best to position ourselves in the Asian century. The task facing my country is to craft the foreign and domestic policies best suited to meeting the challenges and seizing the opportunities of the Asian century. The White Paper is expected to play a key role in that process.
Ladies and gentlemen,
In closing, I quote Prime Minister Gillard who, in announcing the commissioning of the White Paper, told Australians that:
“These are historic changes.
Change isn’t easy, change has never been easy.
But Australians always make change work for us, turning our creativity and co-operation to the task.
We are already a decade into the Asian century.
A great future is there for us – there for us if we understand and explain these great changes – there for us if we make the right decisions as well.
Australians should be optimistic and determined.
Because the prize is rich indeed.
A peaceful, open, rules-based system across Asia.
Effective regional institutions, respect for all countries of the region, large and small.
Space for a rising China.
A robust alliance between Australia and the United States.
That is the Asian future we seek in the Asian future we face.”
Thank you all for your attention.