Australian Embassy
The Philippines

Asia-Pacific Security: Risk to Growing Regional Trade

Asia-Pacific Security: Risk to Growing Regional Trade

Address by Ambassador Steven J. Robinson AO

at the The Makati Business Club

25 April 2019, 12:00 to 2:00 pm

Dusit Thani Manila

 

Acknowledgements

·       Edgar O. Chua, MBC Chairman

·       Coco Alcuaz, MBC Executive Director

·       Ambassador Jose Cuisia Jr, MBC Board Trustee

·       Robert F. de Ocampo, MBC Co-Vice Chairman

·       Mr Lito Tayag, MBC Board Trustee

·       Fellow Ambassadors

·       Ladies and Gentlemen

Anzac Day

On 25 April every year, all around the world, Australians and New Zealanders gather to honour the memory of those who have given their lives or suffered injury in the service of our two countries. 

We pause to pay tribute to their bravery, and to honour the sacrifices they have made in defence of the freedoms and values which Australians and New Zealanders hold dear. 

While Anzac Day now commemorates all Australians and New Zealanders who have served their nations and people in uniform, the first ANZAC Day commemorates a particular battle over 100 years ago.

On 25 April 1915, some 15,000 young service personnel from Australia and New Zealand – countries then in the very infancy of nationhood – landed on the coast of Turkey’s Gallipoli Peninsula as part of an ambitious and ultimately doomed military campaign to seize control of the Peninsula.  The soldiers that fell during the Galipoli campaign (many thousands of them) are remembered for their courage, endurance, ingenuity and self-sacrifice.

So whilst not by design, it is still very fitting that today, on Anzac day, I am here to speak to you about security, albeit Asia Pacific Security.

Importance of Bilateral Relationship and Indo Pacific

The Philippines is one of Australia’s longest-standing bilateral relationships. I look forward to celebrating 75 years of formal diplomatic relations during my term in 2021, and we continue to enjoy a strong partnership with the Philippine government across a wide range of issues.

We have shared values, and mutual interest to foster stability, security and prosperity across our region.

Australia’s 2017 Foreign Policy White Paper outlined many of the drivers of change we face: deepening globalisation; fast paced technological change; demographic shifts; and climate change.

In our region – the Indo-Pacific – the White Paper focused closely on the changes to our strategic environment – changes that have real consequence for Australia and, if not well managed, will give rise to new levels of strategic rivalry between the major powers.

ASEAN lies at the nexus of the Indo Pacific, geographically, diplomatically and strategically.

The Foreign Policy White Paper commits Australia to further strengthen our cooperation with the states of Southeast Asia, including the Philippines, and to boost our strategic partnership with ASEAN. 

Given our close proximity, we share similar challenges – particularly in relation to security and stability.  I just want to take some time to outline the security context as I see it.

Security Context

A period of profound change

Professor Allan Gyngell, who is a former Australian diplomat and high ranking public servant, is amongst the foremost thinkers in Australia on regional affairs. 

Allan has written that we are currently dealing (and I quote) “with a future more uncertain than any we have known since the Second World War”. 

The perspective from the Australian government is certainly that we are living through a period of profound change, and that this change brings with it substantial challenge, as well as opportunity. 

China’s fast economic growth, which has seen its share of world GDP increase from two percent in 1980 to nearly 19 per cent today, is already translating into significant power and influence across the region.

China is the largest trading partner for most of the region’s economies – including Australia – and a significant investor. It has the largest navy and air force of any Asian state, and the largest coast guard in the world. Its aid donations to the region are considerable.

At the same time, the US has security and economic equities in the Indo-Pacific so it is deeply engaged in the region.  The US retains a significant lead in military and soft power. While, by some measures, the size of the Chinese economy has already overtaken the United States, the US will continue to be wealthier than China in GDP per capita terms. It is the world leader in technology and innovation, and it is home to the world’s deepest financial markets. 

So the key strategic dynamic that we expect to influence our region for the foreseeable future is the presence of two major powers, each with substantial interests and heft. 

The US and China are of course not the only powers in our region. Japan has substantial economic reach across the region, and is developing new capabilities. 

India is growing fast, and it will have a larger interest in Indo Pacific strategic realities as time goes on.

Other emerging powers, like Indonesia, are also growing in strategic weight and are likely to play larger roles in shaping the future of the region.

The Philippines with its population size and booming economy is also an important player.    

The changes we are witnessing will provide many opportunities, as well as challenges, for Australia, but also the Philippines.

The Australian Foreign Policy White Paper noted that the post-war international order – and the principles embedded in it – are under unprecedented pressure.

Those principles - including open markets, adherence to international law and norms, universal rights and freedoms, and the need to work collectively on global challenges – are important for Australia’s interests and values.  They also matter for the region.

A key judgement of our Foreign Policy White Paper is that, rather than shrink from these challenges, Australian diplomacy – indeed all arms of the Australian Government’s international efforts - should be applied more actively to help shape the sort of region that we want. 

To support a balance in the Indo Pacific that is favourable to our interests and to promote a region that is secure, open, inclusive, prosperous and resilient.

A region where disputes are resolved peacefully in accordance with international law and without the threat or use of force or coercion.

Where open markets facilitate the flow of goods, services, capital and ideas.

Where rights of freedom of navigation and overflight are upheld, and the rights of small states are respected. Where international law, rules and norms are applied.

And where ASEAN and the ASEAN-centred regional architecture, maintains its central role and helps set the rules and norms for behaviour in the region.

For Australia, we welcome the longstanding security and economic engagement by the United States in this region. 

We also acknowledge that China’s influence on the region and global issues of consequence to our security and prosperity will continue to grow.  We welcome China’s rise and the benefits that brings to the region.

It is important that all countries who engage in our region act in ways that enhance stability, reinforce international law and respect the interests of smaller states and their right to pursue their interests peacefully.  

Australia has been significantly advantaged by the relative peace and stability that this region has enjoyed over past decades.  We are conscious that that peace and stability – in a region that could easily have been difficult and divided – owes much to the statecraft of successive Southeast Asian leaders.

It also owes much to the foundational principles of ASEAN. The ASEAN Charter and the Treaty of Amity and Cooperation have establish norms and the expected standards of behaviour of the region.

ASEAN warrants our engagement also because of its role in regional architecture. 

Through its key role in the East Asia Summit and other regional forums, ASEAN’s role is truly central.  

ASEAN hosts each of these forums, sets their agendas, chairs the meetings, and settles statements.

Let me emphasise some other points about the regional security and the context we experience.

The recent territorial defeat of ISIL in Syria and Iraq unfortunately does not mean the end of its pernicious ideology. The threat environment regionally continues to change rapidly.

One particular concern is the ongoing risk posed by foreign terrorist fighters, who may seek to come to our region or come back to our region. The situation won’t be dissimilar to the period after the end of the Soviet occupation of Afghanistan, when terrorist fighters in subsequent years brought back with them battlefield skills and connections to our region.

Those returnees shaped the threat environment across Southeast Asia for the next 15 years, and from Australia’s perspective these threats were materialised with attacks targeting our people and others in Bali and the Australian Embassy in Jakarta in the mid to late 2000s.

Both Australia and the Philippines remain deeply concerned about the influence of ISIL in Southeast Asia, particularly in parts of the southern Philippines where a number of terrorist groups have pledged their allegiance. They are active and remain potent despite the Philippine Governments best endeavours. They are resilient and highly adaptable.

The destructive influence of ISIS ideology in our immediate region can be seen no more clearly than in Marawi, which I had the opportunity to visit last month.

Having been involved in the provision of Australia’s support to the Philippine security services to resolve the siege, I was intimately familiar with what had happened. But nothing quite prepares you for the scenes of utter devastation in that city.

In response to the siege of Marawi, Australia strengthened its security cooperation with the Philippines in the areas of intelligence, surveillance and reconnaissance support to the Philippine military, and enhanced training for the Philippine military, police and intelligence agencies.  We are also working with the Department of Justice and others to strengthen the criminal justice response to terrorism.

My visit to Marawi reinforced powerfully to me the importance of Australia continuing our close partnership with the Philippines to counter these threats.

So what else in terms of the security context? – Cyber is also critically important.

Impact on Business - Cyber

Technology and innovation can afford new opportunities and enable a nation, a company and a society to fast-track and sustain their growth trajectory. However, with new economic opportunities there also comes potential threats to security and prosperity.

Globally, many governments and businesses are expanding into cyberspace without the knowledge or infrastructure in place to protect their data online.

But that also brings a set of new challenges, which can only be addressed through close public-private partnerships in maintaining security and prosperity online.

In 2017, Australia launched its International Cyber Engagement Strategy, which sets out Australia’s agenda across the full spectrum of cyber affairs, including digital trade, cyber security, cybercrime, international security and internet governance.

Part of this strategy is a regional approach to cybersecurity, in which Australia intends to collaborate closely with the Philippines.

Over the coming years, we will be deepening our collaboration with the Philippines and other regional governments through a range of activities to look at how Australia coordinates cyber policy and incidence response across government, in which the private sector plays a key role.

Already there are several Australian companies here in the Philippines providing high-quality cyber security hardware and software, including encryption capability, and of course, they are always looking for more opportunities.

Australia offers niche technology solutions across the pillars of technological advancement including proven capability in Cloud, Big Data and Analytics, Cyber Security, Systems Integration, Simulation, Internet of Things, Additive Manufacturing, Automation, and Artificial Intelligence.

But, what about the Philippines more specifically?

Impact on Business – Martial Law

One issue that is often raised by Australian business is martial law in Mindanao. Having now travelled to Mindanao on several occasions, I have raised this issue with many stakeholders there.  Like many of you, I was keen to understand what it means in practice and how it affects everyday life including its impacts on business.

My impression is that martial law has been prudently implemented by the Armed Forces of the Philippines. Its most visible effect has been extra security checkpoints in and around Mindanao’s big cities. While there are some inconveniences associated with that, most people we have spoken to are welcoming of the checkpoints and the enhanced security. Martial law has brought increased protective security that people have longed for and its actually helped business.

But martial law can’t last forever. I have noticed recent comments from Secretary of National Defense, Delfin Lorenzana, Senator Lacson, and others, saying that martial law can be lifted once the reforms of the Philippines’ counter-terrorism legislation, the Human Security Act, have passed the Congress.

Australia has been providing technical assistance to the Department of Justice and others on the bills before Congress on these reforms. Australia has updated its counter-terrorism legislation on multiple occasions in recent years and has been sharing best practices with our Philippine counterparts.

We see passage of the Human Security Act reforms as significant. Importantly, these reforms will give authorities the power to apprehend terrorists for planning attacks – and not just after events as is currently the case. We are hopeful that these reforms will pass the Congress soon, if not within the next few weeks, as they will help the security situation in Mindanao markedly.

If this is the context, how do these factors affect business and regional trade?

What does the current regional dynamic in the Indo-Pacific mean in terms of growing trade?

I am an optimist.  While disagreements between the US and China in their global trade relationship have had some minor impact on this region, it has been less than some anticipated and, in some ways, it has presented opportunities.  Others have taken advantage on a playing field where some key players have been distracted. This has served to insulate the region in many ways.

Additionally, the rise of China - and the fluid regional dynamic – has provided other opportunities, and this is certainly true in the case of the Philippines, in terms of attracting investment. 

Impact on Business - Trade

Australia is one of the strongest and most competitive economies in the world, with an estimated GDP of AUD1.7 trillion and it is known around the world as one of the great agricultural, mining and energy producers.

Southeast Asia frames Australia’s northern approaches and our key trade routes flow through the South China Sea.

South East Asia has become one of Australia’s most important economic partners. Our trade with the grouping even surpasses our trade with the United States.

Further, while our trade with ASEAN is smaller than with China, the number of Australian businesses exporting to ASEAN is almost double those exporting to China.

With the implementation of the ASEAN-Australia-New Zealand Free Trade Agreement (AANZFTA) and tariffs being gradually reduced to zero, there is a tremendous opportunity for increased regional trade and investment, something I am really keen to do.

Combined with the FTA’s signature in 2009 and entry into force in 2010, the synergistic nature of our two economies has resulted in increased trade and investment flows.

-     two-way trade has increased by around 70 per cent since entry-into-force of the ASEAN-Australia-New Zealand Free Trade Agreement.

Compared to other ASEAN countries our economic relationship with the Philippines is small, but it is growing rapidly from this small base

-     In 2017, two-way trade between Australia and the Philippines reached AUD$4.7 billion. Goods trade of AUD$3 billion and services trade of AUD$1.7.

-     The recent Australian Business in ASEAN Survey 2019 identified the Philippines as the most prominent destination of future investment by Australian businesses.

-     In 2017, the total stock of Australian investment in the Philippines was AUD$9.7 billion.

There are over 300 Australian companies with a presence in the Philippines across a wide range of sectors - from business processing, finance, professional services, oil and gas exploration, resources and infrastructure.

-     These firms employ an estimated 44,000 Filipinos and benefit from their strong education and excellent English language skills.

-     A growing number of companies are establishing a presence in emerging growth centres beyond Manila, such as Clark.

Philippine companies are also turning to Australia due to our reputation for quality, safe and clean products and integrating technology.

In March 2018, our Prime Minister hosted for the first time the ASEAN-Australia Summit where Leaders from the region converged to discuss ways in which to deepen regional integration. 100 leading CEOs, many from the Philippines too, and all over ASEAN and Australia, also exchanged ideas on priority topics, including agribusiness and logistics.

Australia and the Philippines are working together to address important regional trade issues, including

-     Improving the operating environment for our businesses through the ASEAN-Australia New Zealand Free Trade Agreement (AANZFTA)

-     Promoting inclusive economic growth and tackling cross-border challenges through Australia’s development program.

That meeting also served to focus on regional security issues and led to a major commitment to enhance security and related sharing on terrorism and associated issues.

But in talking with business, the key message for governments is to provide clarity, certainty and consistency. By providing the right enabling environment, governments can ensure business thrives.

Conclusion

I am an optimist, the glass is always well and truly more than half full. I see the region has tremendous promise, notwithstanding some pretty significant tensions. While we have some disagreements between the US and China at the present time, countries have been able to take advantage of the situation and that has presented some good investment opportunities.  

For Australia and the Philippines, the depth and breadth of our bilateral relationship reflects the complementarity of our national interests. We both want to maintain and open, inclusive and prosperous Indo-Pacific and are working bilaterally and through ASEAN to achieve this.

An open and growing Philippine economy is good for the Philippines and its people, and is good for Australia. So it makes sense for us to work together in trade negotiations and bilaterally to achieve this outcome.

Terrorism, transnational crime and emerging threats like cyber-crime pose dangers for both states, so we are working together to address these. The international rules that support stability and prosperity have been critical to security and economic development in our region, so it makes sense for us to stand together to promote and protect them, and to join with others in doing so.

Our Indo Pacific region is undergoing unprecedented change. 

If current trends persist, the region is set to become more competitive, more contested and arguably, less stable.  This means that we need to work even more closely together to protect the gains made in recent years.  Closer bonds and even stronger relationships will be key.

So I see a positive future.  If we can all make a greater effort to ensure stability in our region, and seek to address cooperatively the security challenges that are apparent, then our growing prosperity should be preserved and even further enhanced.    

 

Thank you.