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Australia's trade and investment relations with Asia, the Pacific and Latin America

CHAIR —I would like to welcome you here today on behalf of the subcommittee. Although the subcommittee prefers that all evidence be given in public, should you at any stage wish to give any evidence in private you may ask to do so and the subcommittee will give consideration to your request. Do you have any comment on the capacity in which you appear today?

Ambassador De Leon —I am the Philippine Ambassador to Australia, and I have been here since 2006.

CHAIR —Although this committee does not require you to give evidence on oath, you should be aware that these hearings are legal proceedings of the parliament and therefore have the same standing as proceedings of the chambers themselves. Before we proceed to questions, do you wish to make a short opening statement to the subcommittee?

Ambassador De Leon —I would, Madam Chair; thank you very much.

CHAIR —Thank you, Excellency. Please proceed.

Ambassador De Leon —To the principal research officer: thank you for getting us in earlier. To the deputy chair, the Hon. Bruce Scott; the Hon. John Murphy; and Senator Mark Furner: before everything else, I would like to thank you for the very successful visit of our parliamentarians for the past two days here in Canberra. In fact, tonight they will be meeting with the Australia Philippines Business Council in Sydney.

CHAIR —Some of us met with them yesterday.

Ambassador De Leon —I would like to thank the distinguished members of the Trade Subcommittee of the Joint Standing Committee on Foreign Affairs, Defence and Trade for allowing us this opportunity to highlight bilateral economic relations between the Philippines and Australia as part of your ongoing inquiry. We welcome this focus on the Philippines and we certainly appreciate the chance to be involved in the process through our earlier submission and through our participation in today’s public hearing. We are certainly keen to work with the Australian government in any initiative to enhance economic relations between our two countries, which clearly have much room for growth. In the submission we made last year, we reported our bilateral trade in 2007 to be at US$1.2 billion. I would like to update the figures and report that in 2008 our total bilateral trade grew by 10 per cent to reach US$1.372 billion. I wish to clarify that these figures only represent merchandise trade.

The Philippines counts on two important mechanisms by which we can pursue a stronger engagement with Australia. At the bilateral level, we have the Philippines-Australia Ministerial Meeting, or PAMM, which had its inaugural meeting in 2005 in Sydney. In October last year we hosted the second PAMM in Manila with Ministers Stephen Smith and Simon Crean, who co-chaired the meeting with their Philippine counterparts, Foreign Affairs Secretary Alberto Romulo and Trade and Industry Secretary Peter Favila. The PAMM has become more than just an opportunity to dialogue. It has become an important venue to identify and work on specific courses of action that will encourage greater trade, investment and economic cooperation between the Philippines and Australia.

At the regional level, the ASEAN-Australia-New Zealand Free Trade Agreement, which was signed in February of this year, provides a new avenue by which to approach our economic relationship with Australia. Being a comprehensive single-undertaking agreement, the AANZFTA provides a good framework for complementation and collaboration in specific industries which have traditionally been of mutual importance to our respective economies, such as mining, agribusiness and food processing.

In these sectors in particular, we welcome the AANZFTA’s focus on enhanced technical cooperation and addressing market access issues. In mining in particular we are pleased to see good developments, such as the first gold pour of CGA Mining in Masbate, one of our islands, in May of this year and the continued good progress of other projects of Australian industries, such as Indophil in Mindanao, which is a mining success story also for Australia.

We also look forward to new growth opportunities in the services sector, particularly in IT enabled services, education, financial services, health care and tourism. We expect this to be harnessed well as we facilitate services trade in various modes. The tariff advantages provided under the AANZFTA also give us a more level playing field vis-a-vis other countries with bilateral FTAs with Australia and will enable Philippine companies to pursue productive supply linkages with Australian companies in the automotive, transport and electronic sectors.

These initiatives give us much to look forward to in our efforts to expand our trade and investment relations. With the expansion of capacities under the March 2009 air services agreement between the Philippines and Australia, we hope to see greater two-way traffic between the Philippines and Australia for both people and cargo, including those on non-traditional air routes. Thank you very much.

CHAIR —Thank you, Your Excellency.

Mr BRUCE SCOTT —Thank you, Your Excellency. It was a very pleasant lunch and I hope your Speaker and the delegates enjoyed question time yesterday.

Ambassador De Leon —Indeed. We are very happy.

Mr BRUCE SCOTT —I hope it was not reminiscent of your parliament! Thank you for your presentation. With the ASEAN-Australia-New Zealand Free Trade Agreement, this really is an exciting time for all of us in this region. In relation to sharing expertise to harmonise certificates for agricultural products, have you started any discussion with the government on harmonisation of quarantine issues and labelling issues?

Ambassador De Leon —Yes, we have. In fact, AQIS is engaging more and more with the Philippines in bringing our agricultural output up to international standards.

Mr BRUCE SCOTT —They are actually working with you in the Philippines?

Ambassador De Leon —Yes, they are, with specific funding.

Mr BRUCE SCOTT —Funding from?

Ambassador De Leon —From Australia.

Mr BRUCE SCOTT —That is interesting, isn’t it?

CHAIR —Yes, it is.

Mr BRUCE SCOTT —That is underway now?

Ambassador De Leon —Yes, it is. It is underway.

Mr BRUCE SCOTT —In relation to the two-way trade which has been growing strongly through 2007, has there been much effect because of the global financial situation on our two-way trade and investment?

Ambassador De Leon —There is no remarkable movement. Do you want to put some details on that, Michelle?

Ms Sanchez —The majority of the Philippines’ exports—60 per cent in fact—are in the electronics sector, so this is where we see more of the reduction in exports. So it has had some effect on our trade with Australia in this regard. It is in this particular industry that we see some reductions. A few companies in the Philippines have closed down and the overall demand for electronic products has softened. According to the industry, the industry has bottomed out for the past few months, so we are hoping to see some recovery. There have been some rehires, also, in the Philippines in this particular sector.

Mr BRUCE SCOTT —This is probably a more general issue about the economy of the Philippines. Has there been—as with so many countries around the world—a big impact on your domestic economy because of the financial situation?

Ambassador De Leon —Not exactly. We have industries going, although there is unemployment, of course. Still, our GDP is recording positive growth but not as much as we had last year.

Ms Sanchez —We have managed to avoid recession in the Philippines—our first quarter GDP was about 0.4 per cent. The reduction actually came in consumer spending, I think because of the GFC. A lot of people were a bit conscious about new spending. What the banks have seen is an increase in deposits. They have recorded a 16 per cent increase in deposits, so they are thinking that people may be spending less but saving more. We have also seen a shift of foreign investments, financial investments, from outside the country back into the Philippines. So these are good developments that we can probably look forward to.

In terms of our international trade, even if our exports have seen a bit of a reduction there has also been some reduction in imports because of the softening of the electronics sector. So the overall contribution of net trade to GDP has been positive.

Mr BRUCE SCOTT —Can I ask about air traffic routes and your national airline flying to Australia. How do you see that under the new agreement and where we are at now?

Ambassador De Leon —We are looking at filling up the non-traditional destinations. Even with, not exactly our flag carrier, but some other Philippine airlines that would fill up from, say, Davao to Darwin. That would be filled up as part of the air agreement to increase the number or the volume of seats between the Philippines and Australia, and it is happening.

Mr BRUCE SCOTT —In terms of education and students coming to Australia to study, are you seeing growth in that area as an export?

Ambassador De Leon —Not as much as Australia would expect, possibly, but the awareness is developing in the Philippines as to the quality of education in Australia, especially with the efforts of your ambassador, Rod Smith. Rod and I are closely coordinating on this to ensure that the Philippines becomes more and more aware of the competitiveness of Australian education. Traditionally we have been looking at the United States for education, but now, since about 10 years ago, we are taking a very serious look at Australia for our students.

Mr MURPHY —I will just pick up on that. Is there a big demand for education services in Australia coming from your country?

Ambassador De Leon —Not yet. But the awareness is developing more positively.

Mr MURPHY —Okay. What does your government do to entice Australian companies to invest in the Philippines?

Ambassador De Leon —Basically, the first thing that comes in, really, is the mining activity. As far as the Philippines is concerned, mining accounts for 65 per cent of all Australian investment. The reason is that we have had a mining law since 1995. We are exactly following the provisions of that law, although there are still some inconsistencies and some areas where we can improve. I personally feel the Philippines would look at a growing industry, as far as mining is concerned, between Australia and the Philippines. We are able to cite two particular firms, CGA and Indophil, as success stories for mining activity in the Philippines, although there are some others like Xstrata and BHP which are still struggling on so many different areas of concern. It is more of a corporate decision, by and large. There are success stories; there are struggling companies. One Australian company had a liquidity problem. But overall I think the mining industry is moving.

Mr MURPHY —There is much in common between your country and our country, because you have lots of minerals and we are one of the leading mining nations in the world. Have BHP Billiton shown any interest in the Philippines?

Ambassador De Leon —They have. In fact, they are in Davao del Sur with a local partner and they are at the level of developing their working arrangements with a local partner.

Mr MURPHY —There was something else raised with the Chilean ambassador: quarantine issues. Are there any quarantine issues between our two countries in terms of agricultural products or livestock?

CHAIR —Dare I say ‘bananas’?

Ambassador De Leon —Michelle would like to give some details on that.

CHAIR —Right to the heart!

Ambassador De Leon —Before going to that, I would like to go back to mining. One advantage that we have between Australia and the Philippines is that, although we are both rich in so many minerals, what we have is technology from Australia and access in terms of geographical distance to the market in the Philippines. Say you are looking at China as an export destination for your mining material or mining output; your technology would simply look at the Philippines as the source and move it out very quickly. That is the advantage of the bilateral relations between the two countries. Michelle can jump to the quarantine issues.

CHAIR —Ms Sanchez, before you answer I would like to welcome Senator Forshaw to the meeting.

Senator FORSHAW —Thank you, chair. I apologise for being late; I had other matters on. But we have had a chance to meet the delegation and to see you this morning.

Ambassador De Leon —Thank you very much, Senator.

Ms Sanchez —The ambassador mentioned earlier that we have been working closely with AQIS to get food exports into Australia. On a general level we have been able to get food exports in. We work closely with AQIS, making sure that our exporters comply with labelling requirements and any other specific standards or specific requirements that Australia would have for food products.

The only sticky issue right now is with Philippines bananas. We have been wanting Australians to try Philippines bananas for 20 years. You may be aware that the IRA was issued in November and the final policy determination was issued on 3 March, so I guess Australia is now waiting for the Philippines to respond to that. The operation is to start working on a work program. Our Department of Agriculture is consulting the stakeholders. There have been some areas of the IRA that the Philippines is not entirely in agreement with. We are waiting for that and also to see what the Senate inquiry results will be tomorrow, which is hopefully when the report will come out.

Ambassador de Leon —Your Senate inquiry.

Mr BRUCE SCOTT —It is not my report, but the senators’. What is the inquiry about, bananas?

Senator FORSHAW —I cannot talk to you about it.

Ms Sanchez —We can go off the record.

Senator FORSHAW —If I was aware of it, I could talk to you about it.

Senator FURNER —Neither of us is on that committee.

Senator FORSHAW —Between now and tomorrow I will become much more aware. It is a different committee. It is a Senate committee.

Mr BRUCE SCOTT —Is there an issue with chicken and other products?

Ms Sanchez —I think it is meat products. We have also been having difficulty with our ice cream products, anything related to meat products and dairy also. We have been trying to export ice cream to Australia and the problem there is with the lifting of the foot and mouth disease classification of the Philippines, which has to be done with the OIE in Paris. That is something we are working on now. Hopefully we will get off the list this year, which would solve some of our dairy and meat related problems also.

Senator FURNER —Correct me if I am wrong, but either last night or it might have been yesterday afternoon when we had an opportunity to meet with the delegation, I heard that the government was considering moving down the path—possibly next year—of a stimulus package. Is that correct?

Ambassador de Leon —The stimulus package for our economy?

Senator FURNER —That is correct.

Ambassador de Leon —It has started, actually. We are implementing it in phases.

Senator FURNER —Are you able to expand on what might be in that package and what sort of initiatives are being delivered?

Ambassador de Leon —It is actually more about infrastructure. We have not followed some of your approaches to a stimulus package, like giving direct dollars, but we have encouraged our small industries to invest more in infrastructure.

Senator FURNER —I see. Is there any severe degree of protectionism in respect of the package?

Ambassador de Leon —No, nothing.

CHAIR —Ambassador, as a follow-up to your discussion to do with the ASEAN-Australia-New Zealand Free Trade Agreement, you were talking about how that set a path for a new avenue—I think you said—of an economic relationship with Australia. You cited some specific industries. Have there been any discussions between Australia and the Philippines on possible areas of cooperation under the agreement or looking at an economic cooperation program? Or is it too early?

Ambassador de Leon —I am not aware of many details, but what we know is that, on the level of the framework, the Philippines is in it and we are ready to engage with Australia.

CHAIR —So it is just a work in progress.

Ambassador de Leon —That is right.

CHAIR —Correctly, you identified it as a good vehicle.

Ambassador de Leon —It is.

CHAIR —It certainly is.

Ms Sanchez —There are also certain areas, like services for instance, where we are looking to pursue further discussions with Australia and then hopefully come up with some cooperation agreements. These are really in the area of the supply of nursing and healthcare professionals to Australia from the Philippines. We are also looking at tradespeople and other skilled workers to come from the Philippines to Australia. That is part of the package that was bilaterally discussed between the Philippines and Australia under the AANZFTA.

CHAIR —That is interesting. You also train people in that area from the region in large numbers, as I understand it.

Ms Sanchez —Yes. There has also been a lot of interest from Australian universities—nursing schools, for instance—to work with universities in the Philippines. A lot of registered nurses who come to Australia from the Philippines have to go through bridging courses for both English proficiency and clinical work. We are trying to get Australian universities to link up with their Philippine counterparts so that our nurses get a higher standard of training, which hopefully would be acceptable here.

CHAIR —Things like cross-credentialing and so on.

Ms Sanchez —Yes. We are talking about bridging courses and twinning programs.

Ambassador De Leon —Even at the state level, what we are looking at is for the activity to be more economical. Rather than taking the Philippine nurses, say, to Melbourne to do bridging courses, maybe we can get the technology from Melbourne to the Philippines and just get one or two heads to give out the standards and make sure that they are able to take the bridging courses right there at less of an economic cost for everybody. This is now at the state level.

Senator FORSHAW —Are there any particular visa or taxation issues that may arise? I know some Latin American countries have raised the issue of double-taxation difficulties. Also, sometimes there are delays or difficulties in obtaining working visas. Is that something that the Philippines has any issues with?

Ambassador De Leon —From what we understand, it is really difficult for our nationals to be able to hurdle that 457 visa because of the standards required. But if they are your standards then they are your standards.

Senator FORSHAW —It is often raised by other countries. It does not mean that we accept that there is a problem but it is important to hear your view.

Ambassador De Leon —We quite understand that. That is why we are looking for ways for, say, nurses on 457 visas to hurdle the requirements in a way that is less expensive for them. We are looking at specific trades capability. I think even your VETASSESS and TAFE are looking at our own TESDA in the Philippines to crank in the technology right there in the country, rather than letting the guys come here and spend a lot of money to qualify. We are looking at some technical approaches on that at the state level.

Senator FORSHAW —I thought I would give you the opportunity to raise that.

CHAIR —I have some questions to do with the Doha Round. First, do you think that the Doha Round will come to a substantial outcome? Second, do you think that free trade agreements, like the ASEAN-Australia-New Zealand one, weaken the chance of that happening?

Ambassador De Leon —We still pin our hopes on the Doha Round. That is as much as I can tell you.

CHAIR —Understood. Thank you.

Mr BRUCE SCOTT —I have a question to do with visas. This is probably electorate based, but I have a large number of 457 visa holders working in my constituency from the skilled to the unskilled areas—and I do not like using the word ‘unskilled’ because people in what you may call the trade area are still skilled people; for example, they may be working in a saw mill with technical equipment. Have you been made aware by some of your nationals about the potential difficulties that they may have in getting their visas renewed?

Ambassador de Leon —Yes, what is happening in very particular cases is that some employers stop employing because of economic difficulties. That is the reason we have our labour attache in Australia trying to bridge the activities of these 457 visa holders to be able to move onto another job. Since earlier this year, there have been a few instances where some Filipinos on 457 visas were terminated by their employers. We are becoming aware of the need to bridge them for the next 28 days so they are still supported by their employers until they are able to find other employment. There are also cases where a few have had to go back to the Philippines because they were not able to find any other subsequent employment.

Mr BRUCE SCOTT —Is the labour attache here in Canberra?

Ambassador de Leon —Yes, he is here in Canberra.

Mr BRUCE SCOTT —I would like to make an appointment with him because I have a significant number in my electorate. I have very, very low unemployment, which is quite rare in Australia at the moment—

Ambassador de Leon —If you wish—

Mr BRUCE SCOTT —less than 1.5 per cent unemployment and I am in that resource-rich, coal seam methane area of the Surat Basin. What is happening there is quite extraordinary; it is a bit like the North West Shelf. I do not want to bring just constituency issues up here, but I know that the workers from the Philippines are very much valued. I guess we would all be concerned about a 457 worker from the Philippines who could not get another job and how they are treated.

Ambassador de Leon —If you would prefer I could ask the labour attache to call your office.

Mr BRUCE SCOTT —That would be very, very helpful. I am here and I can come back in the middle of July.

Ambassador de Leon —I have your card so I will let him make an appointment with you.

Mr BRUCE SCOTT —Please do.

CHAIR —It is important in relationship building, isn’t it?

Mr BRUCE SCOTT —Yes, it is, very much so.

CHAIR —Ambassador, I have one final question. In several areas of your submission you talk about exchanges of business missions and participation in trade fairs. Have there been any discussions with Austrade about possibilities in this area of cooperation? I imagine there would be, but for the record I would like to know a little bit more about that.

Ambassador de Leon —There are and I would like Michelle to elaborate on that.

Ms Sanchez —I try to work closely with my counterpart in Manilla, Ross Bray. He is the Australian trade commissioner there. We recently organised a trade mission from the Philippines to Australia as part of a Philippines IT services roadshow. That is another sector that we are constantly promoting from the Philippines. This included participating in the CeBIT fair, which is the largest technology event in Australia. It was the first time that the Philippines participated in that fair and the response from the participants—the business delegation—was very good. We are looking at doing that on a yearly basis.

In the past we have also done missions with food exporters from the Philippines to look at Australia as a market. One of the areas we would like to work on now is a reciprocal mission. We had exporters of automotive parts and components from the Motor Vehicles Parts Manufacturers Association of the Philippines visit Australia last year, Melbourne in particular. They had a dialogue with their counterpart, the Federation of Automotive Parts Manufacturers, and we are now looking at inviting FAPM for a reciprocal mission to the Philippines. It is really focussed on specific areas where we want to show that there are opportunities for more trade between Australia and the Philippines.

CHAIR —On behalf of the committee, thank you for your attendance, your submission, your statements and the open discussion that we were able to have. If there are any matters on which we might need additional information the secretariat will write to you.

Ambassador De Leon —On the part of the Philippines, we are indeed very thankful and honoured that we were able to participate in this public hearing. We look forward to more interaction with the subcommittee, even on an informal basis, to be able to pursue and enhance the trade relations between the Philippines and Australia. Thank you very much.

CHAIR —We can certainly follow that up. Thank you very much.

Resolved (on motion by Mr Murphy):

That this subcommittee authorises publication of the transcript of the evidence given before it at public hearing this day.

Subcommittee adjourned at 12.36 pm