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Foreign Affairs, Defence and Trade References Committee
02/10/2012
Australia and the countries of the Indian Ocean rim

GRINCERI, Ms Sonia, Acting Director, International Trade and Investment, Department of State Development, WA

NUNIS, Mr Giles, Deputy Director General, Resources and Industry Development, Department of State Development, WA

CHAIR: Welcome. I invite you to make an opening statement and then members of the committee will ask you questions.

Mr Nunis : Thank you for the opportunity to address the inquiry. My role in the government has two parts: the first part is to look at the resources sector within the state of Western Australia, predominantly around iron ore and gas; the second part relates to trade and investment through Western Australia. We have 11 international offices who report through my area in order to deal with trade and investment.

The Indian Ocean rim for us is a major global trading route linking Africa, the Middle East and Asia. We have a particular focus on China and India as well—hence, we have offices there. We see that as important for Western Australia in two areas that are emerging for us. One is in energy security, and particularly we have had significant gas opportunities, and the other is food security, which drives a lot of changes in terms of export capability here in Western Australia. To that extent, as a net exporter, Western Australia is keen to ensure the stability of the countries that form the Indian Ocean rim, and that becomes favourable for continued international trade and commerce. In particular we are very focused on the establishment and development of those relationships internationally, both at a government-to-government level and at a business-to-business level, and the intersectors between the two.

Western Australia in the last financial year exported about $121 billion worth, which makes up in essence about 46 per cent of Australia's total exports. I understand that if you aggregate Queensland, New South Wales and Victoria together, we actually had the same amount for that period. We are very much a fast growing economy. We are very fortunate that we have minerals here in the state. Western Australia's 12,000-kilometre coastline marks the southern and eastern limits of the Indian Ocean rim. Geographically, Perth is closer to Indonesia than Sydney, and there is up to a three-hour time difference between us and the east coast when daylight savings takes effect. But we are in the time zone where the world's most populous and dynamic countries exist. Malaysia, Singapore, parts of Indonesia, China, Hong Kong and the Philippines, in Asia, are in the same time zone and, hence, we have the same business working hours.

We have overcome the geographical distance from Australia's east coast population centres through engaging with Asia far more strongly. We have strong potential opportunities to expand the state's economic relationship with Africa. In fact, 70 per cent of Australian mining companies that exist in West Perth do a lot of mining in Africa, so we are very much the experts in terms of mining services and mining development. It has been noted in the Western Australian government submission to the Australian Defence Force Posture Review on challenges to Western Australia's security in the region. In fact next month General Hurley and the heads of each of the Defence forces are coming over here to visit Western Australia to look at the security implications here in west. This is a matter of concern, as the state has significant mining and energy projects that underpin the Western Australian and national economy, and Western Australia has a strong track record in implementing multibillion-dollar resource projects. For example, there are the Woodside LNG projects of Pluto and North-West Shelf, and the Wheatstone and Gorgon projects, all of which add up to more than $167 billion.

Western Australia depends on the seaborne trade and in turn on stability in the Indian Ocean. A strong regional Indian Ocean rim forum, like APEC, should be seriously pursued and cultivated by DFAT. The Indian Ocean Rim Association for Regional Cooperation, IOR-ARC, of which Australia is a member and in which Australia currently holds the position of deputy chair, alongside India in its capacity as chair of the organisation, could, if strongly supported, promote a sense of regionalism emphasising shared economic interests amongst countries in the rim. It may also help to allay the future possibility of escalating regional tensions between countries. It has the potential to provide a forum for the economically larger nations to cooperate together to assist the less developed rim nations, whether through development, aid programs, disaster management or good governance et cetera to promote stability. Australia could be a leader in the region and cultivate soft power through using the association to build goodwill in the region and play a leading role, as it has in the Pacific.

The government of Western Australia wants to see the Indian Ocean rim given greater emphasis, particularly around funding by the federal government. India currently has a two-year term in the chair of IOR-ARC, while Australia is vice-chair. Australian will then have a two-year term as chair, which we believe to be important and fundamental going forward. It is anticipated that Indonesia may chair soon after. These three G20 nations are the biggest economies in IOR-ARC. If the association is to be revitalised, it is up to these nations to be proactive and lead the way. IOR-ARC's future depends on how Australia harnesses the window of opportunity.

Specifically, IOR-ARC countries include—I am sure you know what those are. The association also has five dialogue partners: China, Egypt, France, Japan and the United Kingdom. It is proposed that the federal government should use IOR-ARC to encourage initiatives that promote cooperation and goodwill, build confidence, trust and stability and foster regional beneficial economic engagement and development with practical measures. We see this as just being one of many dimensions in order to develop the region. It should be taking the lead in building momentum and championing issues that will be non-controversial and have broad support with the association.

The Western Australian government has been engaging on IOR-ARC through the Department of Foreign Affairs and Trade and has sent an official to attend as an observer to the senior officials annual meetings for the past two years, in 2010 and in Canberra in 2011 and Bangalore, India. The Department of State Development has put forward two practical trade development projects for DFAT, requesting that they in turn be submitted to the IOR-ARC organisation, in the fields of health services and aquaculture. To date, both projects remain unfunded.

Mining and agrifood, especially, are shared industries of many Indian Ocean rim countries in which Western Australia and other Australian states excel. They provide a great opportunity to grow programs and foster closer relationships and ties with the Indian Ocean rim countries. Perth's proximity to Indian Ocean rim countries makes it the logical location for Australia to seriously grow its engagement with the region.

In conclusion, the government of Western Australia makes the following recommendations to the Senate inquiry for your consideration. It recommends that (1) DFAT create a specific Indian Ocean rim desk to oversee its interests in the Indian Ocean rim region and IOR-ARC, as it currently operates desks for ASEAN and APEC, and (2) that a DFAT officer be located in Perth and dedicated to overseeing the growth and development of the Indian Ocean rim countries programs going forward. That is our opening statement.

CHAIR: Thank you very much. I know that Western Australia is perhaps more focused on the Indian Ocean—for the obvious reason that that is where we are—than the eastern states, but Western Australia has developed some fairly important trade links around the Indian Ocean. Would you like to tell us a little about them—in particular, the Gulf and India—for the record?

Mr Nunis : Yes. We have offices in India and in China, Japan and Korea. We also have sister state relationships between certain provinces in Indonesia, China and Japan. Also, more recently—in fact, last year—we signed a memorandum of understanding with the NDRC in China. Those relationships are pretty key for us going forward. Sorry—were you going to say something, Senator?

CHAIR: I was, but I will come back to it when you have finished. Sorry to interrupt you.

Mr Nunis : Those types of relationships are varied in terms of cultural exchange, but predominantly they have tended to be more business exchanges. To that extent, it works very well between the state and those provinces that we have the sister state relationships with.

CHAIR: What about trade relations with the Gulf States? There seems to be a lot of interest in the Gulf States from Western Australia. Would you like to comment on that?

Ms Grinceri : Yes, we also have an office that looks after the Middle East and the North Africa rim region. The Middle East, of course, is a major agrifood export market for Western Australia and there is the live trade also with meat product which, one concedes, is sometimes controversial, and currently there is a situation with lamb exports. Nevertheless, that having been said, they are vital for us, not only in the agrifood sector but in student intake: an increasing number of students from the Middle East study in Western Australia. It is a growing tourism destination as well. Also, there is a lot of work being undertaken, throughout the Middle East and in African state regions, on projects that relate to Australian aid-related programs. It is a growing and important market, and strategically, of course, it is one where we share considerable interest, particularly in the offshore sector.

CHAIR: You also mentioned Africa. You said there is a growing affluence in East Africa and a growing middle class. Do you see that as an area where Western Australia could develop trade and tourism links?

Mr Nunis : It certainly is a very strong emerging area, but the current position that we are in is that we see the way of moving from China through India to Africa, and I think there is a bit of a way or a time to go to move along that path. We have a focus on that particular wave and we are trying to synchronise our resources according to that. We do not have an African office, for example, at this point.

The way that we are seeing that shift is that we have been employed by a lot of African companies to do a lot of mining services. Think of Western Australia 60 years ago when we started the mining development; that is where they are at at the moment. A lot of the issues they have to deal with in Africa are predominantly around sovereign risk issues in terms of investment, and we are certainly assisting African governments in looking at how this state of Western Australia has been able to provide greater security for larger investments over successive state governments. That is by way of state agreements and has been quite attractive for African countries to have a look at. When they get through that particular cycle, we think we can play a much larger role in Africa.

CHAIR: You said you did not have an Africa office. Do have a Gulf office?

Mr Nunis : We do; we have one in Dubai.

Ms Grinceri : It looks after the Gulf region.

CHAIR: What sort of business does that do?

Ms Grinceri : It does a whole range of businesses. Essentially those offices are there to assist Western Australian companies to access markets in the region and, obviously, to promote investment opportunities. Today, Qatar airlines has direct flights to Perth. I think there are talks with Etihad airlines as well, and of course for a considerable amount of time we have had Emirates airlines here. Those trade offices also work with DFAT, embassies and high commissions in the region to further Western Australia's trade and investment interests in that market.

Mr Nunis : Most of the business activity is around agriculture and agribusiness. There are live exports as well as wheat. There is an emerging requirement for luxury yachts and ships to be made here in Western Australia for the Middle East. It is pretty obvious why they would want those things. I have forgotten the name of the company that is involved with that, but—

CHAIR: Austal, I think.

Mr Nunis : Austal, yes. Austal have recently signed quite substantial contracts there to provide shipping manufacturing for the luxury market.

Senator KROGER: Could I just seek clarification. When you talk about trade offices, are you talking about WA trade offices?

Mr Nunis : WA, yes. I think Western Australia probably has the most extensive trade offices through the region out of all of the states. We used to have one in the United States. We closed it. We are essentially focusing west and north of Western Australia, and that is where offices remain, with the exception of one in the United Kingdom, which has been a traditional one for quite some time.

Senator KROGER: So you have your own in Dubai?

Mr Nunis : Yes, Dubai, in the Middle East. We have them in India, Japan, Korea, the UK, China, Indonesia and Singapore.

Ms Grinceri : Singapore is our most recently opened office.

CHAIR: That is very interesting. You also spoke in your opening statement about the IOR-ARC organisation. In earlier sections of this morning's evidence we discussed whether bilateral agreements are likely to be more productive than the IOR-ARC process. What is your view of IOR-ARC? Do you think it is going to serve a useful purpose, or is the future going to be in the development of bilateral relationships? Or is there a role for both, in your view?

Mr Nunis : I believe working in Asia is somewhat different to working in European countries or in the US. So it is very much relationship driven activity and it is also very multidimensional. If you are going to have only one approach, whether it be bilateral or otherwise, I think you are limiting your capability going forward. You have to work at many different tiers with those various countries, whether it be at the government or the business level, in order to develop those relationships and develop those bidirectional business opportunities. The traditional method of bilateral relationships is obviously an important one, but it is not a silver bullet.

We have, as an example, somewhere between 60 and 70 Chinese delegations coming here every year. So a Chinese delegation comes to Perth every week and they are asking at various levels—government levels, business levels, somewhere in between and sometimes the two of them come together—seeking to develop the relationship, getting at the right levels of government and business in order to develop that investment. For us to take a single-pronged approach I think would limit Australia's capability.

Ms Grinceri : I would also add that I have been attending the IOR-ARC meetings in an observer capacity for the past two years. It is true it is an organisation that has a long way to go until it hits its straps. But I believe that since India has taken over the chairmanship role, with Australia as the deputy chair, there has been a willingness and a commitment. Having seen the difference just in those two years, I think this is the window of opportunity to move forward on that.

Regarding Australia's position, who knows? Potentially you could have an ASEAN or an APEC. The whole Indian Ocean rim is an area of great influence and importance. If you just look at the composition of what it represents, it represents countries of south-east Asia. Singapore would be the key player there, and Indonesia. It also has South Asian countries. India is the key player there. You have the Middle East, with the UAE as a representative from there. Then you have the African countries, of which South Africa would be a key player. These are countries with substantial growth and other opportunities. Then you have a third tier of developing countries. In that mix there is a real opportunity to work together to achieve things and to put forward projects to be funded from within the IOR-ARC group. When I was there last year, China committed as a guest member $100,000 towards the operations of IOR-ARC, which is much more than what Australia committed to the grouping of which it is the deputy chair. There is an opportunity there to help shape it and grow it so that it becomes very effective.

CHAIR: Thank you. It is quite interesting that the Chinese have supported it in that way.

Senator KROGER: I want to follow up on an earlier question in relation to your trade offices. I have to say that I think that the proactive approach that the Western Australian government is taking in seeking opportunities and investment is incredibly impressive. Do you coordinate that with DFAT? Are those trade offices coordinated with DFAT? Are they part of the Australian trade offices? How do they work?

Mr Nunis : We work in conjunction with both DFAT and Austrade. We work a lot with Austrade. When we talk about coordination, it is actually a little bit embarrassing out in those regions, because the same people—whether they are in business or government—are getting visits from people from Western Australia, visits from DFAT and visits from Austrade and then the Victorians send a delegation of 300 people to talk to them as well. It is a mixed bag of activities. The issue for us is that each of the states offers different products, if you want to look at it that way. What we are trying to do with the federal government—and in particular with Austrade, which has a senior officers group that I am a member of—is have better coordination.

We do with things with Austrade and DFAT where the need arises more than anything else. We have a lot of direct relationships within governments in those particular regions and with business. And they enjoy having those direct relationships. That is particularly the case with the resources sector, in which we strike deals directly with particular companies. But when it comes to things like agriculture, tourism and education, we are competing on the same level as the other states in the same market. In most of these countries, people do not understand the difference between the state and federal governments here in Australia and in fact do not really care. They see it as confusing that these government agencies are out there beating the drum on similar lines. The cooperation that we have with DFAT and Austrade is very good.

Senator KROGER: You just went through eight trade offices, or something like that—I do not know whether that is the exact number, but it would have been close. Is it through discussions and negotiations with Austrade, for instance, and DFAT that you determine where you are going to place those offices—for example, if they are going to put more resources into one particular area and another area is of more economic interest to WA? There might be an 80 per cent WA focus in terms of potential economic interest and so you might determine that the WA government might invest in that particular area. Is there that degree of sophistication in terms of coordination?

Mr Nunis : Each of the country areas we put an office for different reasons. Recently we established an office in Singapore, early this year, in March. The reason that we chose Singapore is that a lot of financial decisions are made in Singapore; Singapore has become a financial hub. There is a lot of consideration within Singapore of investment in Western Australia. So it was important for us, rather than wait for them to come to us in order to seek that information, we wanted these are dealing with the stock exchange, dealing with the financial companies, dealing with those key investors who travel through Singapore and give them the first-hand knowledge and information. We do not have an expectation that Austrade or DFAT would know that information, so it is up to us to be part of the due diligence process under that investment environment. That is why we are in Singapore.

Senator KROGER: Do you share office resources, intel or anything like that?

Mr Nunis : No.

Ms Grinceri : Some of our offices might be co-located in a DFAT office.

Mr Nunis : Yes. And we share information that we believe is relevant to DFAT or Austrade or they believe is relevant to us. It is a cooperative environment. In essence we are almost acting like a federation out there as well. But we do cross over, we do brand differently. It is confusing in the marketplace.

Senator KROGER: Many of your representatives in parliament suggest that you are a federation in effect anyway, so you have not said anything that surprises us there.

Ms Grinceri : In reality that access of tyranny of distance applies a little bit here too. I operated and lived around our India office for five years and what I spent a deal of my time doing was educating the Austrade officers and to a larger extent too DFAT officers about Western Australia and its industries and its trade. So there is not a great deal of knowledge that still exists, I think. There is room for greater understanding of what Western Australia produces for the Australian economy.

Senator KROGER: Just on the IOR-ARC meeting where you had observer status, how many states would have representatives there on an observer basis? Is it because of the geography with Western Australia?

Ms Grinceri : Obviously we live on the Indian Ocean. In Canberra there were Western Australia and South Australia but the event in Bangalore last year was only Western Australia. It is not an official status, it is simply that we keep close contact with the IOR-ARC officer, Mark Pierce, in Canberra, who has been very helpful, I might add, if we can participate in an observer capacity and it has never been a problem.

Senator KROGER: My question is not premised on a criticism. I think you have got good reason to be there and have a capacity to be able to leverage your engagement, given the critical nature of the room to yourselves. So it was prefaced with an encouragement rather than a criticism.

Ms Grinceri : I appreciate that. We have put up two projects to IOR-ARC which are coalface projects to foster trade as opposed to government to government overarching dialogue that takes place which is more along the lines of security and those sorts of interests. One is in aquaculture and we also encouraged South Australia to participate in that project with us. We are not so parochial that we think we are the only ones who should do it, we appreciate the focus of an organisation like IOR-ARC which represents national interests. The other proposal we put up is in replicating a health services project that operates currently in Africa, taking that model and widening it. They are two practical projects which, in the region, really have greater application more than most.

Senator KROGER: I read those two proposals in your submission, along with your comments in relation to AusAID not having any strategic consideration of the region, yet following the application of moneys that AusAID applies, I note that at various times funding is given to nations and states in the region. So I guess your comment is more in terms of a strategic IOR-ARC based AusAID fund, as opposed to, for want of a better word, random funding of various projects.

Ms Grinceri : What happened was that there was no defined AusAID related funding assigned to, if you like, Indian Ocean rim countries per se. Having said that, last year Prime Minister Gillard during CHOGM announced, I think, a $120-million AusAID funding program for developing world countries in the mining sector. A deal of that funding is being managed through the Energy and Minerals Institute of UWA. A deal that goes into African countries to help them build their governance requirements to build up their resources sectors, which are important to them.

Senator FAWCETT: I have raised a few times with AusAID whether they target their funds to particular regions. Their push back has always been that they think they get better overall outcomes by going through multilateral partners like the World Health Organisation or others. Concerning a particular goal we have, the millennium development goal 5, which is around the maternal and child health, they are saying they would rather give their money to WHO because they get economies of scale and global strategy et cetera. There is an alternate train of thought which says that Australia should be building relationships through its AusAID funding and therefore targeting areas, albeit aligned with the Millennium Development Goals. Why would you contend that the latter approach, which is essentially what you are proposing, is a better use of funds than the multilateral one which AusAID currently prefers?

Ms Grinceri : Having worked in India and having seen some really good outcomes in AusAID funding in hand, I will give you an example. When I was in India, an AusAID-funded project was run from our Department of Agriculture and Food. That was to assist the state of Shimla, I think it was, which had an apple industry which had been decimated. So a two-year program with was put in place with scientists from the department of agriculture in WA to help that state revitalise its apple sector and eliminate blight, which they did do. Along the way they gained great market intel about India's apple industry, which is a phenomenal industry. Indians eat an enormous number of apples. We have complementary industries here. When it is our Apple harvesting season, it is not theirs, basically. So it gave rise to some good market intelligence about how to access the Indian apple market and to export apples from Western Australia. We found at all sorts of things: the Indians do not like apples with wax on them, they like a much sweeter and smaller apple, and so on and so forth.

It came about that we began exporting apples to India. One of the problems encountered along the way was that like many countries—like India, like China—the demand for the import product grew and grew and we could not supply it. Instead of going to other states, which is what they perhaps should have done, they did not; they started sending second-grade apples to India and ruined the opportunity. But the point of the story is that one of the outcomes of AusAID funding is that, aside from helping a state develop its apple crop industry and become self-sustaining you actually help your own country to find good market intelligence to find good trade opportunities and outcomes.

Senator FAWCETT: I guess the trade opportunities go to your second question, about aquaculture. You are right: Australia overall—South Australia in particular—has a very good aquaculture industry. What work have you done looking at whether industry is prepared to spearhead opportunities to develop a market in the sub-continent? The stories of overfishing throughout the whole Indian Ocean are prolific. There is clearly a food task that can be met there, therefore there is a business opportunity. Have you only worked at the AusAID funding side, or have you sought to engage Australian industry to be part of that?

Ms Grinceri : The agrifood sector, including the fishery sector, is covered by the department of agriculture. So we would facilitate that opportunity for them through our overseas office, which is how we got involved in the AusAID program. As to more specific information about how many companies there are, I would imagine that there are a number that have tried to access those markets. I am not sure but I could find out for you.

Senator FAWCETT: I would be interested to know whether that is something that companies have pursued and whether or not it is the government-to-government relations that is required for opening doors for them to take their expertise and develop—with a partner, perhaps, in a country like India—the business opportunities that are there.

Ms Grinceri : I would say that it is not necessarily government-to-government relations that do that. All I am saying is that that is one way—a practical sort of way, I think—aid funded programs can also benefit Australian industries to grow their markets. Really what I was saying was that it is one way.

Senator MARK BISHOP: Thank you to the witnesses for attending. In your opening comment, Mr Nunis, you referred to food security as an issue. There are some remarks in your submission about food security. Are you talking about the primary production level, there, or the value-adding process that could occur?

Mr Nunis : Predominantly at the primary level. An example of that is in Korea. They import 98 per cent of all their food into Korea. The Japanese also import a lot of our wheat and flour. Sometimes they look at a particular wheat product that helps with the production of their udon noodle, which can only be produced in Western Australia. So there is a very strong focus on raw materials.

Senator MARK BISHOP: Okay; we are talking about raw materials. I have got that. In the context of food security, is growth of the producer basis, in terms of the output at a primary level, one of the aspects of interest to the Western Australian government—more growth in grains, dairy and beef?

Mr Nunis : I think there are two parts to that. One is that I do not think our agricultural industry has the size and scale to meet the demand. So they have to grow in terms of size and scale. Secondly, they have to grow to the level of quality that is expected in the market place, which is a very different view. I think the agribusiness side in Western Australia needs to look at how they can commercialise their production, and maybe some of the individual farmers could cooperatively work in order to meet a particular demand in those particular markets.

Most of the interest that comes into Western Australia has been around wheat, but also around dairy. There has been a lot of interest in fresh-milk products or powdered milk products going into Asia. Also, there has been interest in meat and, moving away from livestock, having fresh meat being delivered into China and India.

Senator MARK BISHOP: That is going down some stages of the value-adding process—

Mr Nunis : It is.

Senator MARK BISHOP: in both of those examples. So there is interest in that as well?

Mr Nunis : There is interest in that and it is around how they can get it from the abattoirs, in particular, refrigerating it appropriately and then shipping it out. I think that is where the value-add capability—

Senator MARK BISHOP: On the grains side you identified scale and you identified improvements in the quality of product. There is a bill currently before federal parliament that is going to result in significant ongoing deregulation for the grains/wheat industry. My understanding is that the government will bring it back in the next week or fortnight when we return to Canberra. What is the position of the Western Australian government on that bill? Do you support or oppose it?

Mr Nunis : I have not actually seen it, so I do not know. We are not intimately involved in that one. The department of agriculture deals with those specific areas, so we have not been involved in that regard.

Senator MARK BISHOP: The Western Australian department of agriculture?

Mr Nunis : Yes.

Senator MARK BISHOP: Do they have a position?

Mr Nunis : I am not sure.

Senator MARK BISHOP: Have you made any inquiries?

Mr Nunis : No.

Senator MARK BISHOP: Why is that?

Mr Nunis : We certainly play a very strategic role for Western Australia but for those with specialist outcomes we rely on those particular departments to deal with those particular areas. That is the only reason.

Senator MARK BISHOP: That is the only reason?

Mr Nunis : Yes.

Senator MARK BISHOP: So you would take advice from the relevant department and that would then become the position of the government. You are not aware as to whether the relevant department has a view on the deregulation of the grains industry in this state?

Mr Nunis : It has not been raised with me. I have not seen that more recently.

Senator MARK BISHOP: Can you take that on notice?

Mr Nunis : Sure.

Senator MARK BISHOP: And provide the committee with advice, as a matter of priority, the position of the Western Australian government on the deregulation of the grains/wheat industry in that state? Secondly, you made comments in response to a question from, I think, Senator Kroger about the huge growth in delegations from China. There is huge growth in delegations from countries out of Africa seeking advice on minerals resources, extractive industries and all of the issues associated with that. You made the point that the government here maintains separate positioning into markets via representatives, although you work in conjunction with federal government agencies and bodies.

In terms of the discussion we have been having as to the utility of the Indian Ocean Rim Association, however described, do you see that as having the capacity to add significant value going forward in terms of developing trade and business linkages? Or is the market really acting on its own in developing significant levels of one, business to business and, two, bilateral relationships with a host of countries seeking access down here?

Mr Nunis : I see that the issue for us in Australia as being that we are probably a small nation compared to the population of Asia. For us to address the size and scale of the potential investment opportunities, be it both ways, mostly coming here and not that much in comparison going back, is so substantial for us that to only apply one or two strategies is limiting our capability. So the IOR-ARC will add value. I do not think there is any question about that. We need to see whether it is significant or substantial. But it is a case of what you invest is what you get out of it. The Western Australian government has made a substantial investment in the region in order to develop those types of trade relationships. But it is literally the tip of the iceberg. There is so much more that can be done and so much more that we need to understand from here looking into the Asian region and the Indian Ocean Rim, particularly in Africa. We simply just do not know. The more we can apply different strategies in order to get that better understanding, get those relations right and build that level of trust and integrity the better it will be and the more beneficial for us going forward. Going forward, I do not think there is a wrong answer.

Senator MARK BISHOP: And I was not suggesting that there was. I am reasonably familiar with the level of interest that comes out of the countries of Africa, at the ministerial level and at the officials level. I have been made aware of the large numbers of delegations that come here, and to Queensland, seeking advice. My observation is that that level of interest appears to be growing and that, as our ancillary and services industries also grow, interest is shifting to those growing industries as well. In that context, have you noticed any fall-off, or have you had advice from your own line departments as to any fall-off in the level of interest from countries in Africa on mining, extractive and ancillary issues?

Mr Nunis : No, it continues to grow significantly.

Ms Grinceri : I think the yardstick measure would be Africa Down Under, which is an Austrade event. It has grown exponentially; it has doubled each year. It is burgeoning now and I would imagine that, next year, they could not possibly hold it in the two hotels. It started off at the Pan Pacific, and then they moved from the Pan Pacific to the Langley Hotel across the road. I am sure that they will end up sometime soon in the convention centre because it is an event that really is extraordinary in the growth I have seen, and I have been to four of them now.

Senator MARK BISHOP: Is it fair to characterise a lot of the attendees at that particular conference, which is a sort of headline conference, as coming initially at ministerial level and then going down the pipe a bit to officials level on structural issues in terms of getting access and gaining benefits?

Ms Grinceri : They usually travel with very substantial government delegations headed up by either a minister, a ministerial delegation, and a head of the department of mines et cetera, and the various bureaucrats that fall in behind. Then there is a great deal of interest on the part of Australian companies, most of which are Western Australian companies. That is the configuration of it. But I have seen an increasing number of private sector players from Africa coming across over the years.

Senator MARK BISHOP: I have noticed that that has started to pick up over the last two years. On that issue, I think the federal government has funded—there may be some state money in it, but I do not know—the institute co-located at the University of Western Australia and one of the universities in Queensland. Did you refer to it as the energy institute?

Ms Grinceri : Yes, and I was incorrect.

Senator MARK BISHOP: I think it has another name as well.

Ms Grinceri : It is the institute of mining and petroleum, I think.

Senator MARK BISHOP: Does the state government have a rep on the board?

Ms Grinceri : Not at our department level, but we work closely with them.

Senator MARK BISHOP: Are they addressing issues of regulatory reform and matters of that nature? Do you receive reports on the work they are doing?

Ms Grinceri : No, not in that area.

Mr Nunis : We do not fund it.

Senator MARK BISHOP: You do not fund it so you do not have any involvement in it?

Mr Nunis : Because we know they exist and they know we exist we have kind of worked together, but we do not fund it.

Ms Grinceri : If they have a group over and we are called on, we might sometimes provide a briefing, as does the Department of Mines and Petroleum. I think they also oversee the $20 million of federal funding—I think that is the figure.

Senator MARK BISHOP: It is $20 million or $25 million.

Ms Grinceri : Part of that is assigned to improving governance in developing countries, so we might be involved in that.

Senator MARK BISHOP: In the context of improving governance more broadly in developing countries in Africa, do you get requests from governments in Africa for significant levels of advice on mining codes and associated ancillary matters so that they can establish a proper, lawful regime that minimises risk and allows access and allows development?

Mr Nunis : Mainly it is government department to government department. The Department of Mines and Petroleum look at their regulatory regimes, the royalty structure, safety and how the mine plans are constructed by the industry, so we show examples of those. We frequently get involved in the development of the state agreements that we have within the state.

Senator MARK BISHOP: State agreements for transplanting overseas?

Mr Nunis : No; what they are looking at is how they could potentially apply a similar regime over there. We give government-to-government advice. We say, 'These are the things that we do over here,' and they take those with them. What they do with them we are not quite sure yet, but we have not been drawn over there to give on-the-ground advice; they predominantly come here and seek that.

Senator MARK BISHOP: You are not yet receiving requests from ministers, heads of departments or governments of African states for assistance in developing whole-of-state mining codes or state agreements or models?

Ms Grinceri : The Department of Mines and Petroleum—not state development—receive those requests. They provide that type of service. One of the problems, of course, is that they are so busy focusing on what they need to do here in WA that exporting that service is an issue, but I know that they do get those requests.

Senator MARK BISHOP: Would there be any value in this committee looking further at the utility of state agreements, which have developed in the state since the early sixties, as a model for development in African and South American states and countries?

Mr Nunis : I believe so. I negotiate state agreements on behalf of the state, and the response I get, particularly from the Japanese and the Chinese, is that they see it as a good relationship with the government. They see an element of security with the agreements across multiple governments, because some of these terms of agreement go for 50 years. They see the transparency of government approvals, so they can see the light at the end of tunnel and say, 'I can see how that can work through'—

Senator MARK BISHOP: They value all those things, don’t they?

Mr Nunis : Yes. They only have to deal with one minister, the Minister for is the State Development, who can make approvals going forward, rather than with different people for different types of approvals under the laws of the land. Some other approvals still apply—for example, environmental, native title and heritage agreements—but they are able to deal with that minister and the Department of State Development to try and smooth that out, which gives the element of good transparency going forward.

Senator MARK BISHOP: Which department would we approach to get a status report on the state agreements process, approaches and utility?

Mr Nunis : The Department of State Development.

Senator MARK BISHOP: I will think about that. Thank you very much.

Senator STEPHENS: That was a very interesting discussion. Mr Nunis and Ms Grinceri, I want to take you to another space. You have talked about your relationships with DFAT and with Austrade. What about with Tourism Australia?

Ms Grinceri : In some of our overseas offices, Tourism Western Australia is co-located with us. In fact, we have just doubled our space in China, and a good deal of that was driven by the need of Tourism WA to increase its staff because China is a focus market for them. They liaise with Tourism Australia. Our contact with them would be minimal. In fact, it would be mainly driven by our overseas offices. I know that our India office liaises quite a bit with Tourism Australia, because it is not currently a focus market of Tourism Western Australia. So you see a secondary tier of relationships that are developed through having overseas offices. But we do not officially deal much with Tourism Australia. We would welcome it, but it is not our core business.

Senator STEPHENS: At our previous hearing the Department of Resources, Energy and Tourism told us about a 2020 India strategic plan that is being developed by Tourism Australia. We were interested to know how much the Western Australian government is part of working up that strategy.

Mr Nunis : They would deal directly with the Tourism WA office. They work relatively well together. They piggyback off each other internationally as best they can. The budget of Tourism Australia is far larger than that of the Western Australian budget, so of course we would optimise that as best we could.

Senator STEPHENS: Fair enough. This morning we had discussions with representatives from both universities, talking about the role of IOR-ARC. When Australia takes on the chair in 2013-14, it provides an opportunity for us to perhaps help strengthen IOR-ARC and for it be a bit more strategic in the way it pursues some of its projects. The issues that have been raised with us quite specifically are around climate change, disaster warning systems and those kinds of things. Your submission also identifies climate change as a significant challenge for the region. Can you comment on the level of cooperation around these issues in the region and the kind of role the WA government is playing in all of that?

Mr Nunis : Specifically on climate change?

Senator STEPHENS: Climate change, climatic events, the early-warning systems, tsunamis—those kinds of things.

Ms Grinceri : Through the Oceans Institute that operates out of UWA, there is quite a deal of collaboration in the region. There is collaboration on marine parks. Those tend to be federal government matters. We might be on the peripheral of those. Being part of a strong IOR-ARC, in an observer capacity and helping to shape the dialogue, is as good as it gets, if you like, in those national kinds of bodies. Where we can effect and really make a contribution is in the next tier down—aside from the government-to-government important dialogues that take place, putting on the ground development opportunities and trade opportunities through industry sectors and working with industries to deliver those, with hopefully some sort of funding commitment to facilitate that, to help kick-start aid related projects that are trade driven in developing countries.

Senator STEPHENS: In your submission, you noted that settlers from South Africa account for the largest share of migrants to Western Australia, followed by India and Malaysia.

Ms Grinceri : From the rim.

Senator STEPHENS: Yes. To what extent is the Western Australian government using that migration trend to build stronger people-to-people links with the countries in the region?

Ms Grinceri : That is self-evident if you look at the Africa Down Under event. On our tally, in looking at a number of Australian companies, 70 per cent in the resources sector are out of Western Australia and are involved in Africa. As Giles mentioned earlier, West Perth is considered a 'little Africa'. For the mining sector here, it is a growth industry. I would say they have been the drivers of it, by and large. Through those people-to-people contacts that you have you can deliver back into those countries. Our migrant population is an undervalued contributor to trade factors, not just in this discussion about the Indian Ocean rim countries but also in getting into China, for instance, South-East Asian countries and, indeed, European countries. That is my first port of call. You need to look at the industry networks that are associated with those countries and engage with them. They are very important, very valuable and underestimated.

CHAIR: In fact, I have heard that 70 per cent of the mining companies in West Africa have their head offices in West Perth.

Senator FAWCETT: The Palmer review commissioned by the Department of Resources, Energy and Tourism looked at security of the north-western oil and gas facilities in particular. They told this committee they had briefed the West Australian government on the outcomes of that review. To what extent does the West Australian government feel it was consulted and briefed? Are you happy with the outcomes of the review and with the recommendations?

Mr Nunis : We were not involved with that briefing so I am not quite sure who they briefed. As I mentioned earlier, the heads of Defence are coming here on 13 November in order to brief all the Directors-General relevant to those departments and also heads of the mining, oil and gas companies and to say (1) this is what they are doing in the region and (2) to get feedback and a response in the security implications up in the north-west.

We have a major security risk in Port Hedland. Port Hedland is the big iron ore port, which pushes out 400 million tonnes of iron ore currently. There is only one shipping channel into the port and if that were to go down then the Australian economy would, in essence, go down with it. That is how significant it is. It is the No. 1 risk on the BHP global risk register. It should be a risk for this country going forward. It is, from my point of view, ignored and that is what we want to feed back to the heads of Defence.

Senator FAWCETT: Will you take on notice—you may need to liaise with somebody else in the WA government—its response to the report by Mike Palmer and whether it was happy with (a) the level of consultation and (b) the recommendations from the review. Likewise, the Department of Resources, Energy and Tourism has told the committee that they work fairly closely with the Department of Infrastructure and Transport and the Attorney-General's looking at what is occurring in the north-west and liaise on a regular basis from a security perspective. Does the West Australian government feel as though you are being adequately consulted on a regular basis by the federal government in that region of your state?

Mr Nunis : We are consulted frequently on infrastructure. We continue to make numerous submissions around the types of infrastructure that are important for the state. So the short answer to that is, yes, we were consulted. From those government departments that we make submissions to, feedback and response is very limited in return. We seem to be going through a cycle of continuously making submissions for the same thing over and over again. It is not falling short of Groundhog Day at the moment in getting some kind of response in return. We cannot see anything going forward. We cannot see a plan going forward. We advise about infrastructure choking points, about security issues, about continual trade requirements, and we do not get much response at all.

Senator FAWCETT: So it is a lot of process without a lot of outcome?

Mr Nunis : Pretty much, yes.

Senator FAWCETT: At a very basic level, in looking at security threats elsewhere in Australia leading up to Olympics and things like that you see a lot of joint cooperation between the Federal Police, the Defence Force and state police around security issues. At that level, has there been any joint planning or funding of capabilities in WA?

Mr Nunis : Probably the most noticeable occasion was when CHOGM occurred here last year. There was a lot of interaction between state and federal police agencies and Defence to look at security. It was probably the most I have ever seen here. Apart from that, I do not see it too often.

CHAIR: In its submission, the government of Western Australia noted there are further opportunities for West Australian export growth to the Indian Ocean rim, particularly with the number of free-trade agreements currently under negotiation. Would you like to elaborate on that statement for us.

Ms Grinceri : I think the largest one in train in that area is the free trade agreement in its early stages with India. A lot of people are hoping that the outcome of that is a bit more of a balanced perspective. It is quite difficult currently to put some products into India. We see those as a worthwhile and valid. The ones that have been completed in the South-East Asia market have trade flows with Malaysia et cetera that are really progressing well. I think that there is also one with Thailand, which is quite down the track for us. These are good triggers to help also focus on trade and obviously promote and encourage greater trade not just from Western Australia obviously but also Australia-wide into those markets.

CHAIR: To what degree is the Western Australian government or your office involved in the agenda for these free trade agreements? Do you have input into what you would like to see?

Ms Grinceri : Yes, we are consulted by DFAT on that. We can also send along—and we do from time to time—someone in an observer capacity, particularly if one of the meetings takes place in Canberra, so that we can keep tabs on what is happening. We are invited to comment on the current status of where they are with the negotiations, and from time to time as part of that process DFAT sends a team to Western Australia and they talk not only with relevant government agencies but also companies that have an interest. So people have an opportunity—

CHAIR: I gather that Western Australia's exports of gold to India have gone up quite dramatically.

Mr Nunis : Yes.

CHAIR: Could you tell us why that is, and also in what other areas are there trade opportunities with India?

Ms Grinceri : I know a little bit about that. I looked into that some six to eight months ago so I hope that the information is still valid. All of Australia's gold is processed in Western Australia. Those figures look a bit stacked, if you like, but all gold from Victoria and elsewhere comes to WA and processed. It is now being distributed by the ANZ Bank, basically—this is into India—and I have seen some of it before that used to go into the Middle East. I am not sure whether that continues; I think that now most of it goes through to India and from there it is distributed that way. The ANZ is trying to establish bank-to-bank relationships for the distributorship of the gold. I think that it is a matter of consolidating it into one market for wider distribution.

CHAIR: Are there any other important trade opportunities that you see in that area—in India, Malaysia, Singapore, the gulf—that might be of interest to this committee to hear about?

Mr Nunis : The only predictions that we are making in terms of going past the Chinese economic development is that of India, and the main reasons we are looking at India have been the emerging market for the state. We believe that they will soon run out of iron ore and they are due to go through a major economic development in some form so they will need major construction going forward. They will soon run out of those types of energy opportunities in terms of coal and gas and so that will be part of the economic developments. Those are the two main areas we see India's emerging market for us. Eventually, I think, it will get down to a food question as well and the quality of food that will come through. That is why we have a focus on India as being an emerging market probably more than five to 10 years out. We have been very reactive to Africa, and after that we will take a more proactive stance in Africa. We can only do so much and we have basically focused on what we can do and do the best we can.

Senator MARK BISHOP: We are aware, of course, of significant large-scale coal investment out of India into parts of this country, and you identified likely future shortfalls on both the coal and the iron ore side, going some years hence. Have you noticed yet in your figures significant indigenous interest out of India of a scale compared to what started here 15, 18, 20 years ago out of Africa—or is it just isolated, major investor interest seeking supply sources?

Mr Nunis : Specifically around coal?

Senator MARK BISHOP: Both coal and iron ore. Perhaps address them separately.

Mr Nunis : I think we are yet to see any kind of major investment in iron ore by Indian companies, but we are certainly seeing that in the coal and fertiliser for food requirements here. My dealings with those particular companies relate to the fact that they see coal resources running out and they need to find them somewhere else.

Senator MARK BISHOP: That is really large, established Indian-owned companies seeking to guarantee supply going forward over future generations.

Mr Nunis : Power generation.

Senator MARK BISHOP: Power generation, yes. My question is: the interest that started all across Africa up to about 20 years ago has spread both wide and deep, so there are hundreds and hundreds of companies out of Africa coming over here seeking advice—and hundreds and hundreds out of the west and Queensland investing in Africa. Are you noticing that type of pick-up here into or out of India? Or is that yet to come?

Mr Nunis : It is yet to come. The Africans are more new-horizon type activities and starting with a very greenfields approach and seeking expertise. The Indians are seeking resources. I think those are the two differences.

Senator MARK BISHOP: So the Indians are seeking resource supply, or resource guarantee, but you do not yet notice a widening level of interest down into subsectors of the marketplace over there?

Mr Nunis : No. Not at this point.

Senator MARK BISHOP: Do you forecast that yet, or not?

Mr Nunis : We believe that will happen very soon, certainly in India. It will certainly spread a lot more, there will be far more companies at various tiers entering into our marketplace here in order to seek greater security of resources. That is what we have seen in Japan and China. The security of supply is critical; and, because the security of supply is critical, they must invest in joint venture in order to shore up that supply. So we certainly would see that happening going forward.

Senator MARK BISHOP: On the other side of the coin, are you seeing any signs yet of the level of interest by ASX-listed, second-league companies in Australia that have gone into Africa in a big way going into India?

Mr Nunis : No. The African interest is more that it is a known understanding in terms of mining—as opposed to India, from which they already have a mining industry, they have already got a coal industry and the like and have been there for quite some time. So I think it is a very different play. My understanding is that the risks going into Africa are seen as substantially higher, mainly because of the sovereign risk issue. But that remains to be seen as to how those companies continue to invest in Africa and through the stock exchange here.

Ms Grinceri : But there have been several West Australian mining companies—second-tier companies. Rio Tinto has been operating in India for more than 10 years.

Senator MARK BISHOP: When you look at the stats out of Australian investment into Africa, as confirmed by your comments about the number of delegations coming here and seeking advice, I just wondered if it had slipped into a broader investment interest out of this country into India, as it is clearly established in Africa, and you are saying that you are not seeing that.

Ms Grinceri : What India does at these sorts of times is this. If you are an Indian mining company operating in India, you cannot export your resources—your iron ore, for instance; you have to sell it to the domestic market, and it changes from time to time. We have had an instance of a couple of companies come looking for iron ore, but not to export back to India—basically, to export to third markets so that they are keeping their clients happy and sustaining their market opportunities.

Senator MARK BISHOP: Thank you.

CHAIR: I think we will conclude there. We will now take a lunch break, after a special meeting of the committee.

Proceedings suspended from 12:05 to 12:59