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

HARTLEY, Major General John, Institute Director and CEO, Future Directions International

LUKE, Mr Leighton, Research Manager, Indian Ocean Research Programme, Future Directions International

McHUGH, Mr Liam, Research Manager, Northern Australia & Energy Security Research Programmes, Future Directions International

CHAIR: Welcome. The committee has received your submission. It is submission 12. Would you like to make some opening comments?

Major Gen. Hartley : Thank you very much for the invitation to be here. I have to tell you that I come from a very scarred background! Last time I spoke to Senator Eggleston, before coming here, was at the Senate estimates committee in 1997, I think. It was three o'clock in the morning and he asked me a question to which I did not know the answer—and I cannot remember the question!

CHAIR: Fortunately, we do not do that anymore—that is, sit until 5 am sometimes.

Major Gen. Hartley : That is a great improvement! Let me just say four things before we get into this discussion, recognising that I have a colleague on either side who will each bring forward their own views on a number of issues. Let me speak about Future Directions International for not more than one minute. It is a not-for-profit research institute based here in Perth. We have been in existence for 12 years. Basically we look at four things. We are all about intelligence—we are looking at the future—so we are not really concerned about what is happening immediately, recognising that you cannot judge the future without knowing what is happening right now.

The four areas we look at are as follows. First of all, we are looking at the Indian Ocean region, where essentially we are trying to make determinations about what is going to happen over the next 20 to 25 years that could be an opportunity or, indeed, a challenge to Australia. We do this recognising that traditionally we have tended to look to the north—East Asia, Southeast Asia and across the Pacific—and that the Indian Ocean region is therefore an area which, as a nation, we have not necessarily paid as much attention to as perhaps we might have and that, even when we has given it a good deal of attention, it has waxed and waned over time. The second area we are looking at is Northern Australia. We are trying to make some judgement about where Northern Australia will be over the next 20 or so years and looking at not just the minerals and energy sector but also the agriculture and pastoral sectors, tourism, fisheries, innovation, foreign affairs, climate change, population, infrastructure and so on. The next area that we look at is trying to make some judgment about our energy needs as a nation over the next 20 or so years and where those energy needs may come from. We have gradually expanded that to looking internationally as well: where other people might have energy requirements and how we might, as a nation, be able to support that. The final area—and I would like to talk a little bit about this towards the end of my short presentation—is that we are trying to make a judgement about whether we have an impending global food and water crisis. We are looking to 2050 and trying to make some judgement about, if that crisis does occur, how it would evolve and what impact it could have on Australia and what we as a nation should do about it. So that is the background of my organisation—it is essentially looking to the future and making judgements about where we might be in the next five, 10, 15 for 20 years' time.

With regard to this particular presentation, we have provided a paper for you where we have tried to analyse the outcomes that we would seek from a number of countries in the region. We have started by looking very much at the strategic objectives of three major powers in the area, again to about 2025. We looked at China, India and the United States, and we tried to make some judgement about what they saw in the region that would be of particular interest or concern to them. I might add that, when we did this, I presented the outcome that we had for China to the Chinese ambassador, who told me that it was the clearest statement of Chinese foreign policy that he had ever seen. I am not sure whether that is the right thing or not, but nevertheless it was interesting. The United States was a challenge and India was an even greater challenge, because I think that all three countries in fact have an unclear view of where they would see themselves 20 years from now. When we did that, we then looked at six particular countries in the region, and again we tried to make judgements about the outcomes that we as a nation would want in relation to those six countries. We chose these six countries quite carefully—Indonesia, India, Iran, Pakistan, Saudi Arabia and South Africa. I notice that, on the list of countries you have on the back of this list, Saudi Arabia is not listed as an Indian Ocean country; the Saudis see themselves very much as an Indian Ocean country. That is the first issue. My colleague Leighton will be talking about those sorts of things in some detail.

We also looked at issues that related to security of the region, and I know there was some discussion this morning about security. We did not just look at security; we looked at what we considered to be the potential for a catastrophic disaster—be it from natural causes, an industrial accident or a security-related issue. Our judgement is that in the immediate foreseeable future, probably over the next five years, there is no particular threat to this part of the world from an external source—that is, from a national government. On the other hand, the possibility of something less than that type of threat—an asymmetric threat, to use the technical term—is probably a considerable possibility. This is from an organisation or a group of people or an individual with a particular cause that they want to publicise, and, to do that, their involvement with something that could be catastrophic is quite possible. We are not talking about large groups. We are talking about individuals: people who may hire—for instance—a light aircraft, fit it with explosives and fly it into a particular facility or an area that would cause a disproportionate amount of damage. We see that as the more likely threat.

The final thing I would like to mention briefly is what I think will be the biggest challenge that we will find in this whole area—not immediately, but certainly over the next 15 to 20 years—and it is the issue of food and water security. The region itself already has a significant number of problems, and these problems will probably get even worse. We currently have about a billion people who are living on starvation limits and about two billion people who have food shortages from time to time. A large number of these people reside in the area that we are looking at—South Asia, the Middle East and East Africa. The problem is brought about by a number of issues to which there are no immediate answers. The first is population. There is no doubt that we are going to see an increase in population. Sometime after 2050 it will level out and after 2050 we will in fact start to see a global decline in population—an ageing population. Certainly there will be an increase in population, and the births of most of the people who will be born between now and 2050 will occur in areas that already have major problems.

Secondly, we are going to see an increase in the middle class. People are going to demand higher-nutrient-type foods. The challenge for agricultural production will be even greater. Thirdly, we are going to see people move increasingly to cities. Over the next 20 years or so, about a quarter of the world's population that is currently living outside of cities will move into cities. Urbanisation will bring with it a whole range of problems, including the fact that cities invariably expand over areas which already produce food.

I think we are also going to see a major problem with water shortages. It is estimated that by 2030 we will require the equivalent of 20 Nile Rivers of additional fresh water—and access to fresh water. That is almost impossible to imagine. Someone told me that it was the same as 3,000 cubic kilometres. I cannot imagine what one cubic kilometre looks like, let alone 3,000. There is a requirement for a huge amount of water. Part of the problem is climate change but, equally, many countries—India, Pakistan and parts of the Middle East are certainly involved here—are in fact taking water out of their underground water systems and not replacing it. In general terms the Indian aquifer system has declined by 80 metres since 1950 and that means that since 1950 people are having to go to that depth to get water. Quite frankly, they are running out of water.

The other issue to mention is the fact that our arable land is degrading very quickly. It is estimated that we are losing about one per cent of our available arable land per year, and if that continues then we are going to see serious problems within the next 30 or 40 years. For all those reasons this is one issue where we need to pay a lot more attention. The problem is, of course, that it is not immediate. The problem is already there, but it is something that is distant from us and therefore we tend not to think about it. Having said that, I do sense that there is an increasing awareness of this issue at all levels and that people are starting to think more about it. It is certainly a problem we are going to have to address within the next 20 years or so. That is by way of background.

Mr Luke : My name is Leighton Luke. I manage the Indian Ocean research program at FDI, as General Hartley indicated. Our focus in this program is to consider the geo-strategic developments in the region. So with that in mind, FDI contends that Australia should aim to strengthen its global image and remain an influential middle power in the region by enhancing its trade, economic development and development assistance to promote social stability and improve standards of living among Indian Ocean countries. In addition to India, China and the United States, FDI sees another five countries in the region which can be of particular importance to Australia. They are Indonesia, Pakistan, Iran, South Africa and France. FDI recommends that Australia deeply consider how it relates to these countries and how effectively it works with these countries to enhance cooperation, stability and security. I would emphasise that almost all instances are a case of building upon what has already been done rather than necessarily starting from scratch. I would certainly put that out there.

Mr McHugh : I manage the northern Australia and energy research security programs at FDI. The areas I wish to focus on are twofold: firstly, to discuss the economic opportunities of the Indian Ocean region and, secondly, to very much link the challenges from the Indian Ocean to Australian and particularly Western Australian security.

FDI contends that despite market volatilities and new competing sources of commodities, the Kimberley and the Pilbara regions' strategic share of iron ore, gas, base metals and uranium means sustained growth and contribution to Australia's national GDP. The possibility of market volatilities aside, Indian Ocean economies are projected to continue to expand and to continue to demand more materials and energy supplies from Australia. Large and accessible known deposits will sustain current production levels for the coming decades. There is potential to further extend supply through ongoing exploration and technological advances and investment.

Over the last decade employment within the resource industry has almost doubled. Mining revenue rose to 14 per cent of GDP, and if we include investment in that we go to a further four per cent of GDP. Infrastructure, building and machinery developments in the Indian Ocean region will see these ratios and the sector continue to expand up until 2030. FDI believes that while it has initially been more identifiable in Western Australia, the prosperity from mineral energy will over coming decades spread more evenly across the country, leading to stronger economic growth, domestic demand, national income, labour, materials and investment.

It is worth noting that Western Australia has a strategic share of various commodities including 21 per cent of the world's iron ore, eight per cent of the world's diamonds, 15 per cent of alumina, 12 per cent of nickel, seven per cent of gold, nine per cent of natural gas and other strategic minerals including tantalum, zircon, limonite and rutile. So far Australia and particularly Western Australia, the Pilbara and Kimberley regions have capitalised on their proximity to key Indian Ocean markets. As at July 2011, there were over $107 billion of major resource projects either committed or underway, and a further $194 million in consideration.

This leads me to the second element: the security challenges from the Indian Ocean. I should highlight here that we did liaise with Mike Palmer in the recent Palmer inquiry. The author of the West Australian government's submission to the review also wrote the submission to the White Paper. As the general mentioned, the potential for interstate conflict remains a remote yet possible contingency for the ADF over the coming decades, with changing power dynamics, nationalistic rivalries, competition for resources, and jurisdictional claims, but it is more likely that the challenges will be a non-conventional threat, and they are myriad in the Indian Ocean. Of particular concern is state failure, the movement of illicit goods, exploitation of natural resources, people smuggling and the exponential challenges of climate change.

Senator STEPHENS: Just a short list!

CHAIR: Thank you very much for your opening statements. I will begin the questions. You have obviously done a lot of research on the Indian Ocean, its potential and the benefits Australia could gain from having a stronger relationship with the countries of the Indian Ocean rim. In Canberra, DFAT informed the committee that Australia was relying on its six years of chairmanship to see what the IOR-ARC could deliver, and DFAT intends to start small, with practical building blocks, to get some practical runs on the board, they said. We are interested in what you might see as the potential for Australia during the period of the IOR-ARC committee.

Major Gen. Hartley : Yes, certainly. It is a challenging question. There is no doubt at all that the Indian Ocean region as such is quite different from probably any other region. It tends to be much more a geographical than a political region. Even within its own region there are at least four major regional groupings which probably have more importance within themselves than they do to the IOR-ARC.

Having said that, without the IOR-ARC there is probably no structure in place which allows various interests to be brought together. The question really is: is the IOR-ARC the right organisation? Does it have the right responsibilities and roles? And, if not, is there something else that could be developed? Quite frankly, I would love to see a study which looked at that as objectively as possible, asked what we want out of the region as such and what we can do to bring about those common interests in a way that gives a practical and useful outcome, and then made a judgement about whether the IOR-ARC satisfies that or needs to be changed or replaced. I think that that sort of study is yet really to be done, which I think is a great pity.

Also, I think that the IOR-ARC probably fails, to a certain extent, because of its membership. It is exclusive of Pakistan, for instance—and it is difficult to imagine an Indian Ocean entity that does not include Pakistan; it is a major country in terms of population and what have you—and Saudi Arabia. I know there is some question about whether Saudi Arabia can be classified as an Indian Ocean country; well, it is true—both the Red Sea and the Persian Gulf are seen to be major elements of water that enter the Indian Ocean, if not part of the Indian Ocean itself. Without those two countries being present the IOR-ARC has a certain weakness. It could well be that—from small things great things grow—if there is a very definite and deliberate policy to follow that approach through, something may come out of it. But my sense is that it would be very useful to stand back and do an overall assessment of what it is we want out of the region and ask, 'What are we capable of producing that can actually meet those outcomes?' And I really do not see that happening.

CHAIR: This morning there was quite a bit of discussion about the fact that, while IOR-ARC does bring in all the countries around the rim, more or less, there is not a natural relationship between them in a political sense or in terms of trade and so on, and that perhaps Australia should concentrate on developing bilateral relationships. Would you like to comment on that?

Major Gen. Hartley : My sense, again, is that it probably needs to do both. But keep exploring the possibility of some central organisation. I cannot see another organisation that mirrors what is happening in the Indian Ocean. I do not think APEC does. The East Asia Summit, probably, when it first started, came a little bit close to it. ASEAN certainly does not. What we are talking about are probably five separate political entities—like the GCC, for instance, or the African Union—all of which have got internal attitudes and outlooks, and, to those countries, those institutions are more important and relevant than the IOR-ARC. So again it is a case of looking at what is of common interest, and it is very difficult to find areas that are of common interest to all countries in the region. We talk about security of the lines of communication—yes, that is important for most of the countries. Having said that, I suspect that countries in the African Union could not care less about ASEAN, and vice versa. It is a very difficult organisation, but I think there is a role for an IOR-ARC type organisation; whether it is quite the right organisation at this stage, I am not sure.

CHAIR: Of course, with ASEAN you have 11 countries all closely linked to each other, and I suppose that would be the case with the African Union. These countries are scattered around the edges of an ocean. It is hard to see them having a common purpose except perhaps in some areas such as communications and perhaps provision of aid and so on.

Major Gen. Hartley : There are climate change issues and things that physically relate to the Indian Ocean itself.

CHAIR: So it is a difficult concept progress.

Senator MARK BISHOP: Major General Hartley, you have in paragraph 1 of your submission the presence of France and Saudi Arabia as part of six Indian Ocean states. Are you just asserting in that comment that they are of interest, value or significance to Australia and using that as the hook to have them in the discussion, or are you putting something different to that proposition? Clearly, for example, France is not an Indian Ocean state. What is your real argument there?

Major Gen. Hartley : I think when we look at the Indian Ocean there are several categories probably. There is the pure Indian Ocean state, which has its border on the Indian Ocean, is within the Indian Ocean and so on. I think there is another category which includes states which rely very much upon the Indian Ocean but perhaps are not immediately bordering the Indian Ocean—that rely on the Indian Ocean as a thoroughfare for communication, access to international markets, purchase of raw materials or whatever.

Senator MARK BISHOP: I see. Shipping access.

Major Gen. Hartley : Yes. Then there is a third element which, interestingly enough, the IOR-ARC does probably make some provision for. Those are states outside the Indian Ocean but which have an interest in the Indian Ocean either because of their historical bases or, more importantly, access to natural resources, shipping lanes and so on. France, probably because of its colonial background, certainly had an interest in the Indian Ocean, which it still retains. So it is probably one of those countries. It is a bit like Japan—not immediately in the Indian Ocean but certainly has a great interest.

Senator MARK BISHOP: Through that set of west African states.

Major Gen. Hartley : France certainly had west Africa—although, when we are talking about the Indian Ocean ourselves we are really talking about the eastern states more than the western states.

Mr Luke : We are talking, in the case of France, about French territories—the overseas departments: Reunion, Mayotte, French Southern and Antarctic Lands—and the citizens of Mayotte and Reunion are French citizens, so there is a direct interest there. If we can liaise with France to do more in that context, to build on the relationship further—

Senator MARK BISHOP: But that is French colonial interest in the francophone countries that are located in strategic parts of Africa. You then draw some sort of link from that to access to the Indian Ocean for a range of purposes, and then you draw a link to the overall organisation. Is that your line of argument?

Mr Luke : We are saying that France has a presence there in the Indian Ocean on those islands. It is also an important partner for countries like Madagascar and Mauritius, and it is working with South Africa to help with piracy in the Mozambique channel, so it is an active partner. What we are not talking about is former French colonies on the African mainland—or Madagascar. We are talking about working with, say, the French naval forces based at la Reunion as appropriate. That sort of thing.

Senator MARK BISHOP: Okay. The second question goes to you, Mr McHugh. Could you explain to me how Western Australian security defence interests are so different from Australian security interests or Australian defence interests that you felt obliged to highlight the difference? I do not understand the difference.

Mr McHugh : Certainly. Having written the force posture review, I have sort of an insight into the Western Australian government's thinking. Essentially it is a complex issue. But, put simply, were there to be an attack on a BHP facility or infrastructure, for argument's sake, is that an attack on BHP or is it in fact an attack on the Australian economy? I think it can be looked at or considered in both ways. Given the status of BHP's or Rio Tinto's facilities, you have to question whether that would be an attack on the company or an attack on Australian interests. That is the type of—

Senator MARK BISHOP: That was not my question. My question was referring specifically to your submission. You drew a distinction between Western Australian security interests and Australian security interests. I want to understand what the difference is. The fact that BHP have valuable sites at Port Hedland is no more significant than the fact that they have valuable sites in Bass Strait, for example.

Mr McHugh : Absolutely.

Senator MARK BISHOP: An attack on either would be an attack on either our interests or our geography. So what is the difference between here and the rest of the joint?

Mr McHugh : There is no difference, essentially. It is supposed to provide the Indian Ocean perspective that the force posture review recognised. There is no difference. Western Australia is part of the broader picture, but being an Indian Ocean state—

Senator MARK BISHOP: But you do not suggest that because we are 3,000 miles from the east coast there is any less interest from the rest of the country in this part of the geography, do you?

Mr McHugh : Not at all. There is and was, though, a reduced presence in the north-west and that was reflected in the force posture review. I would not suggest even that there needed to be an increased presence. I would suggest that there is a need for increased Defence infrastructure that is not currently there.

Senator MARK BISHOP: Why is that?

Mr McHugh : Given the region's economic profile and also given developments that are occurring in that part of the Indian Ocean, it is my opinion that there is a possibility for great power rivalries to find a theatre in that part of the world.

Senator MARK BISHOP: Accepting there is a huge resources potential up there, accepting there is huge value either in the ground or being exploited, accepting that it is a valuable part of our coastline, accepting all of those things, the recitation of matters you referred to in your introductory remarks—we take all that as read. But in the final analysis, if there was ever going to be serious economic harm to sites or companies in this country via military means, is there any reason for suggesting that governments of either persuasion would not take it as a serious move, no matter where it occurred? I do not understand the significance in a military or a security sense of having valuable assets in the north-west, as you conclude, simply because of their location.

Major Gen. Hartley : Let me see if I can answer that question. I think one of the challenges that we are about to face, quite frankly, is that we are going to have a very significant review of our total defence strategy. I see post Afghanistan as very much like post Vietnam. In other words, we are going to have to come up with some very clear understanding of what our Defence Force is going to do, what capabilities we need to meet those requirements and so on.

I look back on the 'defence of Australia' concept which emerged in the late 1970s, I think. I think we are going to get something similar again. It may not last very long before we again get another major overseas deployment, but for some of the time at least we should look back at the late 1970s and see what is different today. Very clearly the development of the north-west is one of those issues. In the late 1970s the north-west was not a developed place. It was a long way from our hearts and minds, but we started to think about it.

I think what we are now going to be looking at is a strategy that says we need to have a defence capability that can react quickly, effectively, with the right capabilities, to any potential threat that emerges in the north-west. As we said before, the likelihood of a major conventional foreign military threat is remote. But there are other types of threats that could emerge. I think what we probably now need to do is to think about how we would meet that, what capabilities we would need and so on. I do not advocate for one minute the placement of a major military unit in that part of the world, for a few reasons. One, it is very expensive to develop that sort of capability. Two, the retention issue: if we put families in the north-west people will not stay there. We recently moved 1,000 soldiers out of Darwin for the same sort of reason. And, three, from any rational point of view, there is no foreseeable military conventional threat in that region.

What we need, though, are strategies and processes to be able to move people there quickly in an effective way, and to have them trained in the area so that they understand the area—the geography and climate and those sorts of things. I think that is probably what we are getting out of this.

Senator MARK BISHOP: I will ask one final question. You made reference to Chinese interests in the Indian Ocean. We are aware of what they are doing in their west in terms of bases in Burma and Pakistan and places like that. You advocate us engaging with China to facilitate greater dialogue and cooperation between China et cetera in the Indian Ocean region. We know, firstly, that there is a major emerging—if not emergent—problem in the South China Sea and aspirations and claims by the PRC to a whole range of island states and littoral geographic extensions in various parts of the ocean. Secondly, we know that they do not subscribe to the laws of the sea that have been established in terms of free transit of ships and the like, and they are in continuing disagreement at various levels with the United States, the United Kingdom and European interests who seek to use free transit through the South China Sea for the transport of goods. Why would we want to advocate the extension of those arguments and that approach into the Indian Ocean, which is currently characterised by almost totally pure shipment of goods and the like, all the way through to the Malacca straits and up that way. How is it in our interests to advocate their presence, in a heightened sense, knowing the attitudes they bring to areas arguably a lot closer to their mainland?

Major Gen. Hartley : That is a good question. The sense I have is that the last thing we want to do is to turn the Indian Ocean into another South China Sea. Therefore we want to be able, in every way possible, to reduce any potential process that would allow that to happen. Very clearly the other country that needs to be very much involved with this is India. We want to convince the Indians and the Chinese that it is in neither of their interests to take the sort of approach that may be existing in the South China Sea. Any policies that we can develop along those lines I think would be the right policies indeed.

The Chinese, of course, are very concerned about a place like the Straits of Malacca, which they see as a fairly narrow strait and one that certainly could easily be occupied by a power such as the United States or, possibly in the future, even India. So they have their own concerns. I think probably we are going through a very difficult time in the East Asia area. We have a number of countries involved—not just China; also Japan, the United States, Taiwan, Vietnam. All these countries have their own national interests and at this stage many of those national interests seem to be in conflict.

What we need above all else is somehow to put in place a situation where people can talk about these things, engage each other, and work out the benefit to both sides of not going into conflict. Quite frankly I do not imagine conflict is going to occur in that area—that people are going to shoot at each other—but it is going to be close to that, perhaps, from time to time. I think we also need to recognise that politically China is going through a change of leadership—one of these 10-year things that it goes through—and is very much concerned about its own nationalism. And where you have countries that are suffering economic problems, problems relating to population change or what have you, nationalism becomes a very important issue. And there is a heightened sense of trying to portray nationalism. If you are going to be nationalistic about owning the South China Sea, and that is going to help you at home politically, then that is an approach that people are going to take.

Senator MARK BISHOP: There may well be an argument for heightened Chinese interests in the South China Sea. I pass no comment as to whether there is or is not; I respect the arguments about the South China Sea. But your argument, as I understand it, is to somehow or other more heavily involve the PRC in the Indian Ocean area—an area, which, for millennia, apart from land routes across the top of China through to India, they have not expressed any interest in or ownership of. Why, on the basis of their current track record, would we want to facilitate that?

Major Gen. Hartley : I think the Chinese interest in the Indian Ocean is essentially the lines of communication, from the Middle East in particular where they pick up a large amount of their oil, and to be assured that those lines of communication are not going to be interfered with. This is probably their main interest in the Indian Ocean region at this stage. You are absolutely right, they have not been involved in the Indian Ocean region in any significant way for 1,000 years. Indeed, their deployment around the Gulf of Aden to the north Arabian Sea and their antipiracy operation is the largest overseas deployment of military force that they have had forever, certainly in the modern era. That amounted to three ships. So I think it is really to convince the Chinese that, yes, it is in everybody's interest to have secure lines of communication across the Indian Ocean, and by so doing to keep out the need for China to think that it needs to deploy military forces into the region.

Another issue which is of concern is that there is a great deal of emotion about a lot of this. The string of pearls, for instance, which has been captured by people instantly as representing a Chinese, if you like, policy in terms of providing armaments within the Indian Ocean region, trying to isolate India, trying to develop potential military bases and what have you, quite frankly is nonsense. Within the Indian Ocean there is not one single Chinese military base, nor is there much sign of their being one.

Senator MARK BISHOP: The other country you have advocated in the context of France and you explained they need access to the Persian Gulf for Saudi Arabia. What productive interests can Saudi Arabia bring to involvement in the Indian Ocean rim considering its status effectively as a client state of the United States in that part of the world?

Major Gen. Hartley : I think that last assessment could be a bit debatable. It made have been from time to time—

Senator MARK BISHOP: They buy a lot of hardware.

Major Gen. Hartley : Yes. I think Saudi Arabia in the Indian Ocean context has a number of issues. It is a very important Sunni religious state. It has a Wahhabist approach to the Sunni religion which it attempts to export across the area very effectively.

Senator MARK BISHOP: I am not sure we see either of those as positive.

Major Gen. Hartley : Okay. It also produces a great deal of oil and is concerned about the export of that oil. For that it needs to have secure lines of communication.

Senator MARK BISHOP: That is their domestic interest.

Major Gen. Hartley : It is their domestic interest but they also see themselves as an important regional state because of their wealth, their export of oil, their position, their Sunni influence. For all those reasons Saudi Arabia perceives itself to be an important state, and so do many of the countries in the region.

Senator MARK BISHOP: A lot of states in the region are actively engaged in warfare against funded Islamic expansion in parts of their states some of which it is suggested comes out of Saudi Arabia. Are you sure they are as fond of them as you might think?

Major Gen. Hartley : What you are saying is right, that has certainly been the case. They funded, for instance, the Afghan people who fought against the Russians. There is that element involved as well. But equally when you look at conflict in the region there are a number of different Islamic factions which are involved and the Saudis are strongly opposed to al-Qaeda, for instance, which has a significant influence in Yemen, increasingly so in Somalia and other parts of East Africa. So, yes, there is an element of being involved in other conflicts, but at the end of the day is it a very significant issue? I am not sure.

Senator MARK BISHOP: Really you argue twofold there, that their presence as a major wealthy state in the region and their need to have legitimate avenues of export for oil warrants our paying serious attention to them in the context of this Indian Ocean rim organisation. Is that right?

Major Gen. Hartley : Yes, I do. I believe that. And they are a member of the GCC, which is an important sub-element within the whole region as well.

Senator FAWCETT: Mr McHugh, your work looks at Northern Australia but also, I believe, the energy and resources portfolios. Do you also go to the issue of resilience, particularly in the energy sector? You would be aware there are national standards for what reserves countries are supposed to hold for petrols, oils, lubricants and those things, and there are certain definitions around that. There is some contention that various nations are not as robust as they would like to think, and given the 'just in time' nature of much of our economy that leads to the potential for single-point failures to cause quite significant disruption for a whole economy. In your work have you identified where countries around the Indian Ocean rim sit in terms of that resilience, and are there other potential triggers there for instability?

Mr McHugh : To be totally honest, no. It is not something that we have had an opportunity to focus on as yet. Within the literature that I have been aware of there is talk particularly of an overreliance on refining countries such as Singapore and India and, within the Australian context, with refinery closures et cetera, of Australia becoming less resilient. But in terms of other states around the rim, no.

Senator FAWCETT: What work have you done specifically in the area of the food task, looking at global demands in years to come and the potential of developing Northern Australia?

Major Gen. Hartley : It is a very interesting one. We were approached by the Australia Arab Chamber of Commerce and Industry about 18 months ago with a proposition that the UAE in particular was prepared to invest in our agricultural and pastoral regions in Western Australia. The investment would not be the purchase of land; rather, it would be developing infrastructure, providing irrigation and so on. The quid pro quo was that they would receive an assured outcome in terms of food being distributed to them. I have spoken to everybody in the state about this and it is a very difficult issue to get going. In fact, I am not sure that state-to-state approaches are going to work. It would almost take the UAE talking to private enterprise within Western Australia for that to happen.

As an example, four farmers outside of Wyndham recently bought farms. They wanted to be assured of a product they could sell to somebody for however long ahead they wanted to look—10 years, maybe. This seemed to me to be ideal. All we needed to do was to get those four farmers talking to somebody in the UAE government and between them they could arrange something. The theory was that, as a result of that, the UAE would develop a container port at Wyndham. That would be the quid pro quo which would allow food to be properly exported and so on. I have to say that approach has not gone anywhere. There are just too many entities with too many ideas, which just makes it very difficult. They range from the environment to land ownership to investment. Trying to get those elements together has proven to be a considerable challenge.

We are undertaking another project, which for commercial-in-confidence reasons I do not want to say too much about, quite frankly. But it is to develop a website which identifies the export of food, again to the UAE—in fact, it is to the GCC in this case. In other words, the project looks at where the GCC gets its food from and what comes out of Australia and then makes judgements about the future. For instance, the GCC imports most of its carrots, would you believe it, from China. The issue is whether China is going to be an assured carrot exporter five years, 10 years from now, and to make a judgement about that—and, if that is not going to be the case, then perhaps they should be advised to start looking at markets elsewhere. At the same time, ipso facto, Australia could produce more carrots if that were an outcome that was desired. I am using those as examples; that is not necessarily the case. We are working through that sort of process.

My sense here—and I am talking purely about the Middle East at this stage, but I can also say it for other countries—is that the GCC of the Middle East, which includes Saudi Arabia, are going to face a very significant food security problem in about a generation, less than 25 years. That is, firstly, largely because their populations are going to expand rapidly—there is going to be at least a 30 per cent increase in population—and, secondly, because their own internal ability to grow food is declining rapidly due to a lack of water as much as anything else. For those two reasons, there is going to be a requirement to send those countries increased amounts of food. Now, how can we capitalise on that? That is the sort of challenge that we face, and we are looking at those sorts of issues.

I have one final point. I would also like to make you aware that we are doing a study looking at the Indian Ocean littoral, about 40 countries, and making a judgement about their ability to sustain themselves in the case of a food and water security threat over the next 20 years. We are looking at where those countries will be in 20 years time from now in terms of their food and water requirements: if they have a deficiency, what impact will that deficiency have on the country itself, on the region and on Australia; what are governments doing about it, not only their own but also foreign governments, NGOs and so on; and what role, if any, can we as a nation play in it? The first of those studies will be released within about a month, which is on southern Africa. We looked at just the five countries relating to southern Africa. The next one that is being done is on the Middle East. We will then do South Asia and so on. What I hope to get out of that is that we in Australia recognise that, if there is a food requirement for those people, what can we as a nation do about it? I might add that it involves a lot of people, including AusAID, which we mentioned a good deal this morning; the CSIRO; DFAT itself; a group called the Consultative Group on International Agricultural Research, which is based in Canberra; the NGOs; and Outcomes Australia, which you might have heard about. For this first study, I also spoke to the representatives of the five southern African countries, including the South African high commissioner, who really liked my report—this is all being recorded, isn't it; I should watch what I say—apart from one thing which I will not tell you about! So this is an in-depth study that I cannot see being done anywhere else at this stage. What I am hoping to do in about 18 months time is present these five studies and say, 'Look; this is what we can do in the region.'

Senator FAWCETT: Okay. In your submission, you recommend that we look at developing a regional maritime security forum, and most of the discussion this morning has been around using the existing regional forum for that. Given that that has been largely unsuccessful to date—although it has got a breath of fresh air with Australia taking the chair—would you contend that it is best we use that or would you say that, given that we have the EU, Australia, China and India somewhat independently doing antipiracy operations, we should actually be targeting those nations bilaterally, initially, and then try to use that as the basis of a working forum that has a specific purpose that enables us to broaden the scope?

Major Gen. Hartley : I think the answer is yes. It is certainly an option we would consider, absolutely—yes.

Senator FAWCETT: Thanks.

Senator STEPHENS: Just to follow up, the study that you just mentioned you are undertaking—is that the study that you refer to in your covering letter, the FDI landmark study investigating major power intentions in the Indian Ocean region?

Major Gen. Hartley : No, that is another set of studies.

Senator STEPHENS: Okay. When is that one due to come out?

Major Gen. Hartley : We are doing it by regional entities. As I said, we have finished southern Africa, which involves five countries. We will probably publish that next month. We have published various sections already as individual chapters. The next area we will do will be the Middle East. We will then do South Asia, which includes India, Pakistan, Bangladesh, Sri Lanka and Nepal. I am not sure about the order, but we will then probably do the rest of South-East Asia that has an Indian Ocean connection, the rest of east Africa and, finally, the five territories in the Indian Ocean region itself. I suspect that we will produce those one at a time and it will probably take us about 18 months to do the lot. There is a lot of involvement with a lot of people here. For instance, we found out that the number of NGOs that we need to go and talk to.

One of the issue that has come out of this very clearly is that there is not all that much coordination between these various entities, yet all of them have an impact or an influence on what we are doing. We find that when we have a workshop, for instance, and we bring together groups of people from all these entities, they look at one another and say, 'So that's the face of someone whose work I have been reading. I didn't realise that he did that job.' That is very interesting particularly if they live about three kilometres apart in many cases.

Senator KROGER: How do you ensure that your reports do not become another item to put away on a bulging shelf and therefore it is for a future generation to say, 'This should have been considered at the time'?

Major Gen. Hartley : It is a very, very good issue. I do not consider that our research is complete until it gets into the hands of the people who have the responsibility and authority to do something about it.

Senator KROGER: How do you do that?

Major Gen. Hartley : I knock on lots of doors. I talk to lots of people. I get lots of blank looks. You just have to keep at it basically. We look very carefully at who we send our information to. It is on our website—anybody can read it. That is the first part.

Equally, we have something called an associate list. Before I leave here, those of you who have not given me one of your business cards, please do so, because I need to make sure that you are on our list. I tell you equally that you have a delete button on your computer, so do not be too concerned. We have about 2,000-plus people that we send information directly to and those people are looked at carefully. They are people who have influence and authority. They are very much involved in policy work sometimes, but equally I think it is a very broad selection. We send our information, for instance, to universities which study or research these areas. We also send it to the media to people who are journalists who have a particular responsibility for it. Basically, we have someone who does this almost full time, who tries to identify the key people who need to get our material.

Having put out a major study, we then follow that major study with frequent reports that further analyse that major study. I have to say that that major study is probably almost out of date the day it is issued, because we live in such a rapidly changing world and so many issues are occurring. So we keep having to, if you like, update that major study with weekly reports or other studies that relate to it. It is a challenge and I try very hard. I am really fed up reading research material that does not go anywhere. We have a lot of researchers in this country who are just like that. So we try hard. We are not perfect at all, but at least we are trying.

Senator STEPHENS: In terms of the countries that you make recommendations about—actually Australia engaging with countries—I just want to look at the things you have said in your submission about Iran. I guess the real challenges that we have in engaging with Iran in ongoing dialogue are things like the UN sanctions and the fraught relationship that we have. Do you have some advice for the committee about ways in which we could engage with Iran on issues such as maritime security and fisheries management, which are the things that you raise?

Mr Luke : Thank you for that question. It is a good question and it is, as you say, 'fraught'. It is a relationship which is fraught with all sorts of problems, not least of which is that, and obviously Iran's relations vis-a-vis the United States. Given that and given the period in which IOR-ARC finds itself, it could well be that Iran has been quite active in a number of the research aspects of it—technical research, fisheries research, what have you—that could be the window, the vehicle, with which to do something there. It would be extremely difficult and it would be overlaid by the tensions of the nuclear program, but that would be potentially the window there.

Senator STEPHENS: So you are saying that Iran is actually been participating in some of the more research focused projects of IOR-ARC?

Mr Luke : Yes—and Dennis who was here earlier this morning would be rather more full bottle on the actual nuts and bolts of it than I am. They have participated in things like scientific research and fisheries management. They have a particular interest in those sorts of things. The IOR-ARC committees which deal with them tend to feature Iranian participation.

Senator STEPHENS: This morning you would have heard Senator Fawcett raise the issues of human rights, the MDGs and those kinds of things. Where do you see those issues getting some traction?

Major Gen. Hartley : Are you talking specifically about Iran or across the region?

Senator STEPHENS: No, generally I guess.

Major Gen. Hartley : It is a challenge. There is no doubt that it is a real challenge. You have to keep engaging countries. One of the concerns I have with the Iran issue is we are going to cut Iran off completely and will not be able to talk to Iran. I think you have got to appeal to the humanitarian instincts of people. This is where I think the food and water issue will be particularly relevant. If we can bring advantages to countries that improve the capacity of people to exist in those countries it will also mean that those countries are politically more stable as a result of that. One of the concerns I have is if we do not do this it will lead to an increasingly unstable area, maybe not interstate conflict but certainly conflict within states—that is already happening in a number of areas. We will see large displacements of population. We worry about people that come here illegally by boat. That number could be miniscule compared to what we might see in the future. It will not be the poor people coming here. It will be the middle class of India who will be fed up with the 400 million peasants living in cities on their doorstep. It is that sort of future we face. How we deal with populations who are not being treated well is a very difficult issue that has to be thought through very carefully.

We have three points for Iran. It was very difficult to find what to do with Iran. I really would like to see a group of people seriously close the door and think very seriously about how do we engage Iran, how do we improve it to the state where it does allow foreign investigation of its nuclear facilities and where it is prepared to look after its own people who are seriously suffering as a result of the imposition of sanctions. In other words, where are we getting people who are thinking that way and who are able to come up with some sort of process? How do we engage Iran? Do we have to say—and I do not know this—at the end of the day it is impossible to engage Iran? Maybe we need to have regime change. Maybe we need to think about how we do that. I do not know those issues. What I am saying is I do not think there is nearly enough considered thought being given to this process. How we do that in the environment we live in and in the busy lifestyles we have I am not sure. But, if we do not do something like that then, quite frankly, I cannot see how we are going to sort this problem out.

CHAIR: At the roundtable Canberra hearings, when we asked what advice they would give the government to ensure that its chairing of the IOR-ARC produced positive results, members of the roundtable highlighted the importance of being modest in ambition. What advice would you give the Australian government in what should be its objectives during its period of chairmanship?

Major Gen. Hartley : It probably goes right back to the beginning. I think what we need to do is identify what a regional grouping in the Indian Ocean region can do which would be a benefit to ourselves and to the region and what outcomes would we want from it. How do we actually achieve that and does IOR-ARC provide the basis on which we can achieve that? In other words, what is the goal we are looking for? How we actually do that, I suspect, is a process. We probably cannot do it all at once. We probably have to take certain things first because they are more modest or we have to take certain steps first because they will lead to the second step and so on. What I would really like to see is somebody who could ask clearly: what are the outcomes an Indian Ocean regional grouping involving all the Indian Ocean regional countries needs to achieve and how do we go about doing it? It could well be that IOR-ARC may be the answer to it. I suspect not. Or it may be an amended and extended IOR-ARC. I have not quite answered your question but that would be the approach I would take.

CHAIR: No, that is a very useful answer. You are saying the engagement with the Indian Ocean rim countries is important but it may not be through this mechanism. Thank you very much for being here. We have found your evidence very useful.