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Australia - Committed to stronger ties with Malaysia and the Region: address to the Malaysia-Australia Business Council

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Speech by the

Minister for Foreign Affairs The Hon Alexander Downer MP

to the

Malaysia-Australia Business Council

Australia - Committed to Stronger Ties with Malaysia and the Region

Kuala Lumpur, 23 July 1998

(Check Against Delivery)


Australia - Committed to Stronger Ties with Malaysia and the Region

Address by the Hon Alexander Downer, MP, Minister for Foreign Affairs, to the Malaysia-Australia Business Council, Kuala Lumpur, 23 July 1998.


It is now a year since I was last here in Kuala Lumpur. And what a year of economic and political upheaval in the region it has been.

It is therefore all the more pleasing to see forward-looking Australian and Malaysian business people here tonight in numbers. Australia and Malaysia share a very sound commercial relationship which is to a substantial extent, being maintained through the crisis.

I therefore congratulate the Malaysia-Australia Business Council on its contribution to maintaining the strength of our trading ties.

I want to start today by assuring this audience that one thing which has stood firm throughout this tumultuous time has been Australia’s commitment to its continuing engagement with the region.

It is said that the real test of a relationship, the real test of commitment, comes not when times are good, but when they are at their most difficult.

The Australian Government has certainly demonstrated its commitment by standing shoulder to shoulder with our friends in the region over the last twelve months.

And Australia’s positive and beneficial relationship with Malaysia, I am very pleased to say, has also stood firm during these difficult times.

I welcome the opportunity which my visit has afforded me over the past twenty four hours to meet with the Prime Minister, my counterpart - the Minister for Foreign Affairs, the Deputy Prime Minister and the Minister for Education, to discuss developments not only between our two nations but also what is happening in the region.

Malaysia is very much in the minds of all Australians at the moment, with the Commonwealth Games almost upon us.

Australians take the Commonwealth Games very seriously and you can expect that throughout the Games, many of us will be glued to our televisions sets and radios following the progress of our athletes - much as many Australians and Malaysians have been following the World Cup in France in recent weeks.

The Games provide a great opportunity to showcase Malaysia to a whole new audience in Australia. The message we are getting in Australia is that Malaysia is very well prepared for the Games, and I wish you every success with them.


And Malaysia will also be the focus of our attention in November when hosting the APEC Leaders’ meeting. In this most difficult of years Australia and the world will be eagerly following how APEC Leaders respond to the region’s economic difficulties.

And I would like to turn now to how Australia sees the current situation for regional economies and how Australia has worked with regional partners to meet the challenges together. .

The Regional Outlook: Meeting the Challenges Together

All those in this room know only too well that the region is facing its most serious economic challenge in decades.

But I think we need not swing from unbounded optimism about the region’s prospects - which was generally the view only a year ago - to what seems to be equally excessive gloom about its economic future.

In fact, when I read the papers at the moment I am reminded of something one of Woody Allen’s more morose characters said: "More than any other time in history, mankind faces a crossroads. One path leads to despair and utter hopelessness. The other to total extinction. Let lis pray we have the wisdom to choose correctly."

The answer to this conundrum is, of course, that this kind of pessimism is always the wrong path.

In our case, we must not lose sight of the fact that the economic strengths which made East Asia highly attractive to global investors over the past two decades have not disappeared.

High savings rates continue and an increasingly skilled and educated workforce will be able to capitalise on the upswing which will inevitably come.

It is clear, however, that all regional economies need to stay on the path of economic reform.

The faster such reform can be implemented the more likely it will be that we will see an early return to growth in the region.

It is now recognised that financial sectors in many regional economies failed to keep up with the cracking pace set by capital flows at the height of the East Asian "miracle".

Accordingly, governments in the worst affected economies need to take bold and transparent decisions to recapitalise and restructure their ailing financial sectors, currently burdened by high levels of non-performing loans.

We are seeing, however, some encouraging signs suggesting that the savage currency fluctuations we have witnessed over the past twelve months may have passed for the most affected economies - with the exception of Indonesia. In particular, Thailand and Korea are making good progress on their economic reform programs. This has been reflected in their

currencies appreciating this year and in growing investor confidence.

Malaysia, too, has had to face considerable challenges as a result of the unprecedented economic shocks that have hit the region.

But there can be no question about Malaysia’s credentials as a leading economy.


The Malaysian Government has guided the country along a strategic path of development for the past decade. Its track record of growth, its status as a regional exporter and the strategic diversification of its export capacity have all contributed to an economy which has to date weathered the current storms comparatively well.

Australia, I am pleased to say, has been able to weather the regional economic storm well.

We have put in place an economic environment which is truly internationally competitive and which makes it possible for Australian business to be more competitive.

The Australian Government has turned around a huge public spending deficit in two years, has put in place a low inflation and low interest rate regime and has begun a program of massive Government debt reduction. We will be following up with tax reform and further

microeconomic reform to ensure Australian business stays competitive.

But the regional downturn is having an impact on our economy. This year Australian industries have seen exports to the most affected markets, such as Indonesia, Korea and Thailand, fall significantly from levels achieved at the same time last year. And other markets in the region, including Malaysia, have also been affected.

But Australian exporters have adapted to difficult times and have continued to seek out opportunities both in the region and beyond.

In doing so they have been helped by the fact that, as has been the case for Malaysia, a lower currency has made them more competitive against US and EU products.

And our total exports have continued to grow. For the eleven months to May 1998, merchandise exports grew at 10 per cent compared to the same period a year earlier.

While export growth to East Asia has slowed, it is important to remember that East Asia will still be a major buyer of Australian goods.

Regardless of the shorter-term growth prospects, the East Asian market is 18 times larger than the Australian market, and imports around US$1.4 trillion worth of merchandise each year.

I said at the outset today that Australia’s engagement with Asia has stood firm throughout the region’s economic difficulties. That is not simply a matter of continuing to trade with the region.

Australia has certainly worked closely with its neighbours to provide assistance where needed. Australia was one of the first to commit itself to a practical contribution to the three IMF rescue packages for Thailand, Korea and Indonesia. Indeed, apart from Japan we were the only country to contribute to all three.

We have also lent considerable moral support to our neighbours through the crisis.

Australia has participated actively in bilateral and multilateral forums which have met to look at responses to the crisis and to map out early strategies for recovery.

As well, we have made practical contributions at the people-to-people level. For example, in the field of education, Australian universities have put in place a range of support measures to assist international, including Malaysian, students in cases of hardship resulting from the currency crisis.


Amongst other responses aimed at allowing students to continue their courses wherever possible, they have varied fee payment schedules, have granted leave of absence from study for varying periods until things improve and they have made available extended and flexible student loan arrangements.

A Continuing Commitment to the Region

I’d like to take the opportunity tonight to reassure tms audience that this kind of commitment to closely engaging with the region is certainly not going to be affected by the apparent success of isolationist views in the recent election in the state of Queensland.

The views of the One Nation Party, which managed to secure a handful of seats in that election, are not the views of the majority of Australians.

And let me state once again - they are certainly not Government policy nor will they ever become Government policy.

There is no doubt some Australians are uncomfortable with the pace of change in our society and, in particular, the economic impact of increasing globalisation.

Many of these have taken refuge in simplistic, isolationist and unworkable solutions. And I do not think that this phenomenon is unique to Australia.

I am confident, however, that, in time, these people will come to appreciate that raising barriers to trade, investment and migration will cost Australians in terms of trade and investment and, ultimately, in jobs - the very thing they are hoping to preserve.

Australia is, and will remain, a culturally diverse and tolerant society that is committed to closer engagement with Asia. In fact, the commitment to racial equality is a fundamental tenet of Australian values - and nothing is going to alter that.

Australia has the most generous, open and non-discriminatory immigration program in the world, having welcomed 5.6 million migrants since 1945.

In 1996-97, over 85,000 settlers arrived in Australia - six of the top ten source countries for these migrants were, in fact, Asian countries.

So let me put it on the record here today that there is no question that the emergence of isolationist sentiment in some parts of the Australian community will have any impact on our commitment to engagement with the region.

It will certainly not have any impact on our very positive relationship with Malaysia.

Malaysia-Australia Relations: Solid Foundations for Future Growth

And I am pleased to say that relations between Malaysia and Australia are in excellent shape.

When the Government came to power in 1996 we were determined to strengthen what is a very important relationship for Australia in the region.

Malaysia has had an increasingly prominent role in regional affairs and economically has become more and more important for Australia.


Our bilateral trade has increased nearly threefold in the 90s, reaching $A 4.5 billion, and this makes Malaysia our 12th largest trading partner.

Partly as a result of our focus on Malaysia, we now have government and private sector links as comprehensive as any we maintain in the region. What is particularly pleasing is that Australia and Malaysia have actively pursued this relationship over the last year despite the region’s economic upheavals. .

Last year my counterpart Minister Abdullah Badawi and I outlined a number of initiatives to help take our relations onto a new plane.

We are making good progress with all of these. In sports administration we are aiming to share experience in relation to the forthcoming Commonwealth and Olympic Games.

We are looking to cooperate closely on information technology: my colleague Mr Fischer led an IT delegation here last October and I know we are looking at ways of coordinating approaches to electronic commerce.

In addition many Australian companies are positioning themselves to capture opportunities flowing from the Multimedia Super Corridor (MSC) initiative: a number have applied for MSC status and are confident of achieving success in this market.

We are also making solid progress towards an agreement to amend our existing Double Taxation Agreement.

There have been other important steps forward on the commercial front. At last October’s Joint Trade Committee a new Australia-Malaysia Trade Agreement - updating and reinvigorating a 1958 agreement - was signed and this came into effect on 1 January this year.

This agreement has established a framework which should allow new impetus to develop in our commercial and trade links. .

A very important step forward has also been taken by our building and construction industries. 1200 delegates from 30 member companies of the Housing Industry Association of Australia recently held their annual convention in Kuala Lumpur in conjunction with the Housing Development Authority of Malaysia.

Business will undoubtedly develop from these meetings as the Australian delegation eagerly discussed with Malaysian firms the prospects for smart partnerships and the transfer of skills and technology.

As a result of the convention, the Malaysian Authority has nominated the Australian group to become a full member of the ASEAN Housing Association.

I would also note that several Australian companies have already entered into agreements with Malaysia in recent months.

Let me mention a few which will lead to the development of long term business:

. a Memorandum of Agreement signed between a Western Australian firm, The Smart Company, and Telekom Malaysia Berhad and Tenaga Nasional Berhad to install home automation systems in Malaysian residences,


. a Joint Project Agreement between Australian Business Health and Kolej Damansara Utama to deliver training courses, seminars and workshops to healthcare professionals in Malaysia; and

. a Memorandum of Agreement between Edith Cowan University and Prism Interactive - both from WA - with Gopeng Technologies to introduce interactive multimedia training courses through private education colleges in Malaysia. „ ■ ■

But perhaps one of the best measures of how well Australia and Malaysia are engaging with each other at present is the enormous amount of two-way exchange and contact between Ministers, officials and business people. .. .

For example 10 Australian Government Ministers have visited Malaysia in the last 12 months!

In this regard, I would note that our Prime Minister, Mr Howard, is certainly looking forward to visiting Malaysia for the APEC Leaders Meeting in November when he will be able to meet Dr Mahathir and other key figures.

As I said earlier, Malaysia, this year, is chairing APEC at a crucial time.

The Asian financial crisis has challenged APEC’s credibility as a forum able to respond to its members most pressing economic needs.

APEC must meet this challenge if it is to continue to meet its objectives of sustaining growth and development and promoting open trade and economic cooperation within the region.

APEC Finance Ministers have already taken some important steps towards strengthening regional financial institutions.

APEC is also well placed to complement the IMF economic recovery program by contributing to capacity building in the field of economic governance. .

Australia has also made a contribution in this field. We have secured APEC support for carrying out a survey of existing programs with a view to identifying unmet needs which could be addressed through enhanced regional co-operation.

However, Asian economic recovery will also depend on the continued efforts of APEC members towards regional trade and investment liberalization, particularly in finalizing the package of proposals for sectoral liberalization agreed by APEC Leaders in Vancouver last November.

In this regard, let me say that Australia has greatly welcomed the leadership shown by Malaysia this year, including at the recent Trade Ministers Meeting, in taking work on sectoral liberalisation forward.

We look forward to the contribution Malaysia will make as we move towards the all-important Leaders meeting in November.

Before closing tonight, I want also to flag several other significant forthcoming events which will continue to bring our two countries closer together.


First, the next meeting of the Malaysia-Australia Dialogue, which has proven an important vehicle for bringing together Australians and Malaysians in government, in business, in education and in the media to enhance understanding of each others’ way of doing business.

And a further meeting of the Joint Business Councils will provide scope for further understanding of the opportunities to do business in each other’s country.

Also, the Malaysia-Australia Foundation is continuing to make a very positive contribution to greater understanding on both sides of our two cultures.

Their programs do a great deal to encourage educational, cultural and people-to-people links.

I am pleased to say I had lunch with them today and was delighted to be able to bestow the Order of Australia honorary award on Dato’ Lee Yee Cheong, the Foundation’s Executive Chairman, in recognition of his excellent contribution to the bilateral relationship.

People-to-people links are the foundation upon which dealings between two countries are built and it is therefore very pleasing to note that a second Alumni Conference is to be held in Adelaide in October.

Over 500 delegates from Malaysia and other regional countries are expected to attend this conference which will give graduates of Australian universities a chance to renew their links with our country.

And I think the last word on the bright future of Malaysian-Australian relations must go to the education sector.

Last Saturday, the 18th of July, Australia’s Monash University officially celebrated the first enrolments of its branch campus here in Kuala Lumpur, becoming the first international education institution to do so.

The educational link between our countries has certainly played a vital role in bringing us together over four decades and this development bodes well for even closer ties in the future.


And on that very positive note I will leave you with the assurance that I hold great optimism for the future of the capacity of Australia and Malaysia to work together through trade and investment, through political and educational exchanges, and through extensive dialogue across a range of forums to assist each other in what are, undeniably, difficult times.

Australia stands committed to continuing engagement with the region.

We stand committed to strengthening our ties with Malaysia.

With you and with other regional partners we will continue to endeavour to look towards the positives. There are opportunities to continue to do business. I know Australian businesspeople here at today’s excellent business forum organised by the Malaysia-Australia Business Council will vouch for that.

Let me therefore wish you well in identifying where business can be conducted to mutual advantage. That is the best way to address the economic difficulties we are all encountering.