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Address to the Australia and the Arab countries: partnership for future business briefing launch, Sydney



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Senator the Hon Nick Sherry Minister for Small Business, Minister Assisting the Minister for Tourism, Senator for Tasmania

Senator the Hon Nick Sherry

29 Oct 2010

ADDRESS TO THE AUSTRALIA AND THE ARAB COUNTRIES: PARTNERSHIP FOR FUTURE BUSINESS BRIEFING LAUNCH

Sydney, NSW

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Good morning.

I’m delighted to be joining you today - both as the Minister for Small Business and as a supporter of harnessing the potential for Australia of greater trade investment and economic links with the Arab world.

I have spoken with interest on Australia’s relationship with the Arab countries in my previous role as Assistant Treasurer.

As you may be aware, I was fortunate to be able to visit Arab League countries in April as Assistant Treasurer, accompanied by an Australian trade delegation to Qatar, Bahrain and the United Arab Emirates.

The trade delegation had a particular focus on Islamic finance and I will say more on that later.

Further, I met with a range of financial institutions, in particular sovereign wealth funds, concerning Australia’s consultations to develop a codified tax regime for sovereign immunity for investment.

I want to especially acknowledge Ray Najar, the chairman of the Australian-Arab Chamber of Commerce with whom I am sharing the podium today.

The chamber is a strong, effective advocate and facilitator of Australia-Arab League interaction.

Australia’s long-standing relationship with the Arab world is diverse and positive, both on economic terms and on a person-to-person basis.

There are more than 300,000 Australians of Arab descent, many of them here in Sydney and, in fact, Arabic is the second most spoken language after English in New South Wales1.

In addition to our community of Australians of Arab descent, tens of thousands of Australians live in the Arab countries.

Mutual interests

These links mean we share a number of common interests, including working towards peace and stability in the Middle East.

Australia’s commitment in this regard can be seen in our long-standing deployments with the Multinational Force, with the Observers in the Sinai and with the United Nations Truce Supervision Organisation.

These commitments are complemented through our support for economic development and the provision of humanitarian aid in the region, including in the Palestinian territories.

Since late 2007, Australia has contributed more than $125 million to help prepare Palestinian institutions for statehood.

Trade Relations

As a keen student of history, I am aware of the seminal role the Arab countries have played in the expansion of world trade over the centuries.

East has been going West through the Arab world for a long, long time now and in the post-war era, this trade has spread in all directions.

Two-way merchandise trade between Australia and Arab League countries was worth $10.5 billion in 2009-10.

Of this, around $8.6 billion was with the Gulf Cooperation Council or GCC.

The Council is Australia’s ninth largest merchandise export market2 and we are currently negotiating a Free Trade Agreement to secure the future of this important association.

The GCC is particularly significant to our automotive sector - in 2009, Australia exported $1.3 billion worth of passenger motor vehicles to the GCC. That’s 79 per cent of Australian-made passenger vehicle exports and about a third of all passenger vehicle production3.

However, I did say our relationship was diverse and in recent years the trade relationship has expanded to non-manufacturing sectors, such as education and financial services.

In 2009, almost 13,000 Saudi Arabians formed the largest group of the growing number of Arab League students in our schools and universities.

The relationship is also growing in agriculture, mineral commodities, engineering, construction and investment.

The Australian Government recognises we need to build on this relationship and we continue to work towards this goal with organisations like the Australia-Arab Chamber of Commerce and Industry.

I’d also like to acknowledge the efforts of local Australian business organisations in the GCC who are helping our relationship grow.

Small business

The Australian Government is committed to a strong and vibrant small business sector, recognising that it is an integral part of the structure that makes the Australian economy so strong.

Small businesses provide opportunity and they create jobs, whether in Australia or elsewhere in the world. As Small Business Minister, I am proud of the package of assistance my Government provides for the two-million small businesses in this country.

But it is also important to emphasise the big picture and that is the macro-economy.

The Government remains committed to responsible economic management that will underpin confidence, create jobs, and provide certainty to businesses.

The global recession had devastating consequences for the global economy and many of the world's major economies are still in crisis.

Australia's performance through this period has been remarkable - we did not have a recession.

Supported by the Government’s stimulus measures, hundreds of thousands of Australian business owners and managers put in the hard yards to keep doors open, people in jobs and the Australian economy ticking over.

Australia’s economy has emerged from the global downturn in a stronger position than any of the major advanced economies and as a Government we remain focused on remaining at the head of the pack. Small businesses will be crucial to achieve this objective. Our policy priorities include:

• Continuing the business recovery from the global recession • Maintaining low inflation and encouraging lenders to provide access to credit at justifiable interest rates • Reducing business regulations • Simplifying taxation reporting and compliance requirements for

small business • Maintaining a flexible and fair labour market • Providing fair competition for business, and between large and small

businesses • Ensuring government agencies continue to pay small business suppliers on time.

Specifically, we have a range of initiatives that can assist small businesses.

Our tax plan for the future provides tax relief and less red tape for small businesses with:

• Instant tax write-offs for assets of up to $5,000 • Simpler depreciation rules • An early cut to company tax

Direct assistance includes:

• Funding for a number of Business Enterprise Centres across Australia to provide small business owners with enhanced access to information and advice on issues important to sustaining and/or growing small business.

• Our popular Small Business Support line which helps small business owners access information and referral services and has taken 20,000 calls in just over 12 months • Our Small Business Online program helping small business go online

and engage in the digital economy.

The Government’s Commercialisation Australia initiative encourages Australian researchers, entrepreneurs and innovative firms to convert their good ideas to marketable commodities with tailored assistance from experts and matched financial support.

The Apprenticeship Kickstart initiative assists eligible small and medium enterprises skill their staff through offering apprenticeships.

Our Enterprise Connect program delivers practical support to small and medium Australian businesses to boost their competitiveness, innovativeness and productivity.

Working overseas

Several initiatives are specifically designed to assist small business gain work overseas.

For example, many small and medium-sized enterprises face difficulties procuring finance, particularly for export activities.

The Export Finance and Insurance Corporation (EFIC), provides finance and insurance solutions to help Australian exporters overcome these financial barriers.

It assists small and medium exporters with financing and other solutions to help mitigate financial and payment risk related to exports of goods and services.

EFIC has helped a number of Australian exporters gain entry to Arab League markets.

Australian financial services

Of course, the overall strength of the Australian economy makes Australia an attractive investment destination.

Australia's real GDP grew by a solid 1.2 per cent in the June quarter 2010 to be 3.3 per cent higher through the year.

The performance of Australia’s financial services industry during the global financial crisis has also confirmed it as one of the world’s safest, most sophisticated, competitive and innovative.

The sector is the largest contributor to the Australian economy, generating around 10.8 per cent of GDP in 2008-09 and growing at an average of 4.3 per cent a year over the past decade.

The World Economic Forum ranks Australia second among the world’s financial centres as a place to do business, behind only the United Kingdom.

Against this background, the Australian Government commissioned a report into positioning Australia as a leading financial services centre.

We released the report, Australia as a Financial Centre - Building on our Strengths, in January this year.

The report, known as the Johnson report, identifies ways of expanding our exports and imports of financial services, building from a very high base.

Islamic finance

The Government supported eighteen of the report’s nineteen recommendations.

The Johnson report includes two specific recommendations relating to Islamic finance:

• The removal of regulatory barriers to the development of Islamic finance products for Australia • An inquiry into whether Australian tax law should be amended to ensure Islamic financial products have parity of treatment with

conventional products.

We are acting on both of these.

The Board of Taxation has been asked to undertake a comprehensive review of Australia's tax laws in order to ensure that Islamic finance products have parity with conventional products, having regards to their economic substance.

The board is due to report to the Government in June 2011.

It released a discussion paper on Islamic finance earlier this month, on 13 October.

We have also established an interdepartmental process to examine whether there are any non-tax regulatory barriers to the development of Islamic finance in Australia.

There are a number of sound opportunities to be explored in the Islamic finance space4:

• We are ideally located within and have robust trade links with the Asia-Pacific region putting us adjacent to 62 per cent of the world’s Muslim population

• We have an expanding alternative investments industry with a large infrastructure funds industry and the world’s second largest real estate investment trust sector

• We have a well-recognised reputation for our funds management expertise and experience.

The Australian Government is interested in exploring specific opportunities for Islamic finance including attracting Islamic investment in Australian assets and businesses and expanding Australian banks’ offerings of Shariah-compliant products.

Conclusion

I want to conclude by reiterating that Australia’s economic and social association with Arab League countries is strong and growing.

Its diversity and strength is set to grow and today’s business briefing is another point on a continuum that explores these opportunities.

While a business briefing may be held in a formal environment, it opens doors to the informal interactions that build opportunity.

So my best wishes to you all.

1 2006 ABS Census 2 Department of Foreign Affairs and Trade 3

Department of Foreign Affairs and Trade 4 Minister Sherry speech: The Future of Islamic Finance in Australia, 8 June 2010