OLIVER, Ms Alex, Research Fellow, Lowy Institute for International Policy

SHEARER, Mr Andrew, Director of Studies; Senior Research Fellow, Lowy Institute for International Policy

[09:39]

CHAIR: On behalf of the committee, I welcome the Lowy Institute.

Mr Shearer : I should advise that I was Director of Studies at the Lowy Institute but I have left the institute and I am about to take up a role advising the Victorian government on its international engagement.

CHAIR: Congratulations. You have before you a document which provides some procedural advice to witnesses. I will pause to allow you to familiarise yourselves with that information. Before proceeding to questions, do you wish to make a short opening statement?

Mr Shearer : If that is all right, Chair, just very quickly, without rehashing our submission. I think one of the things that we have been very conscious about at Lowy in a lot of our work is that Australia is heading into a very much more complex international environment than we have faced, I would argue, for several decades. We have the emergence of new powers on the scene, we have increasing competition for scarce resources, we have this extraordinary global economic instability at the moment and some of our neighbours are under growing stress and strain—places like Papua New Guinea, which has been in the news most recently.

When you add all of this up, I think it points to an incredibly challenging external environment with the potential to affect our interests detrimentally, but also with new opportunities opening up. When you add all that up, I am absolutely convinced that now is not the time for Australia to be running down the instruments available to government to protect our interests internationally, and yet the works that we have done over the last several years I think make a very strong case that that is exactly what we have been doing in terms of our overseas diplomatic infrastructure, if I could use that term. I think it is a strong case.

You cannot directly compare apples and oranges. No two countries have the same international interests, so when you do international comparisons of diplomatic representation, the task is difficult, but I would argue the task is not impossible and that the work we have done that compares us with other countries has some valuable lessons. I think it is very clear from our work that Australia has too few diplomatic missions abroad. We have something like 95 diplomatic posts at the moment; the OECD average is 133. Of the G20 countries, Australia is very proudly a member of the G20; a lot of excitement has been generated by that. Of the G20 countries we come last in terms of the number of our diplomatic missions abroad. We are 25 out of 30 for OECD countries.

Many of these countries which have more posts than us have far fewer people. Finland has more posts, 5.3 million population; Sweden, 9.3 million; Norway, 4.8 million; Belgium, 10 million; and the Czech Republic, 10 million. These countries all have more diplomatic missions than Australia. The other thing I would point out is that they all occupy a much more benign region. Many of them are members of the EU as well, so they get the sort of diplomatic force multiplier of being in the EU, and yet we are trailing them badly.

As well as not having enough posts, we have too few diplomats overseas. We have almost 40 per cent fewer diplomats today than we had in 1988. One answer to that which is often reeled out is that we have far more agencies represented overseas and those agencies are doing some of the work that used to be done by DFAT. There is some truth in that, but having worked in a large post myself, having all those agencies at post is actually adding overheads to those missions. The head of mission and senior embassy staff spend a lot of time fulfilling this whole-of-government coordination role, so it is not as simple as saying—

Mr RUDDOCK: Does your comparison with other countries take into account the extent to which they have other agencies represented?

Mr Shearer : We have done that to the extent we can, but it is difficult. I think we have probably taken the practice of—

Mr RUDDOCK: Do they have the same footprint?

Mr Shearer : Some of them do. It is a varied picture, though, hence my caution. It is not possible to draw absolute comparisons, but I think it is fair to say that, however you cut the data, we are not at the front of the pack.

The other point that we make in our research is that when you look at these emerging centres of power that we are talking about—countries that we are used to regarding as weak, not prosperous or not big international contributors—are suddenly very much at the forefront, but our diplomatic posture has remained sort of frozen in time, essentially. If you take China—incredibly important for Australia, obviously—our only diplomatic representation in that country is on the coast. You have these massive cities with anything between 10 and 30 million people in inland places like Chongqing or Qingdao, where we have no diplomatic representation, yet these massive economic opportunities are there. We are reading a lot about the hollowing out of manufacturing in Australia and the need for us to diversify our economy and yet we are not on the ground in the places that really matter.

We could talk, perhaps later if the committee wants to, about some of our work on the way DFAT goes about doing its business. Just to sum up before I hand over to Ms Oliver, I think it is very clear that DFAT has been run down over several decades. It is possible to be selective with time lines and so on, but the point I would leave with the committee is that this is a bipartisan problem. There were big cuts in 1996 and 1997 to the diplomatic profile, but in fact there were bigger cuts in 1988, so both sides of Australian politics have been part of this and hopefully both sides of Australian politics might be part of the solution.

I think one of the reasons it is really good the inquiry is happening is that there is a failure to develop a constituency for Australian diplomacy, which troubles me. I think that is one of the reasons why this process has happened. If you look at Defence, for example, there is a huge constituence, as there is for development, yet despite the fact that a million Australians live overseas, something like six or seven million travel every year, and business relies very heavily on DFAT, I would argue, there is not a large vocal constituency arguing the case for diplomacy, and I hope that can change, in part, relating to this inquiry.

CHAIR: We have noticed it, too.

Ms Oliver : Thank you for the opportunity, again, to talk about the work that we have done in the last couple of years. Mr Shearer has pretty much covered the big picture. I wanted to add just one more thing, and that is about the cuts that the department has sustained in the last 20 years which are now being exacerbated even further by what the government is currently requiring of the department to sustain. In the incoming government brief in September 2010, the department said that it:

… had exhausted opportunities for reprioritisation and efficiency gains. Meeting the challenge of a more complex, diplomatic world will require additional funding with a particular focus on growing the overseas network.

That was the situation in 2010. Since then there have been further demands for efficiency gains: 1.5 per cent per annum as at June 2011, a further 1.25 per cent from 2013-15 and then one per cent after that. In November last year that was added to further, taking the efficiency requirements for the department to sustain another 4 per cent for the financial year 2012-13. We are talking about another $40 million to 50 million a year which the department is required to sustain. Two years ago it said it could not do any more; all the cuts had been made. I guess that is about the only point that I wanted to add to what Mr Shearer had said. The department is required to do more and more with less and less.

Mr RUDDOCK: I think I would have written exactly the same brief to an incoming government that was a new government, regardless of what the situation was.

Ms Oliver : I guess when you look at the position over the last 20 years—

CHAIR: Just before you get started.

Mr RUDDOCK: Just the data.

CHAIR: All right.

Mr RUDDOCK: To what extent did you include state and territory offices in your analysis? Are there other countries that you were making the comparisons with that are represented by state and territory offices?

Mr Shearer : We did not. We could have, but in the end our research would have been about everything if we pursued that. We did look at the fact that our posts are servicing more and more requirements and there is no doubt that the states are part of that. I think Mr Bailleau is either overseas now, or about to go to India, with 200 business leaders.

Mr RUDDOCK: We do have agents-general in various places and I imagine that no other country would have that replication. It is focused on economic issues which posts have to focus on. Does it not suggest that the data that you have presented may be a little inaccurate?

Mr Shearer : I think that if you take the case of this visit to India—and I do not know this; I would have to check it out but—I suspect the vast bulk of the work that has been done in terms of setting up meetings and support for that visit is falling on the high commission in New Delhi and the new posts that have been created, for example, in Mumbai. Those state offices are very, very small and they simply do not have the sort of infrastructure to look after a visit of that level, but I do take your point. There are many actors and those state offices, no doubt, do a good job, but going back to my point about other agencies, they are another factor that the head of mission and the senior DFAT team at those posts have to deal with. It is another complex moving part in an already complex—

Mr RUDDOCK: I would have said it is a resource, myself.

CHAIR: That is a debate, I guess. I have some questions. You said in your submission to open 20 new posts. There is this debate about some other departments, state governments and the like, but our aid and other sort of things are expressed as a percentage of GDP, and indeed that is the way we have been able to get a bipartisan target, if you like. I am just wondering if you know of, or you would like to express a view of, what the figure would be if we were to do that.

Mr Shearer : In partial answer to the question I can say that our research shows that, as a proportion of GDP, the DFAT budget has been in very steady decline.

Ms Oliver : Yes.

CHAIR: You have given us some evidence about the G20 nations. If we were going to, for argument’s sake, aim at the middle of the pack, do you have any idea of what the figure would be, or could you provide it?

Mr Shearer : With some work we could probably provide you a figure.

Ms Oliver : We are talking about massive upscaling of Australia’s diplomacy to even bring us back into the middle of the pack. Not even in the G20s, but in the OECD nations, we currently sit right down the bottom. We are 25 of 34; we have 95 posts. We are talking about an average of, say, 133 posts; that is another 35 posts. That is way more than we recommended two years ago. The sort of upscaling we are talking about is in terms of almost doubling the budget for the department of foreign affairs.

CHAIR: I for one appreciate it might be a massive upscaling; it might be beyond what we can imagine in the current budget cycles, but I think we have got into this over the last two decades and perhaps we could try and aim to get out of it over a similar time frame and that might make it a bit easier on governments of the day. So, if you have any ideas about that, even if it is in a staged process or whatever; I do not want you to do too much work or take too much of your resources, but it would be a useful figure, I think, for the committee to have.

Mr Shearer : My recollection is that the DFAT budget now accounts for about less than 0.2 per cent of GDP. Defence, for example, is 1.9 per cent. Broadly speaking, in an ideal world, I think we would be looking at close to a doubling of the DFAT budget and that would suggest a number of 0.3 to 0.4 per cent of GDP, I guess.

Ms Oliver : Just to add to that, what we did recommend in our report was a staged investment. Obviously, it has taken 25 years to run it down and it will take another 25 years to build it back up again, but we should start somewhere. The recommendation that we made in the report was that, say, for example, if we delayed the upscaling in the aid budget—we are looking at increasing aid from 0.35 per cent GNI to 0.5 per cent GNI over the next four years—that could be delayed or you could take a tiny percentage of that growth.

We are not talking about cutting existing programs; we are simply talking about delaying the start of some new programs. If you took just six per cent of the growth over the next four years of the aid budget, which is going from $4 billion to $8 billion, you could take, say, $200 million of that money and open five new posts. That would be a very good start and we could say straight off the bat now, there are five new posts that should be opened in, for example, eastern Indonesia and inland China; great start.

CHAIR: Just while we are talking about China and Indonesia, it is pretty obvious that we are underrepresented. Do you have any idea about the opportunity costs for business, for our diplomatic relations or for our broader public diplomacy efforts?

Mr Shearer : It is hard to prove a negative. There is a lot of discussion about globalisation and what that means for diplomacy, but I think one thing that has become very clear is that there is no substitute for having some smart, well-qualified people on the ground, because you cannot build the relationships that you need to take advantage of the opportunities without that. To me, that is the real problem. There has been an assumption that a minister flying in once every two years can sort of get the relationships going and give you enough purchase in a country. I just do not think that is right, especially in these places where these cities are really opening up to the outside world for the first time. China has started to open up at the end of the seventies, obviously, but it has been moving inland. So, we do not really know, but we know what their demand is for steel and concrete. We know that there is a massive middle class emerging in these places and that they are going to need services, so I think it is pretty clear that there are opportunities that are going by, going begging.

CHAIR: One last question, if I may. It is pretty clear that the consular costs have exploded and that has put a great pressure on the department. Your submission talks about a review and I think also creative solutions that government might seek. Generally, when people talk about creative solutions, they are really actually talking about revenue measures. We all know revenue measures are a particularly difficult debate for the Australian community to have because they tend to get politicised, but do you think that we need to have some growth revenue—even passports, airline tickets or the like—attached to the growth in the travelling of Australians overseas? It has exploded and it is likely to get bigger as the dollar appreciates.

Mr Shearer : The short answer is yes, and your passports example is a very good one, except, with the issuing of passports, it is completely separate from the DFAT budget, and if you get a passport, then you pay a fee and that money goes into a sort of separate revenue stream. The number of people in DFAT issuing passports is hence growing in proportion to the number of passports. It is completely different with consular work. There is no relationship between the resources and the burgeoning caseload, so I would argue we need a model for consular that is analogous to the passport one. It cannot be identical, but—

Mr ADAMS: A fee?

Mr Shearer : Possibly a fee. To start with, it could be putting in place some ways of reducing the number of Australians that travel without any insurance. I think it is something like 20 per cent of Australians who go abroad do not take out travel insurance. Now, there may be issues with making insurance compulsory, but—

Mr RUDDOCK: I am surprised that it is so few.

Mr Shearer : We put fees on travel for all sorts of different reasons. Looking after the welfare of Australians when they are travelling would seem to be a perfectly worthy reason to charge people, it seems to me.

CHAIR: We might go to Dr Stone.

Dr STONE: You have made it very clear—and I think compellingly—that we are very thin on the ground in terms of our stations, especially in places like China, but you are also equally condemning in one of your papers particularly about the websites. You suggested that they:

… remain among the worst websites hosted by any arm of the Federal government and do nothing to capitalise on the main reason people visit the websites (for visa and immigration purposes). There is no serious effort … to promote major Australian exports like education and tourism …

Can you expand on that and tell us what do you think is the problem? Is it a lack of understanding of the power, potentially, of e-commerce or e-diplomacy? Is it lack of technical skill, or is it again, a resourcing issue, or all of the above?

Mr Shearer : Thank you, Dr Stone, and I should say that our colleague Fergus Hanson has done most of our work in this area, but just a couple of very broad reactions to that. I think the first thing to say is DFAT has made some effort since we first reported on this to improve the quality of the website and its use of social media. So, there are some baby steps that have been taken and that is welcome. I think it is all of what you said. I think there is a resources component to this. I think, to be frank, there is also a risk aversion about it. DFAT is a traditional foreign ministry, and foreign ministries are used to going overseas and talking to other diplomats. The whole history of the profession, if you like, is a slightly secretive state-to-state transaction, so it takes time to break that down. I think that, as well as the resources, there is a cultural change needed.

There are a lot of new actors out there that can affect our interests, whereas traditionally it was okay just to go in and hand over your third-person note to the desk officer in the foreign ministry. That is not good enough in a world where you have everything from global NGOs through to social movements and terrorist organisations, all of which can affect our interests. We have to be much more broad ranging and much more creative in reaching out and engaging those actors, so the internet and social medias are very important components. We are underdone compared with the UK, certainly, and the US, which is moving very fast on this now. Indonesia, for example, has massive uptake of mobile phone technology and Facebook. We are only just now starting to dabble our toes in those waters.

Dr STONE: Do you have any comment about the cable culture? Do you think that is virtually obsolete?

Mr Shearer : DFAT struggles with the shift to a world which is about exchanging information away from a world which was about controlling information. The department is uncomfortably perched across those two different imperatives. I think there needs to be a sort of recognition that it is totally appropriate that some information which is sensitive remains in channels which can manage it and make sure the people who need it see it, but not others. But the mindset should be that most information is open and frankly, not that sensitive, and we should exchange it more freely. It is a shift of the onus, if you like, towards sharing and opening up the information away from holding it tight.

Dr STONE: I understand that you are going to work for the Victorian government in this arena, but do you have a view about our often competing state interests? We have Queensland and Victoria neck to neck in a trade fair somewhere trying to get tourist visitors or education for fee-paying students. I saw it continually when I worked in this area. Do you have a sense that we should be doing that better, that these agents-general would be better to be somehow made more harmonious and represent Australia as a whole, rather than having all of these little underdone competing agencies, often very public in what they do, literally trying to kill each other’s opportunities off in a trade fair situation.

Mr Shearer : Broadly speaking, a Team Australia approach should be promoted where that is possible and we should be on about growing the pie, not squabbling over the existing portion. I would not want to go beyond that because it would pre-empt and pre-judge the work that I am meant to be doing for the Victorian government going forward.

CHAIR: Mr Adams.

Mr ADAMS: I appreciate your work and your effort. I am interested in the way that diplomacy has shrunk or how much we have out there. Foreign affairs, diplomacy and post seem to be an elite end. They choose top-end graduates. You speak four languages or you do not get in. Maybe that is why it has been in decline for so long. It does not seem to be connected to domestic politics and the rest of the country. It is possibly a bit like Defence used to be with an elite class of officers and the rest of them cannon fodder. That has changed and now any modern country would not think about having a defence force like that.

When we talked about travel insurance, the problems with travel insurance do not get into the domestic argument very much. Maybe that has been a failure of what should happen and how that should come back. Buying travel insurance, making a claim and those sorts of things continue to be issues. That is probably why some people do not take it out.

I am thinking that it seems to be an elite end and maybe it needs to come into the real world, back into everyday effort, so someone with no other languages, a rough and tumble Australian, could do just as well in a diplomatic post as somebody with four languages and at the top end of the graduation circle.

Mr Shearer : I think there is something in what you are saying. Although I think DFAT is changing. We could perhaps argue about how far behind the curve it lags, but in my experience the intake of people into the department has become significantly broader in the last decade or two, which is a very positive thing. I agree with you, very strongly, that one of the problems that the department has had, which I find ironic because we employ smart and well qualified people to understand other governments, to interpret what they are doing and to advocate our interest to them, but our diplomats seemingly are not that great at understanding our own government or advocating interest or persuading them.

One of the things that the department needs to do is to engage the Australian community much more broadly than it does right now and explain what it is. Part of the problem for DFAT is, for example, if you take a trade liberalisation negotiation, which benefits Australians, but explaining exactly how that works to a family that is struggling to make the budget balance, how that trade negotiation can help them, seems to me something DFAT needs to get much better at. Case studies, going out into the community and talking to people about what they do, is part of the solution.

CHAIR: Would an office of e-diplomacy possibly be the most effective way of doing it?

Mr Shearer : That is one way of doing it. Part of it is when our diplomats are back for consultations, which is an age-old tradition, they will traipse around Sydney and Melbourne, visit all the boardrooms, come to this building and check in, which is all good and they should continue to do that, but I would like to see them go out to some of the smaller rural and regional communities and do almost town hall style presentations. It relates to the social media point. There is a kind of risk aversion. What if one of our people says the wrong thing, gets the message wrong and so on? My answer to that is that if you are trusting them to be out there representing the country overseas then surely you can trust them to turn up and talk to Australians.

CHAIR: Any more questions?

Senator ADAMS: Yes. I have a question on the issue of e-diplomacy, but also roving diplomacy. We cannot cover every part of the world, but how effective do you think that is by having one post looking after five or six small agencies and how do they do that effectively and efficiently?

Mr Shearer : The multiple accreditation question is complex. There has to be some of it, there is no doubt about that. Some foreign services are working more on a regional hub approach where you will have quite a large central mission that is servicing five or six countries around it. We have mimicked parts of that and you can see why we have done that. We are certainly not advocating having a diplomatic post in all 192 countries and all of their major cities, because no one can do that, including the Americans. There are real limits to it. I think about 25 per cent of our posts are small, which means that they only have two or three A-based officers.

I was talking to someone the other day who mentioned that at one of these small posts someone was sick in the next small post along, which is several countries away, and that meant the mission was going to have to close for a week, so from this other small post they had to rip someone out and send them over there. You can end up with missions with one A-based officer. Due to the security requirements and so on, they have to actually shut the mission to go to the bathroom or go out for lunch. It is that kind of tenuous.

These posts are under real strain and, to be quite honest, most of their effort is consumed with administering themselves, if you like, and going through the formal niceties of traipsing around the capitals that they are accredited to and then dealing with the odd consulate crisis. There is no capacity for anything else after you do that.

Mr ADAMS: Is that a problem in itself? Are we spending too much time on structure and not enough on diplomacy? Maybe we should get rid of some of that. There is the security stuff and all of us that have been overseas would understand the increase in that, but should we do things differently than we have done in the past? Should we look at new ways of doing things?

Mr Shearer : I think we should. In our work we are careful not to say that it is just a resources problem. It is not that if you write a big cheque for DFAT that all of this will be fixed. DFAT needs to address red tape.

Mr ADAMS: Structure?

Mr Shearer : Structure and process. There is a lot of risk aversion. A lot of admin gets pushed out to posts. It is just servicing all of that. There are constant reviews. A lot of it is very important, but it could be cut back. I think more authority needs to be pushed out to the heads of mission, in particular.

Mr ADAMS: Trusting people that we put in charge to do the job, report back and make judgments on what the outcomes are, rather than all the structure and processes, being the judging process in the past. Let us have some looking at outcomes and how that works and giving people trust.

Mr Shearer : Yes. It is risk management rather than total risk aversion.

Senator McEWEN: Would that also involve giving locally engaged staff more responsibility?

Mr Shearer : It could do, but to be honest, in many cases locally engaged staff have a lot of responsibility. The LES is a success story. We have the odd problem. There is always the odd bad apple, not surprisingly, as there will be in any workforce, but being flexible about the employment of LES is definitely part of the solution. Many of them are incredibly able. They are choosing to do that sort of work for whatever reasons, so we should absolutely make the most of what they have to offer. In my experience in a big mission we did that. We were always happy to give them serious responsibility.

CHAIR: Ms Oliver.

Ms Oliver : I have one final note on that last question. We have quite a big locally engaged workforce of around 40 per cent. It has remained at about that level over the entire period that we reviewed back to 1988, so that has not changed.

With respect to Mr Adam’s point about small posts, not only do we have a very small number of missions overall, but a huge proportion of those and a larger proportion than most other diplomatic services around the world are small posts. Those are the ones that really struggle to meet their administrative requirements. That 40 per cent of small posts has grown in the last 20 years as well, so there are many more small posts than we used to have. We have the double incapacitation of a small workforce and a lot of small posts which are administratively challenged.

CHAIR: Ms Brodtmann.

Ms BRODTMANN: Just building on the chair’s question in regards to the opportunity costs, do you have any concrete or specific examples of where there have been failures in execution of policy or where there have been failures in pursuing the national interest as a result of the current representation, or instances where greater representation would achieve a better outcome?

Mr Shearer : This is the problem that I alluded to, that it can be quite hard to trace a direct causal connection from diplomacy to results. Again, it is difficult to prove the absence of something. I think it is the case that if you look at some of the business submissions to the committee and if you talk to say our major miners and even the tier below that, because they are miners they will go out there and do their thing and they will come up with work-arounds, but it is pretty clear to me that they would say that they are not getting enough support in some of these emerging countries that they are operating in. And going to my earlier point, our diplomatic footprint is still very much that of the 1980s when we were focused, rightly, on North Asia and to a lesser extent on South-East Asia. If you look at places like Francophone Africa, in particular, where a lot of the big miners are, they are operating in a vacuum. Some people would say that is fine, they are big, they have their own information sources and their own ways of accessing government. I personally think that is probably not right and that there should be some alignment of our resources with our emerging economic opportunities. I do not have a example that I can give you that we were not in city X and we missed out on some multibillion dollar contract.

Ms BRODTMANN: In terms of the miners, what support are they citing that they need that they are not getting at the moment?

Mr Shearer : In a way it is the full range of diplomatic services. It is established relationships on the ground with decision makers. Sure, they can do some of that themselves, but in a lot of these countries government matters in ways that it does not in Australia and having an Australian government representative in the room when the head of X is meeting the president matters commercially, as well as the full range of other services that Australian business is rightly entitled to expect when it is operating in countries. I know that Austrade has recently been through a big review and have made some changes to their profile. I think that is good and encouraging, but I do not think that means that DFAT should not also be thinking about which countries are going to be important to our future, positioning there and starting to build the webs of contacts that you need to be successful.

Ms BRODTMANN: Thank you.

CHAIR: Mr Danby.

Mr DANBY: Ms Oliver, I am sorry I was not here for your presentation, but I have read your papers and appreciated your work since the paper was published in 2009. In fact, I commend you and the Lowy Institute for making this an issue that has begun to be discussed and should be pushed a lot further, whether it is by diplomats, us or other people. I think everyone should draw on the context of the picture that you draw of Australia’s representation overseas and that I have experienced and be on the same wave length that the Lowy Institute is.

You say that Australia’s representation has improved slightly since the DFAT funding was boosted in 2009, but I am interested in specifics. I noticed that you draw attention to our representation in China being underrepresented. We only have representation in Beijing, Shanghai and Guangzhou. Do you recommend a diplomatic presence in Chengdu and Chongqing and, if so, why? Also, how big are the cities, what are the regions they serve and the opportunities that are there?

Mr Shearer : We are not pretending to say that we have got all the information and the resources to make absolute recommendations, but there are reasons that we have mentioned those cities. For example, Chongqing has a population of 30 million.

Mr DANBY: That is bigger than some countries.

Mr Shearer : It is 1,400 kilometres away from Shanghai and is accessible from the coast within half a day, potentially, as high-speed rail develops in China. It is a city the size of a province and it is moving into high technology in a big way. Annual laptop production capacity is set to hit 100 million units by 2015. The numbers, to my mind, are compelling.

Chengdu, the other one that we mentioned, has a population of 14 million. Shenzhen has 13 million and so on. The other point that is pertinent here is that, because they are earlier in the development curve, growth has actually slowed down a bit along that coastal belt. These cities are growing much faster, at an average of between 10 and 15 per cent over the last five years, whereas growth on the seaboard has slowed to a dreadfully sluggish 10 per cent! The centre of growth, or the engine of growth, in China has moved and we are still where it was 20 years ago.

Mr DANBY: Is the second city, Chongqing, the old nationalist capital that used to have a more imperialist kind of name?

Mr Shearer : Yes, that is right.

Mr DANBY: Chungking or something like that?

Mr Shearer : Yes, that is right.

Mr DANBY: You also recommend representation in eastern Indonesia.

Mr Shearer : Yes.

Mr DANBY: Where and why?

Mr Shearer : There are several reasons. One is that Indonesia has always been important to Australia, but it has largely been important for reasons to do with its weakness. That is all changing. Indonesia is growing at about 6½ per cent. On current projections by Goldman Sachs, it will be in the top five or six economies in the world in a couple of decades, yet our diplomatic representation there is confined to Jakarta and Denpasar. The other reason is that in Indonesia power is being devolved away from the centre to the provincial level of government, which means that you need to be there when the policy decisions are made and when the big contracts are awarded. Ms Oliver has reminded me that Indonesia’s middle class will be 50 million in size within a decade from now. They are not all going to be in Jakarta, and we need to be there. If you take Surabaya, for example, it is the second largest city in Indonesia. It has nearly 6 million people in it. East Java, alone, has nearly 50 million people.

Mr DANBY: I think some members of this committee went to Surabaya. Three that I can spot here were just in Surabaya.

Mr Shearer : I would argue that as being a place where we should be represented.

Mr DANBY: You point out that DFAT’s staffing has been flatlining while other departments have nearly doubled, such as AusAID, Defence by 40 per cent, PM&C and so on. You are recommending that we open 20 new missions over the next decade including, apart from what we have already discussed in China and Indonesia, in the Gulf, Latin America and Central Asia. Is that correct?

Mr Shearer : That is correct. We had a brief discussion before you came in about how ambitious or not one would need to be to restore us and get us back in the game. Our 20 is not what we would want, ultimately, but we thought it was a sort of reasonable way station.

Mr DANBY: You are being too conservative. Does that include in Central Asia? Did we have a post in Kazakhstan for three years that we closed down?

Mr Shearer : We did. This is one of our problems. We have just opened a post in Kingston, Jamaica and we can speculate on the reasons, but I would not be surprised if that is a post that we close in five years. This is one of the problems. Turning posts on and off is really damaging to us because it causes enormous resentment. We need to think about this very strategically.

Mr DANBY: It covers former Soviet Central Asia. Is that the only place you would do it from?

Mr Shearer : Kazakhstan and Ulaanbaatar. I think we should be in Mongolia.

Mr DANBY: So we do not have a post in Ulaanbaatar?

Mr Shearer : We have an Austrade post. We do not have a DFAT post.

Mr DANBY: The Mongolians obviously have a representation here and a very active ambassador.

Mr Shearer : They do.

Mr ADAMS: The government could set up an office there.

Mr DANBY: To your regions, the Gulf, Latin America and Central Asia, what do you think of the fact that Ukraine, which is a country of nearly 50 million people, along with Moldova, Georgia and Azerbaijan that do not get on with Moscow all that much, are not represented at all. What do you think of the idea of having a post in Kyiv? Can you confirm what DFAT cannot, that the Ukrainians have offered us free land in Kyiv for an embassy?

Mr Shearer : I cannot. I think it would be possible to construct a case for opening in Kyiv, but for me, it would not be the same priority as what we have talked about. I think inland China, eastern Indonesia, Phuket and beefing up in Africa would come ahead of that.

Mr DANBY: Has the Lowy Institute or anyone else done any scoping studies of the number of engineering graduates and their suitability for the mining industry that pour out of Ukrainian technological institutes?

Mr Shearer : No, we have not.

Mr DANBY: In answer to that you might change your priorities.

Mr Shearer : Sure.

Mr DANBY: It is only a personal feeling, but if you go to Kharkov, Kishinev and all of these places you are just astonished by these big ex-Soviet universities pouring out all of these people who could very usefully be employed in the Pilbara.

Mr Shearer : Yes.

Mr DANBY: Arab Maghreb—talking about Africa, do you think we need representation in those four groups of countries or the Austrade post that we have in Tripoli is sufficient?

Mr Shearer : We probably do, in short. I think we are underdone in the Maghreb. We were represented there. Did we close the mission there?

Mr DANBY: I think we have an Austrade post in Tripoli.

Ms Oliver : The posts that we closed were Ethiopia, Tanzania, Algeria and Zambia.

Mr Shearer : We have reopened Ethiopia.

Mr DANBY: We did have a post in Algeria?

Ms Oliver : We did.

Mr Shearer : Until 1991.

Dr STONE: We do not have a post in Morocco and they are very anxious; in fact, we have taken evidence from Morocco.

Mr Shearer : I think there is an argument for another post there, but I would not want to say that it should there and not there.

Ms Oliver : In the joint standing committee inquiry into Africa last year, the report which I am sure you all took notice of, had a ranking of Australian exports to various African nations and you can see that in terms of the top 10 Australian export destinations in Africa, Australia is not represented in Mozambique and it is not represented in Tanzania. They are in the top six, and we have no posts in those places.

Mr DANBY: The top six of exports to those countries?

Mr Shearer : Australian exports.

Ms Oliver : Australian exports to those countries. That might be a good place to start. This is a large exercise in terms of calculating our interests and opportunities, but some starts have been made.

Mr Shearer : Mozambique stands out to me, and then in terms of mining interests, there are countries like Tanzania, Zambia, Botswana.

Mr DANBY: But the poor old fellow in Kenya represents Kenya, Uganda, Rwanda, South Sudan and Tanzania, so it is probably too much.

Mr Shearer : He is doing well if he does much more than pay his introductory round of calls.

Ms Oliver : There are similar strains on the post in Nigeria, which serves six accreditations as well.

CHAIR: I understand that you do not want to say here and not here. I do not want to give you too much work, but do you think there is an objective set of criteria which perhaps the public and the department could be aware of about the opening of posts and that sort of thing?

Mr Shearer : Yes.

CHAIR: It seems to me that this committee is going to get various representations and stuff which all have good arguments, but that has not really been set out by the department or by anybody.

Mr Shearer : That is true. In our report we outline some of the factors that government does and should pay attention to, but they can vary very strongly and it is quite hard to compare them. For example, in some countries there are very longstanding people-to-people links because of migration in either direction, but perhaps not so many contemporary economic interests or security interests. It is quite hard to say that there is a diaspora of 300,000 Australians equal or exceed a fragile security relationship in—

Mr DANBY: It seems to me that no one has said, ‘Here are the criteria that you should think about.’

Mr Shearer : With aid and education links.

CHAIR: With skilled migration, which Mr Danby brought up, it is self-selection. As far as I can see, we do not actually go out there and say to the rest of the world, ‘Hey, we have got this big mining industry, how about you.’

Mr RUDDOCK: Can I first endorse Mr Danby’s comments and thank you for what I think is an excellent submission. I am sorry, in a sense, it is very much alone. As to some of your arguments, however, I am not convinced that a larger diplomatic footprint itself is necessarily a good thing. I look at the quality of representation from many of those countries that you are talking about and I would say they have a very good life in Canberra on the diplomatic circuit, national day cocktail parties one after another. I do not see the Americans at those cocktail parties in the same way, but I do read in WikiLeaks that they have a very successful rate of obtaining delicate information—

CHAIR: You are not going to be political now, are you?

Mr RUDDOCK: No. That suggests to me that they are working very hard on finding out what is happening in the broader Australian community. But I do not see terribly many of these others, quite frankly, doing any of that. I think what they report on is what they got from the last cocktail party about what their mate told them.

Mr DANBY: But they do not have WikiLeaks in Mongolia or China, so you do not know.

Mr RUDDOCK: I would be interested. But I just put that point. I think there is a qualitative judgment that you need to make as well. The chairman and Mr Danby’s questioning went where I wanted to go—and you may be unwilling to do it—but I do not think there will be a desire from any government in the medium to short term to find extra money for this in the context of the political debate that goes on in Australia. I do not think you are going to change it. The only thing that will change it will be hard economic arguments about why something further needs to be done. That is all that will change it. To that extent I noticed the ambit claim. You tell me it could have been larger, but I saw it as an ambit claim of 20 missions. But I go to the same point that Mr Danby did. I think we need a lot more information to help us in suggesting what the priorities should be.

One of the reasons we are having this inquiry is that I was not convinced that Francophone Africa was necessarily the most needy post. I was saying at the time it needed to be looked in the context against the other competing priorities. Given that so few, other than special pleading—you are the only one who is trying to do it objectively—I think we would be aided significantly if you could get down to some of the things that were suggested to us that we might ask. What is the cost and where should posts be opened? Are there other changes that should be made and where should they be? I do not whether you have got enough time before your new job—

Mr Shearer : Ms Oliver has lots of time.

Mr RUDDOCK: I do not know where else we are going to get that sort of information, and I would regard that as being particularly helpful.

CHAIR: In regard to Mr Ruddock’s questions, is there a need for some external review of DFAT? I do not know how to judge the culture of a department or whatever. But has the underfunding caused other problems in terms of the management of staff.? I noticed you have talked about languages and that sort of thing. Have we had enough new blood entering the department?

Mr RUDDOCK: Do it like a university does. You get an actual team of people, former heads of the American, British, some business people and others to actually review how DFAT does pursue its operations. Would that be helpful?

Mr Shearer : It could be. I think any organisation should be prepared to open itself up to that sort of thing, not all the time. Otherwise, you just end up in a spiral of self-examination and doubt, but I certainly think that can be valuable. Going to your question, Mr Chairman, this is anecdotal necessarily but I do not think it is a secret that in DFAT there is a growing sense of strain and issues with morale because people are overstretched and run a bit ragged. I am sure people often like that, but I think there are issues there because of this long-term trend we have identified and it is difficult for people.

Mr ADAMS: Do you accept that it is really about what is the focus of the diplomacy of the country and that debate is not really very broad or understood in society? I think that is one of the bigger issues that faces that department, that it is not a part of everyday thinking or debate or discussion within the parliament. Trade hardly ever comes up as a debating or discussion point within the parliamentary processes. These are all the issues where, if you want to get a focus on how you expand something or the importance of it, you have to have a focus of why it is more important, not just a plea that we are working too hard; there is too much going on; we cannot do it.

Mr Shearer : I think that is absolutely right. I think DFAT’s public diplomacy needs to start at home. I think the stereotype in the public conscientiousness is a bit like the one that Mr Ruddock alluded to with diplomat’s in Canberra: pinstripes and cocktail parties. Whereas the reality of being an Australian diplomat today is forcing your way through a hot, crowded airport lounge taking bottled water to Australians who are stranded somewhere in a consular emergency. DFAT is really, in my view, bad at explaining to people that is what we really do. We do go to the occasional cocktail party, I am sure, but what diplomats are doing makes the life of ordinary Australians better and you have got to explain how that is the case.

Mr ADAMS: You would learn more at a Labor Party cocktail party than you would at all the others.

CHAIR: We do not have cocktail parties.

Dr STONE: Reflecting on what you said before about some of the diplomats not being necessarily connected sufficiently when they come back to Australia when they do their debriefing and so on, have you got a view about whether or not it is more or less advantageous to have a career diplomat who has come through DFAT versus a Tim Fischer style appointment where someone has come out of the political sea, or a key business appointee?

Mr Shearer : I am a former diplomat but I am not one of the career diplomats who resents political appointees. There have been outstanding political appointees from both sides of politics and there have been pretty ordinary political appointees from both sides of politics, but if you get the right person I think it is a real force multiplier because ultimately diplomacy is about politics and no-one understands politics the way politicians do. So, I totally think that there is a place for those appointments.

CHAIR: Thank you very much for your evidence today. I think it has been most enlightening and helpful for the committee. Obviously the secretariat will be writing to you about some of the additional information that we have requested. They will also send you a copy of the transcript of your evidence to which any necessary corrections can be made.

Mr RUDDOCK: It was first class, notwithstanding my cynicism.