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Australia and Malaysia: globalisation and the regional outlook: address to open the Australia - Malaysia Conference 1997, Canberra, 19 November 1997


Your Excellency (the Malaysian High Commissioner), Ladies and Gentlemen I am delighted to have the opportunity to open the first ever Australia-Malaysia Conference.

Celebrating 40 years of Malaysian independence, this Conference is another step in the development of mutual understanding between our two countries. It is the first in what is planned as an annual series of meetings, held in Australia and Malaysia in alternate years. A very impressive group of distinguished Malaysian and Australian scholars have been brought together to explore the economic, political and social aspects of Malaysia's development into the 21st Century.

I congratulate the organisers - the ANU and Dr Colin Barlow - and all the other organisations and individuals who have played a part in making this initiative a reality, including the Malaysian High Commission, the Australian Institute of International Affairs and the Australia-Malaysia Business Council. I am very pleased that my Department was able to provide some assistance, including $10,000 for the Conference.

The Australia-Malaysia relationship has been strengthened considerably since the Coalition Government came to power in March last year. In July this year, when I visited Malaysia for the ASEAN Regional Forum and PMC, the Malaysian Deputy Prime Minister characterised bilateral relations as "excellent".

But before I say anything more about the expanding bilateral relationship, I want to speak briefly on two important themes with major implications for the future of Australia and Malaysia, and the wider region:

. The challenges and opportunities posed by globalisation; and

. The impact of recent financial developments in East Asia on the region's outlook, including the implications for Australia.

Part One: Meeting the Challenge of Globalisation: More Liberalisation, Not less

The Australian Government's White Paper on Foreign and Trade Policy - Australia's first ever - released in August this year highlights globalisation as one of the two key trends shaping Australia's regional and global future.

A truly global economy is emerging at an unprecedented and often surprising pace. One of its defining features is the integrated way in which business operates: firms increasingly organise their activities on a global scale, forming production chains, including services inputs, that cross many countries and greatly increase global flows of trade and investment.

New forms of communications technology, emerging relentlessly by the month, are ensuring that no corner of the world will be untouched by globalisation. Technology that links financial markets and the processing of massive volumes of financial transactions is becoming cheaper than ever. It ties currency markets together more completely and enables financial markets to judge instantly the policy settings and decisions of national governments.

All of this means that globalisation is offering huge opportunities for internationally competitive economies. It is encouraging countries to do what they do best in the world economy. It is driving specialisation of production which has increased the importance of trade as part of economic growth. For example, in the decade after 1984, worldwide trade in manufactures grew by nearly 90 percent while output of manufactures grew by less than 25 percent.

But globalisation is also bringing in its wake many challenges for political and economic management. It means that no national economy stands - or prospers - alone in our region or beyond. Globalisation encourages increased competitive pressures in markets, and makes globally-based trade rules and disciplines even more important.

I want to emphasise that globalisation is here to stay. It is an enduring trend of the late 20th century, and it will gain even more momentum into the new millennium.

That is why the most effective response to the challenge of globalisation is more economic liberalisation, not less. There is no doubt that market regulation and protection imposes great costs in a globalised world economy where the capacity to adjust, and to allow resources to move freely, is crucial to maintaining a competitive edge.

History offers example after example of economies across the world that - once they have opened their markets, pursued export-oriented policies and exercised fiscal discipline - have experienced soaring growth rates. The contrast between Latin American economies in the 1970s and 1980s compared with the 1990s after they adopted more liberal policies is clear.

Closer to home, it is often forgotten that many of the East Asian economies - including Malaysia - had lower per capita incomes in the 1970s than many other developing countries. The East Asian economies were able to lift their growth rates by 'plugging in' comprehensively to global trade, investment and capital flows, and new technology.

For Australia, too, globalisation offers substantial net benefits, and we welcome it. There is no future for Australia in turning our backs on the world or attempting to 'quarantine' ourselves from the international and regional forces that are shaping the future.

Rather, Australia is a stronger, more innovative and more successful nation - economically, strategically and culturally - because of our unique capacity to embrace the best the world and the region has to offer and make it our own.

Part Two: The Outlook for East Asia: Australia's Enduring Regional Commitment

The recent currency movements in East Asia are a sharp reminder that the winds of globalisation blow with equal force across all the major regions and markets of the world. But East Asia's continuing importance to Australia and the rest of the world has not been diminished by these currency developments.

Australia has one of the most East Asian-oriented economies in the world, and East Asia accounts for just over one quarter of the global economy. East Asia's 'fundamentals' are impressive and not easily overlooked; a strong resource and population base; high savings levels (extraordinarily high by global standards) and investment in human capital; and political stability - to identify only a few of these fundamentals.

I am not suggesting, of course, that the currency instability has changed nothing in East Asia - far from it. But it is important to be accurate about what has happened, and to give due weight to the medium to long term outlook. What we have witnessed in South East Asia, and in some North East Asian economies, is a predictable consequence of relaxing controls on exchange rates. We are seeing currency and asset price realignments which might have happened more gradually in other circumstances.

All of this means that several countries in the region face new - but not overwhelming - macroeconomic policy challenges, as well as the pain that adjustment brings. Financial sector weaknesses have been highlighted by the experience, and these will need to be remedied. Measures of the kind contained in the IMF packages for Thailand and Indonesia are the sorts of reform needed for a return to robust growth. In the end, South East Asia will be a more attractive investment destination as a result of these reforms.

As many of you know, APEC is the region's premier economic forum - which next year will have the benefit of Malaysia as chair. Canada is chairing this year, and I will be leaving Australia shortly to attend the Leaders' meeting in Vancouver. This meeting will be an opportunity to reinforce the message inherent in the IMF packages of the importance of ongoing economic reform. Regional finance deputies and central bank governors are meeting in Manila currently to discuss the possibility of a regional financial facility. The outcome of these discussions - which will be fed into APEC Leaders' consideration of currency instability - will be known in a day or two and I expect it to be a further step in building a financial co-operation brick into the wall of overall regional co-operation.

The APEC Leaders' meeting will also provide an opportunity to send a clear message to the global community on the underlying strength of the region's economies and APEC's commitment to push ahead with economic reform in line with Bogor targets. APEC Finance Ministers - who drive an ongoing work program promoting stronger, deeper and more efficient domestic financial systems - may also be tasked by Leaders to further consider the issues next year.

There is little doubt that South East Asian economies will have a degree of slower growth in the next year or so. This will have some impact on Australian trade and investment interests, although it is not expected to be significant.. Moreover, the picture is not uniform across Australia's products or markets. Let me explain why.

The increased export competitiveness of most ASEAN economies as a result of the currency devaluations should lead to increased demand for Australia's unprocessed primary and intermediate capital goods. We can expect to see some negative effects at the other end of Australia's product scale - for example, luxury and other valued-added exports - although high price inelasticities should help to insulate some of our exports. And it is worth bearing in mind that regional currency fluctuations have not occurred in isolation from other developments. Other factors - such as drought in Indonesia - can have an impact on market conditions.

In overall terms, I am encouraged by what I have been hearing from the Australian business community. Like the Government, the private sector takes a medium to long term view of the region and its markets. Successful business plans always take into account alternative scenarios, and not even the most pessimistic forecasters are expecting less than a healthy return to robust growth in three years.

The Australian Government's judgement is that the region will remain strong and dynamic. East Asia will remain a regional and global economic powerhouse. The abundance of investment opportunities with superior rates of return means that growth in industrialising Asia will continue at relatively high levels over the next 15 years. The challenges that recent currency developments pose for ASEAN economies are the challenges of managing the success and growth which globalisation has helped to create.

I should also say that Australia's commitment to the region's prosperity and quality of life, and to helping our neighbours manage the challenges of globalisation, goes well beyond the trade and investment sphere. For example, the Prime Minister announced on Monday that I will travel to Ottawa in early December to sign on Australia's behalf the Ottawa Treaty banning anti-personnel landmines. This will mean that Australia will forever forswear the use of anti-personnel landmines and destroy its stockpile, consistent with the provisions of the Treaty.

I am very proud of the leading role that Australia continues to play in international efforts to find a comprehensive and lasting solution to the grave humanitarian and economic crisis which the misuse of landmines has inflicted on many countries, including in our region. This has been backed up by a practical $19 million commitment to demining in the last 20 months which will help make a real difference to villagers in Laos, Cambodia, Afghanistan and other countries. It is a sign of our regional engagement in action.

Part Three: Australia and Malaysia - Deepening Cooperation at all Levels

Australia' s growing relationship with Malaysia is another important example of our comprehensive and practical regional commitment. Malaysia has been experiencing some tough times, but I have made it clear that Australia is not a 'fair weather friend'. We are committed to the bilateral relationship, as we are to the region, for the long haul.

Malaysia is a country of the future. It has political stability and a dynamic economy. It has a visionary outlook. It is outward-looking, and it plays a very active role in the area of Australia's greatest strategic and political interest - South East Asia.

It often seems that anyone with an interest in foreign and trade relations has a view on Australia' s relations with Malaysia. But much of this commentary is not accurate or balanced. The reality is we have strong, mutually beneficial and dynamic links.

These extensive bilateral links are founded on the vast alumni of Australian-educated Malaysians and the high level of contact between our two countries from earlier times to the present. Exchanges of views and perspectives on a wide range of issues - at the Ministerial level and below - are flourishing. This year alone, in addition to my visit to Kuala Lumpur, Mr Fischer, Senator Alston, Mr Costello, Senator Vanstone and Dr Wooldridge have all made successful trips to Malaysia.

Over the past 20 months, the Government has announced several initiatives which have given the relationship new momentum and vigour. Last month, for example, Tim Fischer signed a new Agreement on Trade and Economic Cooperation with his counterpart, Dato' Seri Rafidah Aziz. This Agreement will provide a basis for strengthening the bilateral commercial relationship into the next century, and a modern framework for the trading relationship, which is our twelfth largest overall and third largest within ASEAN.

The signing of the Trade Agreement took place at the second Ministerial level Joint Trade Committee (JTC). The JTC itself - which ensures high-level contact on trade issues and is a symbol of both countries' commitment to strong trade relations - met for the first time under the Howard Government.

And, beyond the expanded trade dialogue, during my talks with Abdullah Badawi in Malaysia in July, I proposed - and he agreed - to a regular broader Ministerial level dialogue. Most recently, following his meeting with Dr Mahathir at the Edinburgh CHOGM, Prime Minister Howard announced our desire to work together in partnership with Malaysia to establish clearer rules in relation to the regulation of electronic commerce.

Of course, there are extraordinary people-to-people links between Australia and Malaysia - not just at the official level, but among people from all walks of life. I was particularly struck - when opening the Malaysia-Australia Alumni Convention in Kuala Lumpur in December 1996 - by the natural warmth of personal ties between Malaysians and Australians, reflecting the large numbers of Malaysians who have studied and lived here.

A few figures tell the story well. In the ten months to October this year, the number of Malaysian visitors to Australia increased by 16 percent, when compared with the same period last year. If this trend continues, Australia will receive more than 120, 000 Malaysian visitors in 1997. This is a very impressive achievement given the maturity of the Malaysian market, and compares favourably with the still strong growth across South East Asia of 6 percent.

More than that, the flow of students from South East Asia to Australia increased by 8 percent during the same period, and student numbers from Malaysia have remained at about the same level as in 1996. If this trend is maintained, more than 5, 000 new student visas will be issued for Malaysian students in 1997.

These facts are an unambiguous rebuttal to those who claim that the people of Malaysia and the rest of the Asia Pacific are turning their backs on Australia because of the views of a small and increasingly insignificant minority in this country. The Australian Government and the vast majority of Australians reject those intolerant, backward-looking views and the Malaysian people understand this.

In sum, the Australia-Malaysia relationship has a very strong future. Apart from the vibrant people-to-people dimension, we have a $4 billion trading relationship that continues to grow, and several prospective areas for cooperation such as electronic commerce and sports management. Malaysia will host the Commonwealth Games next year, only two years before Sydney 2000, and we have a lot to learn from each other's experiences in organising and preparing for these events. Indeed, Foreign Minister Badawi and I recently agreed on an exchange of sports officials to assist each other prepare for our respective Games.

Conclusion: Staying The Course

This first Australia-Malaysia conference is a clear demonstration of the depth and breadth of the relationship between our two countries, and it highlights the fact that academic links hold a special and enduring place in that relationship.

In bringing together such a wide range of specialists with a focus on the future, this Conference has the potential to make a significant contribution to mutual understanding between Australia and Malaysia as we move towards 2020.

Australia's commitment to South East Asia and its future is unequivocal. Australia's economy is very much complementary to the economies of our region. The Australian Government is building successfully on the foundations of that complementarity by forging strong bilateral relationships and a comprehensive engagement with the Asia Pacific.

Freer and more open markets have driven global economic integration over the last fifty years, and they will remain the best way for Australia, Malaysia and our neighbours in the Asia Pacific to harness globalisation's benefits more fully in the future.

In short, regional doors will stay open for those who stay the course, and I am confident that Australia's growing presence in the Asia Pacific will continue to be characterised by a genuine and practical commitment to the region's wellbeing.

I am delighted to declare this Conference officially open.