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Transcript E&OE
Speaker 1
Alright, ladies and gentlemen. Now, strengthening trade and investment between ASEAN and Australia is one of the strongest themes of this summit at a time when both are looking to diversify and drive inclusive growth, we're lucky to have the Architect of Australia's strategy to do just that, as well as the key Minister of Australia's largest state economy here today, they'll talk to these topics before we hear from our entrepreneurs amongst us, providing your take on how we can take this agenda forward.
So we have Martine Letts, the Group CEO of Asialink at the University of Melbourne, has had a rollercoaster career demonstrating her breadth of interest and leadership. She has headed the Committee for Melbourne, the Australia China Business Council, being Ambassador to several South American countries, an adviser to foreign minister Gareth Evans. Her experience spans government, non-profit, and international policy, underscored by significant contributions to public service and law for which she received an honorary doctors of laws from the Australian National University.
Next we have Mr Anoulack Chanthivong serving as the NSW Minister for Industry and Trade and the NSW Minister for Innovation, Science and Technology since the 2023 election, has had a dynamic career, a career path from his birth in Laos to growing up in Sydney. His journey through Australian politics, marked by the his tenure as the Campbelltown City councillor and mayor and subsequent election as the member of Macquarie Fields in 2015, showcases his deep commitment to public service and policy innovation within NSW.
And lastly, we have Mr Nicholas Moore, celebrated for his transformative 10 years CEO building Macquarie Group into a major regional and international player. Changing the face of infrastructure financing and 18 months ago he was appointed Special Envoy for Southeast Asia with the mission of strengthening Australia's economic engagement with Southeast Asia. In that role, he's led the development of Australia's Southeast Asia economic Strategy to 2040. And now championing its implementation. Please make them welcome everybody.
Martine Letts
Thank you so much for that lovely, wonderful introduction. Good afternoon, everybody, and welcome to this fascinating session, what promises to be a fascinating session on inclusive and resilient trade and investment at this summit.
As Australia's National Centre for Asia capability and engagement since 1992, Asialink has been and I think fair to say, an evangelist for the importance of deepening our engagement with an understanding of ASEAN as an institution and its member states, looking to ASEAN as our essential regional partner in navigating an increasingly complex world.
Asialink has also focused intensively for the last 10 years on helping build an Asia capable workforce and an Australian business community which is more aware of and more deeply engaged in the economies of the region. It is fair to say that our efforts so far have met with only qualified success and the more reports point of departure is that the economic relationship, especially when it comes to investment, is significantly underdone.
This afternoon, session will focus on the economic dimension of the ASEAN Australia relationship and the role that ASEAN–Australia trade and investment can play in contributing to inclusive growth and what needs to happen to further unlock the potential in our economic relationship. By 2040, Southeast Asia as a bloc will be the 4th largest economy in the world. The region is poised to drive global economic growth into the coming decades. However, Australia's current trade and investment relationship does not correspond with the immense talent and opportunity Southeast Asia offers, something many other countries even outside the region have already significantly invested in.
In 2022, Australia's investment stocks in Southeast Asia represented only 3.4% of Australia's total investment overseas. So in Australia we need to be asking ourselves what will be the opportunity costs if we do not deepen our economic relationship with ASEAN. Some key questions for discussion today include how can we ensure that economic growth includes all peoples in our region? How can we ensure that our economic relationship is underpinned by sustainable industry? How can we help ensure that the ASEAN–Australia's trade relationship is resilient against potential great power competition and the rising geopolitical tensions of which we spoke this morning? Or can it reach the depths and integration that would act as a type of hedge against the instabilities generated by great power competition in the region.
The ASEAN–Australia economic relationship is only just beginning and filled with potential. We must take advantage of this unique opportunity to think critically and consciously about what we want this partnership to be, and each of you in this room have an opportunity to shape that partnership. We have an excellent group of speakers to throw some light on these questions from two I would say unique perspectives. Nicholas Moore and the Honourable Anoulack Chanthivong l will speak to you in two key notes. Then there will be a number of questions from the floor which I'll moderate. I already know who you are. And if there's some time after that, we'll have some open Q&A. But first of all, please let me now invite Nicholas Moore to get us started.
Nicholas Moore
Thank you Martine for that introduction and thank you very much all of you for joining us today for this very interesting conversation. Before I start, I should of course always acknowledge the traditional owners on the land, we, we meet the Wurundjeri people and acknowledge their elders, past and present, and emerging and all Aboriginal people and Torres Strait Islander people who may be here today.
My claim to fame for being here is being the author of this excellent report that you've probably seen in the marketplace. Now this report is the result of the Prime Minister, Foreign Minister and Trade Minister upon coming into government having a strong. Belief that Australia's relationship with the region was underdone. They fully understand, understood the importance of the region, the region are our neighbours, the regions prosperity and security is our prosperity and security, and they're very aware of it and they wanted to know why our trade wasn't greater and they wanted to know why our investment in the region wasn't greater.
So they commissioned a team of us led by me and a number of colleagues from DFAT to review what the reasons were and come back with recommendations. Now, importantly, the mission they gave us was to develop a strategy to take Australia from where we are to where we'll be in 2040, with the objective of greater trade and investment between Australia and Southeast Asia. And that was a great topic for me and my colleagues to go to the region with, we weren't going to the region saying we want to increase Australian exports, we want to increase investment in Australia.
We're saying our focus is two-way trade and investment. So increasing exports from the region to Australia is as important to us as increasing Australian exports to the region and similarly increasing Australian investment in the region is as important to us as the region's investment in Australia. And that was a very positive message to be given. To all the regional businesses and all the regional leaders and it was very well received everywhere we went, it was well received. We went on, I think politicians would call it a listening tour, we met with over 700 different individuals who were invested in terms of their business and their time in the relationship in some way, shape or form the economic relationship between Australia and the region and we received over 200 different submissions.
So we took that this information and we developed some themes, but we started off of course with some top down numbers. Which I'll share with you, and Martine has touched on the way through the top down numbers give us a little bit of the view and then the analysis comes from the bottom up feedback that we received from the almost 1000 people that we met with. Now, as Martine said, the trade situation between Australia and the region is strong, so when we look at where we sit, this is our major trading partners. You see the region is our second largest trading partner behind China of course, but still a very substantial trading partner. That's a that's a good story and particularly you can see during the recent disruption with COVID and other things, the trade to Southeast Asia actually increased and between Australia and the region actually increased, which is a very positive sign in terms of the health of the relationship.
The next chart though is the one that we sort of question, can we do better so you know when used to get your report from the teacher and occasionally it would say can do better doing OK but can do better and I think is they can do better report here in that if you look at our trade with the region it's been a pretty consistent 14% over the while. Now that's 14% of two-way trade which effectively reflects Australia's GDP. Now Australia's GDP has been growing over the period, you know, sort of two, 2.5% percent or something like that. The region as we know has been growing much. Better than that, so we would have liked to have seen that the trade with the region grew at the same rate as the region grew because we know where the region is headed. But it's actually growing at the same rate as Australia in terms of where the region is headed.
I said that with, you know, a great degree of confidence. And I think again coming back to the discussions that we had with the, you know, 900 interested people with Australia in the region, there was great confidence that what we're seeing in Southeast Asia is reflective of what we have seen since the Second World War in, in North Asia with the development of Japan, Korea, Taiwan and of course more recently, China.
Now that economic development that took place you people probably know that in 1963, South Korea's GDP was the same as Bangladesh. Now, of course, it's one of the most-wealthy countries in the world. As that growth happened, the prosperity flowed to Australia. So when Japan boomed in terms of needing to build cars and steel and what have you, Australia was able to sell energy to the region, coal and gas and what have you. So Australia has been a great beneficiary in terms of what's happened and we can observe the development model and we can observe what's happening in the region and we know we recognise all the elements that happened in North Asia, of course in Southeast Asia and that's why those 900 different groups we spoke to are very confident in terms of the potential for growth.
Now, it's not just growth, of course. That attracts us to the region and makes the region central. It's of course geography, as has been emphasised time and time again, that prosperity and security of the region depends upon the prosperity and security of the region.
Australia's security and prosperity depends upon the security and the prosperity of the region. So this is a very, very vital interest to Australia and a very good economic prospect at the same time. So that's the trade story, so the trade story was we can do better in terms of the investment story. Unfortunately, it's not as strong, so this is FDI, foreign direct investment, so you can see here basically 2003 both sides, the region's investment in Australia and Australia's investment in the region was about 2.5% of total FDI.
You can see from an Australian viewpoint, it grew to over 6%, but now in more recent times has come back to 3%. Now the region continuing to grow throughout that period in terms of the investment from the region in Australia, and it's great to see whilst in the last, in today and looking at what's going to happen over the next few days, how many Asian companies are invested in Australia and continuing to invest in Australia for a whole range of reasons. We'll talk about before. So that's a positive story, but what's not so positive is the fall out that's happened in recent years, and the question is what's going on there? How can we actually respond and how can the government respond to turn that story around?
It's particularly surprising if you look at the global Southeast Asian foreign direct investment story, which is reflecting, of course the growth that's been taking place in the region. So it's almost the inverse of the Australian story going from 3.5% to over 7%. This is all the countries in the world, this is the United States, of course, It's Japan, it's Korea and of course China. Yeah. And a lot of the development of course is reflective of that underlying growth story that we're so familiar with in the region and that export led growth, the urbanisation growth that international companies want to be a part of. So it's happening internationally, but it's not happening in in Australia. And it's particularly stark from an Australian viewpoint if we compare the 3% investment foreign direct investment in the region with where else our companies are investing and you can see for example in New Zealand, a great country actually has more investment in it than the entire Southeast Asian region from an Australian viewpoint. That does stand out as being quite unusual and quite surprising.
So it does beg the question what's happening? There's obviously a lot more we can be doing. How do we approach it and how do we address it? And it's also important to remember. As well that from an Australian corporate sector viewpoint. Australian companies have never been larger, stronger, better capitalised, more skilled and more globally competitive. Never. In the history of Australia we have never had a corporate sector. Both the public companies and the private companies who are as capable as the companies are today.
Similarly in Australia, we have a pension industry, a super fund industry that's one of the envies of the world. It's one of the largest super fund industry in the world. It's got 3 trillion dollars, $3 trillion under management, and that's expected to go to $9 trillion by the end of the period of our strategy. So we have a lot of savings looking to invest. We have a lot of companies who are capable of investing, which makes this story even more challenging when one thinks about it and that's a problem.
Now the potential we've laid out to the world is if the region as we expect to be growing by at least 4% per annum, less than it's been doing recently, so this is a conservative judgement from an Australian viewpoint, we have less than $4 billion as we saw before in two way trade that will grow to $14 billion over the term of the strategy period. So there is a lot, there's a lot of opportunity there for the Australian people and the Australian corporate sector, and of course the citizens of the Asian region and their companies to actually be going for, there's a great opportunity here.
So what were our recommendations in terms of dealing with this opportunity? Well, number one is actually what we're engaged in today and tomorrow and the next day, which is this question of raising awareness. It's great that we're having this meeting in Melbourne. Melbourne is where we have so many headquarters for major Australian companies and of course the super funds I mentioned before, a lot of them are here and a lot of them are involved in what's happening, being able to go and meet their counterparts from ASEAN countries who are here with their leaders.
It's remarkable, and it's remarkable for all of you, of course, are being here when you look at the leaders of the countries being here, the top companies in the in each of the ASEAN countries are here with their leaders. They're open for business. They're available to talk. I was talking to the CEO of a major Australian company out there and saying this is just a terrific place to be where I can meet three Prime Ministers in in two days, I could never do that being based where I am at the moment. So it's a great opportunity for all of us.
It's a great opportunity for all you as well. So raising awareness, so we have quite a few recommendations in terms of how we raise awareness, which I'll talk about in a second and the good thing is the government has already responded as I'll come back to at the end in terms of what we can do to raise awareness out there. The second thing is removing blockages between countries, there are always blockages. The good news in the Asian–Australian region, as a result of bilateral agreements and multilateral agreements, most of those blockages are minimised, so we can export goods and services with very little tariffs across the region, including Australia.
So relatively speaking compared to a lot of countries, we're in a very good position in terms of how we can grow our trading relationships. That said, we have highlighted a number of areas we can work on to actually reduce those blockages.
Thirdly, building capability. Building capability in terms of what the individuals and the organisations both in Australia and the region are capable for, a lot of that is training, of course, a lot of it is in terms of corporate capability, government capability and we have a whole range of areas where we think we can cooperate in terms of actually leveraging what we already have in place to build the capability in Australia and the region more broadly.
And lastly, deepening investment. Australia already has a very substantial investment in the region from a diplomatic viewpoint, from an Austrade viewpoint, from a long -standing development footprint, university footprint, we've got a very big government footprint in the region. The question is, how can we grow it?
And we made some suggestions how we can the government could look at investing that growth. We looked at for example universities, how do we do research in the region from financing facilities, we recommended the government to look at a finance facility to help and we also we looked at a whole range of different alternatives and we'll come to those in a second. We also looked at the priority sectors because one of the first thing you learn in business, most importantly you have to have a comparative advantage. You have to be bringing something of interest to the market.
So mostly what we do in Australia would be interesting to people in Australia, but it's not necessarily transferable into the region. It's what are the areas in the region and Australia as well where we really need something additional, and these are the categories that we've lined up which we think really do resonate both in Australia and in the region, starting off with agriculture and food.
Now historically, of course, Australia has always been a strong agricultural country, well, all the regional countries are strong as well. What we've worked on from a development viewpoint over the while actually is improving the agricultural practises and crops and what have you across the region. From a regional viewpoint, there is great ambition for further processing of Royal Commodities, so a lot of the companies we met with are buying Australian raw materials and are looking to convert it and actually sell it across the region and indeed across the world.
So I think a lot can be done in agriculture in terms of agricultural practises. How do we improve it? Secondly, how can we actually boost the productivity of the land? And thirdly, most importantly value add across it. Resources, Australia, obviously very strong country, a lot of our exports are resources related. There's great potential across the region for resource development. How do we get our major mining companies, we got some mining companies involved, how do we get our major mining companies investing in the time and the resources in this sector?
Green energy transition, we had a great session this morning on green energy transition, massive challenge for Australia, massive challenge for the region, everyone's basically signed up to be carbon neutral by 2050. That's a huge amount of investment necessary. Some numbers put it at a trillion dollars a year, so massive amounts of investment necessary in the region, we need to work together to do it. We need to get the skills, we need to develop the skilled people. Some of the estimates we've seen is 2 million people in Australia need to develop new skills to meet the transition just in terms of generation in the region. It's put at 5 million people. How are we going to develop these people? How we going to use the market regulation to actually roll out the standards, the manufacturing all those different related areas that flow through infrastructure.
Australia has long been a major infrastructure investor globally. Our investors like it, we've got the skills in terms of our engineers and our service sector. How do we work together in terms of infrastructure? We know infrastructure is absolutely essential for the development of modern economies, education and skills. We know it's our largest services export to the region. It's all about capability building, as someone pointed out earlier, there's a lot of overlap with all these areas and not free standing. If you want to develop a green energy transition, you need education to do it. A visitor economy, you need education to do it.
The two things sit together and the visitor economy, obviously it's two ways, not just people from the region coming to Australia to people from Australia going to the region. Bali is our number one destination. You probably know from an Australian viewpoint. Well, there's a lot of other great places in the region that people should be introduced to as well as Bali.
Healthcare, obviously, as everyone becomes richer, healthcare gets more sophisticated. Again, a lot we can work on. We're short again workers in the in the healthcare space. How do we work on qualifications and skills and training to develop the skills in our country and globally. The digital economy at the moment is estimated to be $200 billion a year. It's expected to go to a trillion dollars a year from 200 to a trillion massive numbers. The thing about a lot of these numbers you can be sceptical, but it seems the digital economy always outperforms on the upside in terms of the size of this opportunity. A lot of Australian companies are participating in the digital economy. But similarly, great skills and great companies are being built across the region that should be accessing Australia as well. Professional and financial services, about 8% of our economy, are very large proportion of our economy. How do we share those skills and help development? And of course, creative industries where we are very underdone on both sides.
In terms of the action we gave the report to the Prime Minister at the Jakarta ASEAN meeting in September. We're delighted when he picked it up and endorsed the general thrust of it not only endorsed it, but actually, as you can said almost allocated almost $100 million to support a number of the recommendations. Investment deal teams, $70 million, so this is dealing with the issue in whether it's an infrastructure, mining or an energy transition project.
It takes many years to come from the idea to work through the regulation, work through the capital, work through the engineering, how do we actually get there? This chicken and egg problem. The government say we will step in and help, and there are ideal teams being recruited who will be based across the region helping these deals happen.
SouthEast Asian business exchange in terms of growing awareness and one of the things we know is that if you speak to Australian senior executives, many of them have been to Israel, which is a country of 8 million people or, you know, most of it, would have been to New Zealand. You asked how many people have been to the region far, far fewer and we're delighted actually out in the marketplace, I don't know if you saw it, but Asialink, Martine and also Austrade are proposing a business mission at the moment to Vietnam, focused, of course, on the energy transition. Just one of one example we have to have many of these examples are flowing through and the government as you can see, has provided $19,000,000 to help that happening.
And finally placements and internship, a pilot program for young professionals, we spent a lot of time in our paper talking about how education is not just sitting in a classroom, it means a much bigger immersion. How do we actually have people from Australia working in the region? People in the region working in Australia working training together? How do we actually develop these hybrid courses and this hybrid skills? So we have a workforce that's able to work anywhere in the region with qualifications that will be recognised anywhere in the region. So there is three of the four recommendations the government has picked up.
The government also gave an undertaking to continue to work on the other recommendations, the other 72 recommendations, which I won't bore you with, but they're all here in this excellent publication you can read. The good news is we expect to hear from the government on further implementation of these initiatives as time rolls out.
So that's the end of my presentation. Thank you very much for being here. And for your attention, and obviously for your focus on building greater economic cooperation between Australia and the region. Thank you.