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Sydney, 6 April 2009

Address to the European Australian Business Council Policy Forum

Introduction

Thank you Charles, as Chair of the EABC Board, for that introduction.

Before I start I’d like to acknowledge the traditional owners of the land on which we meet today, the Gadigal people, and show respect to their elders past and present.

In addition, I’d like to thank the representatives from the diplomatic community here today, His Excellency Mr Juraj Chmiel, the Ambassador of the Czech Republic; and His Excellency Mr David Daly, Ambassador and Head of the EC delegation to Australia and New Zealand.

Thank you also to the members of the EABC Board and Corporate Council for coming along tonight.

I’m very pleased to have this opportunity to meet with EABC members and to say a few words about Australia’s engagement in the Pacific.  I also look forward to discussing Australia’s and Europe’s common Pacific agenda over dinner.

 I think it is useful to set out Australia’s engagement with the region generally. Particularly as it affects how Europe and Australia engage and work together in the region.

The Government has acted recently to strengthen our bonds with Europe in a practical way, launching the Australia-European Union Partnership Framework in Paris last October.  The framework sets out areas for closer cooperation between Australia and the European Union.

I am sure that, as business leaders with strong links to European markets, EABC members will have taken particular note of the strong commitment the European Union and Australia have made to strengthen the bilateral trade and investment relationship.

That commitment is backed up by our plans to enhance exchanges on energy, climate change, research, education and the movement of people.

The Government appreciates the important role the EABC plays across many of these areas and we welcome input from your members as we progress the Action Plan set out in the Partnership Framework.

Tonight, however, I’d like to make a few points about an important aspect of the framework that might not have captured your immediate attention last October – that is the clear commitment we have made with the EU to cooperate across a range of issues to achieve shared goals in the Pacific region. 

I believe that it is not just the political establishment, but also business that shares the Government’s strong interest in the further development of the Pacific region. 

Close coordination between the EU and Australia, and our respective business communities, will be a key element in achieving private sector development and trade liberalisation and facilitation in the Pacific. 

Doing so is particularly important as we strive globally to overcome an economic crisis which is placing the world’s most vulnerable populations under very considerable stress.

Partners in the Pacific

Like Australia, Europe, of course, has strong historical ties in the Pacific.  It was the Portuguese explorer Ferdinand Magellan who gave the Pacific its name, and early European exploration led to colonial and then commercial engagement of the region and political ties that endure to this day.

Many Pacific countries maintain links to Europe through the Commonwealth of Nations or as French overseas collectivities.  It is firmly in Australia’s interests that Europe remains engaged in the Pacific and that we coordinate our own policy towards this important region with European friends.

Australia’s approach in the Pacific reflects the ambitious foreign policy the Government has pursued energetically since coming to office. 

It is a foreign policy grounded in our democratic values, our respect for the rule of law both domestic and international, our tolerance and our deep-seated belief in others getting a fair go. 

Our determination to cooperate with our Pacific Island neighbours and reinvigorate our relationship and engagement with the region as a whole is based on principles of mutual respect, mutual responsibility and mutual commitment to build a better future

We also understand the need to ensure that our assistance in the region is tailored to the unique political, social and economic circumstances of individual Pacific nations.  We are establishing a series of specifically bilaterally negotiated agreements called Pacific Partnerships for Development to achieve this. 

This fresh approach has been warmly welcomed by Pacific Island Countries. 

The Partnerships commit Australia to provide new bilateral assistance over time and embrace commitments from our Pacific partners to improve governance, increase investment in economic infrastructure and achieve better outcomes in health and education.

Prime Minister Kevin Rudd signed Pacific Partnerships with the leaders of Papua New Guinea and Samoa in August 2008, and with the leaders of Kiribati and Solomon Islands in January this year.

I look forward to equally good outcomes in our Partnership talks with other Pacific neighbours, including Vanuatu, Nauru, Tonga and Tuvalu over the coming months.

The development challenge

There can be no doubt, however, that there is much work to be done; some parts of the Pacific are falling behind other developing nations, including with respect to the Millennium Development Goals.  

Sporadic economic and social gains over recent years remain vulnerable to the developmental challenges of weak governance, poverty, instability and rapid population growth.

Pacific Island countries are especially vulnerable to the current global turmoil due to their small size, lack of economic diversity and distance from major trade and commercial sectors.

I know some harbour a rather romantic vision of the Pacific as an Arcadian idyll that will escape the buffeting winds of the global financial crisis but, in truth, our Pacific neighbours face some distinct vulnerabilities at this time.

Australia is determined to help Pacific countries overcome these difficulties. 

My colleagues Simon Crean and Bob McMullan have recently returned from visits to the Pacific, where they have consulted with counterparts in Vanuatu, Solomon Islands, Samoa and Tonga on a range of trade and development issues.

 We will continue our strong engagement in the region as the global economic circumstance develops.

Global Economic Crisis

There is no question that Pacific countries have benefited from their increased engagement with the global community and international markets over recent decades. 

Health and education services, infrastructure and telecommunications have all improved through that engagement, leading to opportunities for greater development and prosperity in the region. Some countries benefit from, and depend heavily on, remittances.

But the benefits of engaging with globalisation have a downside also in that Pacific countries are exposed to risks when global markets decline. 

Many Pacific Islands have narrowly based economies, largely dependent on one or two commodities or services such as agriculture, fishing or tourism. 

Adverse impacts of the global downturn on just one of these sectors can rapidly spiral into a major economic challenge for Pacific Island countries.

Already real economic growth in the Pacific is expected to fall from 5.1 per cent in 2008 to 3 per cent this year.  Like many figures released over the course of this crisis, we should not be surprised to see them worsen over the course of this year.

The pressure on Pacific budgets is building as commodity prices drop and unemployment rises. 

This, in turn, is leading to increased strain on health and education systems and on governments trying to improve service delivery.

The UN’s recent Economic and Social Survey of Asia and the Pacific warned that social unrest and political instability were real risks for the region as the financial crisis impact on economies.

It is likely that the compounded impacts of these factors will be felt by some Pacific Island economies more than others.  We are particularly concerned about the vulnerability of Fiji and Solomon Islands.

Australia is firmly committed to developing a global response to the economic crisis through the G20. 

The recent Leaders Summit in London has delivered a global plan for recovery on an unprecedented scale.

Leaders have agreed to support emerging and developing countries by trebling resources available to the IMF, increasing lending by multilateral development banks and approving an additional $250 billion in trade finance support.

These are strong outcomes for Pacific Island countries and, as the only G20 member country from the Pacific, Australia will continue to engage closely throughout the region as we develop our approach.

In particular, we are conducting with New Zealand a joint study of the regional implications of the global economic crisis to inform discussions at the Pacific Islands Forum, which Australia will host in August of this year.

Coordinating development assistance

In the current circumstances, and with considerable economic challenges of our own, it remains essential that we not lose sight of our commitment to the Pacific.

Australia shares with Europe a strong commitment to the Millennium Development Goals and we have committed to increase our development assistance to 0.5 per cent of our gross national income by 2015.

In the Pacific Islands region, Australia’s development assistance program (of just under $1 billion for 2008-09) is broadly structured to help promote the goals of:

There can be no doubt that the global economic crisis has the potential to impede the Pacific region in its progress towards the Millennium Development Goals.  This means that now, more than ever, donors and Pacific Island Countries must work together to ensure better use is made of development resources in the region – both aid and the Pacific states’ own resources. 

As the region’s largest donor, we have committed to strengthening development coordination in the Pacific, and our Partnership Framework with the European Union is an important step in this effort to hasten development. 

The aim is to develop common and complementary aid methods and to agree on a division of labour which avoids duplication of effort and allows each of us to play to our strengths in delivering aid.

Later this year Australia will host the Leaders meeting of the Pacific Islands Forum.  As host and Chair of the meeting we will be working to ensure a strong focus on development coordination in the region, including with the EU.

Already we are involved with the EU on a range of important projects across the Pacific. 

In Vanuatu, for example, the EU built an impressive new tourism and hospitality school for the Vanuatu Institute for Technology which is used by the Australia-Pacific Technical College to provide professional training in commercial cookery to students from around the region. 

In Solomon Islands, we’re working with the EU and the Asian Development Bank on implementing a national transport plan.

And the European Union and Australia have both supported Solomon Islands in establishing a Truth and Reconciliation Commission following the riots and the loss of life preceding RAMSI’s intervention.

Economic development through trade liberalisation

In the belief that development assistance alone is not sufficient to help improve the long term economic outlook for Pacific Island countries, Australia and New Zealand have given a high priority to greater trade and economic cooperation and integration with our Pacific partners.

Our aim is to secure greater regional economic integration in a way that promotes the sustainable economic development of Pacific Island countries and aids their gradual and progressive integration into the international economy. 

In total, Pacific Island countries maintain a goods and services trade surplus with Australia and are therefore well-placed to benefit from further trade liberalisation. 

As you know, Australia is working towards a successful conclusion to the WTO Doha Round. 

It would send a powerful global message about the importance of free trade, and it would deliver sizeable gains to developing countries around the world, including the Pacific Island countries that are members of the WTO.   

We’re working through the WTO, of course; but, in addition, our free trade agenda seeks to maximise the benefits of trade in the Pacific by putting in place a new  agreement.

This prospective agreement is known as the Pacific Agreement on Closer Economic Relations (PACER) Plus.

 Pacific Islands Forum Leaders expressed strong support for greater regional trade and economic integration, as well as a road map for prospective PACER Plus negotiations, at the Forum meeting held in Niue last year.

At the Pacific Island Forum Leaders meeting this year we expect that Leaders will revisit prospective PACER Plus negotiations.  Australia supports a decision to commence the negotiations from August 2009. 

We are determined that PACER Plus will take account of the individual circumstances of Pacific Island countries and have a strong development focus.

We are also working with Pacific Island countries as they bid to join the WTO. 

Last week Simon Crean signed a market access agreement with his Samoan counterpart which takes into account special WTO guidelines for the accession of Least Developed Countries and will take effect when Samoa joints the WTO.

We also continue to engage with Vanuatu as they progress towards WTO accession.

Pacific Island countries have already reaped the benefits of aviation deregulation for tourism; and deregulation of telecommunications is bringing down the costs of mobile telephony across the region.

We believe enhanced trade liberalisation through the negotiation of PACER Plus will bring further significant benefits to the region in the longer term. 

Role of Private Sector development

Opening up trade opportunities to the Pacific is important. A strong, vibrant, efficient and effective private sector in the region is needed for opportunities presented through processes like PACER plus, to find fruition.

Doing business in the Pacific is obviously challenging even before facing the business and investment environment. Communication, transport and logistics in a region as remote and spread out as the Pacific, will always come with some fixed transaction costs.

The more that can be done to improve the enabling environment for business and reduce unnecessary transactions costs for business, the better.

Over the long term getting the balance and relative strengths of the public and private sectors in the Pacific right, is important for the region itself. Both help to reinforce governance, sustainability, employment, growth and long term stability in the region.

 Australia has acknowledged the importance of private sector development and importantly the business enabling environment in the Pacific as a priority and is working closely with both the Asian Development Bank and World Bank in this regard. The European Investment Bank also has a substantial presence in the region. It is true to say that no country has ever lifted itself out of poverty without a strong and vibrant private sector.

To this end, I would encourage the EABC as well as Australia's own Pacific business councils to actively promote and get in behind initiatives such as the ADB's private sector development initiative, the IFC's  Private Enterprise Partnerships for the Pacific, and AusAID programs including the Enterprise Challenge Fund.

I am confident that private sector participation in such initiatives will see business in the Pacific emerge as efficient, competitive and globally focused.

Political stability and economic development

Strengthening democracy in the region is another shared priority and the EU, like Australia, has been active in encouraging a return to democracy in Fiji. 

The EU has sent a clear message by implementing travel sanctions against Commodore Bainimarama and members of the Interim Government, and by suspending assistance to the sugar industry. 

As I’m sure you will agree, political instability is bad for business and bad for economic development.  We are working with the EU and our Pacific partners to ensure a prosperous and stable future for the people of Fiji.

Not withstanding our political disagreements, Australia wishes to strongly support the people of Fiji and the countries ongoing stability as an important economy in the region.

Evidence of this includes our humanitarian assistance during recent floods and our ongoing aid program to the country.

As well we stand ready to assist the Presidential Political Dialogue Forum, provided that it establishes its credibility by demonstrating that it is genuinely independent and inclusive, proceeds within a reasonable time frame, and is not subject to predetermined outcomes.

Conclusion

I’ve touched on the importance of improving development coordination in the Pacific.  But we are also working together with the EU to improve fisheries and forestry practices in the region, to raise human rights awareness and to promote efficient and sustainable energy use

As you can see, then, we have an ambitious agenda in the Pacific.  I am confident our prospects for success in pursuing this agenda are bolstered by our active engagement and partnership with Europe.

Once again I welcome the European Australian Business Council’s interest in Pacific affairs and look forward to further discussions over dinner.

Thank you.

Media inquiries: Mr Kerr's office - 02 6277 4991

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