THE MEKONG BASIN - POISED FOR TAKEOFF?

Address by The Hon Alexander Downer, MP, Minister for Foreign Affairs, to the Australian Institute for International Affairs, Canberra, 19 June 1997.

Members of the board of the ACT Branch of the Australian Institute of International Affairs, distinguished members of the diplomatic corps, colleagues and guests.

It is always a pleasure to address the Australian Institute of International Affairs. It provides an important forum for discussion of Australia's foreign policy directions.

I have stated on many occasions that this Government's highest foreign policy priority is closer engagement with Asia as we recognise the profound benefits which flow from our deepening relationships there and from the realisation of our mutual interests.

Within Asia, the Mekong Basin region includes an intriguing mix of vibrant and still emerging economies. Burma, Cambodia, Laos, Thailand and Vietnam as well as China's Yunnan Province are at different stages of development but they all share the ambition of achieving the sustained high growth associated with East Asia generally.

I want to look first today at the Mekong Basin's potential for rapid economic growth, as well as Australia's extensive involvement in the region's development.

Second, the capacity for the region's development as a whole will depend on the performance and stability of the individual countries which make up the Basin. I particularly want to look today at the countries which I will be visiting before too long: Cambodia, Laos and Vietnam.

No consideration of the Mekong Basin would be complete, however, without looking at the difficult situation in Burma. Sadly, the ongoing intransigence of the military junta continues to cripple its chances of moving forward confidently as a welcome and prosperous member of the region.

The Mekong Basin - Poised for Take-off?

The vast Mekong River stretches 4,200 kilometres from China's southern province of Yunnan to the South China Sea, passing five South-East Asian nations. The Basin region comprises 2.3 million square kilometres with a population of nearly 240 million people. That makes it comparable in size to the European Union.

Decades of conflict have, however, forestalled the economic cohesion which might otherwise have been expected between countries connected by such a mighty river. However times have changed for the Mekong Basin. Peace has come to Cambodia, Laos and Vietnam. Market-based policies are increasingly the norm. In recent years the countries of the sub-region have increasingly embraced free market policies and become more active players in key regional institutions.

The Mekong Basin is now poised for take-off.

The Asian Development Bank estimates that in less than 15 years the Basin could increase its average per capita income level from the current AUD800 to nearly AUD3000, or around twice the level Indonesia now enjoys.

The Mekong Basin region has all the hallmarks of a successful sub-regional growth area. It has strong complementarities in natural resources and labour. It is rich in timber, oil and gas, water for hydropower generation. It has huge labour reserves. Most importantly, it has the advantage of close proximity to the high growth economies of North and South East Asia. Provided political stability can be sustained, I believe that the next few years will see significantly increased economic integration not only between the countries of the Mekong Basin themselves, but between those economies and the rest of the region.

Moreover, ASEAN's decision to admit Burma, Cambodia and Laos to membership this year, following Vietnam's entry in 1995, has realised the long held aspiration to unite the ten South East Asian countries in one association. We very much hope the influence of the existing ASEANs will help provide the countries of the Mekong basin with the long-needed security and stability to enable them to focus on economic and social development.

What Australia is Doing to Help Realise This Potential

I need hardly point out that these developments also open up tremendous opportunities for Australia. It is my strong hope that, as the Mekong Basin region develops, Australia's commercial links with the region will develop apace to our mutual benefit.

Australia has long recognised the Mekong's potential. We have a proud record of working with these countries, both individually and, in cooperation with other industrialised countries, to develop the Mekong Basin as a whole.

Between 1975 and the end of 1998, Australia will have delivered over AUD 2 billion in development assistance to these countries, directed to key regional and national needs. This makes Australia one of the major contributors to the region's development.

Australian aid flows to the five countries of the lower Mekong in 1997-98 will be about AUD 140 million, some 10 per cent of Australia's total aid for the year. Indeed, in recent years, we have been the third largest donor to these countries behind Japan and the European Union.

This assistance is, of course, only a fraction of the public and private sector flows required to sustain growth rates that will be necessary to reduce poverty and inequity in these countries. The private sector will necessarily have the central role in capital formation, especially for physical infrastructure. But the role of Government will also be pivotal, particularly in relation to the formation of human capital, enhancing institutional capacity and the establishment of social infrastructure.

Let me give you an excellent example of the tremendous impact our aid can have.

Cambodia's years of strife had meant it had not, since the 1970s, been able to produce enough rice to feed itself . In 1995 Cambodia became a rice exporting nation once again. A major contribution to this turnaround came from the AusAID sponsored Cambodia-International Rice Research Institute -Australia Project.

The project, begun in 1986, saw Australian scientists developing higher yielding rice varieties more resistant to disease. These varieties were, in fact, based on original Cambodian rice samples held in the Institute's gene bank for decades.

Australia has also been deeply involved in assisting the Mekong Basin as a whole through a number of important regional development processes.

One of our longest established links as a donor has been with the Mekong River Committee, established in 1957 to oversee water resource development projects. Since 1995 Australia has also worked closely with its successor body, the Mekong River Commission which aims to promote sustainable and equitable development throughout the Basin.

Australia has committed nearly AUD 1 million to a strategic liaison between the Mekong River Commission and the Murray Darling Basin Commission which will enable the Mekong countries to avoid many of the environmental problems Australia has experienced.

Also AUD 1.7 million will go to a major project installing an up-to-date network of water monitoring equipment along the river and its tributaries. Associated training will enable the Commission to enhance considerably its monitoring and forecasting capabilities.

Australia has also just completed a major telecommunications study, at a cost of AUD 0.5 million, as part of the Asian Development Bank's Greater Mekong Subregion Program. This study is now the foundation for the emerging telecommunications network in the Mekong.

Most recently, ASEAN countries themselves have recognised the imperative for development in the region and its massive potential. At the ASEAN Leaders Summit in December 1995 Singapore's Prime Minister Goh Chok Tong announced a plan, based on a Malaysian initiative, for an ASEAN co-ordinated Mekong Basin Development Cooperation initiative.

The first project in this initiative is an ambitious trans-Asia railway project starting from Singapore and running through Malaysia, Thailand, Laos, Cambodia and Vietnam to China. Other infrastructure areas identified for development include telecommunications, irrigation and energy. The initiative will also look at agricultural production, sustainable forestry and mining and human resource development.

Australia welcomes ASEAN's commitment to this project, and looks forward to close involvement in it, in view of our long record as one of the major donors to the region.

Private Sector Investment Vital

I noted earlier that the involvement of the private sector would be crucial to the development of the region's much-needed physical infrastructure. Much of our aid program's activities are directed at enhancing the attractiveness of the developing countries of the region to private sector investment.

The Asian Development Bank has identified 100 priority projects in the Basin which will require investment in the order of $40 billion. The lion's share of this amount will clearly have to come from foreign direct investment.

Australia's long and distinguished involvement in the development of the region means the Australian private sector is well-placed to capitalise on these commercial opportunities . The respect and reputation we have earned over decades translates directly into goodwill towards Australian business.

And our business strengths are complementary to the needs of the region. The Australian private sector has a high profile in infrastructure development and a reputation as a reliable, high quality partner in mining and agricultural development.

Australian expertise made possible the first ever bridge over the Mekong River, joining Thailand and Laos. We will also be building the second such bridge, the My Thuan Bridge in Vietnam.

Since 1986 Telstra has been closely involved with Vietnam's telecoms agency, VNPT, in developing Vietnam's domestic and international voice and data services, partly by installing an undersea optical fibre cable linking Thailand, Vietnam and Hong Kong. Testra's work is a good example of the way in which Australian technology can contribute directly to both economic prosperity and regional integration.

The private sector is also reaching out to take advantage of new opportunities offered by the efforts of regional countries to integrate large scale development projects in the Mekong Basin. The Australian International Projects Group, an association of many of Australia's most experienced companies set up specifically to integrate bids for large scale infrastructure projects, is putting together a group of companies with strong interest and experience in the Mekong region. Working closely with my Department in Canberra and Australian missions overseas, this group will seek to maximise Australian involvement in major Mekong Basin projects.

Australia is, of course, also involved in many smaller industrial activities, hotel and tourism development, agriculture and cooperation in education and training throughout the Mekong Basin region.

I will, therefore, take this opportunity to recommend to Australian companies, whether they're yet involved in the region or not, to get hold of a copy of my Department's new study on four of the six Mekong riparian states. Entitled The new ASEANs: Vietnam, Burma, Cambodia and Laos, this latest excellent publication by the East Asia Analytical Unit will be launched tomorrow in Melbourne by my colleague, Mr Fischer.

PART TWO: Cambodia, Vietnam and Laos

Given the positive prospects for the development of the Mekong Basin, it will come as no surprise to you that I intend visiting a number of countries in the sub-region in the near future. I have already, of course, visited Thailand and Vietnam.

Whether the region realises its potential will, of course, depend ultimately on the economic prosperity and political stability of the Basin's constituent countries. I would like, therefore, to take this opportunity to set out our views on three of the key Mekong States - Cambodia, Laos and Vietnam.

Cambodia

The plight of the Cambodian people during the Khmer Rouge years moved the Australian people deeply. Australia played a vital role in the Cambodia Peace Accords and in the United Nations force, UNTAC, which gave Cambodia the chance to make a new start after more than 20 years of conflict.

It is a major achievement that the Khmer Rouge no longer represents a real threat to national security. Cambodia, after so many years of war, is entering into a period where demilitarisation is possible and where the Government can concentrate its energies on the difficult task of rebuilding a robust civil society.

Cambodia has made solid progress down that track with the support of the international community. In the last five years, economic growth has averaged between 6 and 7 per cent, and inflation is largely under control. But there is still a long way to go.

It would be a major setback for both Cambodia and for the region as a whole if Cambodia's progress to date were jeopardised by the present breakdown of cooperation between the coalition partners in the Royal Government. This has unfortunately paralysed the National Assembly, and held up the passage of much important legislation, including the basic legal framework for the 1998 elections.

At the same time the rising tide of political violence, appallingly demonstrated by the grenade attack on a peaceful demonstration in Phnom Penh on 30 March, is a clear threat to Cambodia's stability.

It is vital that Cambodia holds peaceful elections as scheduled in 1998. Otherwise, the achievements of the Paris Peace Accords could be put at risk. The very considerable economic and social gains that have been made since the election of 1993 could be undone. I firmly believe that the rule of law must be firmly established to provide the necessary basis for effective and sustainable development.

I therefore urge Cambodian leaders to pursue a course of reconciliation and compromise in order to ensure a stable and peaceful political future for their country. I have no doubt that if Cambodia is able to achieve political stability it will have a bright economic future.

Australia remains strongly committed to assisting Cambodia to build a strong democracy. A key element of that process is restoring and rebuilding the country's former institutions. An important priority in our aid program is therefore the promotion of good governance and institution building. I recently announced a commitment of up to AUD 0.5 million to support preparations for elections in 1998 as part of our efforts to encourage Cambodia's efforts to develop a robust democracy.

Other sectors of our aid program to Cambodia include education and training, health, agriculture, and support for the reconstruction of basic infrastructure. Since 1992, total Australian aid flows to Cambodia have amounted to AUD 135.2 million. This includes expenditure in 1996/97 of AUD 30.5 million.

Australian companies like the Snowy Mountain Engineering Corporation, or SMEC, P & O, BHP, the Henry Walker group and Stanhill Engineering have a presence in Cambodia and are playing an important role in the development of infrastructure and industry. Telstra has been largely responsible for the re-establishment of Cambodia's international and domestic telephone services.

The years of war left Cambodia a terrible legacy of minefields which continue to maim and kill its population. Between 1993 and 1998, Australia has committed AUD 13.45 million to the operational costs of the Cambodian Mine Action Centre or CMAC. In addition, we have provided a total of AUD 1.0 million for mine detection equipment and AUD 5.3 million to support NGO projects in de-mining and rehabilitation of mine victims.

Vietnam

To turn to Vietnam, this country is now emerging as an important bilateral partner for Australia and a potentially significant player in regional economic, political and security arrangements. As we approach the 25th anniversary of diplomatic relations between our two countries, I wish to put on the record that the Australian government greatly values its relationship with Vietnam and particularly the way this relationship has developed over the past year.

Ministerial-level visits in both directions over the past year have added an important personal dimension to the bilateral relationship. This will be my second visit to Vietnam as Foreign Minister. It follows successful visits by my ministerial colleagues, the Deputy Prime Minister, Mr Fischer, and Minister for Veteran's Affairs, Mr Scott, in August last year. The visits by those Ministers and a group of Vietnam veterans to the site of the battle of Long Tan reflected an understanding between myself and the Vietnamese Prime Minister in our first meeting that such a visit would help heal the wounds of the past and strengthen the friendship between our two countries.

I also had the pleasure of hosting a visit to Australia by my Vietnamese counterpart, Mr Cam, in February this year.

Australia and Vietnam enjoy a dynamic commercial relationship. Two-way trade between Australia and Vietnam has expanded rapidly in recent years totalling around $600 million in 1996. Australian investment in Vietnam is also approaching the $1 billion mark.

There are over 100 Australian companies represented in Vietnam. They operate in sectors as diverse as banking, legal services, agriculture, building and construction, telecommunications, food processing and mining.

Australia has a long-standing commitment to assisting Vietnam's economic and social development. We are providing over $60 million in aid to Vietnam this financial year with major projects covering education and training, health and infrastructure development.

Australia's relationship with Vietnam has also expanded to embrace a common interest in regional political developments.

I am particularly pleased that during the last year we have developed a human rights dialogue with Vietnam which is constructive and practical, and which makes an effective contribution to institution building and good governance. In the spirit of this new cooperation, I recently met in Canberra with representatives from the Ho Chi Minh National Political Academy who were visiting Australia as part of their Australian Government funded training course on international law and human rights.

As a relatively new member of ASEAN, Vietnam has an increasingly important role to play in regional affairs. We will continue to work closely with Vietnam on a range of regional and global issues such as regional security, AFTA-CER linkages and the development of regional institutions such as the ARF.

Laos

Although a much smaller player in the region, Australia also enjoys a close and productive relationship with Laos. Our bilateral relationship has been built on more than forty years of unbroken diplomatic ties, a high profile program of bilateral aid, high-level official visits and expanding commercial relations.

Laos has perhaps been least exposed to date to the forces accelerating development in the region. Its population is small, but it has substantial untapped natural resources. It will, however, continue to need foreign assistance and foreign investment to develop.

Australia has made a strong contribution to the development of Laos. This Government has exceeded the aid pledge to Laos made in 1994 by the previous Government. Over the four years from 1994, I expect to provide almost $70 million in development assistance to Laos.

This Government has also taken a leading role in funding demining activities in Laos. In May 1996, as part of a $12 million initiative to help rid the lower Mekong basin of landmines and unexploded ordinance, I announced the grant of $900,000 for a Trust Fund in Laos for these demining activities. Australia is one of the largest single donors to unexploded ordinance activities in Laos.

Since the introduction of the new economic reforms in 1986, the Lao Government has achieved substantial progress in transforming a centrally planned economy into a market based economy. A market based price system has now been implemented, the currency floated, foreign investment regulations are among the most open and the region, and trade barriers are low.

Recognising Laos's forward progress, Australia is the fifth largest investor in Laos and a number of major Australian companies are working on major infrastructure projects. As the economic reform process gathers pace in Laos, new opportunities will be opened up for Australian companies.

PART THREE: Burma

I said at the outset that no examination of the Mekong Region's prospects would be complete without looking at Burma's somewhat anomalous situation. Let me now say, with considerable regret, that Burma cannot be regarded in the same way as other countries of the region.

I have repeatedly and consistently spelt out the very real concerns Australia has on the political and human rights situation in Burma, where the State Law and Order Restoration Council - the SLORC - continues to oppress the country with a harsh and arbitrary rule.

Australia discontinued bilateral development assistance to the Government of Burma after the ruthless crackdown of 1988 which left thousands of people dead. The Government has also imposed a ban on defence exports and defence cooperation and adopted a policy of neither encouraging nor discouraging trade and investment with Burma in response to the SLORC regime's failure to recognise the results of the 1990 election.

The Government is always looking for new opportunities to advance our interests in Burma. Some people argue that the Government should follow the United States and impose sanctions on new Australian investment in Burma. Let me assure you that we have looked long and hard at the sanctions option. But ultimately we have decided that Australia's investment in Burma is so small that such a move would have no practical impact on the situation in Burma.

I do see an opportunity for regional diplomacy to bring change to Burma. ASEAN policy is, of course, a matter for ASEAN member countries. But I will continue to encourage them to give real effect to their "constructive engagement" policy by using their new relationship with Burmese leaders to express the very real concerns that I know they have about the human rights situation in Burma.

Let me reiterate, however, that in the eyes of Australia and many others, ASEAN membership will not legitimate the SLORC nor pardon their oppressive rule.

Without change, Australia cannot in good conscience treat Burma in the same way it does the other countries of the Mekong Basin. I look forward to the day when a real and positive change in the SLORC's approach to political reform and human rights will allow a change in our policy, so that, through development assistance programs and trade and investment, we can assist the people of Burma to raise their standard of living.

The people of Burma deserve to share fully the economic rewards of growth and development in the Mekong basin region.

Conclusion

To conclude, I would like to emphasise that the extent of our involvement in the Mekong Region, in addition to benefiting the peoples of the region considerably, has the potential to reap further rich rewards for Australia. Australia welcomes the countries of this sub-region's increasing economic and political integration into South-East Asia and the region more broadly.

We may have some concerns about potentially destabilising developments in particular countries. We are nonetheless very hopeful that the region's steady progress towards greater wealth will not stall and, ultimately, will be reflected in all the countries of the Mekong Basin.

A potential market the size of Europe which looks set to embark on rapid growth like that of its East Asian neighbours, will provide many opportunities for Australians and Australian business.

This is just one of the reasons why I will continue to emphasise that closer engagement with the region is Australia's most important foreign policy priority.

We would not have it any other way.

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