AUSTRALIA AND THE NETHERLANDS - INVESTING IN THE FUTURE

Address by the Hon Alexander Downer, MP, Minister for Foreign Affairs, to Australian Business in Europe, Amsterdam, 28 January 1997

UNDER EMBARGO UNTIL 2230 [CANBERRA TIME] TUESDAY 28 JANUARY 1997

. This is my first official visit to the Netherlands as Australia's Minister for Foreign Affairs

- I am delighted to address a group of business people with a committed interest in the future of Australian-Dutch and Australian-European commercial relations

. ABIE is a valuable networking vehicle for Australian business people and I am delighted to see it and other Australian business groups working so effectively throughout Europe

. From my perspective ABIE is an important forum. ABIE not only advances Australia's trade and investment interests, but also works to raise Australia's national profile

. ABIE's investment seminar in Amsterdam last March, for example, was important in generating greater awareness of investment opportunities in Australia

- And the Dutch Foreign Trade Minister, Mrs van Dok, did Australia a great favour when she presented her positive impressions of her visit to Australia to an ABIE luncheon in Rotterdam in August last year

Australia and the Netherlands: Important Economic Partners

. The new Australian Government recognises that it is crucially important for Australia to maintain and build closer relations with its key European partners like the Netherlands

. Australia, like the Netherlands, is a country which has global interests in addition to the strong interest we have in the future of our own region, the Asia Pacific

- We pursue our foreign and trade policies in ways that maximise our national interests

. One of the reasons that I am in the Netherlands is for our regular half-yearly discussions with the EU President

- We value highly this opportunity to exchange views on developments within the EU and on global issues

- For its part, Australia brings to these meetings our perspective on developments in the fast growing Asia-Pacific region

. As most of you will be aware, Australia has very important commercial interests throughout Europe

- These were laid out in a comprehensive report on the Australia-EU commercial relationship prepared by my Department last year

. The study highlighted just how significant the relationship is for the Australian economy, for Australian jobs and for the living standards of ordinary Australians

- If you have not yet seen this publication, I commend it to you

. Today, however, I would like to focus on Australia's strong and growing commercial relationship with the Netherlands

. The Australia-Netherlands relationship is underpinned by a long history of people-to-people contacts

- In the years after World War II, Australia welcomed thousands of Dutch migrants and they have made a substantial economic, social and cultural contribution to modern Australian society

. Well before the first British settlement of Australia, Dutch sea captains had acquired a remarkably good knowledge of the western part of the continent which they called New Holland

. This month Western Australians celebrated the 300th anniversary of the European naming of the Swan River and Rottnest Island by the Dutch explorer Willem de Vlamingh

- His Royal Highness, The Prince of Orange, attended these Tricentennial Celebrations as a guest of the Western Australian Government

. As luck would have it, the first impression of these Dutch sea captains was not favourable. They saw little in western part of the Australian continent to attract trade, settlement or further voyaging

- so they stopped their exploration just where they should have pressed on - to the more hospitable south eastern part of the continent

. By the end of the 17th century the Dutch sea captains had made up their mind about New Holland. There was no profit to be made there. Sadly for them they were wrong

. Today the Netherlands is a significant trading partner for Australia

- Our sixth largest in the EU, and our twenty first largest overall

. Commodities, like coal, are still the mainstay of Australia's exports to the Netherlands, although exports of services and manufactures are increasing significantly

- For instance, it is Australian software which now manages air traffic control at Amsterdam's Schiphol airport

: and Dutch banks and supermarkets are using PIN pads and smart cards developed in Australia

. Another example is the Red Earth company which produces and retails cosmetics made from natural Australian ingredients

- Red Earth opened its first European outlet in Amsterdam two years ago, and the company has been very successful

: so successful that new Red Earth shops are now springing up throughout the Netherlands

. Trade flows between our two countries are very significant

- but it is the two-way investment relationship which has become the dominant element in our commercial partnership

. Dutch investment in Australia has more than trebled since 1985 and preliminary figures for 1995/96 show that total Dutch investment in Australia has reached almost $12 billion

- Most importantly, some $8 billion of this was direct investment

. The Netherlands is now Australia's fourth largest investor. It is Australia's second largest European source of direct investment

. The acquisition of TNT Limited by KPN is but the latest example of Dutch companies establishing a major stake in the Australian economy in recent years

- KPN will join companies like Shell, Unilever and Philips, which have been established for a very long time in Australia

: In fact more than half of the Netherlands' top twenty companies are now doing business in Australia [NB. Source: Dutch Business Magazine, FME]

. The success of these companies highlights the fact that Australia has a great deal to offer European businesses

. Opportunities continue to abound, and Dutch companies are actively exploring them

- Schipol airport, for example, recently joined a consortium including the Commonwealth Bank of Australia to bid for Australian airports when they are privatised

- Companies such as Philips have positioned themselves to share in the commercial opportunities of the Sydney Olympics in 2000

. While not quite on the same scale, Australian investment in the Netherlands is by no means insignificant

- The Netherlands is second only to the UK as a European destination for Australian foreign direct investment. Preliminary figures show that Australian companies invested more than $1 billion in the Netherlands last financial year

. Through their investments here in the Netherlands, Australian companies like Boral, Goodman Fielder, Western Mining and Mayne Nickless have made a strategic decision to make the most of opportunities emerging from the European Single Market

- These Australian companies have approached their objective with purpose and imagination, coupled with a strong local presence

- They have identified the advantages of doing business in the Netherlands - its central geographical location, solid infrastructure, and its logistical and distribution expertise

. The increasing globalisation of Australian companies is, in large part, a reflection of the changes that taken place in the Australian economy

- The Australian economy continues on the path of reform and as a result is becoming stronger and more outward looking

. The Australian Government is committed to keeping the Australian economy on this path

Australian Economic Policy

. At the heart of Australia's economic strategy is a commitment to increase domestic savings by raising public savings. The rationale for higher savings is to achieve a higher speed limit for economic growth over the long term without the constraints of rising current account deficits and inflation

. Achieving this goal, while maintaining low inflation, will progressively produce a climate for low real interest rates, which in turn will stimulate investment

. Together with our fundamental labour market reform this is forming the basis of a change in the composition of the Australian economy. What we are already beginning to see is a shift in our resources to the production and sale of more exports

- In short, a leaner, more competitive domestic economy is making Australia a better, more competitive exporter

. Apart from moving decisively in our first year of office to cut Australia's underlying budget deficit and taking steps to ensure the budget is balanced by the end of this Parliamentary term

- the Government has a very strong microeconomic reform agenda, that will push aside inflexible and inefficient work and business practice

. We aim to establish a more flexible labour market, reduce the burden of regulation and paperwork for business - particularly small business - and to improve efficiency in the provision of infrastructure services in areas such as the waterfront, aviation and energy

. As you know, the Australian economy has consistently outgrown those of other industrialised economies

- In the last financial year, the Australian economy grew by 4.1 per cent, around double the OECD average rate

- and at a forecast 3.5 per cent, growth will remain at the stronger end of OECD growth in 1996-97

. The fundamentals of the Australian economy remain very sound

- investment growth is likely to be around 14 per cent in 1996/97

: reflecting high levels of capacity utilisation, confidence about future business conditions and profits

- the current account deficit should fall as a share of GDP to 4 per cent or around $20 billion in 1996-97

: and we should see a continued improvement in the terms of trade

- employment should continue to pick-up through this financial year

- and the underlying inflation rate is forecast to be 2_ per cent in the year to the June quarter 1997

. The Government's economic reforms will enhance Australia's competitiveness further

- and will make Australia a more attractive investment destination

. Australia's resources and farm sectors are not the only areas where we are world-class competitors

- Australia is now a much better prospect for those looking to invest and develop joint ventures in manufacturing and services

. The upshot of the Government's economic reform process is that our export performance - to Asia in particular, but also to the world - will be strengthened substantially

Australian Trade Policy

. Let me now make some brief comments about Australia's approach to trade liberalisation

. Australia now has one of the most open economies in the world and, as a global trader, we are particularly concerned to see that global trade liberalisation is not de-railed by new preferential, and hubs and spokes arrangements

. Through APEC, Australia is pursuing regional trade liberalisation in accordance with the free trade commitments agreed by the region's leaders in 1994 - that is, that APEC would achieve free trade by 2010 for developed countries and 2020 for developing countries

- The APEC agenda is for this to occur on the basis of open regionalism

. Beyond this, APEC is pressing for the most ambitious possible global trade liberalisation through the World Trade Organisation

- We would therefore hope that the EU, as one of the world's leading trading groups, would also fully support the call for the most ambitious possible global trade liberalisation

- This would moderate the threats that some have identified to the integrity of the multilateral trading system from the proliferation of regional free trade arrangements

Australia - a Competitive Base for the Asia-Pacific region

Ladies and gentlemen,

. Australia's strong economic and personal ties in the Asia-Pacific means that Australia is an attractive option for European companies looking to expand their operations in the region

. Dutch companies, like Shell, Philips and ABN-AMRO, already use Australia as a regional headquarters or as a management operation and as a base for exports to the region

- Others like Unilever base their research and development operations in Australia

. They have identified numerous key factors in deciding to operate in Australia

- its well developed information technology and telecommunications infrastructure

- its strong skills base and familiar legal and accounting systems

- its attractive, safe, low cost living conditions

. I'm also sure that companies like these recognise - as Mrs van Dok pointed out in her address to you last August - that "Dutch and Australian business people understand each other"

. The Netherlands and Australia have great potential to build on our already strong and growing partnership, by fully utilising each others' knowledge, expertise and strengths

. For Australia and the Netherlands investing and doing business in our respective regions makes more than just good business sense

- it is an investment in our future prosperity