Australia and Malaysia: An Enduring Relationship

Address by the Hon Alexander Downer, MP, Minister for Foreign Affairs, to the Australia-Malaysia Business Council Dinner
Melbourne,18 March 1999

(Check Against Delivery)

Ladies and Gentlemen.

It is a great pleasure to be here this evening. The Australia-Malaysia Business Council has done a great deal to promote linkages between our two business communities. Forums such as the Council add real depth to our bilateral relationship and provide a mechanism to ensure that ties between our two countries remain strong in good times and bad.

Of late times have been less good. The regional economic crisis has raised, in particular for the business relationship, a number of challenges. But this first national forum for the Australia-Malaysia Business Council is an excellent opportunity to discuss these challenges and to formulate strategies to deal with them.

I congratulate the AMBC on bringing together so many key participants from the business sectors in both countries. It is clear that our business communities are determined to maintain the strength of the relationship, and are committed to expand it with new ideas and fresh partnerships. The Australia Malaysia Business Council and its Malaysian counterpart have each helped to keep our relationship fresh and lively in what have been difficult times.

A challenging time for business

Of course, no one here needs me to tell them how challenging the last 18 months have been. The region has been hit by its worst economic crisis since World War II. Economic growth in the region has plummeted and with it has gone much of the confidence and dynamism that, over the last decade characterised the Asian economic powerhouse.

Despite some encouraging signs of stabilisation in some of the crisis-afflicted economies in East Asia, the prospects for an early recovery in the region as a whole remain subdued. While a return to positive growth in 1999 is possible for some economies, it could take up to five years for the region to return to pre-crisis levels of economic output.

Put simply, substantial overcapacity in many sectors (including manufacturing and property development), the high cost of financial sector restructuring, and the general weakness of the corporate sector are not problems which can be solved overnight.

The Malaysian economy has unfortunately not been able to quarantine itself from the regional financial contagion. For the first time in 13 years the Malaysian economy is in recession. Economic and a degree of political uncertainty in Malaysia have caused business to reassess and refocus their strategies.

Malaysia's economic difficulties have unsurprisingly had an impact on the Australia-Malaysia business relationship. Australian companies which have long had a strong presence in many sectors, but particularly in the construction and property sectors, have been affected by the downturn.

A relationship of enduring strength...

I am well aware that all of you, and your partners in Malaysia, have been striving to respond quickly to the changed situation, to sustain existing operations and to seek ways of expanding trade and investment links in the new economic climate. I am confident that these efforts will bear fruit in due course.

And the reason for my confidence is the underlying strength of the ties between our two countries - and our business communities - which continues to see us enjoy to enjoy a productive and profitable bilateral relationship despite the economic and political uncertainties of recent months.

The bilateral trade and investment relationship has a solid foundation and has produced sustained growth over the past decade, quadrupling during that period. Malaysia is still Australia's third largest trading partner in ASEAN, and our 13th largest partner overall. And while short to medium term prospects are somewhat uncertain, the long term outlook remains good.

Although some Australian companies are reassessing their operations in Malaysia, most are committed to remaining active in the country, reflecting their confidence in Malaysia's medium to long term prospects. And the recent announcement by Pioneer International of a fifty per cent joint venture deal with Sungei Way Holdings last year is just one example of the fact that opportunities for profitable cooperation continue.

My message for Australian businesses has been that those companies who do not cut and run at the first sign of difficulty but who choose to stay for the long haul will be rewarded for their foresight. The East Asian economies will recover and that recovery will bring with it a more open, flexible and transparent economic and political situation. Such a change can only strengthen the business environment. It is much easier to participate in the upswing if you have remained in the market . Those companies who have pulled out will find it much more difficult to regain their foothold in the region when the good times return.

Indeed it is a testimony to the depth and maturity of our bilateral relationship that new and diverse avenues of cooperation continue to emerge. Earlier this month we saw the signing of a Memorandum of Understanding between the NSW Rural Fire Service and its Malaysian counterpart the Fire and Rescue Department of Malaysia. This important initiative emerged from Australia's interest in assisting Malaysia and other ASEAN regional countries to improve their capacity to prevent any recurrence of the smoke haze which affected the region in 1997.

The visit to Australia by the Malaysian Minister of Education Najib Tun Razak in October last year in conjunction with the Interact Multimedia Festival here in Melbourne provided an excellent opportunity for Australian business to further explore opportunities emerging from the Multi-media Super Corridor initiative. The business linkages and partnerships to emerge from that visit demonstrated the continuing potential for cooperation in information technology.

Next month's proposed visit by the Minister for Energy, Telecommunications and Post, Datuk Leo Moggie, as a guest of my colleague Senator Alston, will be an opportunity to build further on existing cooperation in the important information technology sector. In particular the expansion of links in the fast-developing E-commerce sector will be an important focus of this visit.

The Joint Trade Committee meeting in late July will be an excellent opportunity for our two countries to take stock of recent developments and to plan strategies to maximise opportunities on the commercial side in coming years. In this respect we are particularly interested in the discussions and ideas that emerge from this forum as they will provide an invaluable guide for our planning for the JTC.

Strong linkages

Strong economic and commercial interaction has formed a solid base for a broad range of linkages in other areas. These range from warm, open and productive political dialogues at the government-to-government level, to extensive people-to-people links .

The fact that we have been able to maintain a strong bilateral relationship in these times of economic trouble is, I believe, a testimony to the strong personal relationships which have been developed over the years, including through forums such as this one. Whether in business, education, politics or culture, it is these linkages which ensure that the bilateral relationship prospers in the good times but does not perish in more difficult periods.

Nowhere is this more evident than in education. In 1998 over 15 000 Malaysian students were studying in Australia. And Malaysia has now invited two Australian universities to establish the first and second off-shore international branch campuses in Malaysia - ahead of a strong field of international competitors.

At the same time the third Malaysia Australia Dialogue, held in Kuala Lumpur in November 1998, further demonstrated the value of maintaining lines of communication outside of formal channels. The Dialogue has proved to be an excellent forum for frank and free-flowing discussions on a broad range of bilateral issues between government, business, academia and the media of our two countries. As with previous Dialogues, this meeting resulted in a diverse range of new initiatives, from new ventures in education cooperation to "smart partnerships" in research and development.

As we commemorate the fiftieth anniversary of the modern Commonwealth it is also worth remembering that the relationship between Australia and Malaysia is not simply a function of geographic proximity. And with the establishment of the Commonwealth Business Forum in 1997 the Commonwealth connection can play a useful role in strengthening the commercial relationship between our two countries.

...and healthy differences

The trial and detention of Anwar Ibrahim has added an element of political uncertainty to the economic difficulties currently being experienced by Malaysia. Let me take this opportunity to state once again that while the details of the trial proceedings are a matter for the Malaysian courts, we continue to hope that the trial of Anwar Ibrahim will be conducted in accordance with the principles of due process, natural justice and the rule of law.

We are encouraged to see that the commission of enquiry into Anwar's mistreatment has been conducted in an open, transparent and even-handed manner. And we hope that the final outcome of this situation will be a reaffirmation of the underlying strength of Malaysia's democratic and judicial institutions.

The introduction of capital controls by the Malaysian Government in September has also added an additional element of uncertainty into the commercial operating environment. The Government's decision to chart a new economic course was a brave one. It is also one that is yet to be fully tested.

Although it has been encouraging to see some signs of recovery in key areas such as domestic consumption, it is too early to assess the long-term impact of the controls on the Malaysian economy. We, along with the rest of the international community, have adopted a "wait and see" approach to the long-term impact of the new measures, though we have welcomed Malaysia's recent decision to relax one element of the controls. We hope that this will have the desired effect of restoring international investor confidence.

The need for economic reform

The Australian Government continues to believe that far-reaching economic reform remains the key for the Malaysian economy to return to sustained long-term growth. The current strength of our own economy - including interest rates reminiscent of the 1960s, the lowest unemployment for a decade and a strong budget surplus - underline the benefits of reform.

In this respect we have been encouraged by a range of new economic measures introduced by the Malaysian Government this year. New corporate governance measures introduced on 1 January should provide for stronger management of companies. A new takeover and mergers code will help increase the transparency and professionalism of corporate behaviour. And refined prudential standards in the stockmarket should reduce risks in the securities sector.

All of these changes, if properly and transparently implemented, will help to re-establish the confidence of international and Australian investors in the Malaysian operating environment.

The Australian Government is not, however, in the business of providing gratuitous advice. Our encouragement of Malaysia in its reform efforts is the encouragement of a neighbour and a friend. Australia is committed to helping regional countries through their economic difficulties, a commitment we have well and truly demonstrated over the last 18 months.

Apart from our participation in all three IMF assistance packages for the region, we have undertaken a number of initiatives to help regional states with the process of economic reform. At the APEC meeting in Kuala Lumpur last year our Prime Minister, Mr Howard, announced a three-year program to help regional economies strengthen their economic and financial management. We have also boosted our aid programs to foster better economic management, good governance and further institution building.

Conclusion: The need to remain engaged

What these measures underline is our continuing commitment to the region. In this context Malaysia is and will continue to be a key regional partner for Australia across many fields from commerce to managing the challenges of a less certain regional security environment.

While we are on the subject of Australia's relations with the region, I would like to take this opportunity to mention that I, together with my colleague, Tim Fischer, the Minister for Trade, have asked the Department of Foreign Affairs and Trade to produce a narrative history of Australia's engagement with Asia in the twentieth century. We are confident that the book will make a fitting contribution by our portfolio to the celebration in 2001 of Australia's Centenary of Federation.

Clearly the Australian business community has no intention of walking away from important regional relationships, just as Australia has no intention of slackening its engagement with Asia. One of the more positive elements to emerge from the changes of the past year has been the obvious determination of many Australian companies to pursue their commercial ambitions in Malaysia despite the uncertainties and upheavals.

This gathering tonight is an excellent illustration of this commitment and I urge Australian business to retain it. I know that the Government has the luxury of not having to factor profit margins into its decisions. But I encourage you to make the most of this opportunity to develop a strategic approach to managing commercial relations in the future. Now is the time to take advantage of the solid relationship we have established over many years.

The Australian Government has also been encouraging the world to not lose sight of Asia. After all, the economic situation is a global, not just a regional, problem. As we near the end of the 20th Century, more than ever we are living in an interrelated global economy. Few countries around the world remain untouched by the region's economic difficulties. In Europe at the beginning of this year I renewed our call for the EU to increase its engagement to play an active part in the region's recovery. And at the beginning of this month I convened in Sydney a meeting of key aid donors and regional countries to address the long-term development challenges facing the region. The rest of the world cannot afford to just sit back and watch developments unfold. It must be prepared to play a real role in the recovery.

It is all too easy to throw up barriers in difficult times. But ultimately a commitment to openness, to transparency and to an outward-looking posture will ensure a strong and confident bilateral and, in particular, business relationship.

The strong and enduring relationship that we have built over the years - at all levels, political, commercial, cultural - provides a solid basis for a continued and fruitful engagement between our two countries. This forum provides an excellent opportunity to make sure that this engagement continues. It is an invaluable opportunity for the cross-fertilization of ideas as you develop business strategies in this new and more challenging environment. I can only encourage you in your efforts to help maintain a strong and vibrant partnership in the future.

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