Introduction

Thank you, Simon, distinguished guests, ladies and gentlemen.

I'm very pleased to speak to you today about 'what Australia wishes for ASEAN'. And I'm particularly glad to be here at the Singapore Institute of International Affairs. The Institute is Singapore's oldest think-tank, and has made a tremendous contribution to foreign policy thinking in Singapore and the region since its foundation in 1961. I congratulate the Institute on its 40^th anniversary in two months' time.

A year ago, my Thai counterpart and I invited your Chairman, Simon Tay, to Australia for the Coolum Forum, an initiative of mine which brings together prominent regional thinkers for off-the-record discussions on regional and global issues. As always, Simon was a very frank and insightful contributor.

I think I should also be frank today in speaking about the insights I have gained into ASEAN since my last major speech on this subject four years ago. Australia and ASEAN have a mature relationship, so it's only natural for an Australian Foreign Minister to speak honestly and constructively about how best we can work together as neighbours. I hope you will take my remarks in that spirit.

Our wish - your vision

Our wish for ASEAN is simple - we want it to be 'outward looking, living in peace, stability and prosperity, bonded together in partnership in dynamic development and in a community of caring societies'. Nobody could disagree with this, least of all ASEAN members themselves. After all, as I'm sure you know, it's exactly what ASEAN leaders agreed to in 1997 as their Vision for 2020.

Progress towards that vision has come under pressure since 1997, mainly because of the financial crisis and the economic and political upheaval that followed. Four years later, the residual effects - or 'present difficulties' as Singapore Prime Minister Goh recently called them - remain. But the ideal is by no means lost, and Australia is as committed as ever to working with ASEAN to ensure that your vision - our wish - is realised.

In Australia, some commentators continue to claim that our Government's engagement with the region has somehow diminished. That criticism is disingenuous and unfair. Today I not only want to make clear how important Australia and South-East Asia remain for each other, but also to set out for the record, here in Singapore, the many ways in which Australia has helped ASEAN maintain its vision since the crisis. Finally, and perhaps most importantly, I would like to speak frankly about how I believe ASEAN needs to help itself, as an organisation, if it is to achieve the goals we share.

A close partnership

South-East Asia matters to Australia. It is home to 500 million people, has a total GDP of US$576 billion, and accounted for 14% of Australia's total trade in 2000. Together, ASEAN's 10 member countries are the fourth most important geographic region for Australian trade - well behind North Asia, but nearly rivalling Western Europe and North America. South-East Asia is not just significant commercially, it also has an important role to play in Asia-Pacific security. The health of individual ASEAN members - and of ASEAN as an organisation - is therefore of quite direct interest to Australia.

But Australia also matters to ASEAN, and the figures tell the story. Between 1996 and 2000, total trade in goods between Australia and ASEAN grew by a total of 62% to A$32 billion - and that's not counting A$8.9 billion worth of trade in services in 2000. ASEAN's exports to Australia jumped by a total of 110% to A$16.5 billion from 1996 to 2000, while Australia's exports increased by 31%. Whereas in 1996 Australia enjoyed a A$3.7 billion trade surplus, by 2000 ASEAN had tipped this in its favour to the tune of A$1.3 billion. ASEAN's surging exports to Australia include computers, furniture and telecommunications equipment.

It strikes me that while the media and academics have been busy debating the quality of relations between Australia and South-East Asia, the corporate sector has been getting on with business.

And so have students. Over 68,000 students from South-East Asia were studying at Australian educational institutions last year, up 26% from 54,000 in 1996. In 2000, nearly 20,000 of these came from Singapore alone, up from 15,600 in 1998.

The strength of our trade relationship, and the depth of our people-to-people ties, underline just how close and friendly Australia's relations with South-East Asia really are.

Australia - good neighbour in a crisis

Our Government has backed those links. And nothing illustrates this better than our response to the East Asian financial crisis.

• Australia was one of only two countries (Japan was the other) that committed funds to all three regional IMF second-tier support arrangements in the crisis. Our total commitment amounted to A$3 billion.
• Australia has provided substantial bilateral aid targeted specifically at better governance and economic management in the region. In 2001-02, our aid to ASEAN countries will total A$351 million, including support for efforts specifically tailored to realise ASEAN's Vision 2020.
• Australia pushed successfully for APEC to have a stronger focus on technical assistance - and has backed this up with $45 million in support for trade-related capacity building in APEC developing economies in the last three years.

This sort of assistance might not have grabbed the headlines, but it has delivered practical and important outcomes for the region.

And our engagement with the region goes far beyond crisis management.

As far as trade is concerned, Australia and Singapore are at an advanced stage in negotiations for a bilateral FTA. And only two weeks ago, during Foreign Minister Dr Surakiart's visit to Australia, we were able to confirm that we would conduct a joint scoping study into a bilateral FTA with Thailand.

Security is another vital element in Australia's support for South-East Asia. We have always played a leading role in the ARF, and last year helped bring about North Korea's participation. We have a strong network of bilateral and regional security dialogues with regional countries, which our Government has expanded further to include Thailand, Vietnam and the Philippines (as well as India, China and the ROK). We enjoy close and productive defence cooperation links with a number of ASEAN countries, including with Singapore and Malaysia under the Five Power Defence Arrangement. We have worked closely with countries such as Indonesia, and most recently Cambodia, to combat illegal people movement. Most significantly, in 1999 we led an international coalition, including Singapore and other ASEAN members, to restore peace and security in East Timor after the devastation that followed the UN's ballot in August 1999. In the words of Lee Kuan Yew:

'While no Asian leader voiced support for Australia as it led INTERFET troops in East Timor, all knew that Australia was saving an ugly situation from getting worse'.

Damage to the core

Australia's support for ASEAN is firm. But there is only so much that we and the rest of the world can do. Ultimately, it is up to ASEAN to realise its vision. And that is more difficult now because of what the East Asian financial crisis has done to the organisation.

Until 1997, there was a strong core of ASEAN members who guided its evolution. ASEAN was established in 1967 to reduce tension among South-East Asia's non-communist countries, but its core members later steered the organisation into cooperation in many areas of public policy, including a commitment to trade liberalisation under AFTA, and an endorsement of APEC. ASEAN also reached into the security domain by creating the ARF.

But the financial crisis, especially the political and economic upheaval it caused in Indonesia, has damaged the ASEAN core. As a result, there is a sense that ASEAN has, to quote one Australian commentator, 'lost the power of action'. This comes at a time when the post-1997 world economy requires decisive responses from ASEAN, especially if South-East Asia is to attract the capital inflows which it needs, and which were the lifeblood of its growth until the late 1990s.

The main way in which ASEAN can take up this challenge is at the level of its member states. Commitment to structural reform must be translated into action, no matter how painful that may be. For several members, who are at an economic and political crossroads, the need for reform has generated protectionist and nationalistic pressures. Resisting these forces is difficult but essential, and Australia has been helping with generous aid and technical assistance to smooth the transition. Those who implement reforms are restoring not only their competitiveness, but international investor confidence. In so doing, they boost the ability of ASEAN as a whole to compete successfully for capital inflows.

Equipping ASEAN

What individual ASEAN members do is important. But they must also reflect on whether ASEAN, as an organisation, is equipped to meet the challenges of the world economy, and realise its vision for 2020.

ASEAN has a culture of working around problems rather than confronting them. The limits of this approach have been exposed by the financial crisis, and by the way in which expansion has increased ASEAN's political and economic diversity. Burma, Cambodia in 1997, and smoke haze are just some of the examples that come to mind.

I understand very well that this is a consequence of ASEAN's principle of non-interference in the internal affairs of its members.

But there is no compelling reason why discussing regional issues in a more open way should be seen as interference. A strict interpretation of the principle ignores the reality that some problems can only be addressed effectively through regional cooperation. Foreign investors increasingly look at ASEAN - despite the distinct characteristics of its members - as a single region rather than ten individual economies. In a visit to Brussels last month, Singapore Trade Minister George Yeo explicitly encouraged European companies to see ASEAN as one investment area for trade and manufacturing.

By adopting a more flexible approach, ASEAN would arm itself better to pursue deeper integration, manage change in the region, and take a more prominent role in international affairs.

In 1998, then Foreign Ministers Surin and Siazon were rebuffed when they tried getting ASEAN to discuss internal issues more openly under a principle of 'flexible engagement'. It is not clear that 'enhanced interaction', the final compromise at the time, has brought about any practical change in how ASEAN members interact with each other on sensitive regional issues.

A dual approach - structural reforms by individual members and a more active ASEAN to shape the overall picture - would help project a greater sense of regional recovery and restore investor confidence. Along with heightened competitiveness, this would help South-East Asia attract the capital inflows it needs to sustain economic recovery and build long-term prosperity. One statistic that Minister Yeo has used makes the urgency of reform very clear: in 1990 China accounted for less than 20% of total foreign investment in developing Asia, and South-East Asia attracted 60%. Today the numbers are reversed.

AFTA-CER - a missed opportunity

South-East Asia cannot afford to miss out on the jobs, income and growth that foreign investment brings. But this is exactly what will happen if ASEAN continues to hamstring itself in a way that inhibits economic integration. A prime example of what I'm talking about is how, last year, ASEAN's consensus-based decision-making system meant that its members chose not to proceed with an AFTA-CER free trade agreement. By rejecting the recommendation of an AFTA-CER taskforce that an FTA was both feasible and advisable, ASEAN sent a strong - negative - signal to investors about the commitment of its members to increasing regional economic integration.

An AFTA-CER FTA was a missed opportunity. Consider some of the things the taskforce found:

• In total, ASEAN-CER economies would have gained an additional US$48 billion in GDP over 20 years from an FTA.
• More than half of that - US$26 billion - would have accrued to AFTA members.
• The gain in real welfare for AFTA countries as a whole would have been 1% above what it would otherwise have been in 2005.
• There would have been additional capital inflows to the region worth US$39 billion in the decade to 2010.

In view of these potential gains for both sides, ASEAN's decision not to proceed with an FTA was very disappointing. But our commitment remains. Despite last year's setback, we are working hard with ASEAN to develop an AFTA-CER Closer Economic Partnership (CEP). We want the CEP to be credible - to move beyond our six years of economic cooperation under the ASEAN-CER Linkages program, and provide a firm basis for closer economic integration and expanded business opportunities.

Conclusion

Until recently, ASEAN was a symbol of prosperity, at the heart of a region full of opportunity and dynamic success. And ASEAN's influence was reflected in the attention and support it received from international capitals. While that image has been shaken in the past few years, ASEAN remains very well placed - with a young community of 500 million people, natural resources, sea lanes and substantial markets - to fulfil the vision it has set for itself.

Australia never loses sight of how far some ASEAN countries have come in their transition to more democratic political systems and market-based economies. The need for further reform is still substantial. For some, it is daunting. But an outward-looking ASEAN, committed to structural reform, would be a compelling destination for long-term foreign investors. It would also receive the greater international attention that Prime Minister Goh called for in his recent speech in Washington.

Australia's wish for ASEAN is that you achieve your vision. Our commitment to this is firm and enduring. The evidence is not always in the headlines, but it is crystal clear in the quality of our day-to-day cooperation.

Australia will continue working with ASEAN to strengthen existing regional institutions such as APEC and the ARF. We will support new frameworks such as the AFTA-CER economic partnership. We will also encourage forums in which we are not members, but which we see as good for the region - such as ASEAN+3. And we will continue to pursue with vigour our bilateral relationships with ASEAN members.

In order to fulfil its vision, ASEAN needs to become more open. I have been open with you today. In thinking about what I have said, I hope you can accept that frank dialogue between the closest of friends is not only healthy, but essential.