Speech

8 August 2007

Speech for the Biennial Sir Arthur Tange Lecture on Australian Diplomacy

Australia's Commitment to the Pacific

Excellencies, heads of mission from the Canberra diplomatic corps and representatives of international organisations, fellow Members of Parliament, Secretary of the Department of Foreign Affairs and Trade Mr Michael L'Estrange, former secretaries of the Department, heads of other agencies, members of the family of the late Sir Arthur Tange, other distinguished guests, ladies and gentlemen ...

INTRODUCTION

It is a great pleasure to be here tonight to deliver the second Biennial Sir Arthur Tange Lecture on Australian Diplomacy.

Two years ago, at the inaugural Tange Lecture, I spoke about Australia's relations with what I describe as the great powers. I spoke about the strength of our ties with the United States; the new depth to our political relationship with Japan; and about our developing relationship with China.

I made the point that Australia has successfully managed to strengthen all of these key relationships.

Tonight I want to focus on another key area of Australian diplomacy - our relationships with our near neighbours in the Pacific.

It is fitting that this year's Tange Lecture deals with Pacific policy.

At the start and end of his working life, Sir Arthur had a close connection with the Pacific. In 1941, when he worked for the Bank of New South Wales, Sir Arthur spent a year in Fiji overseeing the bank's foreign exchange operations.

And, after his retirement as Secretary of Defence in 1979, he was appointed to review Fiji's public service. Just as he had reformed the administration of the Department of External Affairs and the Department of Defence during his time as Permanent Head of those two organisations, he drew on his experience in Australia to recommend reforms to the fledgling Fiji Public Service.

Sir Arthur's professional connection with Fiji highlights the theme I want to speak to you about tonight - the importance of economic development and of good governance to the future of the countries of the Pacific and Australia's role in supporting this.

Australia's political and economic interests are global and we have a global foreign policy. We make a strong and constructive contribution to international efforts on the major challenges facing the world today - from terrorism to climate change.

But we also have a very particular relationship with the countries of the Pacific - a commitment to help them grow and prosper. The countries of the Pacific matter to Australia. And Australia, the largest country in the region, matters to the countries of the Pacific.

CHALLENGES

When I visit the countries of the Pacific I am struck by the youthfulness of the population. The statistics back this up.

Most Pacific countries have between 30 and 40 per cent of their population aged 14 or under - compared to only 19 per cent in Australia. And the Pacific's population will double in the next 50 years.

Such a rapidly growing population presents challenges. Young people need to be given the opportunity to develop their potential. But in some Pacific countries these opportunities are lacking.

The countries of the Pacific are varied but they face some common economic challenges. Many are small in size and population. They are often distant from potential trading partners. They are not fully integrated into the globalised world and cannot reap the rewards on offer from globalisation. In many Pacific countries, economic growth is slow and income levels are falling.

Slow economic growth and young populations combine to create high youth unemployment.

And the large numbers of young people put education resources under severe strain. They put pressure on health care resources too. And this pressure will only increase, certainly in Papua New Guinea, if current HIV/AIDS infection rates continue to climb.

Since becoming independent, many Pacific countries have had a strong history of democratic elections. A free press supports this robust electoral process. Last month, Papua New Guinea conducted a free and fair election, and I congratulate it on that.

But in some parts of the Pacific we have seen examples of leaders failing to live up to the hopes vested in them by their electorates. Economic under-performance has been aggravated by severe problems of governance.

In some cases, sadly, leaders have concerned themselves more with self-interest than national interest, and in bullying and intimidating those who stand in their way rather than working to equip their countries for the future.

And the result is that the people don't get the services they deserve and need - the health clinics, the schools, the job opportunities, and the chance of a better future.

Key partners and donors to the region need to ensure that their own political interests and rivalries - such as that between China and Taiwan - are not encouraging this sort of corrosive behaviour.

I hasten to add that this is not the case everywhere. There are Pacific nations that are performing well. There are leaders of vision, and there are individuals of great courage and integrity who stand up for what is right. They deserve our admiration and our support; they give confidence for the future.

I would like very quickly to put paid to one item of mythology in this area of governance.

Some say that emphasising the problem of corruption shows we don't understand the role of custom. The distribution of the spoils of office, they say, is inevitable in Pacific societies.

But deals for government contracts with big companies in back rooms, siphoning off money from trust funds, conspiring to settle fallacious compensation claims against the government for millions of dollars - that is not custom; that is corruption. And public debate in the media of Pacific countries shows that no-one supports corruption.

While Pacific countries do face a number of challenges they also have substantial assets. Beyond their democratic heritage, many have significant resources, including fisheries and forestry; most have areas of outstanding natural beauty and the potential to increase tourism; and a young, dynamic population can in fact be an enormous plus. They are located in and adjacent to a dynamic region of the world. In particular, I would also argue that the Pacific countries could benefit from even deeper economic links with dynamic countries like Australia and New Zealand.

AUSTRALIA'S INTERESTS

What are Australia's interests in the Pacific? Why do we get involved? Wouldn't it be better, less onerous for us, to take a more narrow view - to stand back, let these countries develop as they wish and at their own pace?

We don't take that narrow view for a number of reasons ...

Australia wants to be able to look to its North and its East and see strong, stable, prosperous states. States that lack good governance and face a bleak economic future are vulnerable to the damaging effects of transnational crime. They run the risk of becoming havens for criminal gangs and others who seek to evade the law. The presence of these people in a turbulent and chaotic neighbourhood would obviously not be in our interest.

We have economic interests too. Our trade with the countries and territories of the Pacific (not including New Zealand) is substantial - nearly $7 billion a year in total.

And we have a consular interest - the safety of the many Australians who live in or visit the Pacific. The welfare of Australians overseas is a central issue for my Department, our overseas posts, and for me as Minister. And in a region which over the past year and a half has seen two regional capitals erupt in violent and destructive rioting, and a military coup, this is a responsibility we take very seriously indeed.

I make absolutely no apology for pursuing Australia's national interests in the Pacific. It is what Australians expect of their government. But that is not the full picture. We are pursuing more than narrowly defined national interests. We are working to give the Pacific and its young population a better future.

The Australian public does not want to see poverty, violence and misery anywhere, but in particular, in a region close to home. They want their government to help the Pacific countries carve out a better future for themselves. There is a large element of altruism in what we do.

The world, too, expects Australia to help. We have particular capabilities - economic resources, as one of the 15 biggest economies in the world, substantial military and police resources to help with crises, knowledge of the region through our extensive diplomatic network and our comprehensive aid program, and our participation in regional organisations.

We have the means to help and we will not shirk our responsibilities.

I would like to make one further point about Australia's interests in the Pacific.

I want to rebut the idea that Australia's insistence on decent, law abiding behaviour is somehow misguided and insensitive to regional ways. When, for example, we ask for the extradition of an Australian citizen facing serious charges in Australia, or when we apply travel sanctions against an illegal regime installed by a military coup, we occasionally hear the accusation that such actions are bullying, or show a lack of respect for sovereignty.

Frankly, the cry of sovereignty is occasionally used as a smokescreen, meant to distract attention from corrupt and illegal behaviour. Corrupt behaviour is itself the threat to sovereignty - it undermines the constitution and the law of the country involved, it undermines the institutions of the country. That is the real attack on sovereignty.

OUR APPROACH

Our approach to meeting the challenges in the Pacific has evolved over time. Most Pacific countries gained their independence in the 1970s.

At that time, Australia saw its role as helping to establish the foundations of independent government and providing development assistance but otherwise leaving these newly independent countries to find their own way.

By the 1990s it was becoming clear that this was not working effectively. Economies were stagnating. Living standards were levelling off. Civil tensions were rising in the face of ineffective governments.

In 1997 we recognised the need to step up our engagement. We, with New Zealand, took a leading role in settling the Bougainville conflict. We worked hard to encourage a return to democracy after the coup in Fiji in 2000. We took the lead in establishing the Townsville process to end conflict in Solomon Islands.

From 2003 we took decisive steps to confront the Pacific's challenges more directly. We established, along with other Pacific Island Forum countries, the Regional Assistance Mission to Solomon Islands (RAMSI) and led the Mission, which we still do. We began our Enhanced Cooperation Program with Papua New Guinea in 2004. In both cases we committed to long-term engagement to get to the roots of problems of governance and economic development.

Our engagement now is guided by some key principles.

First, as I have said, we take responsibility. We have made a commitment that we will play a leading role in helping the Pacific countries overcome their challenges.

Second, our approach is comprehensive and involves a wide range of Australian Government agencies. RAMSI, for instance, involves Australian officials in strengthening the rule of law, improving the economy and rebuilding national institutions. Australian officials are supporting the Solomon Islands Government in advisory and line positions in the public sector.

Development assistance is a key component of our approach. In this financial year, the Government has allocated $870 million for development aid to Papua New Guinea and the Pacific island countries. This is more than one-quarter of our entire aid budget. But aid alone is not the solution and it is not the only element in our approach.

We have defence links with the countries of the Pacific which help them secure their fisheries wealth. We have police cooperation to help ensure that ordinary Pacific islanders can go about their lives in peace and safety.

Third, we will remain ready to respond to crises. Sometimes there is just no choice but to put boots on the ground to help deliver emergency assistance or restore order.

And these interventions are important. In Bougainville, we helped to bring an end to a conflict which had cost around 10,000 lives and completely destroyed the island's economy. RAMSI in Solomon Islands stopped the chaos and the killing, and gave Solomon Islands a chance to rebuild.

More recently, together with other regional partners, we have intervened to stop rioting and destruction in Honiara in April last year and in Nuku'alofa, in Tonga, in November. These interventions cost a lot and they sent our forces into harm's way. But they saved lives, they stopped destruction, and they restored peace and security. And if we must, we will always do that again.

Indispensable as it is, responding to crises is simply one element of what we do. It is not something we are focused on to the exclusion of dealing with underlying causes. But you can only deal with underlying causes of instability when you have a secure environment to operate in.

You have to respond to crises and you have to work on underlying causes. It's not a case of either/or; it's a case of doing both. And we do.

The fourth element of our approach is our long-term commitment. The economic development challenges in the Pacific need long-run solutions. Good governance - well functioning institutions and deeply held democratic values - does not spring up overnight. Along the way there will be setbacks and short-term crises. The going will be tough, and progress sometimes disappointingly hard to see. But we are in for the long haul. There are no easy solutions.

The fifth element is that we work with the countries of the Pacific. We do not impose ourselves. We work with countries when they want to work with us.

And we expect the Pacific countries themselves to shoulder the responsibility of working towards a better future. The leaders of the Pacific countries have the greatest responsibility for making the right policy choices in the interests of their people and following through on those policies.

PUTTING OUR APPROACH INTO PRACTICE

These principles guide what we do. I now want to look at how we are putting these principles into practice. I will focus on good governance, economic development and trade, investment in human capital and working with other partners.

Good Governance

Governance is an important focus of Australia's Pacific policy. At the working level, governance is about public servants and politicians doing their jobs well and fairly. It is about politicians and public servants respecting institutions, such as parliament and the legal system. It is about encouraging and supporting democratic systems.

Australia can draw on the experience and expertise of its own government institutions to assist Pacific countries on governance. Take the Enhanced Cooperation Program - the ECP - with Papua New Guinea.

In Papua New Guinea, we have placed experienced Australian officials in the public sector to offer advice and work under the management of senior PNG officials and ministers.

For example, Australian officials have been working with their PNG counterparts to improve budgetary processes and financial management. Perhaps this is not high-profile work, but it delivers real results. By better managing budget processes and having a better understanding of where and how money is being spent, millions of dollars have been saved.

This means that there is more money available for priorities like health and education. And it means that existing programs are better delivered.

Governance also matters because when it collapses the population suffers.

The Regional Assistance Mission to Solomon Islands came about because law and order had collapsed in that country. The failure of governance led to a severe crisis.

RAMSI showed the value of a prompt and effective response implemented with the support and encouragement of the host government. Putting a regional police force on the streets of Honiara made it safe for people to go about their business.

But RAMSI has done a lot more. RAMSI is helping Solomon Islands manage the business of government more effectively. It assisted the Solomon Islands Government in stabilising its financial situation. With RAMSI advice and support, the Government has embarked on economic reforms. Business confidence has returned. As a result, economic growth has returned.

And when a tsunami struck in April of this year RAMSI helped manage the crisis response.

RAMSI demonstrates a point I made earlier - we solve short-term problems and work to provide long-term solutions.

Solomon Islands still faces challenges. And a government that appoints international fugitives to key constitutional office-holder positions will always struggle to establish credibility.

This is not a question of Australia imposing its views on Solomon Islands - the question is whether the Solomon Islands Government is acting in the interests of and the people it is supposed to represent.

One of the greatest threats to governance is illegal takeovers of government.

The coup in Fiji last year was a terrible setback for democracy. The Fiji military's removal of the elected government is completely illegal and cannot be justified on any grounds. We have responded by imposing travel restrictions on the coup leader, his supporters and their families. We have also suspended our defence cooperation and parts of our aid program. But not, of course, our humanitarian aid.

The Foreign Ministers of the Pacific Islands Forum recognise how damaging the current situation is for Fiji. In March, we issued a call for an early return to democratic government and the rule of law in Fiji. True leaders respect the institutions of government.

At its core, good governance is about better management. Pacific countries as diverse as Nauru, Samoa and Vanuatu have all improved their government financial systems in recent years. They have demonstrated that fiscal discipline brings rewards - greater business confidence and respect from the international community.

Economic Development

Governance is the foundation. On the base of a well-governed state, there are still many policy choices to be made, particularly related to economic development.

Countries need economic growth to reduce poverty. With growing populations, the Pacific countries need to lift rates of growth over the long term to deliver prosperity. And to do this, economic reform is essential.

Australia has been through long a period of economic reform - which is still ongoing - and we are now deriving the benefits of that process. Our growth has been made possible by our economic reforms.

The key point is that countries have to reform themselves and the process of reform never ends. The onus is on governments to make the right economic choices and to provide the right environment to encourage business activity. The countries of the Pacific will need private investment - as well as development aid - to develop their economies.

We have made support for sustainable economic growth a feature of our relationships with the Pacific countries.

Our experience with Nauru shows how positive this can be. When I visited there last month, I was pleased to see the progress Nauru had made on improving its financial situation. With the help of Australian officials working on the ground, the Nauru Government actually balanced its last three budgets. Nauru is no longer issuing investor passports, it has closed shell banks and, as a result, it is off the blacklist of the OECD's Financial Action Task Force on money laundering.

Some Pacific countries are showing what is possible with self-starting economic reform.

Take Samoa's example of liberalising its telecommunications market. Once, government-owned SamoaTel was the monopoly service provider. But the Government decided to open the market to competition. It granted a licence to a competitor. Digicel - the competitor - has made a good start, securing more than ten per cent of the mobile telephone market. But, more importantly, SamoaTel was forced to compete.

It may have been a tough decision for the government of Samoa to open up its own company to competition. But it did. And the benefits are clear - the people of Samoa now have more access to better telecommunications.

Vanuatu has shown that sound economic management and good governance can quickly turn an economy around. Vanuatu's economy contracted in the late 1990s and early in the 2000s. But the economic growth rate is now around six per cent. Exports are growing and the tourism sector is doing well.

This turn-around came about because the government of Vanuatu, working together with key donors like Australia and the Asian Development Bank, agreed to a program of economic and governance reforms. And it stuck to the plan.

Trade

The countries of the Pacific cannot meet the economic development challenges they face in isolation. They will benefit from closer economic and trade integration with each other and with Australia and New Zealand.

The region as a whole runs a modest trade surplus with Australia. In other words, trade with Australia is good for the region. Those who trade most with us do best. Total two-way trade is already significant at $7 billion annually, larger than our trade with France, Canada or the Netherlands.

The Pacific Agreement on Closer Economic Relations (PACER) between Australia, New Zealand and the Pacific countries has opened the door to negotiation over coming years of a new PACER-Plus regional free trade agreement to drive regional economic growth and spur greater regional integration.

The countries of the Pacific should be looking to integrate themselves into the wider international economy. Globalisation and free trade have driven global economic growth over the past 30 years. They can do the same for the countries of the Pacific if managed wisely.

Human Capital

We also recognise that the Pacific countries need to strengthen their investment in human capital. If the goal is better governance and better economic performance, greater education and training opportunities are essential.

There has been public debate recently about allowing unskilled Pacific island labour into Australia to work and send home remittances. Under Australia's global migration program, Pacific islanders have the same opportunities as all others seeking work here.

I know that New Zealand has started a seasonal labour scheme to allow Pacific island workers to fill some rural jobs. We will be watching the results of this program closely to see how effective it is and how well its works.

The New Zealand program complements the approach we have taken on the labour-mobility issue. Australia's view has been that the best way to assist economic growth is to help people in the Pacific get better jobs by providing better training opportunities. Skilled workers are in demand, and demand for education in the Pacific is high.

So we have funded the Australia-Pacific Technical College, which has now opened its doors to its first students. It will deliver vocational education and training, and it will offer Australian-standard qualifications to Pacific islanders. Graduates will have better employment chances at home and abroad.

We anticipate that those graduates who find work in Australia, or in other developed countries, will generate remittances to send home. We also believe that many graduates will not want to emigrate. They will choose to seek jobs or start businesses in their home country and, by doing so, they will contribute to their country's economic development.

Working together

Earlier on I said that Australia works with the governments of the Pacific countries on the challenges they face. But we also work with others.

New Zealand is our closest partner. We develop policy responses together. I was in New Zealand just last weekend to compare notes with New Zealand Foreign Minister Winston Peters. We share the same basic view that our role is to help the Pacific countries develop themselves. We both recognise that together we achieve more than either of us ever do could acting alone or, perhaps, if we were in competition with each other.

But Australia and New Zealand are not the only countries with interests in the Pacific. The number of countries with aid programs to the Pacific is growing. And we welcome this. Well-thought out, well-targeted and constructive aid is good for the Pacific countries.

We already work closely with Japan and the United States in the Pacific, including through the Trilateral Strategic Dialogue process.

We have worked closely with the United Kingdom and France and continue to strengthen our coordination. The EU too plays a positive role in strengthening governance and providing development assistance to the Pacific countries.

China is an increasing presence in the region and its role as a donor is growing. Taiwan is also a donor to the region. It would be a mistake for either side to see its relations with the Pacific countries through the prism of cross-Strait rivalry. As I said earlier, we do not want to see competition between donors undermining our efforts to improve governance and eliminate corruption.

Beyond our bilateral approach, we work through the Pacific Islands Forum. The Forum is the key regional body for the Pacific countries. It brings together leaders to set the agenda for the region.

And the region's leaders have repeatedly committed themselves to the goals of good governance and regional stability. They agreed in the Biketawa Declaration of 2000 that good governance was crucial to the future of the Pacific. They reaffirmed this in the October 2005 Pacific Plan, which is the blueprint for shared regional development.

It is heartening to see the Forum taking on a stronger role in the region's affairs. The Forum was a key player in establishing RAMSI and has led the way in responding to the coup in Fiji. We will continue to support the Forum as it evolves.

FUTURE DIRECTIONS

Australia is already working on helping Pacific countries meet their challenges. But we have shown that we are always open to new approaches. We keep our policy under close review to ensure that Australia's assistance is well-targeted, effective and leads to improvements. I would like tonight to set out some new ways in which we will strengthen our commitment.

Good leadership in the Pacific, as I have explained, is essential. That's why, in this year's budget, I announced that Australia would increase its work with leaders in the Pacific. The program - worth $10.5 million over two years - will target current and emerging leaders to develop their leadership potential.

This initial investment will form the basis of a long-term approach - we know leaders do not emerge overnight. Our work with the Pacific Islands Forum to develop leadership programs will start next month.

I also think it is important that we give real support to those in the Pacific who are committed to real reform. Reform cannot be imposed. It requires a genuine commitment from the governments involved. We are always ready to help those governments that help themselves.

In this year's budget, I therefore announced that the Government had allocated over $100 million to introduce new performance incentive measures into the aid program. The logic behind this measure is that we will provide additional aid funding to those countries that meet certain performance criteria.

We have already successfully trialled this approach with Papua New Guinea and will offer to extend it to other Pacific countries in future.

But I am also thinking beyond these programs.

The Pacific Agreement on Closer Economic Relations (PACER) holds the prospect of a comprehensive, region-wide free trade agreement. But there may be some countries that would like to develop their relationship with Australia at a faster rate and in ways that go beyond the scope of PACER.

To encourage even greater commitment to good governance and economic growth in Pacific countries, we might be able to strike bilateral agreements with particular countries to give them more support in return for a greater commitment to reform. Simply providing more aid money will not solve the Pacific's problems, but we should support real reform efforts.

Such agreements would set clear targets for economic and governance reforms. In return, we would offer opportunities for greater economic integration with Australia.

Under the agreements we could provide more aid targeted at economic growth or, in some cases, the establishment of trust funds. We could offer assistance with attracting investment and promoting trade; help Pacific countries meet Australian import requirements for their export products; and provide assistance with infrastructure projects that help build the capacity to trade.

We would also look to place more Australian officials in advisory or line positions in the public service in Pacific countries to help plan and implement the agreed reforms.

The conclusion of such agreements would send a strong signal to the region about our commitment to the Pacific and our strong support for real reform.

I am also considering expanding opportunities for Pacific public servants to gain experience through temporary work placements in Australia. We will, of course, continue to expand training in public administration and academic education in Pacific countries. But I would welcome the day when it could be said that the majority of senior public servants in Pacific island countries had worked or trained in Australia.

Both sides would benefit. It would help develop the public sector in Pacific countries, and expanded exchange and linkage programs for officials would build personal contacts and improve cooperation between Australian and Pacific agencies.

We stand ready to offer more help to those who are committed to ensuring a sustainable future for their own countries.

CONCLUSION

Each country in the Pacific has its own strengths and faces unique challenges. There is no one-size-fits-all policy. But Australia's integrated strategy of supporting good governance, economic development and trade, investing in human capital and working collaboratively with others is a positive way to help. But remember, we need to be patient and we need to be persistent.

Most people agree on what is needed - strong, stable states in the Pacific. And we can only achieve that if the states are well governed and if they have sustainable economic futures.

Australia's relationship with the countries of the Pacific is constantly evolving. Our approach today has changed as the challenges have changed. And our policy will continue to evolve to meet new challenges and deepen our engagement with the countries of the Pacific. Our commitment to their future is stronger than ever.

As I have outlined tonight, we are ready to explore new ways to offer assistance to those Pacific countries that show a real commitment to economic and governance reforms.

The countries of the Pacific have opportunities ahead of them as well as challenges. We owe it to the young population of the Pacific to do what we can to give them the chance of a better future. The challenge is long term. But Australia is committed for the long term to meeting that challenge.

Thank you.