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JIM MIDDLETON: Foreign Minister, thanks very much for your time.

STEPHEN SMITH: Pleasure Jim.

JIM MIDDLETON: We'll get to PNG in a moment, but first of all to the asylum seeker question (inaudible) of a regional processing centre in East Timor?

STEPHEN SMITH: Jim, we've put the idea out there. The question or the notion of a regional processing centre is not in every respect a new or a fresh idea. It has for example been discussed informally by officials through the Bali Process in the past.

But Prime Minister Gillard has seized the issue, and she wants to see whether it is possible for us to effect a genuinely regional processing centre that would service the needs not just of Australia, but of the region. Under the auspices of the United Nations High Commissioner for Refugees, but also clearly with regional support.

She's had a conversation with President Ramos Horta, and as she has made clear, we're at the very preliminary stage. And there, we're dealing, when we deal with asylum seekers, refugees, people movements, boat people, we're dealing with highly charged, emotional and difficult issues. So we expect that there will be a range of views put forward, not just from East Timor itself but generally throughout the region.

But we genuinely want to have the conversation, the discussion, to see whether we can take it forward.

JOURNALIST: Did you have discussions with East Timor about the idea before Julia Gillard spoke to President Ramos Horta ...(inaudible)?

STEPHEN SMITH: Well, I haven't had a conversation about the matter with my counterpart Zacarias da Costa. Obviously that's on my list and when I return from Papua New Guinea to Australia I will do that.

But I think the important thing is that we now have one of our region's leaders, the Australian Prime Minister, taking up this issue. She spoke to President Ramos Horta, she's spoken to Prime Minister John Key, and the reason she spoke to Prime Minister Key of course, is New Zealand, as Australia does, plays a very important role in settlement and resettlement arrangements in our region.

But for this suggestion to be successful we need to work carefully with the UNHCR to get its support. We also need to have a conversation with the region generally, either under the auspices of the Bali Process or generally, but we also need to have a conversation with the resettlement countries like New Zealand because if we can get support and get something up and running then it will be of genuine assistance to all of the countries in the region.

In our own region we have source countries, destination countries, and transit counties and we all share this problem but we have said for a considerable period of time that one of the key aspects of the solution is working together as a region. And that is what Prime Minister Gillard now wants to do on this particular point and the question as to whether it is possible to get a regional processing centre.

JIM MIDDLETON: Today with the PNG Government, did you raise the possibility of perhaps re-opening Manus Island as a regional processing centre if the East Timor idea falls over given that PNG (inaudible) to the UN Convention of Refugees?

STEPHEN SMITH: I haven't had the opportunity yet of having a conversation with my PNG counterpart, Sam Abal, but I expect to do that obviously later today or tomorrow. But the difficulty of course that we had with Manus Island, the difficulty we had with Nauru, didn't just go to issues with membership of the Refugee Convention, it also went to of course to the bilateral way, and in very many respects the unilateral way, that John Howard's Government established the so-called Pacific Solution.

Whether other countries are interested in putting their name forward potentially as a regional processing centre will be a matter for them. But the conditions, the fundamentals if you like, would remain the same, which would include support from the UNHCR for the notion of a regional processing centre but also general agreement within the region that it was a sensible thing to do. And also discussion with the settlement and resettlement countries who take refuges as part of their humanitarian program.

JIM MIDDLETON: You talked about the Bali Process a moment ago. Indonesia is of course at the centre of that. Did the Australian Government give Indonesia advance notice of what was being planned as far as East Timor was concerned before the announcement?

STEPHEN SMITH: We asked our officials in Canberra and Jakarta to alert Indonesian officials to the Prime Minister's speech before delivery, but I took the opportunity last night after the Prime Minister's speech to speak to my counterpart Indonesian Foreign Minister Marty Natalegawa and we had a good conversation about the regional thrust of our proposal and he of course wants to be fully briefed and to contemplate it.

But we also spoke about the importance of the Bali Process and the importance of regional solutions to a difficult problem which Australia, Indonesia and other countries share. And we have already agreed that it would be a good thing to reconvene a Ministerial-level meeting of the Bali Process in the course of this year. We haven't settled on a timetable yet, but we think that it is an important thing to do.

I spoke to Marty about the matter and other matters also last night and we are making sure that Indonesian officials are fully briefed. And of course earlier today Prime Minister Gillard spoke directly with Indonesian President SBY, so Indonesia is being kept fully informed of our initiative and, as we always do we will work very closely with Indonesia on the difficult questions of people movements, human trafficking and people smuggling.

JIM MIDDLETON: One final question about your visit - time is short unfortunately. Papua New Guinea (inaudible) proportion of Australian aid spent on advisers. You're conducting a review. Will this be part or has this been part of the discussions you're having in PNG?

STEPHEN SMITH: We had a very good discussion about our development program. We have had a review of our Development Cooperation Assistance Treaty, which both Governments are considering. But we've agreed that we really are potentially at a turning point of the relationship so far as these matters are concerned.

We're very keen to assist Papua New Guinea see the successful completion of its Liquified Natural Gas plant. That potentially can bring significant and enormous economic and social benefits to Papua New Guinea.

We are prepared and happy and want to provide technical and other assistance on that front, and we've also agreed that we should not just consider the question of the use of technical advisers, which has been coming down in recent times, but also use the review of our Development Cooperation Treaty generally to look at whether we can improve it. And we do think that we need to make some, frankly some fundamental changes. We've been spreading the butter a bit too thin, so we're looking at focussing on a smaller number of areas to get a greater output.

But we also are exploring the possibility of putting our Development Cooperation Treaty under the auspices of an Economic and Trade Treaty. We're looking at whether we can craft between Australia and Papua New Guinea an economic and trade treaty to put all of these things in their proper economic context. We can make improvements on the development assistance front and we've agreed together to do that.

JIM MIDDLETON: Foreign Minister thank you very much for your time.

STEPHEN SMITH: Thanks Jim, thanks very much.

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