Change and uncertainty in the Indo-Pacific: Strategic challenges and opportunities

  • Speech, check against delivery
13 March 2017

It's a pleasure to beat this event hosted by the International Institute for Strategic Studies – andI thank you Dr Huxley for this event and I also acknowledge Dr Malaki, andformer Minister Lim, Excellencies, ladies and gentlemen.

We live in uncertain times.Many of our assumptions founded on the international rules-based order thatevolved after World War II, now appear less certain.

Globalisation hasbrought great prosperity to millions of people around the world, yet is underchallenge from rising protectionist sentiment in some countries.

The decision of theBritish people to leave the European Union is a significant rebuttal of theinternational integration that was driven by a desire to not repeat the horrorsof the 20th century's two great wars on the continent.

Russia's annexationof Crimea is the first attempt at redrawing Europe's international borderssince Hitler annexedCzechoslovakia and subsequently invadedPoland in 1939.

In this time of uncertainty and developing pessimism, history can be aguide.

The Singapore experience, for example, is instructive.

Singapore has often been buffeted by the winds of change, perhaps morekeenly than other nations, and has experienced the highs and lows ofinternational developments.

Singaporeans know the significance of 9 August 1965, the day a tearfulLee Kuan Yew announced Singapore's traumatic separation from the Malaysianfederation following a unanimous vote of 126-0 by that country'sparliament.

Rather than being a day of celebration which is common when countriesattain independence, many Singaporeans felt anxious and uncertain as to theirfuture.

Australia was the first country to recognise Singapore just nine daysafter independence.

With a land area less than fifty kilometres across at its widest pointcompared to say, approximately 4,000 kilometres that separates the east andwest coast of Australia, Singapore's GDP per capita was a quarter of that ofAustralia, and seven times smaller than that of the United States.

At the early stages of its industrialisation, with few natural resourcesincluding a lack of drinking water that was imported from Malaysia, I am sureSingapore had its doubters.It was a time when the region and the world was on edge - a restlessplace and apprehensive time.

In 1965, communism was in ascendency in many places - an ideology on themarch.

Eastern Europe remained behind the Soviet Union's Iron Curtain.

In Asia, communism had taken hold in the People's Republic of China,North Korea and North Vietnam.

While the Soviet Union and China viewed each other as rivals, theyviewed the West as a common enemy and believed Southeast Asia was there for thetaking.

In such a tumultuous and precarious decade, few would have believed thatthis so-called 'Red Dot' would eventually become one of the Four Asian Tigersin the final quarter of the 20th century; or that East Asia wouldemerge this century as the most economically dynamic region in the world.

Past events are a reminder that every generation carries with it thebelief that they are entering a period of immense change and uncertainty - thattheir time is one of great historical significance.

This conviction is only sometimes warranted.

There have been times of great revolution through technological change,political upheaval or both.

Change and uncertainty will always be with us.

Competition is ever-present and relentless.

In every age, decisions we make can lead us to a better place or towardcatastrophe at the other end of the spectrum.

It is how we respond to the winds of change and choose to compete thatultimately decides our fate and that of others.

While we should remain clear-eyed about the challenges, I believe thereis reason for us to be optimistic about our future in the Indo-Pacific.

Our region has gone through dark days and come out of them remarkablywell.

We should embrace change rather than fear it.

Consider economic globalisation which has been made possible because ofthe technological advances that we have witnessed over the past fewgenerations.

The world is growing ever smaller.

The capacity to send large amounts of information across the world atthe speed of light means communication is instantaneous.

Cloud technology means we can access any and all information we havestored from virtually any location in the world.

Decisions made in a boardroom in New York, Frankfurt, Tokyo or Singaporewill have a significant impact in other parts of the world.

Those with funds to invest can easily deploy them anywhere in the worldto maximise return. If their capital is not welcomed – or more welcomedelsewhere – they can recall it almost as quickly.

From a computer terminal in London or Shanghai, they can buy or tradealmost anything in all corners of the planet.

Advances in transport, logistics, engineering and fuel efficiency meansit now costs about two-and-a-half cents to transport a small package on asuper-tanker from the US to any port in Asia.

A machine in one part of the world can communicate intelligently andwork with others around the world in real time.

Depending on one's perspective, these advances can be awe-inspiring orthreatening.

Far from resisting technological progress and change, our regionwelcomed these marvellous advances as a way to rapid economic growth andcontinues to do so.

Singapore, Japan, South Korea, Taiwan, Malaysia and Thailand were allbeneficiaries of these changes.

In the last century, they made products for export cheaper, faster andmore reliably than any other part of the world.

China and later Vietnam, Indonesia and Bangladesh have since joined thisgroup.

India and Myanmar should be next.

No-one should begrudge any country the ambition to lift its people outof poverty.

On a GDP per capita basis, Japan is 185 times more prosperous than whenit regained full sovereignty in 1952.

Singapore is more than one hundred times richer than when it became aRepublic in 1965.

China is 36 times richer since it embraced market reforms in 1978.

These are true economic miracles.

When Lee Kuan Yew informed Singaporeans about their separation fromMalaysia, East Asia accounted for a mere 14 per cent of global GDP.

The figure is now 27 per cent.

By 2030, it could be as high as 40 per cent.

We live in a region that has achieved the most rapid increase in wealthover a seventy year period in human history.

My optimism that this can continue is always tempered by the realisationthat, as always, significant challenges remain.

The export-orientated model for growth has been so remarkable thatalmost every economy throughout the Indo-Pacific is seeking to replicate whatSingapore, Japan, China and others have done.

One problem is that older models will not work as well as they have inthe past, as the field of competitors grows and there are changes in the natureof manufacturing.

When Singapore embarked on the export-orientated path in the late 1960s,the combined populations of Asian nations such as Japan and South Korea doingthe same thing was about 150 million.

These nations made products for consumers in advanced economies with acombined population of over 400 million, mainly in North America and WesternEurope.

This balance is reversed now and will continue for future generations.

There are one billion or so consumers in the handful of advancedeconomies around the world while there are two billion people in developingcountries in East Asia alone wanting a larger slice of export markets.

The figure becomes even more lopsided if we include India.

There are now too many countries and too many firms making too manyproducts for too few consumers.

Even the rising middle classes in the Indo-Pacific will not be able tomake up the shortage in global consumer demand, to support the export-ledgrowth model for the number of nations aspiring to that path.

Advances in manufacturing technologies such as in robotics, automationand artificial intelligence will ensure that an increasing number of workersthroughout the region will be competing for jobs that are declining in numberor may one day cease to exist.

In short, globalisation and technological advances will only intensifyrather than alleviate regional and global competition between nations andfirms.

We cannot reverse globalisation, the advance of technology, or eliminatecompetition.

It is a fact of life that we compete or we fall behind.

It is how nations choose to compete that really matters.

Competition can bring out the best and the worst in nations as it doesin people.

There has been a concerted international effort to ensure that more powerfulnations do not bully their neighbours.

History tells us then when 'Might Makes Right' prevails, it setshumanity on a dark path towards conflict in our international relations.

When the strong impose their will on the weaker state, it invariablyleads to the latter's resentment of unfair agreements imposed on them.

The better alternative is the existing rules-based order which hasserved the region remarkably well.

It has underpinned the economic miracles even if some economies outpaceothers at different times.

The evidence is overwhelming that countries buying into the system ofrules have fared much better than those which have not.

Nevertheless, the regional order is under strain asnations occasionally use their economic or military weight to push the envelopewhile accusing the rules-based order of being a relic from a different era.

It is clear that the case in favour needs to beremade and reinforced.

One reason why the rules-based order underwritesstability despite shifts in power and wealth is that such an order does notprivilege previous winners nor constrain opportunity for newcomers.

Its basic principle is the rule of law wheregovernments, firms and individuals enjoy rights and fulfill obligationsregardless of wealth or power.

In a world of increasing economic competition, itbecomes more important that countries abide by rules rather than break them.

They move ahead by undertaking domestic reformsthat make them more competitive and attractive to others.

They cannot thrive long by merely protectingearlier gains.

This is precisely what Australia and Singapore havedone in concluding and deepening our Comprehensive Strategic Partnership.

It will enhance the ability of our two countries tocompete more successfully through agreements including collaboration betweenour well-educated and skilled workforces, freeing the moving of people andcapital, and the commercialisation of our best ideas.

We live at a time when technology and the movementof people are breaking down sovereign economic borders, and in which many fundamental challenges can only be solved bycooperation across borders.

There is no option other than to work together toadapt and thrive.

Ensuring peace and stability in a time of strategic competition becomingmore intense is at least as great a challenge as managing economiccompetition.

Strategic competition is occurring largely due to the dramatic increasein wealth occurring throughout our region.

Managing growing prosperity is overwhelmingly a blessing and is inmarked contrast to the period after the Second World War when devastation andpoverty brought misery to millions.

Nevertheless, even in happier times, there are complexities.

Rising prosperity means that countries naturally seek to expand theirsphere of influence and to protect their growing interests.

Military outlays in 2015-16 in Asia expanded by over 5.5 per cent whicheasily outpaces the one per cent overall increase in global military spending.

By 2020, combined military budgets in the Indo-Pacific will probablyexceed US$600 billion, matching military spending in North America for thefirst time.

Rising powers may exert newfound strength to challenge existingterritorial or strategic boundaries or to impose their political will onothers.

This inevitably leads to tensions.

Should these tensions lead to conflict, which nobody wants or couldafford, this in turn would disrupt the great momentum toward greater prosperitythat all countries cherish.

The strategic environment is also vastly different to what it was in theseveral decades after the Second World War.

When Japan, South Korea and the Southeast Asian Tigers were rising, theydid so as part of a network of American-led alliances and partnerships cobbledtogether after the Second World War.

Indeed, these countries welcomed American strategic leadership andactively facilitated the American presence as they continue to do now.

It is a testament to benign and constructive leadership over manydecades that Washington has few strategic enemies in our region.

In fact, there is only one: the pariah state of North Korea.

In more recent times, China is rising as an economic partner andgeo-political and geo-strategic competitor with the United States and othernations.

This brings with it its own challenges, not least because China isdisputing maritime boundaries in the East and South China Seas as do a numberof Southeast Asian countries with respect to the South China Sea.

In recent weeks, I have met with senior members of the Donald Trumpadministration including Vice President Mike Pence, Secretary of State RexTillerson, and National Security Adviser General McMaster.

We discussed regional challenges in considerable detail and constructiveways for the United States to become even more engaged in the Indo-Pacific.

Many regional nations are in a strategic holding pattern and waiting tosee whether the United States and its security allies and partners can continueto play the robust and constructive role that they have for many decades inpreserving the peace.

If stability and prosperity are to continue, the United States must playan even greater role as the indispensable strategic power in the Indo-Pacific.

The United States is uniquely placed to do so.It is the pre-eminent global strategic power in Asia and the world bysome margin.

It is a country which does not have territorial disputes with othercountries in the region.

As far as our region is concerned, the United States is a geographicallydistant power dependent on the agreement of Indo-Pacific states to hostmilitary assets and is obliged to use its power and influence to provide publicsecurity goods to the region and not simply pursue its narrow nationalinterests.

This provides reassurance to many countries closely observing how largercountries will seek to wield their power and influence in the region.

Critically, the domestic political system and values of the UnitedStates reflect the liberal rules-based order that we seek to preserve anddefend.

The importance of liberal values and institutions should not beunderestimated or ignored.

While non-democracies such as China can thrive when participating in thepresent system, an essential pillar of our preferred order is democraticcommunity.

Domestic democratic habits of negotiating and compromise are essentialto powerful countries resolving their disagreements according to internationallaw and rules.

History also shows democracy and democratic institutions are essentialfor nations if they are to reach their economic potential.

The only countries in the world who have escaped the 'middle-income'trap to become wealthy, high-income and advanced economies are democracies –with the exception of a small number of oil-rich Middle Eastern states.

Liberal-democratic institutions such as rule-of-law rather than rule byexecutive privilege, civilian control of the military, independent andcompetent courts, protection of property and intellectual property rights fromstate appropriation or theft, and limitations on the role of the state incommercial and social affairs remain the prerequisites for stable andprosperous societies, as they are for the creation of a vibrant and innovativeprivate sector.

While it is appropriate for different states to discover their ownpathway leading toward political reform, history shows that embrace of liberaldemocratic institutions is the most successful foundation for nations seekingeconomic prosperity and social stability.

Australia is an active and vocal advocate of theliberal rules based order because the continuation of the long and prosperouspeace depend on it.

With a combined GDP of US$2.5 trillion, ASEAN hasan opportunity for leadership.

It can do that through advocacy of a rules-basedorder that protects the interests of the large and smaller nations that makesup its membership.

I note ASEAN upholds democracy as one of its core values in the Charterand I urge ASEAN members to champion democratic norms and liberal institutionsthroughout the Indo-Pacific.

As one of the guardians of regional norms, ASEANshould never underestimate the moral force it can exert in the form ofcollective diplomatic pressure on countries that might think or behavedifferently.

I am pleased that Prime Minister Malcolm Turnbullwill welcome all ten leaders of the ASEAN states for an ASEAN-Australia SpecialSummit in 2018 and I am delighted the Summit will occur in a year whenSingapore assumes the Chairmanship of ASEAN.

ASEAN is an institution celebrating its fiftiethyear in 2017 and was established to preserve peace and stability in the region.

This remains its vital and important mission.

Every generationfaces change and uncertainty.

These inevitablybring challenges and opportunity.

The Indo-Pacific region has a long way to go.

We have no option butto preserve and strengthen the liberal rules based order if peace, stabilityand prosperity is to continue.

We are two smallcountries by population. But we have highly skilled workforces, are advancedand innovative economies, and remain open to the world.

Both of us havepowerful friends and are respected voices in the region.

Working together, I am optimistic that Singapore and Australia have the opportunity toframe our future.

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