Former Minister for Trade
Australian Commonwealth Coat of Arms

Building the Australia-Malaysia relationship through trade

7 October 2008, Monash University Sunway Campus, Kuala Lumpur


Thank you, Robin Pollard, Pro Vice Chancellor, for that introduction.

Vice Chancellor Richard Larkin invited me to come earlier this year so I’m pleased I could finally make it.

And thank you to Monash University for hosting me today at Sunway Campus. Let me congratulate the Campus on its recent ten-year anniversary.

I’ve had a long connection with education and Malaysia; my previous official visit to Malaysia was in 1995 as Australia’s Education Minister to promote more vocational education co-operation between our countries.

So coming back to talk today to Malaysian students of an Australian university completes the circle. I’m especially pleased to be at the Malaysian campus of my own alma mater. You share good company: I’m told the Chairman of Proton is also among many eminent Malaysian Monash graduates.

I’d like to speak today about the changing nature of international trade, Australia’s trade policy and our economic relationship with Malaysia.

As business students at a university with a reputation for first class research and a genuinely global outlook, I am sure many of you will embark on careers which shape, and are shaped by, global trade.

It’s your generation of business studies graduates that will help shape the future of international trade, and I very much look forward to hearing your perspectives after my brief address.

The changing nature of trade

The Australian Government – like your own - understands the important contribution that trade makes to a nation’s prosperity.

As business students, you’re all familiar with the concept of the terms of trade. Today, I’d like to talk about what might be called the new terms of trade.

That is, I’d like to look at how our old ideas about international trade are changing – and with them, the way we must frame trade policy.

Trade policy is now about much more than exporting goods and cutting tariff barriers—as important as that process still is.

Investment flows are now crucial, as are services. And both of these factors are well illustrated in Australia’s trade relationship with Malaysia.

As at December 2007, direct investment abroad by Australian companies of A$318 billion rivals foreign direct investment in Australia of A$357 billion.

Australian firms, like others around the world, are repositioning themselves in global supply chains, and expanding their presence in other markets.

Last year, for example, ANZ Bank invested over A$830 million in Malaysia’s Ambank, giving it a 19.1 per cent stake in Malaysia’s fifth-largest financial institution.

Malaysian investment in Australia has also grown strongly in recent years.

Preliminary figures for 2007 put the level of Malaysian foreign investment in Australia at A$8.2 billion, making Malaysia the 14th-largest investor in Australia.

Both countries’ economies benefit from these capital flows. There’s no need to remind you how much Malaysia’s own impressive development has been fueled by investment-friendly policies.

Investment flows have become so integral to trade policy that the Australian Government has recentralisedthe inward and outward trade and investment promotion arms in the Government’s trade promotion agency, Austrade.

Services are another, increasingly important factor in trade – and one whose potential has yet to be fully realised. In Australia’s case, services account for over 70 per cent of GDP, yet in 2007 represented only 22 per cent of our exports.

But as both our economies modernise, and as services account for a greater proportion of economic activity, we need to grasp opportunities for expanded trade across the breadth of the services sector.

I understand Malaysia is looking to develop the export capacity of its own services sector, and I welcome the potential growth to our bilateral trade relationship that this could bring.

But one of the keys to making the most of services trade is having an efficient economy. It means opening up your domestic economy to competition from the best in the world - because competition lifts the standards for businesses and consumers alike.

Education: underpinning people-to-people links

Given the location of our meeting today, I think it’s only appropriate to note that education represents the runaway success story of our services relationship.

In fact, it outstrips all other services, and goods, in Australia’s exports to Malaysia.

And it illustrates the enabling role that services trade can play.

The links forged through education are a vital element in the excellent relationship that exists between Australia and Malaysia.

These ties go back a long way. Since the early 1950’s, when the pioneering Colombo Plan first brought Malaysian scholars to Australia on Australian Government scholarships, over 250,000 Malaysians have studied in Australia.

Each year, I am pleased to say, 20,000 more make that decision.

Australian students, too, have started to come to study in Malaysia, further enriching our ties.

These bonds have in turn catalysed partnerships between our respective education and research institutions, improving learning and research in both countries.

If you work as a professional in KL, there’s a good chance you will know someone who has studied in Australia. It’s unique – not just students to Australia but Australian vocational training providers operating here in Malaysia.

I signed a vocational education agreement between Australia and Malaysia back in 1995, so let’s bookend that…and move to a new page in our services and trade relationship.

Education illustrates the enabling role that services trade can play. I hope by studying at an Australian institution, you learn more about our country and Australian people learn more from you.

And as Malaysia creates new opportunities for education in export zones such as Iskandar, where I visted yesterday, I hope we can see more engagement between Australian and Malaysian education providers.

The Doha Round: keeping trade free

Let me widen the focus of my remarks. A fundamental principle that guides Australia’s trade policy is that trade matters to us all.

It lifts our prosperity and that of the world: since the last world war, world trade has been growing at three times the rate of world output, although that rate of growth has slowed in recent years as progress on the Doha round has stalled.

Every previous negotiating Round has provided a fillip to world trade.

A successful Doha Round remains fundamentally important to the world economy – in fact even more so today in the current international economic uncertainty than it did last July when the talks unfortunately stumbled again.

The fact is that 80 per cent of the agreement that is already on the table locks in remarkable progress for agricultural exporters such as Australia and Malaysia.

Agricultural tariffs in the EU, the US and Japan would be cut by up to 70 per cent, while tariff quotas for agriculture would be boosted to allow, in some cases, hundreds of thousands of tonnes of new market access in developed countries. And export subsidies in agriculture would be eliminated forever – which would guarantee that we will never again face this distortion to world agricultural markets.

But both the progress we made and the fact we are so close to a deal offer real hope that WTO members can quickly return to the table and finish the job. I believe we can to find a way forward on these issues so that modalities for agriculture and industrial products – the two key sticking areas – can be agreed by the end of the year.

Concluding the Round will not be easy – I can assure you that even bilateral negotiations rarely are – but multilateral trade liberalisation is the best way forward towards enhanced global economic growth.

The WTO Doha talks also reflect the concept of “common but differentiated”, that is, a common goal towards trade liberalisation to apply to a very diverse group of economies at different stages of development. This is a constructive path which points the way forward for other complex multilateral negotiations such as climate change.

Malaysia has been a close ally for Australia in the WTO negotiations and I look forward to working with my counterpart, Minister Muhyiddin, in the months ahead.

Both Australia and Malaysia are members of the Cairns Group of agricultural exporting nations and through this group we have worked effectively towards freer trade in agricultural goods.

Similarly we need to work together to ensure a successful outcome on manufactured goods.

And, as I have already mentioned, the services sector is vital to us both. I particularly welcome Malaysia’s signals at the WTO Ministerial Meeting in July and its active role in the sectoral group on education services, where together we are seeking to improve market access in this important sector.

At a time of economic uncertainty and rising global energy and food prices it is crucial that we get back to the negotiating table, lock in the existing gains and work through the differences which have so far prevented a conclusion to the Round.

The WTO and its negotiating machinery can be frustratingly slow to produce outcomes.But we must remember that it has provided huge benefits.

And in recent decades this has been a significant contributor to growth in our own region, the Asia-Pacific.

The WTO has also produced a global system of rules and disciplines and has massively reduced the distortions in international trade and increased certainty and stability in international economic relations.

Free Trade Agreements

At the same time as we continue to work assiduously to finalise the Doha Round, we’re also negotiating free trade agreements, FTAs.

Australia sees no tension between our pursuit of FTAs and our abiding commitment to multilateral trade liberalisation. We simply have an overriding objective of liberalising trade across all sectors.

It’s the Australian Government’s policy that we will pursue bilateral, regional and plurilateral FTAs where they support our objectives for the wider multilateral trading system.

We recognise that FTAs can deliver market access gains deeper and faster than might otherwise be possible in multilateral talks.

Having in May concluded negotiations for a very comprehensive FTA with Chile, we are currently negotiating further FTAs with Japan, China and the Gulf Cooperation Council.

And we’re looking into starting negotiations with Korea, and are currently undertaking FTA feasibility studies with Indonesia and India.

We are also considering the potential of pursuing trade liberalisation through important regional institutions like APEC and the East Asia Summit.

Recently, I was very pleased to have been able to conclude negotiations for an ASEAN-Australia-New Zealand Free Trade Agreement.

In terms of coverage, this FTA is the biggest trade agreement Australia has ever negotiated.

Sixteen per cent of our total trade in goods and services is with the member states of ASEAN.

It is also the most comprehensive trade agreement that ASEAN has ever negotiated, and it will considerably strengthen trade and investment ties across the region.

The agreement, which we aim to sign later this year, will deliver greater certainty and transparency for exporters and investors, including through substantial WTO-plus commitments across a range of sectors and countries.

It provides a solid platform for ongoing economic engagement between Australia, New Zealand and ASEAN, and is a step towards deeper regional integration.

You may be aware that, while negotiations for the ASEAN-Australia-New Zealand FTA were in their final stage, Malaysia and Australia agreed to put on hold negotiations for our own bilateral FTA.

Now that the plurilateral negotiations are complete, Malaysian Minister for Industry and Trade, Tan Sri Muhyiddin Mohammad Yassin, and I today agreed to reinvigorate the Malaysia-Australia Free Trade Agreement (MAFTA).

To this end Minister Muhyiddin and I have instructed officials to meet in November 2008 to progress the MAFTA negotiations.

Trade with Malaysia: unlocking the potential

I believe that there’s great potential to deepen the already strong economic engagement between our countries. Our trade has grown at an average of 10 per cent annually. Malaysia has a trade surplus on goods; Australia has a surplus in services.

Malaysia is our third-largest trading partner in ASEAN; it’s no coincidence that our top two trading partners in ASEAN Singapore and Thailand – are countries that we have signed FTAs with.

In 2007, Australia was Malaysia's 10th largest trading partner overall, and Malaysia is Australia's 11th largest trading partner.

The enduring strength of the relationship reflects the complementary nature of our major export industries.

We are already the leading agricultural exporter to Malaysia, exporting over $600 million worth of wheat, sugar, meat, fruits and other agricultural products last year.

But as the Malaysian food processing industry grows there will be further opportunities for Australian agricultural producers.

These opportunities, and other potential areas to expand our agricultural links, are addressed by the annual meeting of the Malaysia Australia Agricultural Cooperation Working Group.

That Group’s discussions are just one example of the practical and effective working relationship between our two governments. Another area in which I see considerable opportunities is financial services.

Our own financial services industry is particularly dynamic. It’s one of the largest, fastest growing and most sophisticated in the Asia-Pacific region.

Australia has the fourth largest pool of investment fund assets and the seventh largest stock and foreign exchange markets in the world.

The industry manages more than $1.4 trillion in assets, having grown at an annual rate of around 11 per cent since the introduction of the superannuation guarantee levy in 1992.

And there are industry predictions that this figure could rise to more than $2.5 trillion by 2015.

We recognise that Malaysian financial institutions also have considerable expertise in financial services, particularly in the area of Islamic banking.

Australia has much to learn in this area – including, I hope, from the high quality research being done at this Business School.

Given our respective financial services, I believe there are real opportunities for significantly greater two-way flows of both investment and expertise in financial services between Australia and Malaysia.

As just one example, we want the business services many of you will engage in to be readily available in Australia, just as Australia’s education services have been available to you here in Malaysia.

There are other areas of great opportunity that we could expand through a bilateral Malaysia-Australia FTA.

Of course, further liberalisation of tariffs on goods; improving logistics; more sophisticated telecoms links; boosting education links; working on clean energy and climate change and economic co-operation.

And with Malaysia harnessing the engine of economic dynamism in its five special economic zones – I’m confident we can take advantage of that together.


This campus is an excellent example of what can be achieved when governments and businesses work together to create better opportunities for societies.

In this case, the Sunway Group’s Education Trust and the Malaysian Government’s decision to welcome foreign university campuses has allowed Monash University to provide world-class education services to Malaysia.

This is no small accomplishment.

It is heartening to see that an Australian education institution, and particularly one from my home town of Melbourne, is playing so worthwhile a part in creating opportunities for personal and societal growth.

We in the Australian Government fully understand the vital role that education and skills play in securing a nation’s future prosperity.

In fact we’ve already taken steps to boost the competitiveness of Australian industry by implementing programs that address skills shortages in the economy.

That’s another example of our commitment to creating a strategic approach to trade policy.

Underlying that policy is, of course, our commitment to the liberal international trading regime that continues to generate prosperity around the world.

And an understanding that, as the nature of international trade changes, so too must our trade policies.

I congratulate you on your hard work and scholarship, and wish you every success in your future endeavours.

Thank you.