ANZCHAM and Philippines-Australia Business Council Breakfast meeting
9 October 2008, Manila
Salutation
Thank you, Richard for your introduction, and Bert for your welcome.
Let me thank the Australia-New Zealand Chamber of Commerce and the Philippines-Australia Business Council for giving me the opportunity to speak this morning.
As you know, I’m here with my colleague Stephen Smith to take part in our first Philippines Australia Ministerial Meeting.
This morning, we will first have a joint meeting with our counterparts, Secretaries Romulo and Favila, to discuss our broad global and regional priorities, including the implications of the current financial crisis.
After that, I’ll have a separate discussion on trade matters with Secretary Peter Favila.
He and I have worked together closely in recent months, in Geneva on the Doha Round trade talks, and then on the ASEAN-Australia-New Zealand Free Trade Agreement negotiations.
I’ll return to the subject of the FTA shortly.
Let me just say a few words about our overall approach to trade policy before I turn to bilateral relations. The fundamental purpose of the Government’s trade policy is to improve trade competitiveness and boost our exports.
That’s why we have, since our first day in office, been pursuing a trade policy that rests on twin pillars. We’re committed to securing a more liberal international trade environment, so that exporters like you get better market access, and to implementing a program of domestic reforms that places our companies in the best possible position to compete.
We know that trade is no longer just about producing and shipping goods. It’s increasingly about investment flows and services, too.
So, at home, we’ve embarked on a policy of close coordination between Federal and State governments, to produce more coherent strategic responses to critical issues like infrastructure, investment facilitation and skills development.
And we work in close partnership with business to help address the obstacles you face.
We’re currently considering the recommendations of a major review of export policies and programs we commissioned, and will present our formal response soon.
With respect to expanding and facilitating access to overseas export markets, we believe that multilateral trade liberalisation still offers the best means of securing across-the-board gains.
A successful Doha Round remains fundamentally important to the world economy – even more so in the current international economic uncertainty than it was last July, when the talks unfortunately stumbled again.
When this happened, we were 80 per cent toward the solution, but that is not enough. The way the WTO round works is that nothing is agreed until everything is agreed. It’s part of the single undertaking.
On the positive side, we have re-engaged quickly and I believe that successful conclusion of the Round this year is still possible. We are doing what we can to find a way forward on modalities for agriculture and industrial products – the two key sticking areas.
The Philippines has been a close ally for Australia in the WTO negotiations and I look forward to working with my counterpart, Secretary Favila, over coming months.
Both Australia and the Philippines are members of the Cairns Group of agricultural exporting nations and through this group we have worked effectively towards freer trade in agricultural goods.
Australia-Philippines bilateral trade opportunities
In this new environment, how does the Australia-Philippines trade relationship stand? To be frank, I believe we have underperformed.
The facts speak for themselves: Australia’s total two-way trade with the Philippines last year was worth only $2.5 billion. Compare that with our total trade with ASEAN of $71 billion.
If you look at the trade figures between 1997 and 2007, our two-way trade grew at 17 per cent compared with trade with ASEAN of 130 per cent. Over the same period, Australian exports to the Philippines actually fell by 11 per cent.
The overall picture is of a decade of missed opportunity; of market share lost and of opportunities lost despite very strong natural advantages.
It is time to turn this underperformance around and lift our trade and investment to a new level.
AANZFTA
And what we have got going for us is the recent conclusion of negotiations for an ASEAN-Australia-New Zealand Free Trade Agreement. I greatly appreciate the constructive role of Secretary Favila in getting that outcome.
The Philippines is the second largest country in ASEAN and therefore extremely important to Australia’s trade relations with that bloc.
In terms of coverage, this FTA is the biggest trade agreement Australia has ever negotiated.
It is also the most comprehensive trade agreement ASEAN has ever negotiated, and it will considerably strengthen trade and investment ties across the region.
Sixteen per cent of Australia’s total trade in goods and services is currently with ASEAN countries.
Our trade relations have firm foundations in the traditionally strong sectors of Australian agriculture and minerals, and Philippine telecommunications equipment.
And our two economies are in fact, complementary.
We enjoy very strong people-to-people links – there is a 200,000 strong Australian-Filipino community; that’s around one per cent of our population. They are a highly respected community and are engaged in all walks of life in Australia. It’s no surprise that Australia’s third-largest source of skilled workers is from the Philippines.
The Philippines has well educated people and we have a common business culture.
We are both rich in natural resources. In terms of
mineral wealth, the Philippines is ranked 5th in the
world. Australia, by comparison, has the largest deposits
of commodities like nickel and coal, and second largest
deposits of gold and copper.
The Philippines is experiencing a major resurgence in its mining industry, and is on the threshold of becoming a leading producer of gold, copper, nickel and chromite.
Total Australian investment in the Philippines grew from just under $900 million in 2001 to $1.53 billion in 2007, almost certainly on the back of increasing activity in the mining sector.
And ten of the 31 national priority mining projects have Australian interests. There is so much potential for a major increase in investment in coming years.
Business and investor certainty has been shored up by recent legal developments upholding the legitimacy of the Philippine Mining Act, which is widely regarded as world-class mining legislation.
And we’ve got the world-class mining expertise to match it.
But much work remains to be done by both our countries to make sure that this legislation results in practical benefits for both of us. Greater certainty and ease of doing business will be critical in attracting real investment in this sector.
We’ve also got an outstanding reputation as a supplier of food and beverages.
I was in Queensland last month to meet with Australian meat exporters, and I can assure you there is no shortage of interest in the potential of the Philippine market amongst our meat and livestock producers.
Or, for that matter, among our thoroughbred horse breeders, for whom the Philippines is an expanding market.
The demand for our high-quality food products should increase as local disposable incomes rise. But, as I’m sure many of you know, there are still some market access issues we need to address.
Services account for 80 per cent of Australia’s economic base and yet represent only 22 per cent of our exports. For the Philippines, the share of services is around 50 per cent.
As Trade Minister, I am determined to ensure Australia’s capacity in services builds on the considerable strength and expertise embodied in our resources sector.
The growth in the Philippine mining sector will increase demand for associated services. That should create fresh opportunities for our bilateral trade in services to expand.
The Australian education services sector has performed extremely well in recent years.
Education is now our third largest export, across all goods and services.
Currently, there are relatively few Filipino students in Australia, although it’s encouraging to see that, in 2007, enrolments from the Philippines were up by 32 per cent over the previous year.
But, given the Philippines expanding education requirements, our sizeable Filipino community, similar time zones, and the quality and affordability of our tertiary institutions, there is considerable scope for us to boost the numbers.
Again, the mining industry can act as a driver in this regard. As the demand for professional mining qualifications grows, along with the need for improved governance of the sector, Australia is well placed to assist.
That’s something I’ll be discussing with Secretary Favila. Education and training is a sector whose profile in our bilateral relationship deserves to grow significantly.
Another sector with genuine potential, and one in which the ASEAN Australia New Zealand FTA should help, is the financial services industry.
Australia’s financial services sector is one of the largest 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 $1.3 trillion in assets, having grown at an annual rate of around 11 per cent since the introduction – under a previous Labor Government - of the superannuation guarantee levy in 1989.
Here I should note that the IMF recently delivered a very positive assessment of the strength of Australia's banking and regulatory systems.
Our own Reserve Bank has concluded that, while Australia is not immune from global financial market turmoil, our financial system is better-placed than most countries to weather the storm.
Australia’s financial sector is well‑regulated and well‑capitalised.
The ANZ is already operating here, but I think there are good prospects for business growth in this expanding market.
Conclusion
We are ready to overcome a decade of missed opportunity. This is a trading relationship that’s waiting to happen. And it’s an exciting time for Australia-Philippine business relations.
From a Government perspective, we’re doing all we can to ensure you as businesses continue to benefit from a liberal international trading regime.
And that you derive benefit from the soon-to-be-signed ASEAN-Australia-NewZealand Free Trade Agreement.
Many of you here this morning will, I hope, see your business grow as opportunities across the bilateral trade and economic relationship expand.
Business leadership and vision can, and in the Philippines, really does help give real impetus to bilateral relations, because bilateral ties amount to much more than the sum of the goods and services exchanged.
The people-to-people connections you develop and sustain form a vital part of the broader Australia-Philippine relationship, and I want to thank you today for that contribution.
I congratulate you on your achievements to date and wish you every success in your future endeavours.
Thank you.