Pleased Prime Minister O’Neill was in Australia last week.
It’s great to be here in Lae the economic and business heart of PNG.
A city where Australia’s engagement has deepened over the past year as a result of the AFP advisory deployment and our work to transform the Lae ANGAU hospital.
Australia’s relationship with PNG is one of our most important in the Asia Pacific.
We are always looking at ways to further strengthen our long-standing ties.
That’s why I am leading a senior business mission on this visit, with an obvious focus on resources and energy and also infrastructure and critical investment along with agriculture.
Over the past 18 months, I’ve spent a lot of time travelling the world promoting Australia’s strengths and leveraging opportunities.
As the first Minister for Investment I have now participated in more than 60 productive senior investment roundtables in 23 countries.
I’ve also concluded three Free Trade Agreements in North Asia.
Strong bilateral relationships are of course two-way; whether that’s the flow of exports, imports and investment or capacity-building through the provision of services and know-how.
In 1990, of all the goods and services exported from anywhere in the world, 20 per cent ended up as intermediate goods somewhere else as inputs into other goods and services.
If you go forward 25 years, it’s now 73 per cent. And these goods and services can go across four or five borders, before you end up with the final product.
This kind of globalisation means, our imports are as important as our exports in terms of tariff protections.
This changed world has affected SMEs; 20 years ago they would debate about whether to start another office in a different state. Now they’re debating whether to set up a presence in a different country in the region; all thanks to the internet, e-commerce, low-cost air travel etcetera.
Australia has a lot to offer PNG in this capacity and likewise PNG has a lot to offer Australia.
That’s what it’s all about, leveraging each other’s strengths for mutual benefit.
PNG for example is resources rich like Australia and we also have great expertise in developing resources and also a world-class METS (Mining Equipment Technology and Services) sector.
And these are already notable areas of collaboration.
While commodity prices have come off a great deal in recent times – a blow to both of us – the future can be bright on account of demand that will come down the line.
It is a time for our sectors to get match fit, continue to invest and to innovate, and become more productive; so that we are in strong positions for the next phase of expansion, and it will come, especially in energy, sooner than you might think.
PNG has many projects which are getting close to FID, much of it in the areas of growing demand: copper, gold, LNG, notwithstanding the current downturn.
The investment from Australia into this country in services or the development of resources is increasing.
The eyes of the world are now starting to look at PNG in terms of the resources that you have and the ability and capacity you’ve shown to pull off something as large as the Brownfields LNG project; it will affect every part of your economy due to the symbolism of implementing such a huge project successfully.
Investment and infrastructure are critical if PNG is to realise the benefits of its resources and energy assets, as well as its agricultural and tourism assets.
Last year 100 million Chinese left China for a holiday; in five years’ time in 2020 that number will grow to over 250 million.
The unique tourism resources our two countries have, means we’re both perfectly placed to capture our share of this growth.
The profile of the Chinese tourist is changing as well; four years ago 80 per cent of Chinese tourists visited Australia in tour groups, now it’s more like 36 per cent. Chinese tourists are increasingly seeking a premium and independent experience; they’re spending twice as much as Americans when they come to Australia.
This opportunity is no different for PNG. With increased investment in areas such as resources and energy, it will help you raise the money to create the infrastructure to tap into some of these emerging opportunities.
The Australia-PNG relationship is, in many ways, more an investment relationship than a trading one.
Infrastructure is the key to opening up your country. You have such rich agricultural resources, however it can be difficult to distribute, but as in our country with the mining experience, improved infrastructure such as road, rail and ports, will emerge and help in opening up a variety of industries.
Australian investment in PNG is worth about $19 billion (double of what we have invested in Indonesia), compared with bilateral trade of around $6.8 billion – there is plenty of room to improve our trading performance, but the investment side of things is something we’re very proud of.
Attracting additional investment is critical for PNG as it is for Australia.
Since the first fleet, Australia has relied on foreign investment. We’ve still got relatively thin capital markets in Australia and again we’re at a stage where we need to attract capital and investment if we’re to go to another level with our infrastructure and industries, particularly our agricultural industry; we’ve got the expertise, but we need foreign investment.
Reinvestment is a most important source of new investment.
This is why nurturing and growing existing relationships is in many ways the biggest investment of all.
All relationships are built on trust; greater trust results in greater mutual benefits and that’s why these kinds of forums are so important.
It’s also important because while the world is awash with mobile capital, it is also awash with nervous investors.
Investors are more likely to reinvest in good existing relationships than they are to risk their money in projects that are uncertain.
For example, I know of a man in Europe who told me he put $100 million into a European bank at negative 2 per cent interest rates, so he at least knows in a year’s time it’s cost him $2 million but he’s still got $98 million; he’s prepared to lose 2 million a year to keep some of the value in his money rather than risk it in projects around the world – that’s the state of mind of a lot of investors.
Both our countries have opportunities in this regard; there’s a lot of money around the world looking for a safe haven to invest; new investors are looking for strong projects, with reliable returns.
The challenge is to convince them that you can provide an environment conducive to this – stable regulation, a legal system they can trust, political stability.
There’s a lot of attention on our part of the world.
I was in New York earlier in the year and sat down with six businessmen who between them managed funds totalling $1.7 trillion dollars. They’re interested in Australia due to our asset recycling program, our infrastructure investments, our resources, our stable economy – 24 years of uninterrupted economic growth.
The eyes of the investment world are also starting to look at PNG as well as Australia.
We’ve all got to do what we can to maintain a stable investment environment because competition for money is becoming fierce.
Exploding middle class
But PNG, like Australia is situated in a region undergoing an explosion in the middle class.
OECD predicts 600 million to 3.2 billion within 35-40 years; a humanitarian miracle.
This presents enormous opportunities with growing demand for food, water and energy security.
For example China has 20 per cent of the world’s population but seven per cent of the world’s water and 60 per cent of that is polluted.
With hundreds of millions coming into the middle class just in China alone, there’s great opportunity to fulfil their food needs; especially at the premium end.
And it’s happening now; two years ago we sold 60,000 tonnes of beef to China. Last year we sold 260,000 tonnes of beef to China. They went from our 12th to our 3rd biggest market in one year.
Every day, tens of thousands of litres of fresh milk in bladders are going out in the bellies of aircraft to China, where it’s selling for between $12 and $20 a litre, while it sells for $2 a litre in Australia.
That shows you the demand that is coming down the line throughout the entire region.
Our unique place in the Tropics presents challenges but also opportunities in a range of areas.
We have 23 million people in Australia but just one million live in the North.
The top half of Australia is in the Tropics; we’re one of three countries in the developed world that’s located in the tropics along with Singapore and Taiwan.
40 per cent of the world’s population is in the Tropics and this is expected to reach 50 per cent by 2050; the majority of the middle class in the world will be in the Tropics and 60 per cent of the children in the world will be in the tropics.
In our Northern Australia White paper, we’re looking closely at how we’ll collaborate with PNG in a research & development sense, in a marketing sense etcetera, because of our proximity and our similarities.
There are all sorts of products and services where we can be leaders in the world as this emerging Tropical zone matures in the coming years, and we’ll do it much better together than we would separately.
There are endless projects I can see in the pipeline – there are always difficulties, but you have to raise the eyes.
For instance, I talk to tourism SMEs in Australia and say: ‘you tell us about the projects because the money is there’; there are a lot of people that want to back what our countries have to offer – blue skies, clean air, healthy food and water.
We’re giving greater attention to funding infrastructure – a key requirement for private sector development and economic growth.
We’ve re-oriented our aid program much more towards supporting the private sector and strong economic growth.
In this country now there’s $3 billion worth of assisted projects in infrastructure and over 70 per cent of it is being run by the private sector.
Early, successful conclusion to PACER Plus negotiations offers a pathway to achieve greater integration in our economies; one set of trading rules, removing non-tariff barriers which will create more seamless trade and investment between our two countries.
We are continuing efforts to further streamline entry into Australia from PNG.
We value the opportunity to work more closely together.
Our relationship is strong with a shared history – both working to establish freedoms that have lasted many decades.
We have the opportunity to work more closely together to pursue common policy goals through our support to your hosting of APEC 2018.
There is great scope for deeper levels of engagement and I look forward to being a part of it with you all, in the years and decades ahead.
- Trade Minister's Office: (02) 6277 7420
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