Boost relations with Australia for regional success

This year Asean and Australia are celebrating their 40th anniversary of relations. For Asean, Australia is a crucial and increasingly high-profile external partner, aiding its rise to one of the region’s most enduring and important regional organisations.

However, many Australians still have little awareness of Asean’s role in its future security and prosperity in the region. Australia’s new coalition government should focus on raising Asean’s status in Australia, tout it as a high-priority trade partner and facilitate access to Asean markets for Australian investors.

Asean centrality remains the accepted norm in key regional forums such as the East Asia Summit and the Asean Regional Forum, and the appointment of Australia’s first resident Ambassador to Asean in 2013 is in recognition of its growing importance. Australia supports Asean’s economic, socio-cultural and political community building efforts and undertakes aid and development programmes in most countries in the region.

Economic, education and tourism links remain strong. The Asean-Australia-New Zealand Free Trade Agreement came into force in 2010 and Australia has played an active role in the Asean-led RCEP regional FTA negotiations. Last year Australia’s Foreign Minister Julie Bishop launched the New Colombo Plan which aims to further expand Asean and Australia’s education ties.

Southeast Asia remains a leading tourism destination for Australians, but while Bali, Phuket and Langkawi are popular holiday spots, Asean’s profile in Australia is still quite low with a number of controversial issues holding the relationship back.

Australia’s treatment of asylum seekers has soured its relations with Indonesia, while also drawing Malaysia and Cambodia into the fray. Furthermore, Australia’s new coalition government has announced spending cuts for aid, foreign affairs and the Australia Network which could affect its long-term presence in the region. These issues hamper the image of an active and engaged member of the region that the Australian government is trying to portray.

Successive Australian governments have placed a greater emphasis on the country’s engagement China, India, South Korea or Japan than it has with Asean. The Gillard government’s 2012 Asian Century White Paper made few references to Asean while the coalition government’s recent budget again emphasised the importance of the relationships with Northeast Asian countries of China, Japan and South Korea, as well as India and Indonesia. This seems to have taken a toll on Asean-Australian trade.

Since the Asean-Australia-New Zealand Free Trade Agreement, trade in automotive and agricultural products has increased, but overall Australia-Asean economic engagement seems to have slowed in comparison to Northeast Asia and India. Since 2008, Australia’s two-way trade with Northeast Asia and India has experienced strong growth, with Chinese trade more than doubling with India, Japan and South Korea logging average yearly gains between 7-8%.

In comparison, total two-way trade between Asean and Australia has risen from A$82 billion (2.5 trillion baht) to A$94 billion since 2008, an average yearly rise of only about 2.9%. Similarly, GDP growth in Asean has outpaced growth of trade with Australia. Asean’s average GDP growth rate since 2008 has increased by half while trade has grown at only about 15%.

In China, Japan and South Korea this figure is turned on its head, as trade with Australia has grown faster than GDP.

While there are a number of factors at play here, such as the larger proportions of primary product trade between Australia and Northeast Asia, the data suggests that the Australian government and private sector may be missing a lucrative opportunity to put down roots in a growing region.

The varied legal, investment and regulatory rules across 10 countries and sporadic political instability may make China, Japan and South Korea more attractive propositions, but the single-market goal of the upcoming Asean Economic Community aims to reduce that burden.

For Asean, an engaged Australia is essential for the region’s stability and prosperity. Closer relations means access to expertise in education, agriculture and resources.

Australia is also seen as an alternative to the usual United States/China dyad.

It tends to be seen as more flexible than Washington and preferable to being beholden to Beijing. For instance, in the South China Sea dispute with China which is currently threatening Asean, Australia can play a neutral and much more constructive role than Japan or the United States. For Asean, attracting and retaining Australian interest in the region is essential.

Asean has strong and steady growth, a large population and a burgeoning manufacturing sector.

If the Australian government apportioned the same strategic significance to the region as it does to Northeast Asia and assisted Australian businesses in capitalising on the free trade agreement, Australia’s economic engagement with Southeast Asia can strive to reach new heights for another 40 years.