Australia's Bright Middle East Future

Address by the Acting Prime Minister and Minister for Trade The Hon Tim Fischer MP to the National Trade Forum

Eden on the Park, Melbourne, 14 July 1999

(Check Against Delivery)

Thank you Roland Jabbour (Chairman of the AAC); The Hon Phil Honeywood (Victorian Minister for Tertiary Education and Training); Syd Giller (Vice-President of AACCI); Jack Beighton (Managing Director, Arab Bank Australia); ladies and gentlemen.

I am delighted to have this opportunity to speak with my old friends in the Australian Arabic Council, particularly in support of their initiative to highlight the significant opportunities that exist to broaden and diversify the two way trade relationship between Australia and the Middle East.

I am particularly pleased that one of my last official appearances as acting Prime Minister is at today's Forum, because those of you who know me - and I see many familiar faces here today - will be well aware of my enthusiasm for trade with the Middle East. I think I've just about lost count of the times I've travelled to the region to promote Australian trade. It has always been my opinion that there are many worthwhile market opportunities for Australian business people in that region - and, of course, that business people from Arabic countries would benefit from involvement and investment in the Australian economy.

This is a particularly opportune moment for the AAC to hold this Forum, because there has never been a better time for Australian business to look towards the Middle East. I believe the very good news coming out of the region recently gives business people cause for growing confidence that they can benefit from the substantial commercial opportunities emerging there. The election outcome in Israel is particularly welcome because it signals that a comprehensive peace with all that country's neighbours is a realisable and realistic prospect.

Australia looks forward to the creation of lasting peace in the region in which the sovereignty of all countries, and their right to live in peace with their neighbours, are respected and protected on an equitable basis. New Israeli Prime Minister Barak has declared that a lasting peace will only be possible if Israel achieves a permanent agreement with the Palestinians and peace with Lebanon and Syria. Continued Australian Government support for these endeavours can be expected.

This is another sign that the region is successfully finding its feet, changing to reflect the global trading environment, and becoming more resilient as a result. There is every reason to be confident that the people of the Middle East can now better focus their energies on building and diversifying their economies and their relationships with the rest of the world.

Australia's growing Middle East ties

Over many years, Australia has developed a very sound reputation as a reliable and understanding partner with the countries of the Middle East. Our relationships have largely been built on strong commercial ties, but there are growing people-to-people links. The Arab ethnic diversity that Australia now enjoys has become a valuable community resource, and it is vital that we tap into its potential to enrich exchanges between Australia and the Middle East.

And that is really what the theme of this conference is about: to draw people's attention to our own Arab community as a national asset. Today, Australia has a substantial pool of human, linguistic and cultural resources in its Arab community which could add value to the quality, scope and level of commercial contacts we want to foster.

It makes good sense for business people to draw on the knowledge and expertise of the Arab community in Australia as they seek to foster new commercial partnerships with the Middle East.

I believe that taking advantage of this potential is important for us , and I commend the AAC for its initiative in exploring this theme at today's conference.

The Middle East is a major destination for our exports of wheat, coal, live sheep, sugar, alumina and wool. It is a market that is growing at a very healthy rate for Australia, with total exports valued at $4.7 billion in 1998 - an increase of around 13 per cent over the previous year. The growth trend is very positive, with the five year growth rate of Australian exports being well over 11 per cent annually.

I believe the potential of the region as a market for Australian products is even more promising. Australia has a great track record in producing what the market wants - not only commodities, but value added manufactures such as motor vehicles and engineering equipment. The region is also a good market for our services, in the education, medical, hospitality and communications sectors, in mining and mining infrastructure development, and in energy development. There is also great potential for two-way growth in the tourism industry.

The Government has made the development of bilateral relations with all countries, including those of the Middle East, a top priority in the development of our trade strategies since coming to office in 1996. That has been reflected in the growth of Australian representation throughout the region, so that we now have a network of offices to help to establish contact between business people in the Middle East and Australia. For example, in the UAE alone we have recently opened an embassy in Abu Dhabi, complementing the existing Austrade office in Dubai.

The advantages of building economic relationships between Australia and the region go far beyond the increase in two-way trade. Many Middle East countries have developed strong links to markets in Central Asia, the Sub Continent and Europe, and Australian business could benefit by developing strategic alliances with their Middle East counterparts. Likewise, Australia stands as a gateway for foreign firms to the wider Asia-Pacific region, and many businesses, including those from the Middle east, are now looking to have their Asia-Pacific headquarters here in Australia.

Individual countries offer special promise to Australian business.

For example, our exports to the UAE totalled $1.15 billion in 1998 - double the level reached in 1996. The UAE is the largest market for Australian motor vehicles, with Holden and Toyota car valued at $360 million being shipped last year. There are now 3500 Australians in the UAE, and 65 Australian companies are based there.

Saudi Arabia is another important market, with exports reaching $732 million in 1998 compared with $461 million in 1997. Our exports to Egypt increased by 17 per cent last year to reach $534 million; and those to Iraq reached $312 million, a slight increase of 4 per cent on the previous year.

Taking advantage of regional opportunities

Why should Australian firms act now? While many economies, particularly in our own region, are only just beginning to show signs of recovery from the significant downturns of the past two years, growth rates across the Middle East have averaged in excess of 4 per cent in the same period. If you include Iran and Egypt, in 10 years time the region will have a population equal to that of Western Europe today. Over 60 per cent of the Middle East's population is under the age of 21, and they are becoming wealthier and more cosmopolitan in their tastes.

Right now, the Middle East has import needs of some $200 billion each year. It has huge development needs with some $55 billion worth of development projects scheduled for the next 5 years in areas such as water, airports, road/rail, aluminium, and hospitality infrastructure. The Middle East is experiencing generational change, and with it all the range of technological advances that are revolutionising commercial activity in the developed world.

The focus of Middle East economic policy is increasingly one of diversification from reliance on oil revenue. This embraces everything from downstream hydrocarbon products like fertilisers and polymers, to building and construction materials and particularly services such as investment, banking and finance, education and health and information technology. And regional countries are making good progress in deregulating and privatising their economic structures.

Of course, the key issue is the outlook for oil prices. There is reason to be confident the price decline of last year has been reversed somewhat, and that Middle East economies will make better use of oil revenues to diversify their wealth base.

The message I would like you to take away today is simple: remember the lessons of the Asian economic crisis, and have a strong look at diversifying into other markets. And when talking of market diversification for Australian firms, the Middle East market stands out because it offers an excellent opportunity to build on our strong reputation as a supplier of traditional commodity exports to broaden our commercial relationship into value added goods and services.

It can be done; the opportunities are really endless. For example, the Perth- based company Dome has turned a simple cup of coffee into a lifestyle experience even in the discerning Middle East market. Dome has expanded its successful franchises beyond South East Asia and has established its first coffee shop in Dubai, as its first step to enter the Middle East market.

ECS International, a Bowral-based mining software and system consultant has clinched a $US400,000 software contract in Jordan. The contract is to supply geological and mining software to the giant phosphate supplier Jordan Phosphate Mines Co.

As Saudi Arabia moves its economy from its reliance on oil revenue, opportunities have been identified for Australian companies to tap into the Al Yamamah Offset project. This is a formal agreement between Austrade and British Aerospace Australia that will allow Australian companies to tap into a 2 billion pound sterling offset program to draw together the international expertise needed to in joint ventures in a raft of industry applications, such as telecommunications, mining, building, construction , water technology, agribusiness and services.

The key to successes such as these is, as always, personal credibility: the importance of personal contact and mutual confidence in each other's commercial capacity cannot be over emphasised.

Conclusion

The region has a complex commercial environment, but the rewards can be significant for those who make the effort, particularly for those who pursue a long-term approach . And as you will see today, our community links with the Middle East continue to strengthen and can support our efforts to diversify our trade relationship.

I therefore wish the Forum well, with the confidence that the enthusiasm and hard work of the Australian Arabic Council will ensure its success. Now, I might soon be returning to the middle back-bench, but you can be sure that I'll find some way to return to the Middle East before too long. And when I do, I hope to see more of your products in the markets of the region, as evidence of the value that I believe could be added by drawing on the culture and expertise of Australia's dynamic Arab community in enhancing the two way trade relationship.