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25 July 2009
Australia and Vietnam: Strong Ties and a Bright Future
Speech to AustCham, Ho Chi Minh City, Vietnam
Thank you very much for that introduction, Consul General Graeme Swift.
I would like to thank Auscham Vietnam for organising today's event, and to acknowledge Mr Clive Randall, the Chairman of Auscham's Ho Chi Minh City chapter.
Auscham plays a singular role in building bridges between the business communities of Australia and Vietnam, and in doing so, it makes an outstanding contribution to the overall bilateral relationship.
I take great pride in the commitment to Vietnam by the Labor Government.I would like to highlight three specific chapters in time that have helped to develop our strong bilateral relationship.In 1973, the Whitlam Government recognised Vietnam and established diplomatic ties.This happened when my father was Deputy Prime Minister.
In the 1990s the construction of the My Thuan bridge was a major project and remains an enduring example of Australia's commitment to assisting Vietnam fulfil its development objectives.
In 1995, I visited Vietnam in my capacity as Minister for Education, Employment and Training and signed a Memorandum of Understanding that laid the foundations for much of the progress we have seen in the bilateral education relationship. I am very pleased to see how Australia's involvement in providing education services here has developed.
And now in 2009, we are here working to establish a Comprehensive Partnership with Vietnam to begin a new chapter in the expansion of the relationship.We welcome the upcoming visit of the Secretary-General and look forward to further enhancing the bilateral relationship.
As many of you would be aware, yesterday in Hanoi I co-chaired the 8th meeting of the Australia-Vietnam Joint Trade and Economic Cooperation Committee, or JTECC, with my counterpart, Vietnam's Minister for Planning and Investment, HE Vo Hong Phuc.
The joint committee is the primary, high-level mechanism for advancing bilateral trade and investment issues.
I am pleased to report that yesterday's meeting was both productive and successful.
We covered a wide range of issues, including trade and investment opportunities in five key industry sectors.
I want to come back to those sectors later in this speech, because they relate to Auscham's commercial interests as well as Austrade's priorities for this market.
I was accompanied to Hanoi by a senior Australian business delegation.
As many members of the delegation are present here this evening, I would like to take this opportunity to thank them for their active participation.
This was the first time a delegation of Australian business people has travelled to Vietnam to take part in a JTECC meeting.
Their voices added a practical, outcomes-focused dimension to yesterday's meeting, one that will help advance trade and investment relations between Australia and Vietnam over the long run.
The bilateral relationship
Australia's relationship with Vietnam is a true partnership, one which benefits both countries.
Apart from our bilateral cooperation in many areas, with which this audience is very familiar, we cooperate closely in regional fora as well.
We look forward to working closely with Vietnam next year, when it will be ASEAN and East Asia Summit chair.
During Prime Minister Nguyen Tan Dung's visit to Canberra last October, he and Prime Minister Rudd agreed to set an ambitious agenda for further work to strengthen the bilateral relationship, and increasing trade and investment flows is an important element of their commitment.
Australia's bilateral economic relationship with Vietnam is strong and increasingly diverse.
Two-way trade has been growing fast.
Over the past five years, in fact, it has increased at an average of over 20 per cent a year, reaching $8 billion in 2008, making Vietnam Australia's fastest growing trading partner in ASEAN.
Of course, neither Vietnam nor Australia has been insulated from the global economic crisis. Vietnam's growth has slowed to a projected five percent this year, though it is still one of the world's fastest growing economies.
Australia too has been affected by the crisis and our growth has slowed.
But - thanks to the performance of our exporters, to the impact of the Australian Government's three-stage stimulus package, and above all to the structural economic reforms we commenced in the 1980s - Australia still grew 0.4 per cent in the March quarter.
That was the fastest growth in the OECD.But as the Treasurer keeps saying, we are not out of the woods yet.
Inevitably, there are signs that bilateral trade in 2009 will be affected by the economic crisis.
The impact is already noticeable in our trade in gold and crude oil.
We need to put this in context.
The world is experiencing the sharpest contraction in the global economy in 60 years, and nowhere has the impact been more pronounced than in global trade volumes, which are projected to fall more than 12 per cent in 2009 according to the latest IMF figures.
Australia's role in Vietnam's economic recovery
The Australian Government is supporting Vietnam's efforts to modernise its economy and achieve its reform agenda.A strong, prosperous Vietnam is in Australia's interests.
That explains why Vietnam is Australia's fifth largest destination for Australian overseas development assistance, with an estimated $106 million to be spent in 2009-10.
AusAID's programs in Vietnam include support for infrastructure, education and training, water and sanitation, as well as poverty reduction amongst ethnic minority groups.
I was also pleased to announce today our support in the form of a $12 million contribution to phase II of the "Beyond WTO" program and additional technical assistance and capacity building to help Vietnam implement its commitments under the AANZFTA.
In other words, Australia's development assistance is targeted to the drivers of Vietnam's sustainable growth - skills, innovation and infrastructure.
It is one thing to open markets, but it is another to ensure that businesses are competitive enough to take advantage of market openings. We accept that, as part of the dynamic strengthening of the bilateral relationship, it is important to ensure that our aid programs are responsive to the capacity building needs identified in Vietnam.
The benefits of structural reform
In order to achieve sustainable long-term growth and development, further domestic reforms of the Vietnamese economy will be required, as it continues its transition from a planned, to a "socialist market economy."
Now is the time for Vietnam to be pressing ahead with market reforms - in order to address structural weaknesses and to ensure that Vietnam emerges strongly from this crisis.
Let me say a few words here about the economy-wide structural reforms undertaken by Australia 20 years ago.
Structural reform is fundamental in creating well-performing, resilient and robust economies by tackling behind the border barriers to trade and investment.
It fosters an economic environment that supports the efficient functioning of markets.It also contributes to macroeconomic stability, productivity and economic growth.
Our structural reform included making tough decisions on floating the dollar, bringing down tariffs, deregulating the financial sector, putting in place a formal Accord between government and unions to lock in low inflation, retirement income reform - including compulsory superannuation that has produced for us one of the most sophisticated financial sectors in the world, national competition policy, significant cuts to personal and company tax rates and greater autonomy for the Reserve Bank.
Among other things, our reform focussed attention on our trading relationships, particularly in our trading partners in Asia.
Australia has a twin pillar approach to trade policy.We are committed to addressing issues at the border and behind the border.
Key sectors discussed at JTECC
I am in Vietnam to advance the government to government relationship.We are working to establish a framework for business to operate in a more efficient and effective manner, recognising the synergies between our two countries.
I would now like to turn briefly to the five industry sectors that were raised during the joint committee meeting yesterday in Hanoi.Before I do that I would like to discuss the importance of the business to business relationships.
There is no point developing the government to government relationship unless business is ready and prepared to step up.That is why we have Australian and Vietnamese businesses here with us at JTECC.
Business to business links are essential and we need business to step up to the mark.
First, education and training. Vietnam has made a long-term commitment to improving its education system, including a series of ambitious education targets for the coming decade.
But meeting the education and training needs of a modern economy and society will test Vietnam's resources, and so it is developing a new framework to re-define the role of foreign partners in education in Vietnam.
Consistent with this approach, provisions of AANZFTA will open the sector further to foreign providers by making entrance requirements for Australian teachers more flexible and by expanding the fields of study that can be delivered by Australian educational suppliers.
Competition from other international education providers such as the United States and the UK and in the region from Singapore and Malaysia is growing.
But Australia is well-placed to provide services to Vietnam's growing appetite for high-calibre and affordable education services.
Last year, there were some 16,000 student enrolments in Australian education institutions, with a further 14,000 students undertaking Australian education and training courses in Vietnam.
Australia, I would add, is also a leading provider of scholarships to Vietnam.
Second, infrastructure and environmental management.Infrastructure bottlenecks are a key issue for Vietnam.
The government of Vietnam recognises these bottlenecks are holding back the country's development, constraining economic growth and damaging the livelihoods of its people.
It has therefore been putting effort and capital into addressing transport - including ports, rail and road - as well as power and water.
That's why infrastructure is such an important focus of Australia's development assistance, and why it is also a priority for Austrade's work in Vietnam.
That is also why we welcome discussions on Public-Private Partnerships and options to facilitate sustainable, quality investment in this area.
I look forward to the visit tomorrow to the Phu My Bridge, which has been built by a consortium including Australian firm Baulderstone Hornibrook.
A related priority is environmental management.
Vietnam's rapid economic development has created new environmental challenges - not least air and water pollution, greenhouse gas emissions, and environmental degradation.
Again, this too is creating new opportunities for Australian companies like SMEC, GHD and Coffey International.
Third, I want to talk about opportunities in Vietnam's financial services.
If we have learned anything from this global economic crisis, it is the importance of strong financial institutions.
Foreign banks bring expertise, technology and experience that can only enhance the competitiveness of the sector as a whole.
And as Vietnam's economy opens up, so will opportunities to tap this country's long-term growth potential.
I made these points strongly in discussions in Hanoi yesterday, highlighting how well Australian financial institutions had performed through the global economic crisis, and the overall strength and sophistication of Australia's regulatory system.
I also pointed to some of the Australian success stories here in Vietnam, including ANZ and the Commonwealth Bank, and what they were bringing to the table in terms of capabilities, technologies and sales models.
That brings me to the fourth sector we covered yesterday, energy, oil and gas.
The energy sector is a critical factor in Vietnam's economic growth story, and demand is increasing as the economy continues to grow.
Vietnam has substantial proven oil and gas reserves.It needs assistance and expertise to extract those resources efficiently.
There are opportunities in Vietnam for Australian companies, which are of course leaders in the oil and gas and mining industries, and which also have expertise in alternative energies and clean coal technologies.
Australia also understands that this can be a difficult sector for foreign investors in Vietnam. The Australian Government remains ready to continue the dialogue with business and raise matters with the authorities as appropriate.
Fifth and finally, agribusiness.As Vietnam's population grows and income levels rise, we are seeing changing consumption patterns, and the domestic industry is unable to keep pace.
For Australian agribusiness, this is creating new opportunities not only for meat and dairy products, but in livestock, cattle feed, irrigation systems and dairy equipment.
Importantly, Vietnam's commitment under the terms of the AANZFTA to lower import tariffs will make Australian exports more cost competitive.
AANZFTA
My discussions at JTECC were encouraging as they showed the will of both Governments and business communities to forge ahead with the kind of policies that will deliver sustained growth in trade and investment to both countries over the long haul.
The ASEAN-Australia New Zealand FTA illustrates this point.
It is the largest FTA Australia has signed, covering 20 per cent of Australia's total two-way trade in goods and services in 2008.
I want to take this opportunity to congratulate Vietnam on ratifying the AANZFTA.
I also want to acknowledge the commitments it made in the course of the negotiations, some of which were "WTO plus."
It also undertook to enhance investment protections and improve conditions on business entry and stays.A platform was developed under AANZFTA, and we - both government and business - now need to build on that platform.Austrade will be pivotal to link business within this platform.
As you would be aware, Australia's decision to recognise Vietnam's market economy status was taken in the context of the AANZFTA negotiations.
But it's not just the FTA that tells us in which direction Vietnam is heading.
As Trade Minister, I'm also encouraged by Vietnam's participation in APEC, the ASEAN Free Trade Area, and the WTO.I was pleased to see Vietnam attending as observers at the last Cairns Group meeting.
This underscores the point that Government to Government relations between Australia and Vietnam are strong.
Business ties are also strong, and growing.It's a good news story but there is more to do.
I can't overstate the important role business plays in advocating the long-term benefits of free and open trade.
We need your support to take forward the APEC initiatives on "across the border" trade facilitation and the "behind the border" initiatives that will simplify business regulations and make it easier, faster and cheaper for business to get trade and investment flowing.
The Global Round
This brings me to an important point, one that is as valid for Vietnam as it is for Australia.
Earlier this month WTO Director General Pascal Lamy issued a report that concluded the world economy had witnessed further slippage toward protectionism.
At this time of global economic crisis, it is important, now more than ever, to resist protectionism, at home and abroad.
Keeping trade flows open is essential to turning the global economy around.
Trade stimulates economic activity.Trade generates profits for business.
Trade creates new jobs.
That's why bringing the Doha Round to a successful conclusion is so important.This is the message I delivered at the APEC MRT meeting earlier this week, as we worked to develop ways to direct officials to pursue this important work.
It is the best means for keeping the forces of protectionism in check and restoring confidence to the global economy.
Concluding remarks
Summing up, this is my second visit to Vietnam and I've been genuinely impressed with what I've seen and heard here.
I'm particularly glad my itinerary has taken me to Ho Chi Minh City, the engine room of the Vietnamese economy, where many Australian companies have a long-standing presence.
I am pleased to have seen examples of this today in my visits to Strategic Marine and Bluescope Steel - both iconic Australian companies doing good work in Vietnam.
Vietnam is making tremendous forward strides.
The Australian Government is doing its part to encourage Vietnam's economic growth, and support the interests of Australian business in this dynamic market.
The main challenge for Australian business leaders is to position your companies to take up the opportunities that will accrue from Vietnam's long-term growth trajectory, and of course the benefits of the FTA when it comes into force next year.
[ends]
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