Introducing the Australia in the Asian Century White Paper – Part I

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Introducing the Australia in the Asian Century White Paper – Part I

George Gilligan and Jonathan Greenacre, UNSW

On 28 October 2012, Prime Minister Julia Gillard released the Australia in the Asian Century White Paper (White Paper). In her Foreword (pp.2-3) the Prime Minister stresses that the White Paper is a plan to help Australia become by 2025 “..a more Asia-literate and Asia-capable nation”.  The White Paper is thus (p.1): “..a roadmap for the whole of Australia – governments, business, unions, and the broad community..”, to become more prosperous by sharing the opportunities of the forthcoming Asia Century.  Over the coming weeks there will be a series of opinion pieces posted on the CLMR portal by various contributors that analyse elements of the White Paper and some of the many issues that they raise.  This article, (Parts I & II), set the scene for this series by summarising the White Paper as a whole.

The White Paper (pp.2-3) identifies five areas that the Government sees as key for Australia to succeed in the Asian Century: i) building on Australia’s strengths, (especially through the five pillars of productivity: skills and education; innovation; infrastructure; tax reform; and regulatory reform); ii) developing Australia’s capabilities (including broadening and deepening Australians’ understanding of Asian cultures and languages); iii) ensuring that Australian firms and institutions are innovative and competitive, and that the Asian region is more open and integrated; iv) stability and sustainable security in Asia including supporting a continuing US presence in the region; and v) strengthening Australia: Asia relationships, political, economic, social and cultural.

Chapters 1 to 4 of the White Paper contextualise Australia in the Asia region: The rise of Asia (Chapter 1); The future of Asia to 2025 (Chapter 2); Australia in Asia (Chapter 3); and Outlook for Australia to 2025 (Chapter 4).  Chapters 5 to 9 articulate 25 national Asia-related objectives, plus policy pathways to achieve these objectives across five core themes: A productive and resilient Australian economy (Chapter 5); Building capabilities (Chapter 6); Operating in, and connecting to growing Asian markets (Chapter 7); Building sustainable security in the region (Chapter 8); and Deeper and broader relationships (Chapter 9).

The White Paper is overwhelmingly positive in outlook and ambitious in its goals.  In addition it is rich in data sources about the extent of Australia’s trade relationships with Asia.  However, it is light in detail not only about the enormous variance between the countries that constitute Asia, but also the tensions, (historical and current), that characterise those intra-Asia relationships, and what the specific implications of these structural tensions are for the ambitious set of national objectives and policy pathways set out in the White Paper.   Many of these latter issues will be analysed in more detail in subsequent opinion pieces to appear in this series.  The remainder of Part I of this series-opening piece will summarise the content of Chapters 1-4 of the White Paper.  Part II of this series opener will discuss Chapters 5-9 and the prospects for some of the national objectives that these chapters present.

Chapter 1 – The Rise of Asia

Chapter 1 seeks to tell the story of the economic rise of Asia.  It acknowledges (p.30) that Asia is: ‘,,a region of great diversity...” and that there are different national recipes for success, but does not illustrate what are the key variables that differentiate the Asian jurisdictions from each other.  Rather (pp.31-34), it lists a number of discernible common policy patterns of economic development across several Asian jurisdictions, for example high-performing education systems.  In particular, the White Paper notes that economically successful Asian countries tend to follow a two pronged approach to success: favourable investment climate; and enabling markets.  In turn these are manifested in policy pathways such as: ↑ Property Rights; ↑Open Markets; ↑Public Goods (e.g. Education Health) ↓ Price Controls; ↓Quotas (p.36), all of which are policy priorities in Australia.  There is some brief discussion of China’s economic liberalisation (p.37), Japan’s asset bubble (p.38), the East Asian financial crisis and the Chiang Mai Agreement (p.39).  However, the key focus of the chapter is Asia as an economic juggernaut with data to support the claim.  For example: Factory Asia accounts for one third of global manufacturing (pp.41-42); Asia is a net exporter of capital and holds two thirds of global foreign exchange reserves (p.43); ↑ innovation in Asia, massive ↑ in research and development, and in science publications in many Asian countries (p.45); and that “Asia is shifting the focus of global governance” (p.46).  The economic rise of some Asian countries such as: China, India, Indonesia, Japan, Malaysia, Singapore, South Korea and Taiwan is undeniable but there is little focus in the White Paper on the many other Asian countries that do not have such a success story to tell, or of the human costs dimension that is a factor in the economic miracle of contemporary Asia.

Chapter 2 – The future of Asia to 2025

Chapter 2 provides a compelling compendium of data that affirms the coming dominance of the region within the global economy.  For example: by 2025, Asia is projected to provide 45%+ of global GDP: China (No. 1 in world); India (No.3); Japan (No.4); and Indonesia (No.10) – (p.52); by 2025 China + India = > GDP than the G7 combined (p.53); by 2025 Asia will be the centre of global economic activity (p.59); Asian producers are increasingly moving higher up Value Chains (p.62); by 2025, China is expected to have 200 cities with 1,000,000+ population, but Europe only 35 cities of this size (p.66); Asia is a ↑ capital exporter, holding 50% of foreign exchange reserves, 25% of global financial assets, by 2050 the latter is projected to be 45% (p.66); and ↑ regulation and supervision of Asian and global financial markets will → deeper and larger capital markets in Asia (p.67).

These statistics attest to the positive side of Asian development but there remains the potential for substantial downside as well.  In the midst of its continuing Asia good news story, the White Paper mentions some of these downsides.  For example: ↑ gaps and discrimination regarding Asia’s growing wealth along: gender, ethnic, caste and rural: urban lines (p.59); ↑ disparities between different Asian countries regarding growing wealth, e.g. >⅓ of people in Bangladesh, Laos and Timor-Leste live in absolute poverty (p.60); these disparities may well threaten social stability (p.60); by 2025, 2 billion people will be living in Asian cities (p.66); so Asia’s success → ↑ challenges regarding: food; water; infrastructure; energy; minerals security; and climate change (p.68); there are major climate change threats in Asia, specially regarding flooding (p.69); Asia in 2001 was responsible for 31% of global emissions, in 2012 the figure is 40% (and 60% of that from China) (p.69); food production must grow by 70% by 2050 to meet demand and there is ↑water scarcity (p.70); by 2030, India is expected to be facing a water supply: demand deficit of 50% and China 25% (p.71); Asia has a problem of ↑ desertification, 25% of China is already desert (p.71); exacerbated by the many polluted rivers in many Asian countries, as water scarcity ↑ and water quality ↓ there is ↑ potential for water conflict (p.71).

From Australia’s perspective these downsides have strategic security implications, as well as the continuing threat of old frictions and territorial disputes on an intra-Asia basis (p.73), China and Japan spring to mind for example.  However the White Paper is relatively sanguine in its tone, emphasising that whilst US: China tensions exist there is simultaneous inter-dependence (p.73), and also that China and India’s major concerns are domestic, so therefore less of a challenge to the US.  Nevertheless, the White Paper argues that new strategic perceptions regarding Indo-Pacific and Trans-Asia are shaping global policy developments (p.74).

Chapter 3 – Australia in Asia

Chapter 3 charts the evolution of Australia’s engagement with Asia.  It lists notable milestones such as: 1951 – Colombo Plan, as well as the ANZUS Treaty (p.79); 1957 – Agreement of Commerce with Japan (p.79); 1974 – Australia was the first external dialogue partner to ASEAN (p.79); and 1989 – 1st APEC meeting, held in Canberra (p.79).  On the Australia: Asia trade story the White Paper notes trends in Australia’s trade in goods.  For example: 1960 – Asia = 20%; 1980 Asia = 35%; 2010 Asia = 67% (p.88).   Services trade, (especially financial services), between Australia & Asia is smaller: for example, Hong Kong + Japan + Singapore = 10% of foreign investments in Australia (p.88).  These long-standing core features of Australia-Asia trade have implications in a post-resources boom era and should be borne in mind when considering the national objectives and policy pathways discussed in subsequent opinion pieces.

Australia has had 21 years of continuous economic growth due to ↑ trade in Asia (p.94).  However, it is important to note given some of the recent debate about Chinese investment in Australia, especially regarding its agriculture sector, that in 2011 China was responsible for < 1% of foreign investment and was only the 13th largest foreign investor in Australia (p.88).   On Australia’s population demographic, the White Paper notes that since 1945 there have been 1,000,000 migrants to Australia each decade; 2,000,000 of the 4,000,000 Australians born overseas are from Asia, up from 276,000 in 1981.  Also in 2011 China was the biggest source of permanent residents to Australia, the first year it has not been Britain (p.98).  Given these changing demographics the White Paper stresses that Australia needs to address racial discrimination, and promote social cohesion and inclusion (p.100).  This racial tension issue is important given the crucial importance of deepening understanding of Asian languages and cultures to the core White Paper goal of building Australia’s capabilities in Asia.

Chapter 4 – Outlook for Australia to 2025

Chapter 4 scopes some of the core features of the Australian economy and canvasses Australia’s prospects up to 2025 as they are likely to be shaped by engagement with Asia.  It notes that on global rankings in 2011 Australia is 13th in terms of GDP per person up from 17th in 2007 (p.106).  Services accounts for 66% of Australia’s economy and 20% of exports (p.128) and that: “finance and insurance is the largest industry in the Australian economy” (p.129).  Education is currently Australia’s fourth-largest export earner (p.126), and regarding that education industry 80% of international students are from Asia: China = 29%; India = 13%; South Korea = 5%; Vietnam = 4%; Malaysia = 4% (p.126).  Since 2000 there has been rapid growth in the number of international students in Australia.  For example, in 2002 there were 280,000, 600,000 in 2009 and a drop back since 2010 to the current level of 580,000 (p.127).  Similar trends can be seen in tourism which was worth $24 billion to Australia in 2011, seven of the top ten inbound tourist markets are in Asia and China is now the No. 1 source of tourists (p.127).  Pharmaceuticals and industrial machinery are currently Australia’s largest manufacturing exports to Asia, but the White Paper believes there will be other opportunities, especially regarding products and systems that are geared towards a low carbon economy (p.123-4).

The White Paper (pp.106-7) sees three key factors shaping Australian society and its economy and society to 2025: 1) the continuing ↑ of the Asian economy; 2) Australia’s ageing population, for example in 2012 over 65s comprise 13.5%, but projected in 2050 to be 25%; and 3) environmental sustainability.  Consequently productivity growth has to be the key strategic policy aim for Australia (p.107).  In turn this highlights two imperatives for Australia regarding Asia’s economic transformation: 1) the opportunities go beyond mining; and 2) the challenges must be coordinated between government, business and community (p.108).  This coordination is essential because: “..much of what is required to lift Australia’s productivity is in the hands of individuals, especially managers of businesses.” (p.112).

Nevertheless, mining and resources will remain in the vanguard of Australia’s trade with Asia, not least because Australia has the world’s largest reserves in: lead, rutile, zircon, nickel, gold, silver, zinc; 2nd largest reserves of: iron ore, bauxite, tantalum, tungsten, ilmenite; and in the top 10 for several others mineral reserves including black coal; and is the world’s 4th largest LNG exporter (p.120).  ↑ Urbanisation in Asia will continue driving demand for resources and energy.  For example, in 2011 US$10 trillion per annum in capital investment, which in 2030 is projected to be US$20 trillion per year (p.120).

So, this in essence is the message of the White Paper – one of unparalleled opportunity for Australia in Asia.  However, the reality is probably more nuanced and complex.  The potential for political conflicts and associated security tensions both within individual Asian jurisdictions and with external countries is understated in the White Paper, as are the impacts of corruption in Asian countries and the subsequent effects on trade with Australia.  Also, some of the economic assumptions about how Asia will trade with Australia between now and 2025 may be over-optimistic.  How these factors and others, for example, the current falling levels of study of some Asian languages in Australian schools and universities, may impact upon the 25 national objectives and associated policy pathways of the White Paper is considered in Part II and other opinion pieces in this series.

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