Change and Uncertainty in the Indo-Pacific –
Strategic Challenges and Opportunities for Australia and the Philippines

Speech, check against delivery
Manila, the Philippines
16 March 2017

Ambassador del Rosario, thank you for your very kind words. Secretary Andanar, dignitaries, excellencies, ladies and gentlemen.

I am absolutely delighted to be addressing an institute which bears the name of my dear friend, Albert del Rosario.

Albert was the Secretary of Foreign Affairs from 2011 to 2016 and before that, the Ambassador to the United States from 2001 to 2006.

I valued his advice and his wisdom during our many discussions.

During his tenure as Secretary, he had a clear-sighted and strategic appreciation of his country’s interests and pursued these relentlessly and with determination.

The Stratbase Albert del Rosario Institute aims to elevate the level of public discussion of strategic and economic affairs, much like what Albert achieved during his tenure as Secretary. In a time of strategic uncertainty and rapid economic change, this institute can only benefit the Filipino policy community and serve as an important resource for future governments, steering the Philippines through challenging times.

The Philippines and Australia are two successful democracies with vibrant economies. We have both benefited enormously from the international rules-based order. This order has brought greater prosperity to our region and supported the development of our communities and societies.

In particular, the Philippines has come far since the dark days of World War II when an estimated 80 percent of the economy was destroyed amid the human carnage. That is testament to the resilient and remarkable people of the Philippines.

The broader regional story is also inspiring. The Indo-Pacific began the post-war period as one of the poorest regions in the world.

By 1960, East Asia accounted for a mere 14 percent of global GDP. After decades of strong economic growth, it is now predicted that East Asia will produce about one-third of global GDP by 2030.

By 2050, more than half of all global GDP is forecast to come from our immediate region.

Should this forecast prove accurate, more than 50 percent of the world’s middle class will live in our region by 2050. This holds huge potential for our two nations.

Australia is entering its 26th consecutive year of economic growth. This has allowed us to become 13th largest economy in the world even though we are only the 53rd most populous nation in the world.

The Philippines has also enjoyed strong growth in real terms, which has exceeded 6 percent per annum over the past 6 years. The most rapid in South East Asia.

The performance of our economies is an example of the opportunities that arise when the region is peaceful and stable as it has been in relative terms for several decades. However, success also brings challenges, as many countries continue to grow in economic and military strength in our region.

The three largest economies in the world are all Indo-Pacific great powers; the Unites States, China, and Japan. Together these three powers make up around four-fifths of the combined GDP of the Indo-Pacific region.

As India continues to grow, we are seeing the emergence of a fourth regional economic giant. India and China dominate the region demographically with around 60 percent of the region’s population.

Military spending is growing faster throughout the Indo-Pacific than anywhere else in the world. For example, China’s budget accounts for almost two-thirds of all military spending in East Asia and is almost five and a half times more than the current combined military outlays of South East Asia.

In comparison, the United States currently spends 2.75 times more on its military than China.

China’s defence budget is more than 8 times larger than Australia’s and about 55 times larger than that of the Philippines.

India spends more than twice as much as Australia and about 18 times more than the Philippines.

So, for Australia and the Philippines, our challenge is to work constructively and cooperatively with one another and also engage constructively and cooperatively with the larger powers.

The best way for all concerned is within the international rules-based order established in the decades since the Second World War.

This order came into being in response to the “might is right” doctrine of bygone eras that gave free reign to great powers and contributed to untold human misery.

The rules-based order is one in which says a country with a population of less than half a million people such as Brunei should have the same rights and privileges as the United States, China, Japan, and India for example.

The order provides a framework within which disagreements can be resolved peacefully and according to rules and mechanisms that had been agreed upon and fair and are objective.

This includes the role of treaties, of international courts, and the role of independent arbitrators who can peacefully resolve international disputes as a means of avoiding escalating tensions.

We encourage other nations to also embrace this order as a fair means of resolving disputes.

Importantly, the world’s greatest military power is a key supporter and defender of that order even when it constrains its own power.

Australia supports United States’ leadership to preserve that order and safeguard international peace. That peace is the essential precondition for economic prosperity for us all.

Australia’s foreign policy is not limited to or exclusively dependent upon our strong relationship with the United States.

We are committed to a strong Australian Defence Force to defend our own security interests.

As set out in our 2016 Defence White Paper, we will be spending approximately $195 billion over the next decade on improving our military and intelligence capabilities. This includes an almost $90 billion naval ship-building program of 12 new submarines tailored to our needs and unique conditions.

Australia’s experience is that new friends need not come at the expense of existing allies and longstanding partners.

Our alliance with the United States is perfectly compatible with forging even closer relationships with regional countries in ways that are in Australia’s national interests.

Our more recent and deepening security relationships with Japan, the Republic of Korea, Indonesia, India and Singapore contribute to regional stability and strengthen the rules-based order, as does our close and long relationship with the Philippines.

At the same time, we have a comprehensive strategic partnership with China that builds on our free trade agreement, thus elevating our relationship to a level of cooperation that reflects the depth of our wide ranging common interests and China’s increasing role in the region more generally. Our strong bilateral relationships continue to be complementary to our multilateral engagement.

Australia became ASEAN’s first dialogue partner in 1974, and upgraded our relationship to strategic partner 40 years later. We will be taking the relationship further in 2018 when our Prime Minister Malcolm Turnbull will welcome all 10 leaders to Australia for an Australia-ASEAN special summit.

It is important to note that ASEAN is an institution celebrating its 50th year in 2017 and that it was established to preserve peace and stability in the region. This remains its most important mission.

To that end, ASEAN should never underestimate the moral force it can exert in the form of collective diplomatic pressure on countries that might think or behave against that mission.

An area with a combined GDP of US 2.5 trillion dollars, ASEAN has an opportunity to exercise far greater influence than its members could do so individually. This presents member states with a significant degree of leverage.

A grouping such as ASEAN has much greater influence when member states speak firmly with one voice in defence of international law and order. Ten voices are more compelling than one.

There is also a great value in ASEAN-backed institutions such as East Asia Summit because they present unique opportunities for the Indo-Pacific to reaffirm the importance of international law. We are delighted that the Philippines has assumed the chair in what is a very important year for ASEAN and we look forward to its leadership.

It is in the interest of the Indo-Pacific and the world that ASEAN becomes an even more powerful voice and player in regional affairs.

As we negotiate strategic challenges, we must be mindful that economic competition would become more intense. Globalisation, technological advances and the free flow of people and capital between countries are breaking down sovereign economic borders. Countries must compete or fall behind. They cannot shield their economies from competition and increase prosperity at the same time.

In our world of increasing and irreversible competition, countries will only enjoy lasting gains through undertaking domestic reforms that make us more competitive and attractive to others.

We must work together to ensure that competition does not become a zero-sum activity where one side gains at the expense of the other side.

We can cooperate in order to better compete, especially between countries that do not have the advantage of tapping into a large domestic market to find further opportunities to grow.

President Duterte’s ten-point Socioeconomic Agenda is designed to make the Philippines more competitive, productive and attractive to local and foreign firms through initiatives such as improved infrastructure spending, a stronger focus on education, macroeconomic stability and tax reform. This is what nations must do as competition for capital, human talent and markets become more intense.

Australia is a reliable and committed development partner with the Philippines.

When I visited Manila in 2015, I announced Australia’s further contribution of US 2.5 million dollars to the innovative Philippines Public-Private Partnership Center.

In 2015 and 2016, we helped the government to tender and award two infrastructure projects worth US $631 million dollars.

Australia remains the key bilateral donor to this center and will be a making further financial contribution to support its important work.

We are working with the Philippines on the development of competition policy to ensure efficient and fair market competition amongst businesses engaged in trade, industry, and other commercial activities. This includes our support for the establishment of the Philippines Competition Commission and assisting the Department of Budget and Management to implement public finance reform.

Australia’s support for Filipino education is a $90 million dollar investment over 5 years, designed to enhance teacher quality and curriculum standards.

Key elements of our economic partnership are focused on working together to develop Mindanao as a major economic centre. Indeed I will be traveling to Davao tomorrow to announce further initiatives that build on the already significant strides taken by the current government in that region.

By improving the economic environment and competitiveness of the Philippines, there will be increased opportunities for the already 280 Australian firms operating in the Philippines and many more that would do so in the future.

There are other ways that we can make globalisation work in our favour through cooperation.

This example will draw inspiration from the past. Since the 1950s and starting with the Colombo Plan, we had provided funding for scholarships, fellowships and short-term training to over 3,500 Filipinos.

In the long tradition of partnership and reciprocity between our two countries, we are now sending some of our best and brightest to the Philippines to live and study in your universities, and undertake work experience here under our New Colombo Plan. We have supported 219 Australian students to study and work in the Philippines since our launch of the New Colombo Plan in the Philippines in 2015. That number should only grow rapidly in the years ahead.

Investing in our young students under the New Colombo Plan is an investment in the Australia-Philippines bilateral relationship. These young Australians will develop a lifelong interest in and connection with the Philippines. Conversely, over 11,000 Filipinos have enrolled in Australian education institutions in 2016.

Like our New Colombo Plan scholars, these students will be the leaders of tomorrow who would champion and drive economic cooperation and commercial ties between our two countries and deepen our friendship into the future.

So these are just some of the ways our two countries can cooperate at every level to grow economic opportunities.

Australia and the Philippines are experiencing exciting and interesting times. We officially became comprehensive partners in 2015 and we are working to agree on a plan of action for the next 5 years. This is part of our commitment to work constructively with each other and with allies and partners on economic and strategic matters. If we do that, we can advance peace, stability and continued prosperity for our two countries and our region.