ASEAN and Australia - A Melbourne summit series

Lost in translation

It’s 30 years since the Department of Foreign Affairs and Trade produced a 300-page report on business challenges in Southeast Asia, accompanied by similarly hefty publications on new trade opportunities and missed investment possibilities.

It is not surprising that substantial effort and subsequent publications such as ASEAN Now, prepared for the 2018 ASEAN Summit in Sydney, have been conveniently forgotten as the Albanese government embarks on yet another regional adventure built around investment banker Nicholas Moore’s 200-page Invested: Australia’s Southeast Asian Economic Strategy to 2040. It doesn’t help that the larger (at least by pages) 1990s plan was a product of an era of Asia policy associated with former prime minister Paul Keating, who intruded again into this week’s events.

Past efforts have all featured the need for greater Asian literacy, better business expertise, and the removal of impediments to trade and investment. These are also the first three of Moore’s four pillars, which he calls awareness, building capability, and clearing blockages.

As Moore has relentlessly done the summit rounds this week – speeches, panels, interviews – he has stuck to his four pillars with steely discipline, as if to drive them into the public imagination like never before. Indeed, watching him force 100 of his CEO-equivalent colleagues to address their closing thoughts specifically to the pillars on Tuesday afternoon was a lesson in investment banker focus on the bottom line.

It is on Moore's fourth pillar – investment – where the diplomatic and fiscal dial has shifted this week. In the 1990s there was much greater neo-classical economic faith that clearing trade and regulatory blockages would open the way to more investment. And so, Australia set out on securing a series of bilateral and regional trade agreements which were meant to lock its businesses into regional growth.

They are now mostly in place but Australian investment in arguably the world’s fastest growing region has been falling and is still lower than in New Zealand. And so, in the spirit of the new big spending approach to achieving national economic resilience in an era of geo-economic fragmentation, the Albanese government is putting its own budget clout behind pushing business to invest in Southeast Asia.

Australia’s baby BRI

The $2 billion Southeast Asia Investment Financing Facility (SAIIF) to underwrite Australian business in the region underlines the rise and rise of the once low-profile Export Finance Insurance Corporation, Australia’s answer to the likes of China’s Belt and Road Initiative or Japan’s Bank for International Cooperation.

The renamed and much under-recognised Export Finance Australia (EFA) is responsible for building infrastructure in the Pacific, defence industry, critical minerals capacity, and aspects of development aid. Now, in the form of SAIFF, it has been handed its most challenging task yet. Some of Australia’s biggest companies have failed to make much progress in Southeast Asia and government-backed commercial agencies from around the world are already active there. Besides, local conglomerates often have a stranglehold on the nexus between business and government.

Prime Minister Anthony Albanese set a high benchmark for this hastily constructed spearhead for Australia Inc when he told the CEO summit the SAIFF would “demonstrate the value Australia can add”, would improve regional infrastructure, would accelerate regulatory reform in the region, and catalyse two-way investment between Australia and ASEAN.

Given Albanese is fond of declaring portentously that “Southeast Asia is where Australia’s future lies” as though that is a new idea, EFA is also being asked in effect to repair a 30-year policy gap.

To recap, here is the benchmark from the 1992 Australia’s Business Challenge report: “The rapid onset of industrialisation in the region of the world closest to Australia brings with it important challenges for business as well as for foreign and trade policies. The task is to build on Australia’s assets and strengths to enable us to become an important part of the great transformation that is underway there.”

The Moore report supported government-backed political risk insurance for Australian investment in Southeast Asia without specifying a particular model, in a fundamental shift for Australian external economic policy towards the corporatist approaches seen in countries such as Singapore and Japan. Perhaps it takes an erstwhile pillar of the financial sector to give the government the cover for this sort of policy shift – although it was actually former prime minister Scott Morrison who reinvented EFA as an infrastructure builder in the Pacific.

And it is worth noting that despite all the talk about the priority on Southeast Asia this week, the new $2 billion allocation to EFA is still smaller than the $3 billion lending capacity of the Australian Infrastructure Finance Facility for the Pacific, also managed by EFA.

Finding ASEAN

It is now commonly argued that the most productive work at lumbering diplomatic summits like this week’s event is actually done at the bilateral meetings on the sidelines.

This may be all very well for diplomats, but the picture gets confused for business when political rhetoric is all about a notional entity called ASEAN becoming the world’s fourth largest economy and growing faster than most other large nations.

The Moore report tended to skirt around the reality that while there are Australian businesses doing quite well in some countries of Southeast Asia, there are very few pan-ASEAN role models for success. And so it was notable that, at the closing Plenary session of the CEO Summit, quite a few people observed that despite formal movement towards economic integration in ASEAN, businesses mostly still operate country-by-country.

This means they have to understand country risk and regulation rather than get carried away by the often-over-hyped ASEAN collective numbers. As one participant observed: “The perception of risk must be specific and pointed. You must take it one country at a time.”

Champion countries

Nevertheless, the survey of Australian-linked businesses operating in the region released by AustCham ASEAN for the summit provides some sense of hierarchy about which countries are attracting attention.

Malaysia emerges as the benchmark for maturity with 50 per cent of respondents already there but only eight per cent planning to expand there. Forty-four per cent of respondents are in Indonesia, but 16 per cent plan to expand there.

Meanwhile, Vietnam continues its status over the past few years as the favourite with 42 per cent of respondents already operating there and 19 per cent planning to expand. But the Philippines is the big improver with only 28 per cent of respondents there but 18 per cent planning to step up with new investment.

It says something about the Philippines’ growing ambition to climb up the ASEAN ranks with a swathe of economic reforms and an increasingly outspoken leader in President Ferdinand Marcos that it can claim bragging rights at this summit. Marcos oversaw the signing of 14 business agreements of various sorts between Filipino and Australian partners at a Philippines business event. There were only four such deals at a parallel event overseen by Vietnam’s Prime Minister Pham Minh Chinh.

Old guard rules

With the Moore report focused on raising awareness of Southeast Asia’s potential after 30 years of this sort of government advocacy, the AustCham ASEAN survey has some mixed results.

It reinforces that there is a solid longstanding presence of businesses in the region but not much renewal. Only eight per cent of respondents have set up in the past two years as the pandemic has receded and governments of both political persuasions have been talking up the region. On the other hand, 40 per cent have been there for 20 years, raising the possibility that while they understand the business culture, they aren’t transferring that knowledge to potential newcomers. The newly appointed federal government Business Champions for each country will need to do something about that.

While about two-thirds of businesses say ASEAN is a priority and their head offices understand the region, there is also a distinct uptick in negativity about the region, with 22 per cent saying it was not a priority, up from four per cent in 2022. And 24 per cent of respondents say ASEAN experience is not valued in their wider business, which is up from 10 per cent in 2022.

There are some clear disconnections in this survey, which deserve more analysis before Australia Inc weighs in with its new cheque book.

Recommissioning NSW

This week’s summit has been something of a regional coming out for the New South Wales trade minister Anoulack Chanthivong, who conveniently brought a Laotian background to the gathering. But Chanthivong’s government is a bit uncertain about Australia Inc. In the midst of scandals over the appointment of new trade commissioners under the last NSW Liberal government, the then Labor opposition promised to wind back its newly boosted network of representatives.

On a panel this week, the still relatively new trade minister seemed re-enthused about the state’s presence in the region, declaring that “all states have a responsibility to engage with our closest neighbours.” Pointing out that the self-proclaimed Premier State had staff in Singapore, Malaysia, Vietnam and Indonesia, he said he looked forward to “building those partnerships further”.

And he called for more cooperation among the states, with leadership from the Commonwealth to determine which state has the advantage in various sectors to lead in Asia. Whether other states think NSW should lead the way on finance and technology, as he suggested, remains to be seen.

Having talked about atmospherics and then process, let’s look at results from the final day of the ASEAN-Australia Special Summit. This is the “outcomes document”, as they call it in the trade. Or, as the gathered leaders would prefer it be known, the “Melbourne Declaration”.

“Four themes are ... reflected throughout the Melbourne Declaration,” declared Prime Minister Anthony Albanese early today, pointing to trade and investment, climate change and the switch to clean energy, challenges on the high seas, and the next generation of leaders.

“This is the breadth of our agenda,” Albanese said.

Broad, yes. Not unmanageable. The summit outcome document might be a 55-point declaration, replete with the usual clichés of “shared interests” and “people-to-people links”. Yet cutting the ambition into these four themes makes for a digestible program of work. It’s a tribute to careful diplomacy that the 11 countries involved in the talks have agreed to an expansive vision, while making sure it has a practical focus.

That won’t stop criticism of particulars after the document was finally issued late in the afternoon.

The section on the Gaza conflict is notably general, reflecting comments made by Malaysia’s Prime Minister Anwar Ibrahim on Monday that the summit would avoid contentious issues between Palestinians and Israelis, instead taking a consensus position to call for a ceasefire and more humanitarian support.

No direct condemnation is offered of China’s behaviour in the South China Sea – despite the talks being punctuated by the latest reports of Chinese vessels harassing Filipino ships. “We encourage all countries to avoid any unilateral actions that endanger peace, security and stability in the region” highlights a concern, but no blame is apportioned.

Also missing is any reference to AUKUS, although Australia will be pleased by the statement of support from Singapore’s soon to depart Prime Minister, Lee Hsien Loong. The “Quad” grouping won a passing mention, but only in the context of the Quad vaccine partnership. It’s still unclear how this arrangement might fit with the oft-invoked “ASEAN centrality” in regional security architecture.

Myanmar remains an untreated open sore. The support expressed in the document for “concrete implementation” of ASEAN’s response to the crisis won’t do anything more to force the junta to allow a return to democracy.

The language on Russia’s invasion of Ukraine appears strong on an issue where ASEAN has struggled for a collective position, although still affirms “our national positions as expressed in other fora”. North Korea is given standard short shrift. Taiwan is notable by the absence of any mention. That can be expected to get attention.

The precise choice of words does matter. A fascinating comparison can be made between what the leaders ultimately agreed and the so-called “zero draft” of the Melbourne Declaration that ABC foreign affairs reporter Stephen Dziedzic managed to obtain way back in December when it was first circulated across the region. Albanese was asked about this following the summit.

“People have to compromise,” he said. “To get a statement from Australia and ASEAN, it isn't the same endpoint that any one country would have if they went away and wrote a statement.” Albanese acknowledged that the Philippines’ President Ferdinand “Bongbong” Marcos wanted strong condemnation on the issue. They say politics is the art of the possible; that much is true for diplomacy, too.

Picking apart the language shouldn’t be allowed to wash away the overall message, however.

In Albanese’s words, this is “opportunity from proximity”. Australia sits on the doorstep of Southeast Asia. No, this doesn’t mean Australia will seek membership of ASEAN, Albanese said. The government’s talking points are to hammer home that the region will amount to the world’s fourth-largest economy by 2040. That it will fund new scholarships and have ten business leaders spruik the opportunities. The welcome promise to improve Australia’s sclerotic visa system for Southeast Asians will go further than any other measure to improve economic ties.

Albanese became most animated – if only for a few seconds – when he spoke to the Australian media following the summit. He warned the country risked shrinking in on itself unless seizing the chance on offer. Albanese might have been tilting at Opposition leader Peter Dutton’s criticism of “Labor’s bigger Australia”. That’s part of the government’s next challenge. To show how these connections and relationships will improve the lives of all Australians.

Today is “bilat day” (short for bilateral) for Prime Minister Anthony Albanese at the ASEAN-Australia Special Summit in Melbourne. Call it diplomatic speed-dating, with lots of quick meetings in succession: shake hands, sit down, formalities, talking points, some frank discussion, stand up, shake hands.

Albanese started the day with ASEAN Secretary General Kao Kim Hourn, the first time the two had met formally. Then on to Singapore’s Lee Hsien Loong with gathered officials followed by a joint press conference. Late in the morning, Thailand’s Srettha Thavisin. Timor-Leste’s Xanana Gusmão in the afternoon, followed by the leaders of Brunei, Cambodia and Indonesia.

In between it all, a lunch with CEOs doing business in Southeast Asia.

At some point, Albanese will host a private dinner for the ASEAN leaders (minus Myanmar, plus Timor-Leste and New Zealand). Tomorrow he chairs the collective formalities.

Intense. Exhausting. The personal demands that these summits put upon leaders is often obscured by the big story that dominates the media for the day. Dollars announced, for instance, such as Albanese’s pledge today for a $2 billion Southeast Asia Investment Financing Facility, a move that follows a call last month from Lowy Institute’s Michelle Lyons, Roland Rajah and Grace Stanhope for Australia to “go big or go home” in assisting the region’s energy transition.

Yet it’s easy to forget that the leaders are themselves people, and that people can struggle under the weight of work. Sitting down with Albanese on Tuesday, Singapore’s Lee apologised for missing previous talks after contracting Covid. A body battery can go flat. And this is peacetime. Imagine the pressure on leaders and their decision-making in a crisis. Or, in the case of New Zealand’s PM, frustration when his government plane breaks down on heading to Melbourne.

Albanese could be forgiven after three days of non-stop summitting if he just wanted a break, but plans to host Vietnam’s Prime Minister Pham Minh Chinh later in the week will preclude that. Then domestic politics will truly take over as budget season looms in May. Albanese isn’t expected to travel overseas until at least the second half of the year.

So, this week in Melbourne appears intended to shape the foreign policy focus in the months ahead. The grand themes of regional rivalry or cooperation might be evident at the talks, but this summit has a practical focus. As the Business Council’s Bran Black put it when speaking to journalists, while it is good for Australia to have better relations with China, the aim is to have extraordinary relations with ASEAN.

This is a longstanding ambition for Australian diplomacy, perhaps underweighted in recent years because of the heavy focus on the Pacific. Southeast Asia is now collectively judged to be a larger trading market for Australia than it enjoys individually with Japan or the United States, so the trajectory of the economic ties with the neighbourhood has certainly improved. The goal, as ever, is more.

Practical steps should be welcome. Australians too often get caught up in debates about imagined futures at the expense of the here and now. Each small meeting can work towards a larger objective. Some aspects might be performative. Albanese, for example, told the ASEAN chief he supported the organisation's efforts to find a solution in Myanmar. Important, yet nothing really has changed.

The questions reporters lobbed at the PM focused mostly on the big controversies of the day – South China Sea, Gaza, AUKUS, Myanmar. The iterative nature of diplomacy doesn’t always lend itself to attention-grabbing headlines, even when it's just as important.

Melbourne has rolled out a blue carpet, not red. It’s a fitting colour for the assembly of Southeast Asian leaders expected to march along and shake the hand of the host, Australia’s Anthony Albanese, as the ASEAN-Australia Special Summit gets under way.

After all, bright red might invoke the flag of China’s Communist Party. And China, although not invited to this three-day ASEAN-Australia jamboree, has enough presence already.

“If they have a problem with China, they should not impose it on us,” said Malaysia’s Prime Minister Anwar Ibrahim on Monday afternoon, quizzed about great-power rivalries in the region during a joint press conference with Albanese.

Malaysia, Anwar said, was a “fiercely independent nation”, and should not be precluded from enjoying friendly relations with Australia, the United States and China at the same time.

Finding such equanimity in ties would very much the “ASEAN Way”. Malaysia will take its turn as ASEAN chair next year, and “consensus” and “cooperation” are terms that float through the air around these kinds of forums. But in other places at the summit venue, a weightier concern about the challenges could be detected.

“The stakes are clear,” Foreign Minister Penny Wong told an assembled group of delegates for a seminar on maritime security. “We know that a major conflict in our region would be devastating to our communities and economies.”

Wong stressed the importance of “regular dialogue” between the United States and China. And she made a point to acknowledge her counterpart from the Philippines sitting in the room, a country that presently has the sharpest of all the territorial disputes in the South China Sea sparked by China’s expansive “nine-dash line” claim.

Australia’s message was a familiar one, a call for respecting rules and law, “where no country dominates, and no country is dominated”.

Curiously, Wong added an extra warning, that “the region’s character [is] under challenge”.

She meant its peaceful character, and quoted a mention of such by Philippines President Ferdinand “Bongbong” Marcos last week in a speech to the Australian parliament. But Marcos himself is an example that reflects a different and rather uncomfortable character trait of the region.

Three sons of past leaders are presently in charge of an ASEAN country. Marcos’ father was the long-serving dictator eventually thrown from power in democratic uprisings in the 1980s. Singapore’s Lee Hsien Loong is the eldest child of Singapore’s founding PM Lee Kuan Yew. And then there is Cambodia’s Hun Manet, son of Hun Sen, who stepped aside last year after ruling Cambodia since 1985.

All three countries are ostensibly democracies, although each wears complaints about curbs on voter freedoms.

Meantime in Indonesia, following its election last month, the son of the current president will take over later this year as vice-president. And don't forget the Sultan of Brunei, the world’s longest serving ruler.

Australia is right to see Southeast Asia as “a partnership for the future”, as the summit slogan promises. Wong pledged significant money, $222.5 million, in support of the Mekong, the region’s most significant river system. Albanese and Anwar promised enhanced university cooperation, which is crucial for regional relations. More MoUs and announcements can be expected during the conference and beyond, with Vietnam’s leader a guest of Australia following the summit.

All this can be expected to fill in the outlines of the Southeast Asia economic strategy released last year by the government, known as the Moore report.

Yet it also seems reasonable to suspect that a mismatch of values underpins the longstanding complaint that Australia’s ties with Southeast Asia remain underdone. The political differences may not preclude close relations or enhanced economic links, but the professed warmth can feel a little off-colour.

Southeast Asia is home to almost 700 million people and collectively amounts to the fifth-largest economy in the world. Over the past two years, it has grown between 4-5 per cent, close to the growth of India (between 6-7 per cent) and at times exceeding that of China (between 3-5 per cent).

The region is united through the Association of Southeast Asian Nations in a way that goes beyond annual summits between leaders. States prioritise “ASEAN centrality”, seeking to collectively engage with external partners and set up the regional architecture. The ASEAN approach remains focused on unity at a time of global fragmentation, seen in the European Union with Brexit and in more recent geopolitical tensions in the Middle East and the Americas.

This cooperation is despite the nations of ASEAN differing hugely in their stage of development and size. Average annual incomes in 2022 ranged from $2,310 in Laos to $67,200 in Singapore. Indonesia has annual incomes of $4,580 and the largest economy, making up more than a third of the economic weight of Southeast Asia (GDP). The next five biggest economies are more evenly weighted – Thailand, Singapore, Philippines, Vietnam and Malaysia each make up around 10–15 per cent of Southeast Asia’s economy.

The turbulent global conditions emerging from the pandemic shed light on economic differences within ASEAN. Singapore, as a city state, is most exposed to global trade. As the global economy slowed, so too did Singapore: growth fell to just 1.1 per cent in 2023.

Conversely, Vietnam, which has the next-highest exposure to trade, has been more immune. Its large manufacturing base, low-cost production, and proximity to China has made it a key trade beneficiary as global companies shift to a China Plus One supply chain strategy. Combined with the return of overseas tourists, this partly explains Vietnam’s steady 5.1 per cent growth rate in 2023.

The post-pandemic recovery of tourism has been a significant economic force across Southeast Asia, in particular for Thailand's economy.

Elsewhere, rising energy commodity prices after Russia’s invasion of Ukraine benefited Indonesia (i.e. coal and palm oil) and Malaysia (petroleum and palm oil). More volatile electronics prices saw exports rise then fall in Vietnam, Malaysia, Singapore and the Philippines. More recently, rice exporters from Thailand and Vietnam look likely to benefit from higher prices – provided farmers can maintain production amid concerns of dryer El Niño weather patterns. Across the region, higher prices put the spotlight on food security.

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Looking ahead, the flagship industries of countries hint at how each sees a path to prosperity.

Well-educated, low-cost Vietnamese workers power a large part of global video game development. Highly-educated Thai workers are key to Thailand’s medical tourism exports. English-speaking Filipino workers support business process outsourcing. Hydropower from Laotian dams is exported across Southeast Asia. And Indonesia seeks to use its market share of global nickel to move into higher value processing.

The electric vehicle industry is also in the spotlight as a potential new source of growth across Southeast Asia. Each country has a different pitch for the EV industry. Indonesia’s nickel is a key ingredient for one type of EV battery and Malaysia benefits from a deep electronics ecosystem. Thailand-led fossil fuel car manufacturing dominates the region and now Vietnam is home to Southeast Asia’s first US‑listed electric vehicle company, VinFast.

Country differences are important for international partners to understand, as any ASEAN decision requires consensus. Despite the diversity of its members, ASEAN continues to make incremental progress towards common goals.

For example, attracting international investment, including for the green transition, is a focus across Southeast Asia. A notable example of ASEAN cooperation to support this goal is the ASEAN green taxonomy. The taxonomy looks to agree a set of definitions for green activities, which can then be used to guide capital to green investments. Here, ASEAN worked to align existing national policy and reflect the views of all member states through consultation (with the latest iteration published just this month ).

Connecting the region is another ASEAN priority, notably for payment systems. ASEAN cooperation in this area has started narrowly. Payment systems were initially connected country-to-country, then broadened out into an agreement between five of the biggest countries (Indonesia, Singapore, Thailand, Malaysia, the Philippines). Last year, ASEAN leaders agreed to continue deepening payment connections across all ASEAN members.

Overall, ASEAN cooperation continues in the face of diverse economic interests. Like the rest of the world, it faces the challenge of balancing competition and cooperation. The short-term allure of undercutting Southeast Asian neighbours, whether on wages, regulatory protections or foreign investment incentives, is ever present. ASEAN centrality may provide a counterbalancing force. If Southeast Asia can leverage its scale and diverse strengths, its economy will continue to perform for its people.

Next week, Prime Minister Anthony Albanese will host the leaders of ASEAN and Timor-Leste for a summit to commemorate 50 years of partnership. Thanks to the cancellation of the 2023 Quad summit, this will be the biggest international meeting Australia has hosted since … the first ASEAN-Australia special summit in 2018.

What’s on the agenda this time round?

A mostly new crew

Most of the ASEAN leaders will be visiting Australia for the first time, at least in their terms in office. This means a big focus will be on relationship building. The exceptions are outgoing Indonesian President Joko Widodo, elder statesman Lee Hsien Loong of Singapore, and the long-ruling Sultan of Brunei. Ferdinand "Bong Bong" Marcos of the Philippines, Pham Minh Chinh of Vietnam, and Malaysia’s Anwar Ibrahim are undertaking separate bilateral programs to mark their first visits to Australia since taking office. Cambodia, Laos and Thailand also have new faces at the top, although to varying degrees each represents regime continuity.

Timor-Leste is now an official ASEAN observer, so Prime Minister Xanana Gusmão will join the Melbourne meetings. Australia has long wanted to see Dili welcomed into regional forums such as this, so will embrace Timor-Leste’s participation enthusiastically.

Finally, an extra guest: Albanese has invited New Zealand Prime Minister Christopher Luxon to cross the Tasman and meet his ASEAN counterparts.

A cut-through narrative

ASEAN matters, but often sags under the weight of acronyms and bureaucratic initiatives. Summit outcomes can proliferate – last year’s ASEAN-Japan summit announced a 130-point action plan. A US-ASEAN summit in 2022 suffered for a disjointed focus on disparate initiatives. Australia has set itself up for success by identifying a few key areas of focus: climate and energy; maritime cooperation; and economic ties. To differentiate itself from other dialogue partners, who are also competing for ASEAN’s attention, Australia will need clear and impactful outcomes that reinforce these priorities.

Search for economic outcomes

The Albanese government has hung its hat on boosting economic relations between Australia and Southeast Asia, with Nicholas Moore’s 2023 report Invested providing a blueprint. The summit will include a CEO Forum and briefings to help Australian small and medium-sized enterprises do business in Southeast Asia. Sound familiar? The 2018 ASEAN-Australia summit was also preceded by a major report exhorting Australian business to seize the ASEAN opportunity and included a CEO Forum and SME Conference. New funding and government support is now in play to actively facilitate Australian investment in the region, but will it really shift the needle?

Hot button issues and controversies

Despite its absence from the summit table, Myanmar will loom large in Melbourne. It remains the group’s single biggest challenge, but, in the face of intractable conflict, ASEAN’s diplomacy has stalled. Australia has heavily backed ASEAN to address the crisis and will likely want to discuss Myanmar privately in the summit’s retreat session and bilateral meetings.

More broadly, the poor human rights record of some ASEAN members means that some degree of criticism and protest on this score is always likely, including from diaspora communities in Australia. A couple of factors suggest that these issues may be less tense this time round, however: Cambodia’s strongman ruler Hun Sen, who goaded protesters in 2018, has been replaced by his son Hun Manet, who seeks to present a less confrontational global image. Likewise, the Philippines’ Marcos has struck a different tone from his predecessor Rodrigo Duterte, even if he has not officially ended the “war against drugs” campaign.

Another source of potential controversy: diverging views on the Hamas-Israel conflict. Malaysia maintains ties with Hamas, which it does not designate a terrorist organisation. Anwar has rejected Western pressure to condemn Hamas following the 7 October attacks on Israel. Restating these positions in Australia would embarrass the Albanese government.  

The Albanese government’s policy of seeking stabilisation in its relations with Beijing, which plays well with ASEAN countries, makes public controversy related to China policy, including the South China Sea, less likely.

A special Interpreter series ahead of the 2024 ASEAN-Australia Special Summit in Melbourne, 4-6 March. Read more articles in this thread.

The US remains the partner of choice for Southeast Asia when it comes to staging joint military exercises. The next two spots are filled by India and China, respectively.

Data from 2021 to 2023 compiled by Lowy Institute reveals that the US participated in around 33% of the 525 recorded joint military exercises undertaken by Southeast Asian states, either at bilateral or multilateral level. If we include Australia and Japan, Washington and its allies have participated in more than 60% of exercises involving Southeast Asian states.

While the US still dwarfs China, the situation is inconsistent across the region. Further analysis reveals a divide between mainland and maritime Southeast Asia. For mainland states (Cambodia, Laos, Myanmar, and Vietnam), China is a more significant military exercise partner. The exception is Thailand, probably because Bangkok has been a US treaty ally since 1952 and a major non-NATO ally since 2003.

Maritime Southeast Asian states (Brunei, Indonesia, Malaysia, Philippines, Singapore, and Timor-Leste) have more joint exercises with the US. Brunei, Malaysia, and the Philippines all have maritime disputes with China regarding overlapping territorial claims in the South China Sea. While Indonesia is not a party to these disputes, it has overlapping claims with China around the Natuna Sea. Singapore has had closer defence relations with the US since the end of the Cold War.  

While the numbers underscore Washington’s prominence as a security partner for Southeast Asia, a qualitative analysis examining the nature of these exercises reveals why Southeast Asian states generally place a greater premium on joint exercises with the US and its allies than with China. To comprehend this phenomenon, we need to understand why states participate in joint military exercises.

One reason is to enhance interoperability against a common security concern, primarily if the participating countries are tied by a security treaty that obliges them to assist one another in a military conflict. The US-Philippines Balikatan series of exercises is one example, with Manila and Washington bound by a Mutual Defence Treaty requiring both states to support each other if another party attacks them.

At the other end of the spectrum, joint military exercises can also be used to build trust between states, especially if they are rivals. The Aman Youyi exercises between China and ASEAN members is an example. China is locked in a maritime dispute with Brunei, Malaysia, the Philippines and Vietnam in the South China Sea. Military exercises between China and ASEAN members aim mainly to facilitate interactions between their military personnel.

These exercises, especially the maritime ones, are generally unsophisticated. Interoperability is not the main objective. Several Southeast Asian naval officials explained that exercises with China are held due to political pressures from Beijing. As a result, they involve mainly simple activities such as passing and signalling. One official expressed the view that some activities were so basic they could be conducted with non-military vessels. Another added that Chinese naval personnel were secretive during exercises with Southeast Asian states and “fearful of sharing their capabilities”. Instead of developing trust, joint exercises with China could seed further distrust between Southeast Asian states and Beijing.

On the other hand, Southeast Asian states generally value exercises with the US and its allies, Australia and Japan, because they enhance military capabilities through the transfer of skills, tactics and operational concepts. The exercises tend to be more advanced, involving joint planning and operations. An Indonesian naval officer explained that exercises with the US Navy improve their interoperability. For the Malaysians, exercises held under the Five Power Defence Arrangements involving Australia, Britain, and New Zealand enabled them to learn how to operate in real crisis scenarios.

Washington and its allies in the Indo-Pacific should continue to engage Southeast Asia through joint exercises, which are highly valued by Southeast Asian states. For many, such exercises demonstrate Western interest in Southeast Asia’s stability. They also provide meaningful contributions to Southeast Asian defence capabilities, therefore acting as a deterrent to potentially hostile external powers.

A special Interpreter series ahead of the 2024 ASEAN-Australia Special Summit in Melbourne, 4-6 March. Read more articles in this thread.

ASEAN and Australia have worked closely together over 50 years of dialogue relations in a wide range of cooperation areas including trade, economics, politics, culture and education. But the missing piece has always been climate cooperation.

The different starting points among the ten ASEAN members and Australia’s climate ambitions make it difficult to come to a common landing point on what is possible and feasible, despite the great interest on both sides for climate cooperation. The absence of an ASEAN-level regional climate mitigation target also makes it challenging. It would be easy to go down a run-of-mill route of providing capacity building, information sharing, and other forms of technical assistance, but typical is not the order of the day. New and innovative approaches are much needed.

The race to meet the world’s Paris Agreement target to curb a global temperature increase to 1.5 degrees and below demands a complete turn from using conventional fossil fuels to renewable energy sources for power generation, transportation, agriculture and industries. This urgency puts a spotlight on the production of clean technologies to harness renewable energy sources such as solar, wind and geothermal power.

According to the International Energy Agency, mineral production is expected to increase six-fold by 2040 compared to current levels in order to meet low-carbon production demands  and for the world to meet global net zero targets by 2050. Demand for critical minerals in the production of electric vehicles is expected to increase 30 times compared to present levels by 2040. A stable and reliable supply chain of critical minerals and metals to produce low-carbon technologies is needed, but this is becoming challenging given the heightened risks of geopolitical conflict.

Australia and partners in Southeast Asia are well positioned to play a role in the critical minerals and metals supply chain.

First, Australia has rich geological reserves, which are in the top five of the world’s key economic resources, including lithium, cobalt, manganese, tungsten and vanadium. Countries in the ASEAN region are also rich in metals and mineral reserves. Indonesia is a major producer of copper, nickel and bauxite. Malaysia, Vietnam, Thailand and Myanmar have significant rare earth element deposits, as yet untapped.

Second, Australia has an excellent track record in sustainable mining practices and high environmental standards. ASEAN countries can benefit from Australian expertise through tech transfers, capacity building, and environmental management practices to improve their sectors.

Third, Australia has done well as a commodities leader but it can potentially be an investment leader in critical minerals processing. ASEAN countries are eager to move up the critical minerals value chain but have so far employed downstreaming policies that may hinder rather than help themselves, for example with export bans on unprocessed minerals in order to incubate their own domestic processing industries. Protectionist policies coupled with unfavourable investment incentives to draw foreign direct investment may end up hurting the sector in the long run. ASEAN can leverage Australia’s processing capabilities to ensure that a significant portion of the value chain remains within the ASEAN-Australia partnership.

Fourth, the practice of mining and processing is hugely pollutive and based on extractive principles that are harmful in the long run to a country’s development. If Australia and Southeast Asia are serious about sustainable development, then mainstreaming of circular economy principles must be an urgent priority. ASEAN has adopted a Framework for Circular Economy and Australia has an 80 per cent target for all waste streams by 2030. Perhaps it is time for both sides to leverage their capabilities and innovate in the circular economy of minerals and metals.

Finally, the gold standard is finding ways and means to transition justly, equitably and in an orderly fashion. Ensuring that the old economy workforce is upskilled for new jobs in the renewable energy sector is critical, whether ensuring that fossil fuel sector workers can turn to new jobs in solar photovoltaic panel installations or helping mechanics pivot to run diagnostics on EVs. Australia can help ASEAN retrain the workforce to be future-ready for low-carbon economies of the future.

Economic cooperation between ASEAN and Australia has grown over the last 50 years but mostly in plain vanilla cooperation – stable and predictable. The new economic strategy Invested: Australia’s Southeast Asia Economic Strategy to 2040 illustrates the potential for change.

There is a strong strategic imperative for Australia to work with ASEAN in the coming decades but both sides need to consider which emerging area to make the biggest contribution to. Australia’s Critical Minerals Strategy 2023-2030 sets out the Albanese government’s vision to become a globally significant producer of critical minerals and supporter of diverse supply chains by 2030. This is followed through with a AU$2 billion expansion in critical minerals financing announced in October 2023.

ASEAN and Australia can leverage each other's strengths in the critical minerals sector to create a robust partnership to build resilience in the supply chain for clean technologies and contribute to meeting global climate goals. There are unique advantages on both sides and by working collaboratively, the partners can address challenges and capitalise on opportunities within the critical minerals market and stand in the gap of providing uninterrupted, stable, resilient and diverse supply chains in the production of clean technologies together.

A special Interpreter series ahead of the 2024 ASEAN-Australia Special Summit in Melbourne, 4-6 March. Read more articles in this thread.

Australia’s diplomacy with Southeast Asia is poised to take centre stage in March as it hosts the ASEAN-Australia Special Summit in Melbourne. The Summit provides the Australian government with an opportunity to improve its standing with three mainland Southeast Asian states – Cambodia, Laos, and Thailand - in areas of security, economy, and education.

Australia’s relations with Cambodia, Laos, and Thailand have created both positive and negative perceptions of Australia. On the positive end, there has been a dramatic shift in perceptions of Australia when compared to two decades ago. Australia has risen in these countries’ estimation partly due to the increasing prestige of its world-class tertiary education degrees.

On the negative end, Australia is viewed as being of little strategic significance. When political, business and academic elites in each country were asked to determine a third party to hedge against the Sino-American strategic rivalry, Australia was not nominated as the most prominent partner of choice, falling way behind the EU, Japan and India. None of the three states in question regard Australia’s approach to dealing with China as a model to follow, with the country too heavily implicated in supposedly anti-China groupings stage-managed by the United States, such as D-10 Strategy Forum, G-7 and the Quad.

In security cooperation, the summit is a unique chance for Australia to relate to these states in ways that do not depend on geopolitical alignment. This reorientation first necessitates a move from a “security with the region” mindset towards what Misalucha-Willoughby called adopting a “view of Asia from Asia.” In practice this means not deploying language related to “great-power competition” or the “China threat theory” throughout the summit, as Southeast Asian states do not like any language that forces them to adopt a zero-sum position between two great-powers.

The elevation of bilateral ties with Laos to a Comprehensive Partnership last year as the latter began to prepare for its ASEAN Chair Year in 2024 is a step in the right direction but far from sufficient. Australia has to move beyond bilateral diplomatic relations towards the development of “minilateral” ventures with all three mainland Southeast Asian states in the ways increasingly commonplace inside ASEAN, a form of diplomacy involving a small group of like-minded states within a larger multilateral international institution.

Second, the summit serves as an ideal platform for Australia to regain economic ground by combining traditional development aid with more comprehensive economic integration. That is to say, Australia needs to better connect its recent sub-regional economic endeavours, such as the upgraded ASEAN-Australia-New Zealand Free Trade Agreement and the Southeast Asia Economic Strategy to 2040, with already expansive and popular country-specific development programs (i.e. Mekong-Australia Partnership and Partnership for Infrastructure).

Third, the summit offers a unique chance to strengthen Australia’s people-to-people connections through educational ties. The Australian government has long been effective at deploying initiatives in education cooperation, with the result that over half a million Southeast Asian students have studied in Australia in the past twenty years. However, the Australian government’s latest international education policies, such as the New Colombo Plan, approaches these ties too much through a market lens. International students are solely viewed in terms of a market opportunity.

Australia should return to an earlier policy that viewed educational ties as a means to strengthen Australia’s relationships with foreign countries. In practice, this means that the Australian government should fund universities and vocational education providers to offer work-integrated learning opportunities to students from the three Southeast Asian states, as well as coordinating a nationwide initiative to engage alumni and connect them with businesses in both Australia and their home country.

Challenges remain for closer Australian relations with Cambodia, Laos, and Thailand. The most prominent is the increasingly divergent political systems between Australia and the three Southeast Asian states. “Democratic backsliding” is transpiring in all three states but also broadly across mainland Southeast Asia.

Cambodia's former prime minister Hun Sen has handed over power to his eldest son, Hun Manet, but only after first barring the Candlelight Party, the only party big enough to pose a threat to his ruling Cambodian People’s Party (CPP). Australia has been openly critiqued by domestic diaspora groups for its self-stated “quiet diplomacy” with the Cambodian government, which has not produced results on the ground. While Australia has limited ability to influence this trend, it can reinforce positive trends, like providing support for regional media organisations and think tanks, developing greater linkages between parliamentarians and civil society, and increasing governance-focused development assistance.

The 50th anniversary of relations with ASEAN can serve as a platform for Australia to not only celebrate its enduring ties with ASEAN but also forge closer relations with Cambodia, Laos and Thailand, contributing to regional prosperity and stability. Navigating historical perceptions while capitalising on opportunities and addressing challenges will be central to the success of this summit.

A special Interpreter series ahead of the 2024 ASEAN-Australia Special Summit in Melbourne, 4-6 March. Read more articles in this thread.

When the Association of Southeast Asian Nations (ASEAN) was formed in 1967 with five members – Indonesia, Malaysia, the Philippines, Singapore, and Thailand – a major Australian concern was regional security, principally because of the continuing war in Vietnam. Australia had forces stationed in South Vietnam and Malaysia, and was a member of the Southeast Asia Treaty Organisation (SEATO).

At the time, Australia’s External Affairs Minister Paul Hasluck praised the new association and its stated aim of increasing cooperation among the member states. He noted that ASEAN had not only made a commitment to support economic growth, social progress, and cultural development in the region, but also peace and stability.

However, security was not stated in ASEAN’s initial declaration and ASEAN did not embrace military cooperation. In the early years, it was mainly a consultative organisation. Until 1972, ASEAN did not play a significant role in the Australian regional outlook.

It was with the election of Gough Whitlam in December 1972 that ASEAN started to be viewed with greater significance. This new government was keen to see the demilitarisation of SEATO and was not interested in any replacement regional security arrangements. The Whitlam government was keen to foster ties with ASEAN and developed its first formal link with the association – the first such relationship ASEAN established with a non-member country.

After some initial overtures, ASEAN extended an invitation to Australia for a cooperative agreement. This was then formalised at a meeting in Canberra in April 1974. This meeting kick-started economic cooperation with a pledge from Canberra to make available A$5 million for ASEAN economic projects to enhance ASEAN-Australia cooperation. This would be implemented under the newly formed ASEAN-Australian Economic Cooperation Program (AAECP). Thus, in the early years of ASEAN-Australia relations, economic issues were the main preoccupation for the relationship, with trade playing a central role.

However, security has also been important. And while the stated motivations behind the formation of ASEAN were economic, social, and political, an underlying consideration was that there were shared strategic interests. ASEAN had been formed during the Cold War and its founding members were all non-communist nations with individual security concerns.

When Australia became a dialogue partner, there was also a new sense of uncertainty in relation to security due to changes in strategic policies by foreign powers. Britain and the United States had made the decision to withdraw militarily from Southeast Asia in the 1970s.

While these strategic changes brought uncertainty, they also brought opportunity to the new regional grouping, especially with the end of the war in Vietnam.

The 1976 Bali Summit was the first meeting of ASEAN Heads of Government, and it considered the development of political and economic cooperation. The meeting adopted the Treaty of Amity and Cooperation in Southeast Asia, giving more clarity to the association by providing it with a clearly defined charter. The 1976 meeting also adopted the Declaration of the ASEAN Concord, which called for a “program of action” for ASEAN cooperation.

Ties with Australia were strengthened after the second summit meeting of ASEAN Heads of Government in Kuala Lumpur in 1977. This meeting consolidated the aspirations declared in Bali and was the first occasion on which Australia and ASEAN met together at head of government level. Prime Minister Malcolm Fraser announced a further commitment of AU$10 million to support the expansion of the AAECP.

There was further broadening of the economic relationship between Australia and ASEAN with the formation of the Australian-ASEAN Business Council in 1980.

However, defence cooperation remained elusive. Progress on defence and security remained on a bilateral basis and any developments were carefully distanced from the formal ASEAN structure. ASEAN officially remained a non-aligned and non-military association.

Hopes for regional peace and stability were further challenged after Vietnam’s invasion of Cambodia in December 1978. Vietnamese occupation of Cambodia received a united response from the ASEAN states seeking a diplomatic solution. ASEAN played a role in the negotiations for a peace settlement for Cambodia, as did Australia. Relations with ASEAN were seen as central in Australia’s contributions to the peace process.

Yet relations between Australia and ASEAN have often waxed and waned through the years. While there were high hopes for cooperation in the early years of the partnership, by the mid-1980s there was concern in Canberra that ASEAN’s perception of the importance of the relationship was in decline. This was enhanced by problems in bilateral relations between Canberra and the individual ASEAN nations, which included issues over Australia’s relations with Vietnam, human rights, and Irian Jaya.

Responding to the economic and political policies of the individual ASEAN members vis-à-vis those of the regional entity has been a major issue for Australia over the decades, especially as the strategic and economic landscape has evolved since the end of the Cold War and the expansion of ASEAN membership that now includes Brunei, Vietnam, Cambodia, Laos, and Myanmar in addition to the original five.

Nevertheless, the relationship has continued with Australia’s participation in several ASEAN initiatives such as the ASEAN Regional Forum, Free Trade Agreements, and the East Asia Summit. In 1974, Canberra saw ASEAN as an important vehicle for economic development that went hand-in-hand with internal Southeast Asian security, and this lay the foundations for Canberra’s continued acceptance of ASEAN as a significant regional forum.