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Annual Report 1994-95

INTRODUCTION

THE INTERNATIONAL CONTEXT

Summary

In 1994-95, the pace of change in the international arena continued to be unrelenting in security and economic matters. The indefinite extension of the Nuclear Non-Proliferation Treaty was a major step towards a world eventually free of nuclear weapons. In addition, the negotiation of a framework agreement between the DPRK and the US helped reduce tension on the Korean Peninsula and in the Asia Pacific region generally.

Economic dimensions of power and economic issues continued to grow in importance. The World Trade Organisation (WTO) came into being, and the worldwide trend towards economic deregulation was given a major boost by the commitment of APEC leaders at their meeting in Bogor to achieve free trade among participants by the year 2020. As well, many individual countries in the Asia Pacific and elsewhere unilaterally reduced their barriers to trade and/or investment.

The international record on peace making and peace keeping was mixed. Despite further progress in the Middle East and successful UN operations in Haiti and Mozambique, the perceived failures in Bosnia, Somalia and Rwanda raised questions about the UN's proper role and effectiveness. The continued assertion of nationalist identity, most prominently in Bosnia and Chechnya, challenged the post-Second World War assumptions of the inviolability of national borders.

Relations between the major powers were peaceful, but buffeted by disagreements as they sought to adjust to the changing multipolar environment. These disagreements were exacerbated as domestic politics constrained the major powers (and other countries) in pursuing their international policies. This received greatest public attention in the US, after the election of Republican majorities in Congress, but it was also a significant factor in China, Japan and Russia.

The major powers

The US remained the pre-eminent power in world affairs, though there was increased questioning, in the US and in other countries, about its global interests and involvement. A key contributing factor was the Congressional elections in November, which saw a major realignment of US politics, with Republicans obtaining control of Congress for the first time in 40 years. A principal focus of political debate was on the reduction of the budget deficit and of the size of government overall. The Administration opposed Congressional moves to cut foreign aid and contributions to UN agencies. However, the US remained committed to maintaining its security role in the region, as set out in its Regional Security Strategy of February.

An increased US concern about its economic situation led to occasional tension in its relations with China and Japan. A serious dispute with Japan over motor vehicles and parts was resolved just before the threatened imposition of US sanctions, and tension with China increased after a private visit to the US by Taiwan's President Lee Teng-hui. Tension between China and Taiwan also rose markedly, with the Chinese viewing the Lee visit as a direct infringement of its sovereignty.

China's economy continued to grow strongly. Problems associated with this rapid growth, including inflation, corruption and unequal development in different parts of the country, were explicitly noted at the National People's Congress session in March, and actions aimed at addressing them agreed. Commensurate with its economic growth, China's political and economic influence continued to increase, for example in APEC and the ASEAN Regional Forum (ARF). Its expected emergence as one of the world's largest economies and trading nations by early next century has become one of the most important developments and challenges in the region. The importance of achieving appropriate long-term arrangements to cater for China's significance as a world trader is nowhere more evident than in the continuing efforts being made to include it in the WTO.

Japan took a more assertive role on some regional and global issues despite continuing domestic political uncertainty. After a brief interlude in opposition, the LDP resumed power, this time in coalition with the Socialist Party. For the first time in more than 40 years, a leader of the Socialist Party became Prime Minister. International and domestic economic issues caused concern, including trade tensions with the US, low growth, the massive appreciation of the yen, particularly against the US dollar, and the vulnerability of some banks and the property market. These added to external pressure for economic restructuring and deregulation, on which the Japanese Government has cautiously embarked.

European political and economic integration continued. The European Union (EU) expanded to 15 members with the accession of Austria, Finland and Sweden in January. EU member states also agreed to a further expansion to include up to a dozen countries of east, central and south Europe by early next century. This would bring its membership to 27 countries, with a population of more than 500 million. The EU already has association agreements with several of these countries. NATO's Partnership for Peace program was expanded to include many of them. The continued failure of European efforts to mediate a settlement of the Bosnian crisis demonstrated the limits to an emerging EU common foreign and security policy.

Russia sought greater western recognition of its role in world affairs as a major power. It had some success, including participation as an equal in the political, but not the economic, discussions at the G7 Summit. However, uncertainties about its economic reform process and political future constrained further expansion of its global and regional role, as did its handling of the secessionist war in Chechnya. Russia also expressed concerns about expansion of NATO membership to include former Warsaw Pact members but, after protracted negotiations, signed on to the Partnership for Peace program.

The 50th anniversary of the end of the Second World War in Europe focused attention on the new European structures for cooperation. The war itself remained an issue in East Asia, especially with the continuing debate in Japan over how it should come to terms with its wartime past.

Australia's region

The most significant regional development was the second Asia Pacific Economic Cooperation (APEC) Leaders' Meeting, held in Bogor, Indonesia, in November. The commitment by leaders to the goal of free and open trade and investment in the region, by 2010 for developed countries and by 2020 for developing countries, was an achievement of historic proportions. It embraced goods and services and will involve the removal of tariff and non-tariff barriers. Leaders also agreed to accelerate implementation of Uruguay Round commitments and a standstill on raising existing levels of protection. President Suharto's commitment to free trade was critical to the success of the meeting.

The preceding APEC Ministerial Meeting focused on trade and investment. The progress made on the trade facilitation agenda, particularly on investment (ministers agreed on non-binding principles covering investment) and standards, underlined APEC's rapid evolution from a forum for dialogue to one in which agreement can be reached on practical outcomes.

The first meeting of the ASEAN Regional Forum in Bangkok in July heralded a new era in cooperative approaches to regional security in the Asia Pacific. Foreign ministers of 18 countries met to discuss a range of issues affecting security in the Asia Pacific region. The process of dialogue and confidence-building continued through meetings bringing together officials, military officers and academics during the year.

Concern about the threat to regional security posed by North Korea's nuclear program declined after the US and the DPRK concluded a comprehensive 'Agreed Framework' in October covering the DPRK's nuclear facilities and programs. The death of the DPRK's founding father, Kim Il-Sung, in July had thrown the future of the negotiations into doubt. However, his son, Kim Jong-Il, appeared secure in his position as nominated successor and continued negotiations. Further negotiations were required on some of the details, with agreement reached in June on the major provisions, particularly the role of the Korean Peninsula Energy Development Organisation (KEDO).

Tensions increased over the competing claims for sovereignty in the South China Sea. China's arrest of Filipino fishermen near Mischief Reef, which is claimed by other countries including the Philippines, and the discovery of Chinese structures on the reef caused strong concern in Manila. Concerns of claimants were discussed at the ASEAN-China senior officials' meeting in April, despite China's standard position that sovereignty and related issues should be addressed only bilaterally.

The process of regional integration in South-East Asia continued, with the six ASEAN members agreeing to Vietnam's accession to ASEAN in 1995. The prospect of further expansion increased with the decision by Thailand, the host of the 1994 ASEAN Ministerial meetings, to invite Myanmar to attend as its guest, as the first step on the road to eventual full membership.

The pace of economic liberalisation increased worldwide, driven in large part by governments' appreciation of the need for reform. In South-East Asia, Indonesia and the Philippines introduced major reforms reducing barriers to trade and investment, while the ASEAN countries agreed to bring forward by five years (to 2003) the implementation date for the ASEAN Free Trade Area (AFTA) and to consider expanding it to cover trade in services.

Australia: Regional Export Trends

In the South Pacific, economic concerns were the focus of attention. The 25th South Pacific Forum in Brisbane in August focused on managing resources sustainably and in ways which increase returns to island countries. Leaders committed their governments to sound economic policies and to action on forestry, fisheries and aviation. This commitment to sustainable economic development and responsible resource management was an important step in addressing the region's principal challenges, but much work remains to be done to implement Forum leaders' decisions.

In Papua New Guinea, a government led by Sir Julius Chan took office after a court ruling invalidated the Prime Ministership of Paias Wingti. The government's commitment to resolve the Bougainville dispute led to the Arawa peace conference, at which security was guaranteed by a peace keeping force composed of troops from other Forum countries. In the wake of the conference, a Bougainville Transitional Government was established and gained wide support, although a number of prominent BRA leaders did not participate in the processes involved. Deterioration in PNG's economy, compounded by the devastation from the volcanic eruption in Rabaul, led to a reformist budget and discussions with the IMF and World Bank on an economic stabilisation and structural adjustment program.

Interest in regional cooperation in the Indian Ocean led to the inaugural meeting in March of the Indian Ocean Rim Initiative, hosted by Mauritius and comprising representatives from seven regional governments. At the International Forum on the Indian Ocean Region in Perth in June, there was widespread support for enhanced regional cooperation: agreement was reached on mechanisms to promote cooperation among business groups and academics, complementing formal government processes.

The international economic environment

The importance of economic dimensions of power and economic issues in international affairs continued to grow. The relative sizes of economies continued to change as East Asia in particular and countries in other areas such as Latin America grew more rapidly than industrialised countries. The notable exception to rapid growth in East Asia was Japan, which remained in the doldrums with negative or minimal growth for much of 1994-95. A critical factor was the substantial appreciation (more than 20% between January and April) of the yen against the US dollar to record levels.

The significance of international financial markets for national economies was highlighted by the collapse of the Mexican peso. A devaluation and subsequent floating of the peso saw it plummet in value by more than 60% against the US dollar. The crisis and the IMF's response, a package put together by the US, led to serious consideration of reform of the IMF at the G7 Summit in Halifax, Canada, in June. Despite the crisis, support continued in Latin America for liberalisation and deregulation, with President Cardoso of Brazil and President Menem of Argentina being re-elected.

The birth of the World Trade Organisation (WTO) on 1 January greatly strengthened the international institutional framework. Initial membership of 76 increased to 100 by 30 June, including some countries that were not previously parties to the General Agreement on Tariffs and Trade (GATT). Most of the other 29 GATT-contracting parties indicated their intention to join, as did a number of countries not party to the GATT.

Australia: Trends in Export Categories

Negotiations on trade in services continued in line with the timetable agreed as part of the Uruguay Round outcome. As no agreement was reached on financial services, the negotiating period for that sector, originally intended to finish on 30 June, was extended by four weeks. Negotiations were concluded in July, with a broadly satisfactory interim agreement.

The WTO's new dispute settlement mechanism was used actively and effectively in its first six months of operation. Nonetheless, bilateral negotiations remained important, with countries such as the US showing a reluctance to take major matters such as its auto industry dispute with Japan to the WTO. Despite the initiation of consultations by Japan under the WTO, the long negotiations followed the pattern of earlier disputes in which a last-minute bilateral agreement averted US sanctions. The non-discriminatory nature of the bilateral agreement was welcomed by Australia and other countries, although they recognised that its implementation would need to be carefully monitored to ensure this.

There were further moves towards economic regionalism. In addition to expansion of the EU and more rapid implementation of AFTA, a summit of leaders from North and South American countries, excluding Cuba, agreed to create a Free Trade Agreement of the Americas. Argentina, Brazil, Paraguay and Uruguay - the members of Mercosur, the Common Market of the Southern Cone of Latin America - introduced a common external tariff on 1 January. For the first time, the idea of a Trans-Atlantic Free Trade Agreement between the US and the EU was mooted by policy-makers of both potential parties.

Global cooperation

The 50th anniversary of the United Nations in 1995, with the publicity surrounding the UN's role in regional conflicts, focused attention on the successes and failures of the international system. Lack of agreement limited progress on reform of the UN, including expansion of the Security Council.

The indefinite extension of the Nuclear Non-Proliferation Treaty (NPT) at the NPT Review and Extension Conference in April-May constituted significant progress towards a world eventually free of nuclear weapons. This establishes in perpetuity the norm of nuclear non-proliferation. It should add to pressure for further nuclear disarmament, the cessation of nuclear testing and universal membership of the Treaty. The conference called for completion of a Comprehensive Test Ban Treaty (CTBT) no later than 1996.

Substantial progress was made in the Conference on Disarmament and the UN General Assembly on the negotiation of the CTBT. This was complicated by the continued nuclear testing by China, including one test four days after the conclusion of the NPT conference, and newly elected President Chirac's announcement of France's plans to resume testing. There was also progress on implementing the Chemical Weapons Convention and on strengthening the Biological Weapons Convention and the Inhumane Weapons Convention in respect of anti-personnel landmines.

International consideration of environmental issues continued apace during the year with key instruments such as the Framework Convention on Climate Change moving into the phase of practical implementation, and completion of the Convention to Combat Desertification in October 1994 and its opening for signature. Major international meetings included the first session of the Conference of the Parties of the Climate Change Convention in Berlin in March-April. The Commission on Sustainable Development (CSD) continued to monitor progress in implementing Agenda 21 agreed at the Rio conference, with a focus at CSD 3 on forests, sustainable development and rural development.

Social issues were addressed at the World Summit for Social Development in Copenhagen in March. The Copenhagen Declaration and Program of Action contain agreed commitments to address world poverty, unemployment and social integration.

A major achievement for the international community was the entry into force of the Law of the Sea Convention in November after decades of negotiation. After the compromise agreed earlier in 1994 on the contentious issues surrounding deep seabed mining, the number of signatories, including western countries, continued to increase.

Regional conflicts

Global cooperation, primarily under the auspices of the United Nations, focused on attempts to eliminate or reduce the many regional conflicts. The successes in the Middle East, Mozambique and Haiti were overshadowed by the conspicuous difficulties in Bosnia, Rwanda and Somalia.

The many attempts to negotiate a settlement of the Bosnian dispute failed as the warring parties showed little interest in resolving the dispute by other than military means. There was widespread criticism of the UN Protection Force (UNPROFOR), with hundreds of UNPROFOR members taken hostage by the Bosnian Serbs in response to air raids on their positions by NATO aircraft. This criticism, however, took insufficient account of UNPROFOR's successes in carrying out its mission: ensuring that humanitarian supplies were delivered to communities in need and limiting the spread of conflict.

The UN operation in Somalia withdrew by March after coming under increasing attack from local militia. The major catalyst was the US decision to withdraw its forces. Although the UN mission made possible the delivery of much-needed humanitarian assistance, attempts to broker a settlement between rival factions failed.

A UN-organised military presence reduced military conflict in Rwanda, and international attention switched to the humanitarian crisis. The number of displaced people was estimated to be about two million, living in camps in neighbouring countries, as well as in other parts of Rwanda. International assistance helped to alleviate some of the suffering but continued lack of political reconciliation prevented resolution of Rwanda's problems.

After decades of dispute and conflict, the Middle East peace process continued to edge forward. The agreements between Israel and the Palestinians have led to greater Palestinian autonomy than previously, although there have been delays in transferring civil administration of the West Bank, removing the Israeli Army from most Palestinian population centres and holding elections for the Palestinian Authority. Violence has continued, but the conclusion of a peace agreement between Israel and Jordan added momentum to the peace process.

A further success for the international community was Mozambique's first democratic, multi-party elections, held in October with the assistance of UN election observers. This was the culmination of a two-year process designed to bring peace and stable government after almost 17 years of civil war.

Another mission successfully completed was the UN-sanctioned multinational force, led by the US, that was deployed in Haiti in September. Its task was to re-install the democratically elected government of President Aristide after order had been restored. The force withdrew in March and was replaced by a UN mission.

The portfolio operates under the direction of three ministers with separate but related responsibilities for Foreign Affairs, Trade, and Development Cooperation and Pacific Island Affairs. The division of responsibilities, introduced in 1993, enables increased ministerial direction and attention to be engaged on the pursuit of Australia's overseas trade interests, development cooperation and relations with the South Pacific.

The portfolio comprises eight programs administered by the Department of Foreign Affairs and Trade, the Australian Safeguards Office (ASO), the Australian Agency for International Development (AusAID), the Australian Centre for International Agricultural Research (ACIAR), the Australian Trade Commission (Austrade) and the Australian Secret Intelligence Service (ASIS).

This was the second full year of operation with the current program structure, which has two major objectives:

The portfolio comprises the following programs:

Activities under programs one to five, administered by the Department of Foreign Affairs and Trade, and program six, administered by the Australian Agency for International Development (AusAID), are covered in this report. AusAID is an autonomous body within the Department.

Also within Program 6 is the Australian Centre for International Agricultural Research (ACIAR), a statutory body administered by its own board of management. A policy advisory council advises the board and the Minister for Development Cooperation and Pacific Island Affairs on policy direction for the centre. ACIAR was established to fund projects in key areas of agricultural research. ACIAR produces its own annual report, which is presented to the Parliament.

Program 7 is administered by the Australian Trade Commission (Austrade). As a statutory body, Austrade also produces its own annual report, which is presented to the Parliament.

Program 8 covers the Australian Secret Intelligence Service (ASIS), which is responsible to and under the control of the Minister for Foreign Affairs. ASIS's capacity to serve Australia's national interest continues to depend on its activities being fully protected by secrecy. The Government therefore adheres strictly to the practice of not providing details of ASIS activities.

The Australian Safeguards Office (ASO), headed by the Director of Safeguards, a statutory officer appointed under the Nuclear Non-Proliferation (Safeguards) Act 1987, is responsible to the Minister for Foreign Affairs. The ASO's principal functions include administration of the Safeguards Act, administering the operation of Australia's bilateral safeguards agreements, contributing to International Atomic Energy Agency safeguards and advising the Government on nuclear non-proliferation and safeguards matters. The ASO produces its own annual report, which is presented to the Parliament. Its activities are also summarised under sub-program 1.7.

The Chemical Weapons Convention Office (CWCO) was formally established during the year to provide the national focal point for the implementation of the convention banning chemical weapons when it has entered into force. The CWCO will be managed in conjunction with the Australian Safeguards Office. The Director of Safeguards has also been appointed Director of the CWCO.

The Market Australia Unit, established in the previous financial year, expanded its institutional structure to implement more effectively its mandate to enhance international perceptions of Australia's capacities in sophisticated goods and services. A Canberra-based executive director was appointed in August with responsibility for Market Australia's Sydney and Canberra offices, and staff levels were increased to meet the growing workload associated with implementing this major Government initiative. Its activities are covered under sub-program 1.9.

Various cultural bodies associated with the Department develop contacts between Australia and other countries. They are the Australia-Japan Foundation, the Australia-China Council, the Australia-New Zealand Foundation, the Australia-Indonesia Institute, the Australia-France Foundation, the Australia-Korea Foundation and the Australia-India Council.

Several advisory bodies address specific issues in the portfolio. These include the Editorial Advisory Board, which advises on the publication of historical documents, the National Consultative Committee on Peace and Disarmament, which is the medium for the exchange of views between government and the community on peace, disarmament and arms control issues, and the Advisory Council on Aid Policy, a forum for consultation between AusAID and voluntary aid organisations.

Several bodies advise the portfolio's three ministers on trade issues. Currently, these are the Trade Policy Advisory Council, a wide range of other consultative arrangements with the private sector, and a series of joint trade committees or similar bodies handling trade issues between Australia and individual countries.

Corporate plan

A new three-year corporate plan for the Department was adopted in the previous reporting period. It included a mission statement and descriptions of the operating environment and the values and culture of the Department. The mission statement is reproduced below. The complete corporate plan is available in the Department's 1993-94 annual report.

Mission statement

Aim

Goals

Priority tasks

To achieve all the above, the Department's activities will be global with a focus on the Asia Pacific. It will:

The format of this annual report follows the program and sub-program framework set out in the Portfolio and Corporate Overview.

General

The events of the past year have further underlined the centrality of DFAT's first goal in its corporate plan - to increase Australia's economic prosperity through trade and investment flows, as a means of winning a future for Australia. Policies in 1994-95 were determined from time to time on the basis of other goals, relating, for example, to strategic needs, or to concerns for Australia's international reputation, but policy-setting was always marked by strong awareness of the economic implications. Australians cannot afford to have it otherwise, given the inter-relatedness of economic and other factors, the intense international economic competition in the post-Cold War era and Australia's role in the dynamic Asia Pacific region.

The Department's operating priorities and the development of its professional skills have had to be set against the background of Australia's economic fundamentals, including the requirement for the utmost budgetary restraint in government spending, and Australia's balance of payments circumstances (see note below). Effective trade and investment policies play an essential role in strengthening Australia's overall economic situation, and are the areas in which the Department makes its major contribution.

This requires DFAT officers to be trained and geared to assist those in the public and private sector concerned with exports and investment flows to identify and follow up overseas opportunities and, while respecting the primary responsibilities of other portfolios, to promote economic policy settings and reforms directed towards improving Australia's international competitiveness.

Apart from the greater emphasis put on economic priorities in the management of the portfolio, the period under review was one of major consolidation for the Department. Significant effort was put into implementing initiatives arising from the 1994-95 Budget, resulting notably in the opening of two new posts (Ho Chi Minh City and Almaty), strengthening the Asia divisions in Canberra, a sustained recruiting campaign and a substantially enhanced training program. At the same time, preparations were intensified for a number of important changes which will accompany the Department into the next century, including the imminent move to a new headquarters building and the implementation of an upgraded global unclassified communications network. Close attention was also given to aspects of the Department's management and control systems, with a view to ensuring that DFAT was able to meet its formal compliance obligations and the challenge of increased flexibilities available to managers under the Government's running costs system.

Note on the Current Account Deficit

The recent publicity surrounding the current account deficit has highlighted the importance of the state of Australia's economic relations with the world to the nation's well-being. The current account deficit, of which the trade balance is a part, rose to around 6% of GDP - up from around 3% during the early 1990's. While this deterioration reflects a cyclical response to strong growth in domestic investment, it can impose costs on the economy by making it more vulnerable to economic shocks. The size of these costs depends, among other things, on changes in market conditions and the performance of Australia's exporters in general.

The current account deficit is fundamentally the result of decisions made about savings and investment within the Australian economy. Consequently, any reduction in the current account from its present levels must be reflected in an increase in the nation's level of savings relative to its investment. In making this adjustment, the economy will also show an improvement in the value of the nation's output, including exports, relative to the level of its consumption.

Australia's trade policies can, by complementing the other arms of economic policy - macroeconomic and industry policy and microeconomic reform - raise the income received from Australia's output and reduce the vulnerability of the economy to international shocks. As outlined in the publication Winning Markets, DFAT has a significant role to play in promoting such outcomes by seeking improvements to the access of Australian exporters in foreign markets, providing services and information to exporters and developing an export culture within Australian industry. These policies contributed to a substantial increase in the importance of exports in the nation's gdp over the past 10 years (see figure below). In combination with the other arms of economic policy, they have also been successful in encouraging a diversification of Australia's export base toward services and manufactures. Over this period these movements stabilised after the deterioration of the 1970's and the early 1980's.

Access and equity

As its corporate plan states, the Department's values and culture derive necessarily from those of the Australian community at large and those of the Australian Public Service, of which it is a part. In this spirit, as well as by law, the Department is and intends to remain responsive to Government and to established standards of social justice and accessibility and of accountability. Because much of the Department's output is delivered abroad, it is not possible to trace the impact of all sub-programs on social justice outcomes. However, these are regarded as positive concerns and are promoted wherever opportunities can be identified.

Increased efforts were made to improve officers' cross-cultural awareness and the Department's capacity to relate to the community. The flow of useful information and channels of communication, including the publication of historical records and responses to Freedom of Information requests, were further broadened. Accounts of developments in these areas, including the formal 'Access and Equity' statement, are provided under sub-program 1.9.

Principles and practices adopted by the Australian community on matters such as human rights, and the rights and status of women and of indigenous peoples, were incorporated into positions taken by Australia in the United Nations and other international bodies (sub-program 1.7), as well as being promoted under the Department's media and cultural exchanges (sub-program 1.9) and by AusAID under Australia's aid programs (sub-programs 6.1 and 6.2).

Resource management

The Department's operations were considerably enhanced during the year through the conclusion of several resource agreements with the Department of Finance, allowing greater DFAT flexibility in the use of its human and financial resources. Another major development which will have a similar effect was the Government's agreement to the devolution from DFAT to other overseas operating agencies of funding for the provision of common administrative services at overseas posts and to the introduction of a user-pays system. The new system will remove the potential for cross-subsidisation from DFAT's funding for other programs and will give all agencies greater flexibility in their use of resources overseas, as well as the ability to retain savings from the efficient allocation of resources. The new system entered into effect on 1 July 1995.

Internal systems were further refined during the year for regular financial reporting to senior management and for facilitating the Divisional Evaluation (DER) and Post Evaluation Report (PER) processes, which allow for thorough evaluation of the distribution of the Department's resources across its divisions in Canberra, regional offices and posts overseas.

Considerable attention was given to formal compliance procedures. Some financial controls were recentralised, while the Department's accounting system (CAP) was upgraded at all overseas posts and arrangements were made for upgrade in Canberra early in the 1995-96 financial year. The training of staff operating in financial areas of the Department in Australia and overseas continued to receive a high priority. The Department also successfully participated in the Department of Finance pilot program for the production of the 1993-94 financial statements on an accrual reporting basis.

After a major review of internal audit standards and operations, a new audit system was introduced on 1 September. The implementation of the new system has provided management with a sharper assessment of the strengths and weaknesses of Departmental financial systems and transparent standards against which managers should aim to perform.

The Department's evaluation program concentrated on the outcomes of programs and administrative functions with significant policy and/or resource implications identified in the Portfolio Evaluation Plan, which the Minister for Foreign Affairs submits to the Minister for Finance annually. A major review of the Portfolio's overseas representation has started and is expected to be completed in late 1995 in time for inclusion in deliberations for the 1996-97 Budget process.

A major review of administrative procedures, across the full spectrum of DFAT operations was initiated, with the primary objectives of ameliorating the heavy tasking placed on posts and refocusing resources on core activities.

Information technology

The Australian Diplomatic Communications Network (ADCNET) remains the backbone of the Department's secure communications system. Though development work was complicated in 1994-95 by changing security policies and difficulties with the cost and availability of specialised security products, ADCNET systems continued to be installed in posts and in Canberra. More than 1000 terminals were connected to the Wide Area Network (WAN) by the end of the reporting period.

A major IT development in 1994-95 was the definition, pilot testing and funding of a Non-National Secure (NNS, or unclassified) network. In developing this network an asset replacement program was considered by DFAT's standing IT Acquisition Council. Some supplementary funding has been authorised by the Department of Finance. The program is based on a rolling three-year replacement plan, with all DFAT NNS sites connected into the NNS WAN for the exchange of formal and informal documents.

New Foreign Affairs and Trade office building

The fitout of the building, which includes landscaping and the provision of services, started in January and was generally proceeding according to program by 30 June.

The fitout is to be completed for handover of the building to DFAT by July 1996. After the subsequent completion of IT and other DFAT requirements and the transfer of the communications system, relocation from the Administrative Building should start in September 1996.

The $165 million budget for the project includes $26.8 million for the fitout. An additional cost of about $17 million will be incurred by DFAT in satisfying specialised needs and the fitout of areas such as the childcare centre, the Wilenski International Conference Centre and the cafeteria. It will also include the cost of the move and the provision of some loose furnishings. This is to be met from existing Departmental appropriations.

Personnel management

DFAT continued to aim for the highest standards of personnel management in a spirit of 'best practice.' Achievements during 1994-95 included the further streamlining of staff recruitment, placements and postings, improvements in the delivery of conditions of service for overseas staff with the implementation of a new package of conditions for difficult posts, the successful implementation of an integrated performance appraisal and performance pay system, a review of policy on the recruitment and conditions of service of locally engaged staff, and the review of the Department's 1991-94 EEO program.

Some idea of the extent of the Department's personnel operations can be gained from the following examples:

The Department foreshadowed proposals aimed at a closer integration of public affairs with other areas of policy work. The proposals are currently the subject of consultations with staff and unions. They aim to preserve specialist public affairs skills while integrating public affairs officers into the mainstream of the Department.

Training

Significantly greater funding for training programs reflected DFAT's recognition that professional skills and expertise require constant upgrading and that leadership and management skills are particularly vital in a more complex and challenging international environment. The overall aim of the Department's human resource development policies was to create a learning culture in DFAT and to promote the concept of DFAT as a learning organisation.

Such factors as the revision of the Audit Act, the planned revision of the Public Service Act, the Karpin report on Australian management, Government policy on managing diversity, the emergence of competency-based training and assessment and the Working Nation white paper all affected the context of the Department's human resource management and human resource development policies and practices and some had implications for international public policy. At the same time, such issues as technological change and upgrading, cross-cultural issues, the ASEAN Regional Forum and human rights developments affected the Department's training programs.

Increased emphasis on management skills led to the holding of a greater number of management courses and to a new leadership and management course for Senior Executive Service (SES) officers. A major review of pre-posting training was undertaken, resulting in the adoption of a new policy. A review of training opportunities for staff at posts was started.

On 1 November, Senator Evans announced the results of the first full-scale review into language training in the Department, saying that 'to understand and influence the countries with which Australia has substantial relations, we must have a pool of officials with a good knowledge of the relevant languages'. After the review, a Language Training Implementation Strategy was adopted to give effect to the review's recommendations. The strategy established a framework for best-practice language training, ensuring the transmission of current usages and including an emphasis on cross-cultural skills.

The Department's diploma program, which is designed to satisfy professional development needs of officers engaged in the formulation of policy advice, continued to be improved and developed. For the first time, the Graduate Diploma of Foreign Affairs and Trade will be awarded at Master's level, subject to additional work. The Department's commitment to professional development of its staff was further demonstrated by the provision of considerable study leave and payment of HECS to officers undertaking tertiary courses.

Social justice and equity

The Department reached a major landmark in 1994-95 with the conclusion and review of its initial three-year EEO program. The majority (84%) of performance indicators were assessed as fully or partly achieved. Good progress had been made in increasing the representation of women and of officers from Aboriginal or Torres Strait Islander backgrounds in the SES and SES feeder groups, and moderate results had been achieved in maintaining the proportion of staff with a non-English-speaking background and people with disabilities. The Department performed well against APS benchmarks in relation to the proportional representation of indigenous officers and people from non-English-speaking backgrounds, although levels of representation of women in the SES and the overall proportion of people with disabilities were below the APS average.

A draft of the new EEO program for 1995-98 was completed towards the end of 1994-95 and was to be finalised early in 1995-96. The new program will build on the successes of the previous program and will concentrate on areas in which greater progress has to be made. In particular, the Department will seek to further incorporate EEO into all facets of staff management with a view to increasing the representation of women in the SES and feeder groups, the number of officers from Aboriginal and Torres Strait Islander backgrounds and the number of and career opportunities for people with disabilities.

Other important achievements in this area included approval of a Departmental Childcare Policy Statement, a comprehensive budgetary plan for the planned workplace childcare centre in the Department's new office complex at the York Park site, the integration into the DFAT agency agreement of family-friendly measures including provision for more flexible working hours, increased carry-over (credit and debit) periods, additional special leave to care for sick family members, and flexible working year and leave arrangements. Agreement was reached through the agency bargaining process between the Department and unions on recognition of same-sex relationships in conditions of service, and advice was provided to management and complainants by the DFAT Workplace Harassment Contact Group on the resolution of EEO-related and workplace harassment grievances (the vast majority of cases in 1994-95 were resolved informally through early conciliation). The Department continued its participation in the Intellectual Disability Access Program and participated in an inter-departmental 'Disability Task Force', which is developing a work plan for 1995-96 to give effect to the Government's responsibility to achieve equal rights and access for people with disabilities.

The Secretary continued a program of focus group discussions with officers of the Department. Meetings in August and February comprised a 'vertical slice' of female officers from ASO2 to SES levels. The meetings carried forward the momentum created through the earlier meeting in May 1994, which identified and addressed issues requiring attention to improve the career satisfaction and development of women officers. Several recommendations from the August meeting were endorsed by the Secretary and the focus group as directives for implementation, with time frames attached. The February meeting reviewed progress achieved towards these directives and identified further issues to be explored. The issues discussed over the 12 months included the designation of 6% of all Departmental positions to be available for permanent part-time work (the APS ceiling), the requirement that promotion rounds be held annually for ASO2, ASO3 and ASO4 levels and that selection advisory committees be briefed by the EEO officer on gender issues, the provision by managers of practical support for female officers in the SES feeder groups and the inclusion of management as a mandatory criterion in performance agreements of officers with management responsibilities and in post and divisional evaluation reports. It was agreed the focus group discussions would continue with a rotating membership, to provide a forum for the Secretary to maintain dialogue with women officers on their concerns.

The substantial work undertaken in workplace bargaining resulted in a DFAT-specific Agency Agreement that was certified by the Australian Industrial Relations Commission on 5 December. The agreement included a range of 'family-friendly' initiatives as well as the continuous improvement initiatives. The parties to the agreement undertook to consult and work cooperatively towards implementing the agreed range of initiatives in the time frame specified. The process is working well and is being closely monitored by both parties.

Financial and Staffing Resources Summaries

Program 1 - International relations, trade and business liaison

1993-94

1994-95

1994-95

Actual

Budget &

Actual

AEs (a)

  

$'000

$'000

$'000
BUDGETARY (CASH) BASIS
Components of appropriations

Running costs (RC)

268,283

302,934

268,976

Other program costs (excluding RC)

169,218

161,829

136,328

Total appropriations

437,501

464,763

405,305

Less adjustments

31,033

n.a.

21,415

Total outlays

406,468

n.a.

383,890
ACCRUAL BASIS

Net cost of service delivery (c)

337,900

312,682

308,904
Other program costs (excl.

service delivery)

169,812

139,030

139,030

Total costs

507,712

451,712

447,934

Program revenues

34,719

11,536

11,536

Total (allocated) assets

46,862

62,465

61,879

Total (allocated) liabilities

90,854

89,880

90,336
STAFFING

Staff years (actual)

2,605

2,558

2,498

Program 2 - Passport and consular services

1993-94

1994-95

1994-95

Actual

Budget &

Actual

AEs (a)

  

$'000

$'000

$'000

BUDGETARY (CASH) BASIS

Components of appropriations

Running costs (RC)

38,455

44,933

48,190

Other program costs (excluding RC)

175

225

163

Total appropriations

38,630

45,158

48,353

Less adjustments

1,307

n.a.

1,569

Total outlays

37,323

n.a.

46,783

Total revenue (b)

56,957

  

59,643

ACCRUAL BASIS

Net cost of service delivery (c)

45,937

46,702

46,132

Other program costs (excl.

service delivery)

179

217

217

Total costs

46,116

46,919

46,349

Program revenues

57,659

60,413

60,295

Total (allocated) assets

7,016

9,699

9,493

Total (allocated) liabilities

11,839

11,997

12,066

STAFFING

Staff years (actual)

427

423

428

Program 3 - Services for other agencies

1993-94

1994-95

1994-95

Actual

Budget &

Actual

AEs (a)

  

$'000

$'000

$'000

BUDGETARY (CASH) BASIS

Components of appropriations

Running costs (RC)

18,311

17,225

49,830

Other program costs (excluding RC)

0

0

0

Total appropriations

18,311

17,225

49,830

Less adjustments

7,592

n.a.

11,486

Total outlays

10,719

n.a.

38,345

ACCRUAL BASIS

Net cost of service delivery (c)

22,624

43,724

43,190

Other program costs (excl.

service delivery)

3

0

0

Total costs

22,627

43,724

43,190

Program revenues

2,216

2,519

2,519

Total (allocated) assets

3,026

5,296

5,213

Total (allocated) liabilities

6,699

6,563

6,628

STAFFING

Staff years (actual)

183

180

571

Program 4 - Secure government communications and

security

1993-94

1994-95

1994-95

Actual

Budget &

Actual

AEs (a)

  

$'000

$'000

$'000

BUDGETARY (CASH) BASIS

Components of appropriations

Running costs (RC)

44,891

23,538

29,198

Other program costs (excluding RC)

28,570

24,136

22,302

Total appropriations

73,461

47,674

51,499

Less adjustments

2,207

n.a.

16

Total outlays

71,254

n.a.

51,483

ACCRUAL BASIS

Net cost of service delivery (c)

66,244

55,090

54,605

Other program costs (excl.

service delivery)

6,877

6,960

6,960

Total costs

73,121

62,050

61,565

Program revenues

519

815

815

Total (allocated) assets

23,513

25,573

25,497

Total (allocated) liabilities

7,767

7,642

7,701

STAFFING

Staff years (actual)

187

125

290

Program 5 - Executive and DFAT corporate services

1993-94

1994-95

1994-95

Actual

Budget &

Actual

AEs (a)

  

$'000

$'000

$'000

BUDGETARY (CASH) BASIS

Components of appropriations

Running costs (RC)

30,642

80,434

61,714

Other program costs (excluding RC)

415

764

507

Total appropriations

31,057

81,198

62,221

Less adjustments

9,805

n.a.

67

Total outlays

21,252

n.a.

62,155

ACCRUAL BASIS

Net cost of service delivery (c)

24,976

57,647

56,950

Other program costs (excl.

      

service delivery)

3

0

0

Total costs

24,979

57,647

56,950

Program revenues

519

1,171

1,171

Total (allocated) assets

2,990

5,957

5,849

Total (allocated) liabilities

7,683

7,507

7,591

STAFFING

Staff years (actual)

384

435

383

*Program 6 - Development cooperation (AusAID)

1993-94

1994-95

1994-95

Actual

Budget &

Actual

AEs (a)

  

$'000

$'000

$'000

BUDGETARY (CASH) BASIS

Components of appropriations

Running costs (RC)

41,876

47,988

45,600

Other program costs (excluding RC)

1,287,233

1,365,726

1,355,939

Total appropriations

1,329,109

1,413,714

1,401,539

Less adjustments

1,506

n.a.

3,066

Total outlays

1,327,603

n.a.

1,398,473

ACCRUAL BASIS

Net cost of service delivery (c)

44,016

49,126

49,125

Other program costs (excl.

      

service delivery)

878,441

997,927

997,927

Total costs

922,457

1,047,053

1,047,052

Program revenues

6,376

7,011

7,011

Total (allocated) assets

73,372

163,386

163,387

Total (allocated) liabilities

2,648,916

1,671,138

1,671,138

STAFFING

Staff years (actual)

545

615

558

*Excludes sub-program 6.4, Australian Center for International Agricultural Research (ACIAR). A separate annual report is produced for this sub-program.

Financial and staffing resources summary (All Programs)

1993-94

1994-95

1994-95

Actual

Budget &

Actual

AEs (a)

  

$'000

$'000

$'000

BUDGETARY (CASH) BASIS

Components of appropriations

Running costs (RC)

442,458

517,052

503,510

Other program costs (excluding RC)

1,485,611

1,552,680

1,515,239

Total appropriations

1,928,069

2,069,732

2,018,749

Less adjustments

53,450

n.a.

37,619

Total outlays

1,874,619

n.a.

1,981,130

Total revenue (b)

56,957

59,643

ACCRUAL BASIS

Net cost of service delivery (c)

541,697

564,971

558,906

Other program costs (excl.

service delivery)

1,055,315

1,544,790*

1,144,134

Total costs

1,597,012

2,109,761

1,703,040

Program revenues

102,008

83,465

83,347

Total (allocated) assets

156,779

272,376

271,318

Total (allocated) liabilities

2,773,758

1,794,727

1,795,460

STAFFING

Staff years (actual)

4,331

4,336

4,728

(a) Budget figure amended to include Additional Estimates.
(b) See Budget Paper 1 for a description of items included in revenue.
(c) Includes Òrevenues from independent sourcesÓ as shown in the Statement of Program Expenses and Returns included in the financial statements.
* Includes $400,657,000 relating to Austrade expenditure not recorded on an individual program summary.