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DFAT iSAY essay competition - Winning essay 2019

The winning essay in the university undergraduate student category of DFAT’s 2019 trade essay competition appears below. The two joint winning essays in the senior high school category were published in business envoy in December 2019.

The five university undergraduate student finalists were John Swan, Olivia Stanley and Charlotte Choi from Australia and Tran Thi Thu Trang from Vietnam and I Gst. Putu Agung Trisna Guna Pradnyana from Indonesia.

The 2019 essay topic was: What are the barriers to a closer trade and economic relationship and how can Australia and ASEAN countries work together to overcome them?

Author: John Swan, University of Adelaide

Australia and ASEAN countries should continue to expand cooperation to overcome trade, development and security barriers that restrict economic growth. The 10 ASEAN states collectively comprise of 647.5 million people and the region has experienced strong GDP growth of around 5 per cent each year since 2014.  From 2015 to 2030, the number of middle class households in ASEAN is projected to quadruple to over 161 million. 

The key to maximising the substantial economic potential of South East Asia is increased economic integration. This primarily involves utilising free trade agreements (FTAs) that remove tariffs and non-tariff barriers, as well as encourage foreign investment. Education, research and infrastructure deficiencies are further challenges that Australia can assist in overcoming. A unified ASEAN can also foster cooperation between states to more effectively diffuse security challenges.

(Front row, from left) Charlotte Choi, John Swan, Olivia Stanley, Tran Thi Thu Trang and (back row, right) I Gst. Putu Agung Trisna Guna Pradnyana, meeting DFAT Secretary Frances Adamson (front row, center) and (back row, from left) Chief Negotiator Regional Trade Agreements Division Elizabeth Ward, Ambassador of Vietnam His Excellency Ngo Huong Nam, and Deputy Chief of Mission of the Embassy of Indonesia, Mohammad Iskandarsyah Derry Aman, in Canberra on 16 September 2019. Credit: DFAT.

Free trade

The most significant threat to a closer trade and economic relationship between Australia and ASEAN is a retreat from free trade to protectionism. This is a global risk exemplified by recent tariffs imposed by the US against trade partners and its decision to withdraw from the Trans-Pacific Partnership. South East Asia should not be divided by a proxy trade battle between major powers. Instead ASEAN is an appropriate multilateral forum to achieve mutual benefits for member and dialogue states through FTAs.

Australia benefits from existing trade liberalisation with ASEAN states. Australia is a good ‘market match’ for ASEAN, which means Australian products and services are in demand in ASEAN countries, such as minerals, educational services and tourism. Australian consumers likewise benefit from imported products from ASEAN destinations. Since the 1970s, successive Australian governments have gradually removed tariffs.

During the twenty first century Australia has entered into FTAs with Singapore (2003), Thailand (2005) and Malaysia (2013). Australia is currently negotiating an agreement with Indonesia. These bilateral agreements are complemented by the ASEAN-Australia-New Zealand FTA (‘AANZFTA’) which covers all ASEAN states and was entered into in 2010.

FTAs create opportunities for Australian exporters to expand their markets and create jobs. Consumers benefit from increased choice and lower prices. Existing FTAs require periodic reviews. AustCham’s ASEAN 2018 Annual Business Survey found that whilst in 2016-17 the share of Australian firms planning to increase their presence in ASEAN almost doubled, many identified non-tariff barriers restricting their expansion.

These include corruption, restrictions on ownership and investment, access to skilled labour and insufficient information about ASEAN markets. Communication between DFAT and Australian firms to identify barriers to trade and how they can be removed is essential. An example of where non‑tariff barriers may be removed is targeted easing of travel restrictions for skilled workers, tourists and students between Australia and ASEAN. Australia must also explain necessary domestic regulations to ASEAN, such as biosecurity regulations, that may appear to restrict trade but protect national interests.

A criticism of ASEAN is that the complexity and number of FTAs in the region inhibits market access for small to medium-sized enterprises. The phenomenon is called the ‘noodle bowl’ effect. Expanding services provided by DFAT to assist businesses understand the various FTAs and how they can benefit is important. An expansion of the ASEAN Secretariat could provide benefits in promoting trade in ASEAN. Underexploited areas of ASEAN for Australia are the emerging markets of Laos, Cambodia, Brunei and Myanmar. These markets only accounted for 0.9 per cent of Australian exports to ASEAN in 2017 and represent significant trade potential.

Education and research

Education and research deficiencies are barriers to unlocking the economic potential of ASEAN. In 2018-19 Australia contributed approximately $1.0 billion in official development assistance to East and South East Asia. Investing further aid into under resourced schools will have significant productivity benefits. Education-related travel from ASEAN residents was an industry worth $5,685 million to Australia in 2018. Quality tertiary education builds the skills of ASEAN students to contribute to regional development.

It is important that all levels of government in Australia cooperatively regulate educational institutions to maintain academic rigour and high reputational standards. Ensuring that foreign students in Australia have the necessary English language skills to study effectively is a challenge that can be addressed with greater investment in preparatory English courses.

There are similarly benefits for Australians engaging in ASEAN educational opportunities. To maximise these opportunities more Australians must learn Asian languages and develop cultural awareness. Language barriers are a much larger issue in the Australia-ASEAN region compared with the EU. In 2016, more than 90 per cent of the adult working-age population with a tertiary level of education in the EU knew at least one foreign language in the majority of the EU states. 

The New Colombo Plan is an Australian government initiative addressing this issue by sponsoring Australian students to study and gain work experience in the Asia Pacific. By 2020, it is estimated that 40,000 students will have benefited from the program. Greater Asian language literacy will support collaborative research between Australian and ASEAN institutions. The CSIRO is an example of Australian research institute which has recently established research projects in ASEAN including in agriculture, water security, energy and health.

Infrastructure

Infrastructure requires investment in ASEAN to ensure consistent and inclusive growth. The Asian Development Bank estimates the total infrastructure investment need in ASEAN from 2016 to 2030 to be US$2.8 trillion (baseline estimate) and US$3.1 trillion (climate-adjusted estimate). Cyber infrastructure is increasingly important, as ASEAN has the fourth largest and fastest growing online commerce market in the world. 

Infrastructure development directly improves living standards, boosts productivity and reduces trade transactional costs. Governments, development banks and private investors could collectively finance the South East Asian infrastructure gap. The Mekong Program is a successful development aid program funded by Australia in ASEAN with two objectives: enabling regional economic cooperation and inclusive growth, and strengthening regional responses to trafficking and the exploitation of migrant workers. A notable achievement of this program is the professional advice given to states on water management.

It is in Australia’s interests to consider providing further grants and concessional loans to finance vital infrastructure projects in emerging ASEAN states, such as projects in the ASEAN Infrastructure Pipeline. Capacity building in ASEAN builds Australia’s reputation and influence in the region.

Infrastructure investment must promote environmental sustainability. Dr Guy Debelle, Reserve Bank of Australia Deputy Governor, this year warned that climate change inaction is a significant risk for the Australian economy. Development of innovative low emission technologies present opportunities for economic growth in ASEAN. The proposal to construct a US$10 billion wind and solar hub in the Pilbara to supply a future ASEAN connected energy grid is an example of these opportunities.

Security and cohesion

Conflict in ASEAN would be a severe restraint on economic growth and trade. ASEAN states should increase cooperation and information sharing between security agencies to counter transnational crimes including terrorism, cybercrime, illegal fishing, corruption, human trafficking and exploitation of migrant workers.

Whilst recognising ASEANs consensus decision making processes, the ASEAN Intergovernmental Commission on Human Rights should become more supportive of the region’s minority groups. A cohesive ASEAN that embraces differences and harnesses the skills of the entire population will be more economically successful. For example, ASEAN countries that welcome visitors of different religions, races, genders and sexualities will benefit from increased tourism and collaborative research.

Since ASEAN was founded, no major conflicts have occurred between member states. Territorial disputes in the South China Sea and tension between external major powers is a significant threat to continued peace. Australian trade is reliant on free movement of ships and aircraft through South East Asia. The Australian government and ASEAN should continue to advocate for territorial disputes to be resolved in accordance with international law and without the use of force. States should collectively support this principle consistent with the Treaty of Amity and Cooperation.

Conclusion

A closer trade and economic relationship between Australia and ASEAN will deliver shared benefits across the region. Australia became ASEAN’s first dialogue partner in 1974. By building on this strong and longstanding relationship, Australia can become more economically integrated into South East Asia. Greater cooperation can resolve trade, education, research, infrastructure and security barriers that inhibit economic growth. Further success in the ASEAN-Australia relationship will promote peace and prosperity.

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