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Decorative

Chapter 2: Critical enablers

Key points

  • Australia and Southeast Asia's web of free trade agreements (FTAs) and economic cooperation architecture, established trade linkages, technical assistance programs, and goodwill built up over many years provide a strong basis to grow ties.
  • Australia and Southeast Asia should continue to utilise FTAs, the World Trade Organization and other multilateral forums to drive market liberalisation and economic reform for mutual benefit.
  • Building awareness in Australia and Southeast Asia of each other's markets and offerings will be key to commercial growth – business exchanges, diaspora and alumni all have a critical role to play.
  • Facilitating greater outward and inward investment needs to be a priority given its criticality to boosting economic growth, national income and enduring commercial linkages.
  • Australia must continue working to make it easier for Southeast Asian businesses to operate in Australia, including via reform of the migration system and regulatory regulations.

Underpinning architecture and linkages

Growing trade and investment will require drawing on, and making more use of, economic architecture and assets, such as diaspora communities and alumni. Addressing the challenge requires a cross-cutting approach, including trade and investment–related enablers that impact across economies.

Australia and Southeast Asia have built a range of linkages that provide a basis for greater trade and investment ties. These include the network of bilateral and multilateral trade agreements facilitating commercial activity.

Australia has negotiated a web of bilateral and regional free trade agreements (FTAs) with Southeast Asia (Figure 2.1). These FTAs expand commercial ties and offer roadmaps for further cooperation to adopt measures or negotiate rules to boost trade and investment ties. They remove tariffs, standardise trade rules, support trade facilitation, outline cooperation on investment, and set guidelines for digital trade.51

ASEAN-centred FTAs, such as the Agreement Establishing the ASEAN – Australia – New Zealand Free Trade Area (AANZFTA) and the Regional Comprehensive Economic Partnership Agreement (RCEP), ensure all parties have a say in regional trade and investment rules. Engagement with the ASEAN-led economic architecture, such as through the East Asia Summit economic track, brings ministers together to discuss how to deepen rules-based trade and investment.

Australia and the region benefit immensely from the predictability and stability provided by the rules-based multilateral trading system, with the World Trade Organization (WTO) at its core. Australia is active in efforts to reform and strengthen the WTO, including through negotiating new rules on e-commerce, investment facilitation and behind-the-border barriers to services, so that it can continue to support the prosperity of our region into the future.

Australia also works through the Organisation for Economic Co-operation and Development (OECD) and Asia-Pacific Economic Cooperation (APEC) to engage Southeast Asian economies on measures to promote the region's sustainable and inclusive growth, including domestic economic reforms.

In addition, Australia's A$1.24 billion development cooperation program with Southeast Asia enables Australia to work with regional governments to improve the policy and regulatory settings needed to grow trade and investment. This includes providing technical assistance for regulatory reforms, strengthening the private sector, and supporting investment for infrastructure and climate transition projects.

An important element of this assistance is the provision of development financing, including via the Emerging Markets Impact Investment Fund (EMIIF) and the multi-donor Private Infrastructure Development Group (PIDG). Australia's current development finance to Southeast Asia aims to coordinate with the multilateral development banks to crowd in private and like-minded financing (see case Investing in Women and EMIIF case study). There is potential to expand Australia's development finance toolkit given the region's enormous infrastructure and green transition needs.

Figure 2.1 Australia's participation in regional economic architecture

Infographic showing Australia’s participation in regional economic architecture

Source: DFAT, current as of August 2023.

Case study: Investing in Women and the Emerging Markets Impact Investment Fund

Through the Investing in Women program and the Emerging Markets Impact Investment Fund (EMIIF), Australia has supported women-led small and medium-sized enterprises (SMEs) in Southeast Asia to grow their business.

In 2023, EMIIF has invested in TEKY, a prominent science, technology, engineering, the arts and mathematics (STEAM) academy in Vietnam. With a team that is 77 per cent women, TEKY is a leader in promoting gender equality in STEAM education and careers, and uplifting the technological knowledge of Vietnamese children. Australia's support is helping fuel the expansion of TEKY's educational services within Vietnam's public school system, as well as its after-school programs. TEKY is the first Vietnam-based educational technology company to implement a STEAM curriculum. The company is currently operating a network of 21 STEAM centres across five major cities in Vietnam. With a focus on a diverse range of subjects, such as coding, 3D technology and robotics engineering, these centres aim to enhance the skills of 10,000 students aged 5 to 18 years.

Women-owned and -led SMEs encounter significant barriers in accessing formal sources of finance and mainstream investment. The Investing in Women and EMIIF programs have established Australia as a global leader in gender lens investing. By investing at the higher-risk early stages of an investment, EMIIF has demonstrated an ability to mobilise private sector financing, with evidence suggesting a private sector mobilisation ratio of 1:5, including with impact investors and philanthropic organisations.

Since 2016, Investing in Women investment into 82 women-led SMEs in Indonesia, the Philippines and Vietnam has helped catalyse over A$525 million of additional capital and follow-on investment funding. This support has helped bridge the finance gap and demonstrated that these businesses can grow and provide benefits to female entrepreneurs and the wider economy. Over 100 major businesses have also joined Investing in Women's business coalitions for women's empowerment, representing over 1 million employees. The next phase of the program (2023–2027) will continue to accelerate women's economic empowerment and will explore new areas, including quality childcare and jobs for women in emerging industries.

In the 2023–24 Budget, the Australian Government significantly lifted EMIIF's investment cap from a $40 million pilot phase to $250 million, which includes a focus on increasing Australian institutional investor finance into the region.

Two TEKY educators lead a STEM activity for children at a multidisciplinary innovation academy in Vietnam.

Our commercial links are supported by the large numbers of Australians and Southeast Asians who live in each other's countries. For example, over 125,000 students from the region currently study in Australia.52 There are also a significant number of students studying at Australian university campuses in the region, and in 2021, the largest number of tertiary education enrolments with Australian providers in Southeast Asia (including those with in-country campuses) were in Singapore (23,621), followed by Malaysia (17,246) and Vietnam (12,885).53

Over half a million Southeast Asian students have studied in Australia since 2002, making up a sizeable alumni in the region.54 Since 2014, the New Colombo Plan has awarded more than 33,000 scholarships and mobility grants for Australian undergraduates to study and intern in Southeast Asia.55 These people, combined with skilled and experienced Australians working in Southeast Asia, are a significant resource for Australian and Southeast Asian businesses.

Australia's multicultural society, with more than one million Australians with Southeast Asian heritage, also provides unique networks that can be leveraged to deepen our economic and people-to-people links with the region.56

Figure 2.2 People connections

2. Critical enablers	Map of Southeast Asia and Australia showing Australians and Southeast Asians who live in Southeast Asia and Australia.	Map of Southeast Asia and Australia with five groups of figures linked in a circle representing Southeast Asian students at Australian institutions in Southeast Asia, Australian workers in Southeast Asia, Southeast Asian alumni of Australian institutions, Southeast Asian diaspora in Australia and Southeast Asian students in Australia.	SAES-2040 - 02 - Critical enabler

Key cross-cutting enablers

There are a number of critical cross-cutting challenges that – if addressed – can help drive greater commercial activity between Australia and the region to 2040.

Raise awareness

While we have strong people-to-people links, an enduring challenge in both Australia and Southeast Asia is limited familiarity with each other's economies, societies, business environments and market opportunities. Addressing this challenge will require a whole-of-nation effort across Commonwealth and state and territory governments, universities, the private sector, not-for-profits and communities.

Increasing cultural literacy and capability is key to realising the breadth of opportunities in Southeast Asia. This will require greater investment by employers and students to appreciate the lifelong advantages of understanding our region. This will help more Australians build partnerships with the region and take advantage of opportunities for trade and investment.

The decline in learning Asian languages in Australia is well documented, with many universities no longer offering some Southeast Asian languages.57 Declining year 12 enrolment rates in all languages, including Southeast Asian languages, is also of concern. Indonesian language enrolments for year 12 students have declined by 50 per cent in just one school generation.58

Australia needs to lift investment in Southeast Asia literacy at all levels, from stimulating demand and teaching languages and cultural awareness to school and university students, to training government officials and senior executives and board directors on Southeast Asian commerce and business practices. As part of this, industry also has a role to play in building demand for Southeast Asia cultural literacy in Australia. Government should work with industry on developing solutions to encourage students to develop Southeast Asia cultural literacy skills to meet their future business needs in the region.

Australian governments should continue to develop Southeast Asia expertise across agencies with an international engagement focus. To deepen influence and ensure government has the capability needed to advance Australia's commercial and other interests, there needs to be more specialised personnel and teams working on Southeast Asia. Specialisation and continuity will be critical to developing and maintaining capability.

Given the significance and national breadth of the Southeast Asia literacy challenge, the development of an action plan could be considered by the National Cabinet.

Recommendation

  1. National Cabinet should consider developing a whole-of-nation plan to strengthen Southeast Asia literacy in Australian business, government, the education and training system, and the community.

There is a role for the Australian Government to help introduce businesses – particularly SMEs – to Southeast Asian markets. A new Austrade-led, targeted, sector-specific business mission initiative would be an effective vehicle to raise awareness of opportunities and the operating environment in particular markets. Such delegations have been infrequent in recent years and often too general in focus. A more targeted approach covering each of the sectors examined in this strategy would be most effective. A particular focus would also be investment missions targeted at institutional investors, given their criticality to significantly boosting Australian investment in the region. This initiative should also include after-visit engagement and servicing to assist companies to follow leads identified during business missions.

A new Austrade business facilitation initiative focused on trade missions could also examine the best approach to expand the capability of Australian business chambers active in Southeast Asia. Southeast Asian markets are increasingly competitive as businesses from North Asia, the United States and Europe compete for market share. Foreign business chambers are often backed strongly by their own governments, including through the provision of financial support.

Strengthening Australian business chambers and ensuring they have the resources to provide high-quality services to Australian businesses will help position these businesses to succeed. Ensuring that Austrade works with business chambers in running business missions will ensure the latter are more effective in boosting two-way trade, and simultaneously enhance the capability of chambers. The Australian Government should also work with other non-government business promotion authorities interested in the region, such as the Business Council of Australia and the Australian Chamber of Commerce and Industry.

Recommendation

  1. Establish a new Australia – Southeast Asia business facilitation initiative to undertake targeted sectoral business missions and build the capability of business chambers.

Several submissions to this strategy highlighted that Australian businesses need to work together and present a strong Australian brand to be successful in the Southeast Asian market. Australia's Nation Brand is in place to enable all Australian businesses to promote their goods and services internationally, through a range of available assets that leverage Australia's unique value proposition. The Nation Brand will cut through a competitive marketplace with sustained adoption and support from Australian industry.

Australian state and territory and federal government agencies operating overseas need to be better integrated. Australia will be more successful with shared priorities across all levels of government and within the business community. The recently established Ministerial Council on Trade and Investment, bringing together the ministers for trade from all states and territories and led by the Minister for Trade and Tourism, as well as the Senior Officials Trade and Investment Group, which sits under this, are two avenues for pursuing coordination on this matter in the effort to promote Australia and its goods and services as reliable, high quality, and safe.

Recommendation

  1. Australian Government to work with states and territories, and business to ensure a coordinated approach to promoting Australia, leveraging and building upon the Nation Brand.

Strong business-to-business engagement and ownership are essential for a successful whole of nation approach. While Australia does not have large conglomerates like Japan and the Republic of Korea, successful Australian business leaders can play a valuable role in shepherding other Australian businesses through the potential opportunities and pitfalls in Southeast Asia by providing insights and connections to help them succeed.

Senior business leaders should also play an important role in representing the views of the business community to Australian and Southeast Asian governments on actions governments can take to deepen economic engagement, as the successful Australia–Vietnam Business Champions have done.59

Recommendation

  1. Appoint special business champions for key markets to promote Southeast Asian opportunities to Australian business.

Given the limited awareness of Southeast Asian products and investment offerings in Australia, a greater and coordinated promotional effort in Australia may help boost Australia's trade and investment with the region. This could also include tourism promotion to encourage more Australians to visit Southeast Asian countries. The Australian Government may wish to consider working with ASEAN to establish a Southeast Asia trade, investment and tourism promotion campaign in Australia.

Recommendation

  1. Australian Government to work with the ASEAN Secretariat and business to examine an ASEAN trade, investment and tourism promotion campaign in Australia.

In a range of Southeast Asian countries, there are major diversified conglomerates that have an extensive market presence across the economy. It will be important to gain a greater appreciation of their areas of interest and the potential for engagement with Australian business. They should be prioritised by Australian diplomatic missions and Austrade, and introduced to state and territory investment agencies and potential Australian partners, and should receive targeted travel and investment approval facilitation. This could help foster greater trade and investment links.

Recommendation

  1. Survey major Southeast Asian business group interests and facilitate deeper engagement with Australian companies and investment agencies, including their travel and investment.

The more than one million Australians with Southeast Asian heritage represent an important community for driving two-way trade and investment with Southeast Asia. Their relevant cultural and linguistic skills and networks can help to support business planning and operations. A government-funded survey to better understand the business network of Australia's Southeast Asian diaspora would help inform efforts to strengthen business links, including supporting entrepreneurs and SMEs in Australia to engage in two-way trade.

Recommendation

  1. Develop a strategy to engage with Australia's Southeast Asian diaspora to inform efforts to deepen SME business links with the region.

Remove blockages

While Australia is favoured as an investment destination by Southeast Asian investors, some have raised concerns about Australia's foreign investment application process, particularly in terms of timeliness and transparency.60 For those companies that have already invested in Australia, the need to seek new approvals for further investments may disincentivise investment.

Continued efforts to reduce regulatory burden, including the new 'interfunding' exemption under the foreign investment framework regime announced in the 2023–24 Budget, will assist with streamlining investment from the region. The Australian Treasury continues to streamline the processing of foreign investment applications to facilitate investment.

The Australian Government should seek to work with Southeast Asian partners towards reciprocity in streamlining foreign investment.

Recommendation

  1. Continue exploring opportunities to reduce regulatory burden under the Foreign Investment Review Board (FIRB), as the foreign investment framework regime allows, and seek reciprocal action in the region.

Across federal, state, territory and local governments, Australia has a series of mechanisms focused on attracting inward investment. At the federal level, Austrade helps foreign investors identify opportunities in Australia, and facilitates meetings with other key federal agencies, such as the Foreign Investment Review Board, the Department of Industry, Science and Resources' Major Projects Facilitation Agency, and the Australian Taxation Office's New Investment Engagement Service. At other levels of government, each state and territory has its own investment promotion programs, as well as some cities (for example, Invest Melbourne). This plethora of agencies and processes can create challenges for new investors.

During consultations for the strategy, regional investors suggested the Australian Government set up a 'concierge' service to facilitate more investment from the region, including to help investors navigate the different levels of government in Australia and related approval processes, provide advice on taxation arrangements, expedite visa processes, and connect investors with professional and financial service providers.

A new 'concierge' service could formally coordinate relevant Australian Government agencies. It could draw on the successful Singapore Economic Development Board model for facilitating inward investment.

Recommendation

  1. Establish a single-door concierge service to facilitate inward foreign investment.

Australia's bilateral and regional FTAs with Southeast Asian countries have enabled strong trade and investment flows. However, there is considerable scope for modernising some of the older FTAs to increase coverage of issues or sectors. For example, Australia's bilateral trade agreement with Singapore has continuously evolved, manifested most recently through the Australia–Singapore Digital Economy Agreement. The latter set new global benchmarks for trade rules and included a range of practical cooperation initiatives to reduce barriers to digital trade. Similarly, Australia, ASEAN and New Zealand have worked to upgrade AANZFTA, in the same spirit of increasing the opportunities for all participants to that agreement.

Australia sees opportunities to build on the existing architecture to support trade diversification and better development outcomes across the region. Australia also wants to improve the contribution trade can make to Indigenous inclusion, the environment, gender and small business. Australia and regional partners could work together to ensure the trade and investment architecture supports the requisite investment, new technologies, engineering expertise, and flows of specialised inputs.

For example, the 2021 ASEAN State of Climate Change Report identified the need across ASEAN member states to raise capabilities in climate science, to cooperate and collaborate on knowledge and information transfer, and to focus on an energy transition to net zero emission targets. These priorities have informed the ASEAN Strategy for Carbon Neutrality – a priority project for ASEAN. ASEAN member states are focusing on developing renewable energy portfolios for both domestic consumption and export, green manufacturing (electric vehicles), improved land management, and architecture to promote net zero transitions. Existing services commitments in our FTAs need modernisation to enhance delivery of distance/remote services and entry of research and development industries into the region, and to enable incidental services related to green energy production in our region (see Chapter 5 – 'Green energy transition').

The Australian Government's Trade 2040 Taskforce – with support from the Department of Foreign Affairs and Trade (DFAT) and in collaboration with Southeast Asian partners and Australian stakeholders – should review the coverage of existing FTAs with the region to determine which agreements and product coverage should be prioritised for upgrade negotiations. This could initially focus on the clean energy, digital economy and health sectors, given strong regional interest in these areas.

Recommendation

  1. Australia's Trade 2040 Taskforce, in collaboration with Southeast Asian partners, to review the scope of existing FTAs to determine priorities for agreement upgrade negotiations.

Trade is facilitated by the adoption of good regulatory practices and international standards. Harmonising these standards and procedures helps remove non-tariff barriers to trade, while divergent standards lead to fragmented markets and impede trade. Greater cooperation on standards and conformance procedures will be essential for greater Australia – Southeast Asia economic engagement. Australia's strong standards can be an advantage for Australian business in the region. And for Southeast Asian companies that operate in Australia, our standards are also a signal of high quality and safe products. Standards Australia is leading private sector engagement with the region's standard-setting bodies to encourage them to adopt international standards. This work will be particularly important to shape emerging digital trade and clean energy technologies.

Australia should also step up collaboration with Southeast Asia in the WTO to strengthen and reform the rules-based multilateral trading system, including through new rule making, to ensure the system can continue to underpin regional prosperity into the future.

Recommendation

  1. Expand collaboration on trade rules and standards harmonisation with Southeast Asian partners.

People-to-people links are fundamental to business relationships and Southeast Asia is no exception. As global competition for talent and investment heats up, Australia needs a visa system that works to support our links with Southeast Asia. Southeast Asian leaders and businesses have often suggested that Australia's visa system was an obstacle to commerce and travel.

Reform of Australia's migration system is needed to deliver for business, migrants and the Australian community, and this was the focus of the Review of the Migration System.61 Drawing on this report, the Australian Government is developing a Migration Strategy, planned for release before the end of 2023. The reform directions outlined in the Review of the Migration System will support more efficient visa processing and a better client experience of the migration system, particularly in support of applicants from Southeast Asia and the Pacific.

The Australian Government should also work with Southeast Asian partners to ensure further mobility outcomes are negotiated on a reciprocal basis to also provide more opportunities for Australians to live, work and study in the region.

Recommendation

  1. Australian Government to implement the Migration Strategy and associated reforms to improve the visa system to facilitate mobility.

Australia will need to further enhance air links to help promote the movement of people, goods and services with the region. Given the reliance of travellers between Australia and Southeast Asia on air travel, ensuring airlines are well positioned to cater for future demand will be crucial. The Australian Government should seek to enhance capacity opportunities available to airlines under air service agreements so that they remain ahead of demand, enabling future growth and competition to support increases in travel and freight. In its submission, the Australian Airports Association suggested connectivity could be increased through air services agreement negotiations with Malaysia, the Philippines, Thailand and Vietnam.62 Particular focus should be directed towards those agreements projected to reach capacity entitlements in the next five years. Additionally, the Australian Government could explore open skies agreements with interested Southeast Asian partners where in the national interest and on a reciprocal basis. The Australian Government's Aviation White Paper (for release in 2024) will set long-term policies to guide the next generation of growth and innovation in the aviation sector to 2050.63

Recommendation

  1. Australian Government to prioritise updates to air services agreements and explore reciprocal open skies agreements with interested Southeast Asian partners where in the national interest.

Build capability

Australia's development partnerships in the region can help build markets and regulatory frameworks to support private sector–led growth. Regional initiatives like the Mekong–Australia Partnership and bilateral programs like the Australia–Indonesia Partnership for Economic Development (Prospera) (see case study) provide practical support for regulatory changes to promote private sector–led growth. This includes technical assistance, private sector pilots, and policy research and analysis. There is ongoing demand from regional governments for government-to-government collaboration and technical assistance. Australia can provide technical assistance to support Southeast Asian partners' efforts to deliver e-government and long-term acceptance of digital trade rules aimed at facilitating trade, such as e-certification and virtual auditing.

Case study: Prospera – Australia and Indonesia's partnership for prosperity

Through Prospera (the Australia–Indonesia Partnership for Economic Development), Australia has through over 20 years of cooperation.

It supports Indonesia's sustainable and inclusive economic growth, as well as brings together technical support and institutional links between Australian and Indonesian economic agencies.

This partnership has supported Indonesia's economic recovery from the COVID-19 pandemic, Indonesia's financial market stability, and Indonesia's efforts to modernise its tax system, simplify business licensing requirements for businesses in Indonesia and overseas, enhance government budgeting and spending, and improve regulatory settings to better enable businesses to take advantage of the growing digital economy.

Prospera's priorities are to work with the Indonesian Government to implement the goals of its next medium-term development plan, advance the focus areas of Indonesia's ASEAN chair year in 2023 – recovery and rebuilding, energy and food security, digital economy, financial stability, and health architecture – as well as its ongoing participation in the G20.

The Australian Government announced in the 2023–24 Budget funding for a new government-to-government partnerships program to provide government-level technical assistance in the region – currently funded at A$50 million over five years. Additionally, the Australian Government has allocated A$25 million in the 2023-24 Budget for technical assistance and capacity-building efforts to help partners eligible for official development assistance (ODA) to meet the Indo-Pacific Economic Framework’s high-standard rules and commitments. However, this does not cover countries that are no longer ODA recipients (Brunei, Malaysia, Singapore and Thailand). Non-ODA funding will be needed to facilitate more technical exchanges with these governments.

Recommendation

  1. Extend government-to-government technical assistance to other Southeast Asian countries through a new government-to-government partnerships program and other mechanisms.

Following positive feedback from existing ASEAN participants on direct technical exchanges with Australian investment regulators, the Australian Government should consider continuing the Mekong Foreign Investment and Critical Infrastructure Initiative (MFICII), providing capacity building on investment screening and extending it to all Southeast Asian countries. MFICII is currently due to conclude in 2023–24. The initiative works with Thailand, Cambodia, Laos and Vietnam to build their capacity to attract high-quality foreign direct investment, including for critical infrastructure projects. Australia's sharing of our experience with measures such as investment screening helps in building broader, sustained community support for foreign investment in those countries.

A broader MFICII program would help other Southeast Asian countries balance their openness to investment with appropriate broader national interest considerations. Greater alignment and understanding of such processes would assist to increase two-way investment flows between Australia and Southeast Asia as investors increasingly encounter similar laws, regulations and policy perspectives.

Recommendation

  1. Explore continuing Australia's capacity-building support on investment screening and extending it to key Southeast Asian countries.

Concerns around workplace health and safety, environmental standards and modern slavery risks can also act as an impediment to investment. Australia should continue its longstanding efforts with regional partners to build strong legal and policy frameworks, including related to workplace health and safety and environmental standards, tackle human trafficking and modern slavery, and support vulnerable workers. Working with governments on these areas will help make investment projects more attractive to global investors, including from Australia.

Recommendation

  1. Work with Southeast Asian partners to strengthen legal and policy frameworks on workplace health and safety, environmental standards and modern slavery.

Australia and Southeast Asia share significant current and future skills shortages in key industries such as health and aged care, IT, construction, tourism, and a range of green economy–related fields. There is a major opportunity to develop a mutually beneficial skills training and labour mobility arrangement – workers are trained in Southeast Asia to Australian standards and then work in Australia for a period before returning to their home countries with skills and experience to share. This will require collaboration between industries, unions and governments, including to develop the necessary regulatory framework and appropriate intra-regional mobility pathways.

Recommendation

  1. Develop a regulatory framework to facilitate intra-regional hybrid training and work mobility programs in high-priority industry sectors.

Providing opportunities for in-market work experiences would help facilitate the development of business skills, awareness and linkages between Southeast Asia and Australia. A new public and private sector initiative – operating at scale – could help drive these exchanges. This would involve young professionals completing work placements of several months with a company or organisation in the industry related to their field of study in Australia or Southeast Asia. This initiative would build on the Skills Development Exchange Pilot developed under the Indonesia–Australia Comprehensive Economic Partnership Agreement.

Consultations for this strategy suggested a skills exchange involving primary and high school teachers from Singapore and Australia undertaking short-term exchanges to build cultural awareness would be valuable.

Recommendation

  1. Establish a new public and private sector multi-country program to arrange professional exchanges and internships in select industries at the company or organisation level.

Gaining market access and assisting businesses to make the most of trade and investment agreements is a priority for Australian diplomatic missions across the region. But this work is labour-intensive and positive results often rely on one-on-one representations with host regulators and on bespoke issues for each company and sector. This process takes time and sustained effort. Australian officials must engage in regular advocacy to preserve these gains, particularly as local trade rules and political-economic conditions constantly change. DFAT and other agencies, such as Austrade, the Department of Agriculture, Fisheries and Forestry, the Department of Industry, Sciences and Resources and the Department of Education, can deliver advocacy and advisory services only up to their level of resourcing of skilled personnel deployed in the region.

Australian agricultural producers and exporters note that their greatest challenge is gaining new and improved technical market access to new markets in the region. Supporting the Australian Government's capacity for negotiation and cooperation on technical market access is vital to maintain and grow trade opportunities with the region.

Australian education providers' participation in the region is facilitated through the work of the Australian Department of Education, Austrade and DFAT. Submissions from the education sector advocated for more government resources in the region to help scope opportunities, negotiate with host governments on regulations relating to transnational education campuses, encourage recognition of qualifications, and support the region's workforce needs. Building relationships with regional ministries is key.

To achieve significant new outcomes on removing tariff and non-tariff barriers to Australian trade and investment, and supporting more commercial engagement, the deployment of additional trade and economic staff to the region and additional staff in Australia is necessary. The case study that follows outlines the substantive outcomes from the deployment of additional DFAT economic staff in Vietnam over the past two years.

Case study: Delivering outcomes for Australian business – increased advocacy resources in Vietnam

The deployment of six temporary additional staff to economic teams in the Australian Embassy in Hanoi and Consulate-General in Ho Chi Minh City – enabled by the 2021 Australia–Vietnam Enhanced Economic Engagement Strategy (EEES) – helped Australian company PharmaCare and around 30 other complementary healthcare product exporters to access the Vietnam market.

New regulatory changes had presented complex challenges. The Australian economic teams worked with PharmaCare and Vietnamese and Australian regulators to identify issues of concern and negotiate an outcome that satisfied regulatory requirements. A market seminar was held to explain new export processes to other Australian exporters. Australian companies are now well placed to meet Vietnam’s growing demand for complementary healthcare products.

The deployment of these staff in Vietnam enabled commercial advocacy to be ramped up, which led to record growth in bilateral trade. Australia's two-way goods and services trade with Vietnam grew from A$15.5 billion in 2019 to A$25.7 billion in 2022. Other notable outcomes include:

  • supporting Export Finance Australia to identify market opportunities, including its first two renewables/green transport projects in Vietnam worth over US$60 million and a further pipeline of deals totalling US$200 million
  • actively supporting ongoing negotiations in power, renewables, critical minerals, and telecommunications involving Australian companies
  • supporting the EEES Business Champions Initiative, which included workshops with over 100 Vietnamese businesses, development of a business network, and recommendations for the Australian and Vietnamese trade and investment ministers
  • encouraging Vietnam's agreement to the AANZFTA upgrade and Indo-Pacific Economic Framework negotiations
  • facilitating development of seven new or revised memorandums of understanding between the Department of Industry, Science and Resources / DFAT and the Ministry of Industry and Trade; the Australian Securities and Investments Commission and the State Securities Commission; the Australian Competition and Consumer Commission and the Vietnam Competition Commission; AUSTRAC / the Reserve Bank of Australia and the State Bank of Vietnam; and the Treasury and the Ministry of Finance
  • providing support to the Australian Chamber of Commerce in Vietnam (AusCham Vietnam) to upgrade its capacity and scope through a new Australian Industry Hub in Ho Chi Minh City, with in-market representatives from three Australian industry bodies, and via an advocacy officer position in Hanoi to support greater policy engagement between the Australian business community and the Government of Vietnam.
  • Recommendation
  1. Increase whole-of-government trade and industry policy and commercial engagement capability in Australia's Southeast Asia diplomatic missions and in Australia to assist Australian businesses to use FTAs and deliver market access.

Ensuring the benefits of trade flow to everyone is important in ensuring strong, sustainable economic growth. Australia's Indigenous peoples have been trading with international partners for many hundreds of years. Australia's economy includes a growing number of Indigenous companies. Ongoing domestic consultations with First Nations businesses on the barriers and opportunities to trade and investment have highlighted a number of emerging priorities for the sector. These include the need for support for First Nations business leaders to be able to participate in key international markets, and for the protection of traditional knowledge, traditional cultural expressions and genetic resources. The value of mentoring and learning from First Nations' successes, both domestically and internationally, including through the First Nations network globally, is also emerging as a focus.64 Australian Indigenous exporters have expressed interest in new markets across Southeast Asia, including Singapore, the Philippines and Vietnam.

More broadly, the Australian Government has committed to elevating and advancing Indigenous issues in its foreign affairs and trade and investment agendas. This includes the appointment of Mr Justin Mohamed in March 2023 as Australia's inaugural Ambassador for First Nations People, an important step towards placing the perspectives of First Nations people at the heart of Australia's diplomacy and trade policy. As Ambassador, Mr Mohamed will support the Australian Government to develop actions to grow two-way First Nations trade and investment opportunities in Southeast Asia and globally.

Recommendation

  1. Establish a targeted program to support Australian First Nations businesses to increase trade and investment with the region.

Young, entrepreneurial women are leading the next generation of businesses in Southeast Asia. Consultations across the region have underlined the importance of this group to boosting economic outcomes. This includes in agriculture, professional and financial services, the digital economy and the creative industries.

Active role modelling of women leaders and women-led businesses will be central to this objective, including by ensuring diversity and gender inclusion on business panels, boards, committees and showcase events. This should remain a focus for governments and businesses alike, to lift women's economic participation and productivity and reinforce meaningful pathways for engagement.

There is value in the Australian Government placing additional focus on this group in its two-way scholarship and visit programs to create greater business linkages, improve gender outcomes, and empower Southeast Asian and Australian female entrepreneurs.

Recommendation

  1. Australian Government to facilitate young, female entrepreneur linkages with the region through a greater emphasis in visit and scholarship programs.

Small to medium-sized enterprises (SMEs) are the engine room of the economies of Southeast Asia and Australia as sources of innovation, employment and growth. For growing SMEs looking to expand beyond the domestic market, Southeast Asian markets offer opportunities to access rapidly growing and underserved markets. However, SMEs often lack the resources and capacity of larger businesses to explore new markets.

Austrade and state and territory trade and investment agencies are an essential source of support and advice to Australian SMEs, including through the Australian Government's principal export grant program, the Export Market Development Grants (EMDG) program, and state-based grants and programs. But more could be done to prepare SMEs for the risks and benefits of overseas expansion.

The EMDG program plays an important role in helping Australian SMEs enter new markets and diversify their exports by supporting their export marketing and promotional activities. In the latest grant round, 73 per cent of EMDG recipients targeted North America and Western Europe, while 35 per cent of grantees targeted at least one country in Southeast Asia.65

There is scope for the Australian Government to promote a stronger marketing effort in Southeast Asia through the EMDG program, particularly given the current concentration of exports to the region among only a small number of companies. The government should examine the merits of placing a greater emphasis on Southeast Asia in its EMDG program, including allocating a significant proportion of EMDG funding for exporters undertaking promotion in the region.

Recommendation

  1. Australian Government to strengthen efforts to support SMEs to trade with Southeast Asia, including through greater emphasis on the region in the Export Market Development Grants program.

Deepen investment

One of the most significant risks faced by foreign investors in Southeast Asian countries is disruption of the operations of companies by governance and regulatory uncertainty, including unclear and changing laws and regulations. De-risking mechanisms, such as political risk insurance (PRI), allow investors to share risks – partly or fully – with public agencies whose objectives, experiences and diplomatic leverage enable them to provide PRI cover for countries and projects with higher political risks. If done right and with the right Australian government agencies involved, this could help reduce risks for Australian investors into Southeast Asia and encourage further investment.

Recommendation

  1. Explore the feasibility of new government instruments for reducing risk in investments offshore, including examining political risk insurance.

With most foreign borrowing denominated in major international currencies, countries in the region are subject to foreign currency risk on funding from international capital markets. Local long-term debt markets are often shallow and illiquid. As one of only nine countries globally with a AAA credit rating, Australia is well placed to explore ways to work with Southeast Asian monetary authorities to strengthen their long-term funding capability.

Recommendation

  1. Explore working with multilateral development banks to support the development of more resilient long-term debt markets.

51 A full list of Australia's FTAs, including for Southeast Asia, can be accessed at 'Australia's free trade agreements (FTAs)'.

52 Department of Education, Data analysis provided to DFAT, Australian Government, 2023, unpublished. Student enrolment numbers from Southeast Asia were 125,690 in 2022 (or 16.84 per cent of all enrolments).

53 Department of Education, Data analysis provided to DFAT, Australian Government, 2023, unpublished.

54 Department of Education, International students studying in Australia between 2002 and 2022 [dataset], 2023, accessed 3 May 2023.

55 Department of Foreign Affairs and Trade (DFAT), Data analysis of New Colombo Plan Scholarships, DFAT, Australian Government, unpublished.

56 Department of Foreign Affairs and Trade (DFAT), Southeast Asia: People connections, DFAT, 2023, accessed 24 May 2023.

57 For example, see M Heffernan and L Carroll, 'Languages out, cybersecurity in: The degrees universities have axed', The Sydney Morning Herald, 3 May 2023, accessed 7 June 2023.

58 M Kohler, 'Indonesian language education in Australia', Australian Review of Applied Linguistics, 2021, 44(3): pp. 309–327

59 Australia Vietnam Policy Institute and RMIT, The Australia –Vietnam Business Champions Report, RMIT, 2023.

60 The Australian Government the Treasury (Treasury), 2020-21 Foreign Investment Regulator Performance Framework Report, Treasury, Australian Government, 2022, accessed 8 June 2023.

61 Department of Home Affairs (DHA), Review of the Migration System Final Report 2023, DHA, Australian Government, March 2023.

62 Submission by the Australian Airports Association.

63 Department of Infrastructure, Transport, Regional Development, Communications and the Arts (DITRDCA), Aviation White Paper – Terms of Reference, DITRDCA, Australian Government, 7 February 2023.

64 First Nations Trade and Investment Roundtable, stakeholder consultations, 25 May 2023.

65 EMDG grantees can target multiple regions and countries.

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