LYNDAL CURTIS: The Asian Century, a simple phrase that seeks to encapsulate what is a big economic and geopolitical shift of weight towards Asia. A white paper has been commissioned by the Government, that’s currently being written and it’s considering the economic and strategic changes in the region.

Three of the four biggest countries in terms of population are in Asia, and by any measure three of the five biggest economies are now Asian.

The opportunities for Australia are enormous, particularly in providing services to a rising middle class, but what will the Asian Century look like?

Joining me to discuss the topic are two MPs, Labor MP Richard Marles who’s also Parliamentary Secretary for Foreign Affairs, and Josh Frydenberg, a Liberal MP who worked for Alexander Downer when he was Foreign Minister, and also for the former Prime Minister John Howard. Welcome to you both.

We'll start with the big question, first to you, Richard, why is this being termed the Asian century?

RICHARD MARLES: Right now in the world there are about 1.8 billion people in the middle class, the global middle class. In the coming decades that number is expected to grow to something like 5 billion, and 85 percent of that growth will be in Asia. So we're seeing a rapid expansion of the Chinese middle class. We're also seeing an enormous expansion in South East Asia and, of course, the Indian middle class. That represents enormous opportunities for Australia over and above the enormous opportunities that we are enjoying at present.

China right now is our largest trading partner, about $120 billion a year. We can look forward to that expanding beyond the provision of minerals and resources to the provision of services as this middle class continues to grow. So there are enormous opportunities here and frankly our future is going to depend greatly on our ability to harness ourselves to this phenomenon and take advantage of it. That’s really what the white paper’s about, looking at not just what the phenomenon will be but how we can best place ourselves to take advantage of it.

LYNDAL CURTIS: And, Josh with that shift of economic weight towards Asia also comes a strategic shift. We saw the US shift its force posture towards Asia, there’s also a lot of now strategic weight in the region isn't there?

JOSH FRYDENBERG: Absolutely. I think Richard’s right to point out the economic shifts moving from its traditional power base in Europe and the United States towards China, towards India, towards Indonesia even closer to home, and we know that Japan is still the third largest economy in the world.

But with the economic growth, particularly in China, comes with it a greater strategic role that China’s seeking to play in the world, it’s modernising its military, it’s now testing stealth fighters, it’s putting out aircraft carriers to sea. That’s having a dramatic shift in the region. And what we're starting to see, Lyndal, is a number of countries like Syria – sorry, Singapore, like Vietnam, like the Philippines, obviously like Australia, there’s a bit of balancing going on against China, and the United States with its so called pivot to the region has included an announcement of a rotation of US marines through bases in Darwin. That’s a significant move but it’s also consistent with what we're seeing in the rest of the region.

The other point to make here is that the multilateral framework is very important. There’s a thing called the East Asian Summit and both China and the United States participate in that. I think what everybody wants to happen is for the major powers to get together at the discussion table to talk about issues be it over resources in the South China Sea or any other issues that may lead to some sort of discomfort and disagreement, to talk those through and hopefully resolve them without anyone having to resort to military action of course which would be very damaging for Australia, very damaging for the United States, very damaging for China and all the other players in the region.

LYNDAL CURTIS: China is the biggest player in the region and really, Richard does China anchor the Asian century given the enormous growth we've seen in that country even over the last two decades?

RICHARD MARLES: I suppose it does but it’s important that we not see it as the only part of the Asian century. Josh rightly pointed out a number of very large players that accompany China within Asia with whom we'll have very important relationships. India is going to be an enormous bilateral partner of Australia in economic terms, already our fourth largest export market; it’s our second largest source of students, foreign students into Australia for example. That is only going to continue to grow. Indonesia on our doorstep and Josh rightly pointed out Japan as the third largest economy and a very important partner with Australia.

So, yes, it is right to say that China anchors it, but it’s not the whole story. India particularly is a very important part of the story going forward. And that’s why I think in looking at the way in which we engage with Asia going forward, it is important we broaden our scope beyond China and particularly looking towards the west in the direction of India to make sure we take advantage of that as well.

LYNDAL CURTIS: Josh India is a country with which Australia has quite a lot in common, it’s a Commonwealth country, it’s got the same British heritage, and it’s one of the world’s oldest democracies. Why has it not had the weight that China’s been given, certainly from the Australian perspective?

JOSH FRYDENBERG: Well I hope that’s changing. I think Ted Baillieu in Victoria just led a major trade delegation to India. I know that Julia Gillard and Tony Abbott are also both focused on India. So I think that that is changing, but historically it’s been like two countries that have passed each other – or two ships that have passed each other in the night, we really haven't had the level of discourse with India that perhaps we should have had over the years, and hopefully that’s now starting to Change.

India and China, as you know, historically have gone – they've gone to war against each other and it has been an uneven, a difficult situation, and India and Pakistan are obviously sometimes quite hostile to each other. So look India is a completely different kettle of fish to China as a player, but it’s equally presenting a lot of opportunities for Australia, particularly the economic opportunities, and hopefully we'll also see more strategic engagement with India going forward.

LYNDAL CURTIS: Richard is India…

RICHARD MARLES: Yes could I just…

LYNDAL CURTIS: Sorry.

RICHARD MARLES: Yes could I just add onto that. I think Josh’s observations are right and I don't think there’s any sort of partisan question about this in the context of Australian politics. I think it is right that in past years we've perhaps not looked to India in the way that we should have. But I think both sides of politics are now very keen to have a focus on India going forward.

We're increasing our diplomatic footprint in India by something like 50 percent during the course of this year. It’s a very significant upgrading of our diplomatic presence in India. India is the chair of the Indian Ocean Rim Association of Regional Corporations, which is a bit of a mouthful, we're hoping to change the name of that body, but it’s called IORARC for short. We're currently the vice chair of that. It’s a really good opportunity for India and Australia to be working together on regional issues.

So we are very much focused on building the political relationship, but obviously looking at the commercial relationship which flows from that. That’s an important reorientation; looking west to make sure that we take advantage of the Indian future.

LYNDAL CURTIS: The other country in the region that’s a growing player, as Josh mentioned, Richard is Indonesia, on Australia’s doorstep. Australia has had very close links now with Indonesia for quite some time, not only in terms of political links but also things like Australian Federal Police working with Indonesia, and very close people to people links; a lot of Australians holiday in Indonesia and vice versa. How important is Indonesia, not only to Australia but to the region as well?

RICHARD MARLES: Indonesia is critically important to the region and the links that you describe are absolutely right. In a military context we've worked closely with Indonesia as well. We've just recently had the 2+2 talks with Indonesia, which is their defence and foreign minister with our defence and foreign minister. I think that relationship is one which is growing stronger by the day and we've been very big supporters of the reforms that President Yudhoyono has been undertaking in Indonesia. Indonesia is a country which is growing more democratic by the day and is really going forward. Because of that and the stability that’s created by that this is an economy which is going to grow and is going to be a very important part of the Asian century. As one of our closest neighbours it obviously has to be a key focus of the way in which we look upon Asia.

LYNDAL CURTIS: Josh…

JOSH FRYDENBERG: I totally agree with that, Lyndal because Indonesia while John Howard was Prime Minister he had five different Indonesia presidents to deal with, now we have SPY, Susilo Bambang Yudhoyono, he has a very enlightened view of Australia. The Indonesian economy is growing about 6 percent per annum, has more than 200 million people and half of its population is under the age of 30. So there are great opportunities particularly for us as a food supplier, may I say, to Indonesia because they've got a growing middle class.

But Indonesia is the natural leader within ASEAN, and ASEAN is a key regional block of 10 countries for Australia and Indonesia’s support for Australia’s participation in the East Asia Summit, Indonesia’s support for the ASEAN Australia and New Zealand Free Trade Agreement were all very important, and of course when it comes to border protection Australia can't protect its borders without having a very good relationship with Indonesia. So I think it’s a critical relationship going forward.

LYNDAL CURTIS: I'll ask you both, first to you, Richard, where are the opportunities for Australia in Asia and what does Australia need to do to be able to harness them? What are the challenges that we aren't yet properly dealing with?

RICHARD MARLES: Well in the broader sense I think the opportunities are to extend our commercial engagement with Asia beyond being a provider of resources to being a provider of services. In its simplest terms that’s the challenge. And we're seeing that occur.

Josh mentioned in his last answer, quite correctly, the issue of supplying food to Indonesia. I think that’s a real opportunity across Asia and particularly China for Australia to be something of a food bowl for the Asian region, particularly in terms of high protein food. So there are enormous opportunities there.

We do need to look at how we can better engage in terms of doing business. The obvious thing that flows from that is the question of Asian languages. That’s something talked about in the white paper. Going forward governments in Australia are going to need to look at the way in which we can better prepare our people to engage in Asia. My personal experience after having led, with Craig Emerson, the trade mission to China last year, I see the language barrier is a much thicker barrier in relation to China in terms of the different languages than it would be in Europe. Getting our head around language provides, if you like, an even greater opportunity.

They're the kinds of issues that we need to look at. But the other point I'd really make is that I think the Australian character, the Australian way of doing things is very well placed to do business in Asia. We're a practical, unassuming people who I think are pretty easy to deal with. If we can get the language issue right I reckon there are enormous opportunities. I saw that first hand looking at great Australian companies doing amazing things in the services sector in second tier cities in China. So there are enormous opportunities there.

LYNDAL CURTIS: And to you, Josh.

JOSH FRYDENBERG: Well I think, as Richard has said, learning Asian languages is absolutely critical. And Tony Abbott, in his budget in reply speech committed the coalition to an initiative of trying to lift the number of students studying a language in Year 12, other than English, to about 40 percent, which is where it was in the 1960s, right now it’s about 12 percent. Would you believe there are only 300 students at the Year 12 level learning Mandarin that were not – or that are not of Chinese descent? I mean that’s an incredibly low number. Indonesian may be phased out of the Year 12 syllabus in the next four years if current trends continue. When it comes to Hindi only about 16 students in New South Wales took that exam at a Year 12 level, and we've obviously seen Korean and others basically fade away.

This is clearly not good enough; we need a bipartisan commitment to spend more resources in this area. It’s not just about making Australian businessmen more fluent in foreign languages, it’s not about that at all, it’s actually about building greater cultural awareness of our region and getting younger people to feel much more comfortable travelling.

And Julie Bishop has rightly talked about a sort of Colombo plan in reverse where we get more Australians to our region to spend long periods of time. There’s something like 130,000 Australians who are currently living in Asia. I think one of the things that we could do better, Lyndal is to tap that resource to build links, that’s economic links, that’s student links. I mean there are 350,000 international students today in our universities in Australia; this is a great revenue stream among many other benefits. So look we could do a lot more in the people to people links, there are great economic opportunities, we need to make Australia a competitive place, that’s a debate for another time, but that’s going to be very important because we need to attract that investment and we need to make our exporters competitive.

LYNDAL CURTIS: If I could ask, particularly you, Richard because you have a responsibility for Pacific Island affairs, the impact of the Asian giants like China in the Pacific region. China’s been providing aid to Pacific countries for a long time. Is that China buying some influence?

RICHARD MARLES: Well what we did see a decade or so ago was competitive diplomacy between China and Taiwan in the Pacific. Thankfully with the détente, particularly under President Ma in Taiwan, we've seen that stop. That’s been a very important and positive development in the region. A good thing is that whilst that has stopped there continues to be assistance provided by both Taiwan and China into the region, and a lot of that is very constructive.

We very much welcome China’s involvement in the Pacific. One of the misnomers here is this sense that somehow policy is about curtailing China. That’s not it at all. China spreading its wings is perfectly natural and seeing China more engaged in the Pacific is something that we regard in a positive way. The one point that we would make is that in terms of providing development in a place like the Pacific, which is actually a hard place to do development assistance work, it’s really important that all the donor countries are working together and it’s really important that in working together we are operating at world’s best practice.

Now in 2009 we instituted the Cairns Compact framework, which was essentially a framework of coordinating donors within the region as well as coordinating the recipient countries as well. We would like to see China participate in the Cairns Compact. At this point they have not wanted to. We do need to be encouraging China to participate more multilaterally in that way. But we take it a step at a time, and we're going to try and work with China and see whether we can come up with some means of encouraging them to walk down that path. But in terms of the broader proposition about China’s involvement, anybody who wants to provide help in the Pacific is fundamentally welcome.

LYNDAL CURTIS: Josh, as we've heard Richard talk about China spreading its wings, playing a greater role in the region, you've talked about the sorts of multilateral fora there are now that China and other Asian giants are a part of. There would be some people concerned with the shift towards Asia, do you think there are some fears that need to be eased in the community?

JOSH FRYDENBERG: You mean from an Australian…

LYNDAL CURTIS: Yes.

JOSH FRYDENBERG: …citizen’s perspective? Look I think this is the role of leaders, and this is a non-partisan – should be a non-partisan issue in terms of explaining to the Australian people that our best interests lie in closer engagement with Asia. This is where the action is. In fact this is a massive opportunity, as Richard highlighted at the top of the show. I mean this is a massive opportunity because it’s so dynamic in China, it’s so dynamic in India, it’s so dynamic in Indonesia and Vietnam. I mean Vietnam has had double digit growth as well.

And so from Australia we are perfectly placed from a geographic position to reach out into the region. We have a skilled labour force. We produce high quality products. We have a transparent civil society and democracy. These are great advantages for Australia in leveraging us to develop close relationships in the region.

Can I just say in terms of the Pacific, just to finish where Richard started, the US, Europe and others look to Australia to play a leadership role in the Pacific. That truly is our backyard. I do look with a little bit of concern that China has got much greater influence in the Pacific. I think we need to watch that. You know, we do need to welcome obviously support for governance projects and for aid delivery and so forth but we just need to ensure that the US in particular pay more attention to the Pacific. I know Kurt Campbell who’s a senior State Department official has been talking about that, and that’s what, you know, our job is in Australia: to ensure that our close ally, the United States, does stay heavily engaged in the Pacific.

LYNDAL CURTIS: Richard, do you think…?

RICHARD MARLES: Can I just say in relation to that, I don't actually disagree with anything that Josh has just said. It’s prudent obviously to keep a close eye on China’s engagement, but it is right to respond to it in the right way and not to be, you know, immediately reacting to it. I'm not saying that’s what Josh has said. But that is why what we're trying to do in the context of China is to try and get China involved in the Cairns Compact framework. In simple terms, we're just all working together in the effort of doing development assistance work within the Pacific.

The other point that Josh made about getting the US more involved is spot-on. The more the US is involved in the Pacific, I think the better. We've seen some really positive developments from the US in relation to that. Josh is also right; there is no question that Europe, America and indeed places like Japan and China look to Australia to lead in the Pacific. I would even say that in relation to China. So we have a very important role there.

LYNDAL CURTIS: What do you both think will happen with people-to-people links? Will understanding of Asia, engagement with Asia flow not only from business but from Australians going there for holidays? Packing up – packing up and living in Asia for a while? Richard, how important are those people-to-people links?

RICHARD MARLES: The people-to-people links are absolutely fundamental and Josh ran through a fair bit of that which I think was right. There is an Australian diaspora in Asia which we do need to use more. But there is also an Asian alumni who have studied in Australia who I think we need to tap into as well. Josh will have had this experience but in going through both school and university I had close friends who came from places like Thailand, Malaysia, Singapore, who were studying in Geelong and then in Melbourne. Those are relationships which you carry through life and obviously have an important impact upon the way in which you see the world.

I think Australia is developing in a really positive way in relation to that. For me the most poignant example of that was the response in Australia to the great east Japan earthquake, the tsunami which hit Japan last year.

JOSH FRYDENBERG: Yeah.

RICHARD MARLES: I think there was a really genuine feeling of sympathy in the face of an incredible tragedy which happened to a very close friend. When you see the response that came from people in Australia, the way it was expressed – it was expressed as a very close friend. Having been to Japan a couple of times since then, that is a response which has been very, very noticed in Japan. They feel, I think, a close sense of affinity with us. It isn't just about business anymore; it is actually two close friends in the region. The tsunami was an appalling tragedy but that is a wonderful thing, that growing of the two countries together.

LYNDAL CURTIS: And Josh in some ways are we actually closer to Asia than we realise?

JOSH FRYDENBERG: Absolutely, I mean you know as Richard’s pointing out, there are lots of ways that this relation is – relationships are manifesting themselves other than in the economic sphere. Take for example Indonesia sent forensic experts to Victoria to help identify victims in the wake of the bushfires.

That’s a pretty significant contribution. I know for example Australia has been a major driving force by setting up Jakarta Centre for Law Enforcement, which is basically a regional hub for sharing information on counter-terrorism and training there.

And as you mentioned earlier Lyndal the AFP, the Federal Police have been highly engaged with their counterparts in the region and there are a lot of joint MOUs, memorandums of understanding with other countries in sharing intelligence around terrorism.

So I think this relationships[sic] is much – these relationships are much broader than somewhat… sometimes we give ourselves credit for, and I think that’s a good thing, I think it can only deepen from here, and I think it’s very important that in many respects we work both sides of the political aisle towards Australia’s best interests.

LYNDAL CURTIS: If I could ask you both finally about your own people to people links with Asia. Richard, what’s your favourite place in the Asia-Pacific?

RICHARD MARLES: I think that’s a dangerous question for the Parliamentary Secretary of Pacific Island Affairs to answer. Let me say the Pacific and, indeed, Asia are beautiful parts of the world. My wife and I went on a holiday to Kiribati, which is a bit unusual. You've mentioned you went there for a Pacific Island Forum meeting some years ago, but there are remote islands of Kiribati which are amazing.

But, as a place that some haven't heard as much about and which is absolutely spectacular, Palau is totally gorgeous.

LYNDAL CURTIS: And Josh?

JOSH FRYDENBERG: Well my wife and I celebrated our honeymoon in Kyoto in Japan and then we went off to Thailand which is a great favourite for a lot of Australians. I also really enjoy Singapore, a small city state of only around 700 square kilometres, but so much is happening there. And then earlier this year I went to Burma for the first time, and I must tell you Burma, it – despite the poverty and despite the challenges ahead, there’s a remarkable colonial architecture that’s still there, and the people are so joyous, and I really enjoyed – I enjoyed that trip to Burma and hope to go back before long.

LYNDAL CURTIS: And does what’s happened recently in Burma show the pace with which things are changing in Asia?

We've had China opening up its economy, Indonesia’s now a democracy, and Burma’s making steps to be part of the international community again.

JOSH FRYDENBERG: Absolutely.

RICHARD MARLES: Yeah, one of the really positive things to be happening in our region what’s going on in Myanmar and Burma, and you're absolutely right about that Lyndal.

LYNDAL CURTIS: And Josh.

JOSH FRYDENBERG: Yeah, I mean look Burma is a really important country. It’s got 60 million people, it’s got 400,000 men under arms, one of the largest militaries in the region, and it’s the second largest land mass in south-east Asia, so Burma’s a really important country, and it’s located between China and India, so very strategic.

Obviously what Aung San Suu Kyi has managed to achieve in getting elected to Parliament is very significant. There’s still a long way to go Lyndal, I mean there are still political prisoners over there.

And obviously we're all hoping that the political system will free up just like the economic system will, so a long way to go – but certainly some positive developments.

LYNDAL CURTIS: And just absolutely finally now, are you both optimistic about the role Australia has to play in Asia – first to you Richard?

RICHARD MARLES: Oh I'm very optimistic about both the role that we have to play, but the opportunities that are provided to Australia by our relationship with Asia. You know we are seeing that in terms of our economy at the moment. There’s no doubt that being located where we are has been a very important card in our pack in terms of the global economic crisis. But I think we are a very important player.

LYNDAL CURTIS: And to you Josh – we're just about to run out of time.

JOSH FRYDENBERG: We have a big role to play, and it’s a very exciting time for Australia and the region.

LYNDAL CURTIS: And Richard Marles and Josh Frydenberg, thank you very much for having the discussion today.

JOSH FRYDENBERG: Thank you.

RICHARD MARLES: Thanks Josh, thanks Lyndal.

Media enquiries

• Parliamentary Secretary's Office: (02) 6277 4330
• Departmental Media Liaison: (02) 6261 1555