The State Government and WA's Economic Future in the Indo-Pacific

The State Government and WA’s Economic Future in the Indo-Pacific Hugo Seymour November 2018 Economics of the Indo-Pacific series // Volume 3 WA’s economic future in the Indo-Pacific Contents Executive Summary 3 Introduction 4 The WA Government’s International Economic Toolkit 6 Broadening WA’s Indo-Pacific Economic Engagement 8 The Need for a Lasting State Strategy 12 Policy Proposals 14 Endnotes 15 About the Author 18 About the Perth USAsia Centre 19 2 WA’s economic future in the Indo-Pacific Executive Summary • The emergence of India as a major economic power, and the continuing modernisation of Indonesia, Vietnam and wider ASEAN, means the Indo-Pacific has become the global economy’s most dynamic region. • As a trade-intensive and capital-importing state, Western Australia must take active steps to participate in the economic rise of its Indo-Pacific neighbours. Time-zone and geographic proximity alone will not guarantee WA has deep economic partnerships with these countries. • Successive WA governments have a strong track record in driving international economic engagement. The State Government maintains a suite of international partnerships and overseas offices resourced to build economic relationships, support industry and encourage trade and investment. • The strategic purpose with which WA governments have pursued economic partnerships with Northeast Asia, and more recently with Africa, should be further developed with South and Southeast Asia. • To ensure WA realises economic opportunities in the Indo-Pacific, the State Government should orient its international engagement towards the emerging global growth countries of India, Indonesia, Vietnam and wider ASEAN. 3 WA’s economic future in the Indo-Pacific Introduction The contemporary economic dynamism of South While WA has technical capability and and Southeast Asia, complementing Northeast competitiveness in these sectors, the state is Asia’s rapid development over the last half- yet to fully capture the economic opportunities century, is broadening the economic base of the presented by Indo-Pacific dynamism. In 2017, Indo-Pacific region.1 New opportunities have Indonesia was WA’s seventh largest export emerged for Australia beyond its principal trade market, with $2.8 billion worth of exports and investment partners in the United States, comprised predominantly of energy and Western Europe and Northeast Asia. With rapid agricultural exports.9 India was the state’s urbanisation and technological development in eighth largest export market, with $2.4 billion Southeast Asia, the Association of Southeast worth of exports concentrated in gold, minerals Asian Nations (ASEAN) is predicted to become and energy.10 These figures are marginal when the fourth largest economic bloc in the world compared to WA’s significant trading relationship by 2030.2 Indonesia is predicted to become the with China, where $60 billion worth of exports in fourth largest global economy by mid-century,3 2017 were driven by iron ore shipments.11 with Vietnam to become a top twenty economy in this time-frame.4 In South Asia, India is currently As an export-oriented and capital-importing the world’s fastest growing major economy5 state, WA’s international economic relationships and is predicted to become the second largest need to evolve with major shifts in the global by 2050.6 economy. A challenge for WA is that the state’s traditional bulk commodity exports are less This shift in the global economic centre of gravity likely to provide a foundation for developing to the Indo-Pacific generates tremendous new economic partnerships in the Indo-Pacific. opportunities for Western Australia. Sixty Indonesia, India and Vietnam are not resource- percent of the world’s population reside within poor countries. WA cannot expect that providing a two-hour time zone of Perth,7 and more than a secure supply of natural resources to these three billion middle class people will live in this countries will build relationships to the same zone by 2030.8 New economic opportunities extent as with Japan, Korea and China over the exist for WA exporters in the resources sector, last half-century.12 Fortunately, there is plenty as well as in agribusiness and advanced of scope to grow relationships in other sectors. manufacturing. Further, the unprecedented rise WA’s service exports were valued at only $6.8 of Asia’s middle class is increasing regional billion in 2016-17 (three percent of Gross State demand for education, healthcare, professional Product),13 while directly north of the state the and technical services. services sector now accounts for half of ASEAN’s economic growth.14 4 WA’s economic future in the Indo-Pacific While WA will continue to be a resources-driven history of successfully building long-term economy, a more diversified set of economic international economic partnerships. This has relationships is needed to pioneer new trade been particularly evident with enduring WA and investment partnerships in the Indo-Pacific. government engagement with Northeast Asia, Particularly, an uptick in economic engagement as resource exports over the last half-century with rising South and Southeast Asia will help have laid the foundation for WA’s modern ensure WA remains connected into the growth development. To encourage WA’s participation corridors of the global economy. in the broader rise of the Indo-Pacific, the State Government should intensify, and in some The State Government has a role to play in cases reinvest in, its international economic advancing the international relationships engagement efforts with the region’s emerging required for South and Southeast Asia to invest major economies of India, Indonesia, Vietnam in WA’s skills and capabilities. In partnership and wider ASEAN. with industry, WA governments have a 5 WA’s economic future in the Indo-Pacific The WA Government’s International Economic Toolkit The State Government plays a lead role for cooperation in mining and mining services, coordinating WA’s international economic energy production, education and training.21 engagement. Australian states and territories do not conduct diplomatic relations or sign The State Government and its departments also trade agreements. Yet, state governments can enter into other MoU with foreign governments, and do enter into cooperative arrangements regional market zones and international with foreign national and provincial institutions. These arrangements outline governments, regional market zones and capacity building, investment facilitation and international economic institutions. These partnership programs specific to certain sectors formal partnerships establish mechanisms to and/or fields of government administration. encourage trade and investment, and work to For example, WA and the Common Market for advance the international relationships that Eastern and Southern Africa (COMESA) have underpin economic activity. Programs include an MoU focused on whole-of-sector mining 22 cooperation in areas of industry regulation, and petroleum capacity building in Africa. government administration and capacity In the Indo-Pacific, WA and China’s National building, often conducted with industry and the Development and Reform Commission struck Australian Government.15 a resources- and investment-focused MoU in 2011.23 The toolkit for the State The State Government operates trade Government’s international and investment offices abroad, led by economic engagement includes country or regional Commissioners. The overseas trade offices provide support ‘Sister State’ relationships, services both to WA businesses international memorandums of looking to trade and invest abroad, and understanding (MoU), overseas trade foreign businesses looking to trade and offices and programs pursuant to invest in WA.24 Their officers support WA State Agreement Acts. ministers on overseas visits, and coordinate government and business Sister State relationships between the delegations. Further, the trade offices State Government and overseas provincial collaborate with Australian diplomatic governments are established through MoUs. missions and Austrade offices, as well These outline frameworks for cooperation across as foreign governments. There are currently trade, investment and cultural fields, often eight WA Commissioners servicing ten global coordinated by a working group. Four of WA’s five offices (Figure 1),25 with six in the Indo-Pacific: Sister State relationships are in the Indo-Pacific: Jakarta, Kobe, Mumbai, Seoul, Shanghai and Hyogo Prefecture in Japan (established 1981),16 Singapore. The geographic distribution, Zhejiang in China (1987),17 East Java in Indonesia mandate and resourcing of the trade offices (1990)18 and Andhra Pradesh in India (2016).19 has evolved over the decades. For example, the As an example of activity, in the first four years State Government has had a permanent of the WA-East Java Sister State relationship presence in Japan since 1968. The most recent more than 200 business, technical and cultural major restructuring of the offices occurred in exchanges took place.20 The WA-Andhra Pradesh 2011-12, when the Singapore office was re- Sister State MoU outlines specific opportunities opened following the closure of the Los Angeles and Malaysia offices.26 6 WA’s economic future in the Indo-Pacific Figure 1. Government of Western Australia Office network United Kingdom South Korea Germany Japan Middle China East India United States Hyogo Hong Kong Kenya Singapore Indonesia Perth New Zealand Western Australian

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