Chapter 5
Impact on Australia's International Relations in the Asia-Pacific
Region
5.1 As reported in Chapter 2 the Foreign Minister announced the manner
of the termination of the DIFF Scheme on 8 May 1996 and on 17 July 1996
the support for some high priority individual projects using mixed credits
with funding from within Australia's bilateral program allocation for
1996-97. Accordingly, an allocation of $32 million was made available
in the 20 August 1996 Budget and a further $32 million allocation will
be made for the following financial year.
5.2 Also in Chapter 2 the procedure for advising foreign governments
of the termination of the DIFF Scheme was outlined.
5.3 Evidence of the impact on Australia's international relations in
the Asia Pacific region was presented to the Committee from participating
companies, foreign governments through their ambassadors and from government
departments. Also there have been contributions from media coverage
from foreign editors and other commentators.
5.4 The Committee also received submissions from the Ambassadors from
China, the Philippines and Indonesia following invitations to make a
submission to the Committee.
5.5 The Ambassador of Indonesia, Mr Wiryono Sastrohandoyo, in his reply
enclosed an article from The Sydney Morning Herald of 30 May 1996, wherein
he is quoted as stating Indonesia's view as 'concern ... this is an
unfortunate development. We understand the reasons (behind the cancellation)
but we hope there will be some kind of replacement mechanism,' and expressed
the hope that the 'fallout would be dealt with in a reasonable way.'
5.6 Mrs Delia Domingo-Albert, the Philippines Ambassador, stated in
her letter to the Committee of 29 July 1996 that 'We view the understanding
the Federal Government's decision to abolish DIFF in light of the current
domestic fiscal situation in Australia. We welcome the government's
efforts to look at ways of supporting some high priority projects that
come under the social reform agenda of the Philippines government addressing
poverty alleviation and humanitarian concerns. We express confidence
that the Philippines and Australia will continue to enjoy a warm and
cordial relationship.'
5.7 The Chinese Ambassador in his reply to the Committee of 2 August
1996 stated 'We are concerned with the cancellation of the DIFF Scheme
by Australia. The position of the Chinese Government in this regard has
been fully made known to the Australian Government.' In a Sydney Morning
Herald article [1] the Chinese Ambassador
was quoted as saying 'should DIFF projects be scrapped, it would not only
cause financial losses on the Chinese side, but do no good to the Australian
side in terms of the credibility and business interests in Australia.'
5.8 Many Australian companies submitted evidence of the impact of the
termination of the DIFF scheme covering both their perceptions and feedback
on the impact on foreign government and the impact on future dealings
with their company.
5.9 The Majority Report has listed a wide cross section of reactions
from companies involved in projects in China, Indonesia, the Philippines
and Vietnam.
5.10 As the Majority Report chronicles the evidence of these companies
in detail, we will not restate their evidence. Government members accept
the evidence as valued and practical information based on a depth of
experience and understanding gained from working in the region with
national and regional governments and their agencies.
5.11 To refer to a few of these submissions. In relation to China,
Landmarc referred to the destruction of the trust and working relationship
established between themselves and partner companies and Chinese Joint
Venture partners - a partnership developed over four years, concluding
'the cultural importance of trust to the Chinese and the long term effects
are impossible to gauge.'
5.12 Smartgas also submitted that 'We have been advised by the highest
government levels in China that their major concern is that the Australian
government has broken both legally binding agreements, as well as policy
commitments and action and therefore cannot be trusted. We are advised
that crucial to this perception is a Sino Australian Bilateral Agreement
signed in September 1995, and by the then Australian Minister for Trade
and the Chinese Minister for Foreign Trade and Economic Cooperation
(MOFTEC) Hon Wu Yi.'
5.13 Mr Ron Tripp of Relpar described the Indonesian reaction as 'amazement
and disappointment' [2] and Professor
Watts in commenting on Indonesia said that 'the political damage of this
turbulence and uncertainty cannot be overstated.' [3]
5.14 The MTIA referred to a 'don't look South attitude from the Indonesians.'
[4]
5.15 Evidence from relevant Government departments told the Committee
that there had been no substantial damage done to overall bilateral
relationships in the participating countries.
5.16 Mr John Dauth, First Assistant Secretary in the Department of Foreign
Affairs and Trade, stated that 'it was always expected that the Indonesians
would not welcome changes to the relationship, but DIFF has caused no
substantial damage to overall relationships.' [5]
5.17 Mr Robert Trenberth, Deputy Secretary of the Department of Industry,
Science and Tourism, also stated in relation to Indonesia, 'It is important
to bear in mind that, while there are a number of major Australian companies
involved in the DIFF and they have put quite explicit views about the
recent policy decisions, nonetheless, they are only one element in what
is a very robust relationship that has many elements. For this change,
this perturbation, to cause a significant policy shift on the part of
the Indonesian Government. is drawing a very long bow.' [6]
5.18 Mr Dauth also reiterated the view in relation to the Philippines
that 'it is impossible to argue that the broader relationship has been
substantially damaged.' [7]
5.19 Ms Penelope Wensley, Acting Deputy Secretary of the Department of
Foreign Affairs and Trade, stated in relation to China [8]
'Because we are talking about 54.2% of our Australian aid to China, we
identified that there would be an impact on the aid of relationship and
that this would cause difficulties, but we believed that looking at the
overall relationship, it is one that is so strong and so positive that
it is something that could be worked through and would not cause substantial
damage to the overall bilateral relationship' and further that 'there
is no misunderstanding in the minds of the Chinese about the Australian
Government's decision. In a whole range of exchanges, they have consistently
indicated that they understand this was a legitimate decision for the
Australian Government to make, that this was a policy matter for the Australian
Government, and that the Australian Government was entitled to terminate
the program if that is what we thought was in our natural interest.' [9]
5.20 This issue has also led to a considerable amount of reporting
and commentary in the media which government members note have shifted
in emphasis since the original announcement of the termination of the
DIFF Scheme following the announcement of the Priority Program.
5.21 Major critical commentaries on the termination of the DIFF Scheme
in the media have come from Greg Sheridan, Foreign Editor of The Australian.
However, on 31 August 1996, he wrote in an article 'China Tests Howard
Diplomacy.' 'Similarly on DIFF, the Government has made a two year Budget
allocation so that high priority programs in China can go ahead after
all. This demonstrated that their concerns were being taken seriously....'
5.22 The most recent comment from a foreign government comes from a
News Release issued on September 15 1996, from President Fidel V Ramos
of the Philippines, issued by the President 'to rectify inaccurate newspaper
reports' in the following terms:
President Fidel V Ramos reiterated today that the Philippines
and Australia continue to enjoy the warmest and most cordial relations
under the leadership of Prime Minister John Howard and Foreign Minister,
Alexander Downer.
However, the President reacted strongly, through his Press
Secretary, Hector R R Villanuava, to the misleading article of one
Lindsay Murdoch of the newspaper The Age
who insinuated that the Australian Government's decision to terminate
the development import facility finance facility, had damaged relations
between Australia and the Philippines, which has no basis.
The President, who graciously granted Murdoch the interview,
claimed that the was misconstrued. He said he is in regular communications
with Prime Minister Howard and is looking forward to hosting the Australian
Official in November at the Asia Pacific Economic Cooperation (APEC)
Leaders' Meeting in Subic.
On the contrary, it was pointed out that negotiations on funding
mixed credit projects were going on between the National Economic
and Development Authority (NEDA) and Australian aid officials. These
discussions are going smoothly, including active consideration on
the search and rescue vessels.
The President renewed his call for continuing close cooperation
between the two countries, as well as continuing regional cooperation
under the aegis of the APEC. The President issued the statement to
rectify inaccurate newspaper reports.
| Finding: That based on the evidence of AusAID
and DFAT with relevant experience in South East Asian countries,
the termination of the DIFF scheme caused disappointment in recipient
countries but there was no substantive damage to any of the relationships
involved. In addition, Australia's actions were understood to
have been made in the context of a fiscal crisis and as an expression
of its sovereign right to control its domestic affairs. |
| Finding: That Australia's relations with China,
Indonesia, Vietnam and the Philippines are multi-faceted and multi-layered
and not so fragile as to fracture over the termination of the
DIFF scheme and that the aid relationship is only one small part
of the overall bilateral relationships. |
| Finding: That extensive steps were taken to allay
any concerns of recipient country governments. |
| Finding: That additional funding of $64 million
for high priority projects, able to be nominated by recipient
country governments, will go some considerable distance toward
accommodating those high priority project applications that had
significantly advanced through the selection process at the time
of the scheme's termination. |
| Fiinding: That the response of foreign governments
must be determined by taking into account further developments,
including funding allocations for priority projects confirmed
in the $64 million budget allocations for the financial years
1996-97 and 1997-98, and that any final assessment must be based
on the most recent responses from participating foreign governments.
|
| Finding: That there has been no substantive damage
on a Government to Government level to Australia's international
relations with China, Indonesia, Vietnam or the Philippines. This
was indicated by the strong statement issued by President Ramos
reaffirming his support for the Australian Government. |
Footnotes
[1] Sydney Morning Herald, 30 May 1996
[2] Committee Hansard, p. 237
[3] Committee Hansard, p. 247
[4] Committee Hansard, p. 69
[5] Committee Hansard, p. 9
[6] Committee Hansard, p. 509
[7] Committee Hansard, p. 10
[8] Committee Hansard, p. 360
[9] Committee Hansard, p. 347