THE HON. JOHN BRUMBY is a former Treasurer and Premier of Victoria. He is currently a Vice Chancellor’s Professorial Fellow at The University of

Melbourne and Monash University, and an Independent Director of Huawei Technologies (Australia).

The Asialink Essays 2012 Vol. 4 No. 4 Published by Asialink, Sidney Myer Asia Centre www.asialink.unimelb.edu.auAugust 2012 The University of Melbourne Parkville 3010 Australia essays@asialink.unimelb.edu.au

In a recent speech Wayne Swan asked whether Australia would be on the right side of history in this, the Asian Century. This is indeed the right question for Australia today. A child born in the first year of this century will come of age in an Australia that is profoundly shaped by our relationships in Asia. It will either be an Australia that is closely engaged, contributing to and benefiting from the energy, growth and innovation of the most dynamic region in the world; or an Australia playing catch up in a changed global economy it has failed to fully embrace and understand.

The Right Side of History John Brumby

Talking to China

The first imperative is to increase our

governmental and diplomatic presence in

China. Talking to China is crucial. In my

opinion, Australia’s Free Trade Agreement

with the US would never have occurred

were it not for our strong diplomatic

relationship, forged through almost 70

years of dialogue, discussion, negotiation

and friendship. With China, we don’t have

that kind of time.

A deepening of our relationship with

China will not come about by Australian

leaders visiting and lecturing their hosts

about governance, investment, or any other

matter. Rather, it will come about via a solid

diplomatic presence, mutually respectful

dialogue, and a sharing, in friendship, of

our respective cultures, values, and ideas.

In this regard, the Prime Minister’s recent

announcement of a new consulate in

Chengdu, the capital of China’s Sichuan

Province, is welcome news. But as former

ambassador Geoff Raby has pointed out,

until the Prime Minister announced the

new consulate, our diplomatic footprint in

China hadn’t changed in seventeen years.

The new consulate joins just four others. By

way of comparison, we have four diplomatic

offices in Italy alone. Our two way trade

with Italy last year was just under $7.5

billion per annum. With China, it was over

$113 billion.

In some ways the states have been more

nimble than successive federal governments

in responding to China. When our

government came to office in 1999, Victoria

had no representation in mainland China –

just an office in Hong Kong. We opened new

Government Business Offices in Shanghai

and Nanjing – and the current government

proposes a further office in Beijing. Also

NSW, Queensland and WA each have

representation in two Chinese cities.

Trade and investment

The second priority is to deepen, diversify,

and mature our trade and investment

relationship. Some might be tempted to

look at the figures and say the job’s done:

After all, last year Australia’s two-way trade

with China was worth $13,470 to each

Australian household alone – an increase

since 2007 of 93 per cent.

But to rest easy at this point would be

to misunderstand the nature of China

today. China is no longer just a demand

sink for resources, nor the world’s cheap

manufacturing hub. When I joined the

Australian board of Huawei last year, it

was because I wanted to be involved with

a company that symbolised the future of

China, not the past. Huawei is China’s

largest privately owned company, with

an annual turnover of more than $US33

billion, and a presence in over a hundred

countries worldwide.

According to the World Intellectual

Property Organisation, Huawei last

year filed the third largest number of

international patent applications of any

company in the world. In fact, the total

number of applications from China rose by

more than 33 per cent on the previous year

– which is by far the largest increase of any

country. In a world continually transformed

by technological advance, it makes sense to

engage with the region that will more and

more be driving that advance.

Likewise, when we consider trade heading

in the other direction, we need to look past

the obvious needs of a rapidly developing

country for nickel, zinc and iron ore. There

are new export opportunities to consider

today. For example, as the Chinese people

become more affluent they also become

more susceptible to the kinds of lifestyle

diseases we are all too familiar with in the

West. 80 per cent of deaths and disability

in China are now caused by chronic disease,

which is why it’s important to remember

page 2 / 4the asialink essays vol.4 no.4 — 2012 The right side of history john brumby

China is no

longer just a

demand sink for

resources, nor

the world’s cheap

manufacturing

hub.

that here in Australia we don’t just have an

abundance of natural resources, but also

a wealth of experience in tackling these

problems. We need to recognise strengths

like these in the Asian Century – and see

how they fit with the challenges faced by a

rapidly rising Asia.

We also need to recognise our limitations

– which brings me to the thorny question

of Foreign Direct Investment. Australia

has almost always been a net importer of

capital. We built the strong economy we

enjoy today in significant part by leveraging

foreign savings. KPMG predicts that

between US$1 trillion and US$2 trillion

of Chinese investment will head overseas

between now and 2020. By 2011, China had

invested only $13.4 billion in Australia.

For comparison, the United States direct

investment total by 2011 was $122 billion.

We need to make sure that all of the barriers

that might stand between Australia and

new trade and investment opportunities

are removed. Barriers both visible and

invisible. Barriers arising from historical

bias, or outdated perceptions. Engagement

in the Asian Century requires the free flow

of ideas, knowledge, technology, goods,

services, and capital.

Partnerships in innovation

But true engagement requires more than

just exchange between two countries. It

requires partnership. And in many ways the

most important partnerships for Australia

in the Asian Century will be those in

Science, Technology, and Innovation.

The reason for this is simple: China has

no intention of falling into the so called

‘middle-income trap’. This occurs when

developing countries – relying on low

cost labour and the take-up of existing

technologies – hit a wall in terms of

productivity growth. There’s only one way

out of the trap, and that’s innovation.

China’s determination to become an

innovation powerhouse is resulting in what

the Australia China Business Council has

called ‘the largest investment in Research

and Development in human history.’ China’s

12th Five Year Plan aims to increase total

R&D spending to 2.2 per cent of GDP by

2015. In 2010, they were at 1.75 per cent –

$105 billion – which means that in the next

18 months, China’s R&D spend will increase

by more than the total amount Australia

spends each year.

Australia can and must leverage some of

that unprecedented Chinese R&D spend by

forging new partnerships in innovation.

After all, General Electric’s 2011 Global

Innovation Barometer suggests that 40 per

cent of innovation in the next decade will

happen in collaboration across borders. We

need to extend the hand of partnership into

China, and give China a reason to extend

their reach to our shores.

The CSIRO is calling for a big increase in

what they call ‘science diplomacy’ – and

the inclusion of scientific collaboration

objectives in bilateral economic dialogue

and agreements. I would argue for an

annual, ministerial level Australia-China

forum, which sets ambitious targets and

reports back publicly on new scientific

collaborations.

Governments must also continue to create

an environment of innovation here in

Australia. In the year 2000, our Government

in Victoria set a goal to become one of the

top five biotechnology hubs in the world by

the end of the decade. We wanted to give the

world’s best scientists a reason to be here –

and on a number of measures, we achieved

that goal.

We also passed the nation’s most ambitious

climate change legislation – again in the

hope of stimulating innovation and creating

an environment in which new technologies

and solutions could emerge.

page 3 / 4

In many ways

the most important

partnerships for

Australia in the

Asian Century will

be those in Science,

Technology, and

Innovation.

the asialink essays vol.4 no.4 — 2012 The right side of history john brumby

I fully endorse these aims. Here in Victoria

we know how valuable – and mutually

enriching – the sharing of cultures can

be. After all, we are the most diverse state

in Australia. 43 per cent of us were either

born overseas, or have a parent who was

born overseas. We also have a Chinese

community that is almost as old as the

colony itself. All of this is an advantage in

the Asian Century.

Conclusion

While I have focused on China, much of

what I have had to say applies to the other

rising Asian nations in turn. The World

Bank estimates that the global middle class

will expand from 1.8 billion people in 2009,

to 5 billion by 2030 – two-thirds of whom

will be in Asia.

India, for example, is already Australia’s

second largest source of foreign students.

Indonesia has long been the recipient of

Australia’s largest bilateral aid program,

but now there are opportunities beyond

aid. Their economy is growing impressively

at around six per cent each year, but with a

per capita income around one tenth that of

Australia’s, there is enormous potential for

future growth.

So it should be clear that the term ‘Asian

Century’ is not just a catchy name. It

reflects a coming reality that will shape our

future and determine the opportunities

that our children and grandchildren will

enjoy. It should be viewed not as a threat,

but an opportunity: To play a greater

diplomatic role in the region; to reap the

benefits of increased trade and investment;

to join forces with the emerging centre

of world innovation; and to enrich our

cultural lives and relationships within our

region.

We can, if we choose to, shift our

relationships in Asia to the next level. But

we need to act now if we are to be true

partners in this Asian Century.

—

While the Western world argues about

climate change, China knows from

experience that it simply must grow

greener and cleaner: Over the last ten years,

environmental degradation and depletion

cost China ten per cent of their GDP.

It’s no wonder they have doubled their

wind power capacity every year since 2005,

or that they are now the world’s largest

manufacturer of solar panels. I believe

the Gillard Government’s decision to put

a price on carbon will drive investment

in cleaner technologies, which in turn

will open up new opportunities for

partnerships and collaborations with the

world’s largest emitter of greenhouse gases.

A fuller engagement

Finally, it is very important that we

recognise the full human potential of

engagement in the Asian Century. China’s

story is one of an ancient culture now re-

engaging with the world; and given the

centrality of art and culture in all Asian

societies, our engagement with China must

be about more than trade and investment.

In 2010 the National Art Museum of China

showed a series of work by indigenous

Australian artists from our National

Museum of Australia, and late last year the

Australian museum reciprocated with an

exhibition of contemporary Chinese art

called A New Horizon. The name is apt. As

we shift our gaze from West to East, a ‘new

horizon’ is exactly what we see. It’s one we

have barely begun to explore.

As so often, Asialink has been a strong voice

for greater cultural engagement. They

advocate the training up of an ‘Asia capable’

cultural workforce here in Australia; a

strong Asian focus in the new cultural

policy to be launched by the Gillard

Government later this year; and a deeper

sharing of Australian culture with Asia –

one that transcends the kind of shallow

‘nation marketing’ we’ve sometimes seen

in the past.

page 4 / 4the asialink essays vol.4 no.4 — 2012 The right side of history john brumby

While the

Western world

argues about

climate change,

China knows

from experience

that it simply

must grow greener

and cleaner.