The 2016 Sir Zelman Cowen Oration and Dinner
Presented by The Hon Andrew Robb AO
It is a great honour and privilege to speak here tonight at the Sir Zelman Cowen Oration and Gala Dinner.
I have had the good fortune to spend some time with Sir Zelman Cowen over the years, and for all the accolades, honours, accomplishments, high profile positions and academic success, I found Sir Zelman Cowen to be an incredibly generous and humble man.
On my many trips in COMCARs I would often ask the drivers to change the radio to 105.9, the classical station….or the “Sir Zelman Cowen’s station” as the COMCAR drivers invariably described it. And from what I was told, and I am not surprised, there was not a piece of classical music he could not reference. A man of many parts.
As I expect you well know, he was a Rhode scholar at Oxford, law professor, vice-chancellor of two Australian Universities, he taught in both the US, at Harvard, and the UK, he was provost at an Oxford college, and “healed” a country as Governor General, post dismissal. He was a remarkable Australian who was equally remarkable on the international stage.
In the words of Professor Carolyn Evans, Dean of Melbourne Law School, he was "a one-man law school embassy to the world."
He grabbed every opportunity to learn, teach and cultivate relationships overseas, much of which was in the UK or United States, which is natural given the century he predominantly lived in.
Tonight, I look to this new century, the Asian century, and will seek to outline the new opportunities we as Australians are lucky to have. Picture a young Zelman Cowen, recently armed with a first class honours law degree, making his way in the world today. Yes, he would have those same opportunities to learn and teach in the US and UK, however, I think his focus would have been squarely on Asia. I have no doubt he would still become a ‘one-man law school embassy to the world’, however those strong international connections may be with Beijing University and University of Tokyo, instead of Oxford and Harvard.
I noticed as the Dean of Melbourne University he helped establish a Hong Kong law school. I can only imagine the impact he would have had shaping the law profession in Asia, given the environment and access we now have.
So what is the environment and access we now have? What are the new opportunities?
There are now some 600 million people in the middle class, from India through to China, and all the countries in between. In 20-25 years, this figure is expected to rise to over 3 billion people.
You have no doubt heard some variation of this line, or I hope you have as I used it ad nauseam in my previous career.
That’s 2.4 billion new people in the next 20-25 years who expect higher quality food, services such as education, health, finance and law, travel & holidays and entertainment.
In this regard I came across a quote recently, by entrepreneur Richie Norton, which captures the frustration I have been harbouring for some years now, namely:
“Opportunities come and go, but if you do nothing about them, so will you”
The frustration I refer to is the apparent lack of awareness, much less interest and response, of so many Australians, and many at the big end of town who should know better, to the profound transformation taking place in our surrounding Asian region.
Ever since European settlement of Australia over two hundred years ago, most of our economic and cultural focus has been 12,000 miles away in Europe or the United States.
Of course, this started to change with trade and investment from Japan in the 1980’s; and accelerated greatly over the last 15 years with the re-emergence of other Asian countries, particularly China, South Korea, the ASEAN countries and India.
I say re-emergence because for 18 of the last 20 centuries, China and India shared, occasionally with others like the Turks and Romans, the economic and political centre of gravity for the globe.
While we all know the history of the last two hundred years , my assessment in that sometime this century both China and India will inexorably return to sharing the global economic and political centre of gravity – but this time with the United States.
Already, the major drivers of world economic growth are the Asian countries, with China alone contributing between 30 to 40 per cent of world growth. This leadership in global growth from Asia is likely to be a constant throughout this century.
Australians now live in a region of the world that is undergoing an economic phenomena and a humanitarian miracle which has removed over 500 million people from poverty; a phenomena never before witnessed by modern Australia. And, this time, it is in our own backyard. Australia has benefitted enormously from this emerging phenomena particularly through sales of resources and energy, agricultural products, education and tourism services. Eight of our top ten trading partners are now regional neighbours.
Yet our business and cultural engagement with the region amounts to little more than the sale of these goods and services.
Despite now having 10 percent of our population, or 2 million Australians speaking an Asian language in the home, our cultural awareness is meagre, our Asian language skills are largely non-existent, and our investment levels in the region embarrassing.
We must face the fact that many of our large businesses have become somewhat fat and lazy. After a quarter of a century of uninterrupted economic growth averaging 3.3 percent – much of it a product of our geographical good fortune – we are seeing all the signs of having it too good for too long.
Our large oligopoly markets reduce competition. Our corporate climate is deeply conservative – increasingly enforced by government decision to have so many independent non-executive directors.
Our golden opportunity to set Australia up for another hundred years of prosperity is being squandered. We trade with the region, but in large part, we don’t engage with the region.
The next 10, 20 and 30 years can be spectacular if we take a big breath and move out of our comfort zone to help the region reach its full potential by positioning our services into the countries around us, often in joint ventures.
Our clean, green and healthy agricultural produce is viewed in the region as gold standard, especially when countries like China have major water quality issues.
China has 20 percent of the world’s population, 7 percent of the world’s water, and 63 percent of this is deeply polluted. Some of that pollution won’t be removed in centuries.
The Chinese people don’t trust the food they produce locally. Similar stories exist in other Asian countries. Opportunities abound for Australia.
What is not well recognized in Australia is that our services are also seen in the region as gold standard – whether we are referring to health services, aged care services, education, financial services, water management, engineering services, agricultural services, resources and energy, architecture and design services, waste management and hundreds more.
With the digital age, and the connectivity and cheaper convenience of 40,000 aircraft in the world’s skies at any one time, even many of our small and medium enterprises can now consider taking their services into the region, often in a joint venture, without too big a risk.
A prime example is Haileybury College, a wonderful school in my former electorate of Goldstein, in the bayside and South East suburbs of Melbourne, and now with an additional Melbourne CBD campus.
Four or five years ago Haileybury College formed a joint venture with a major Chinese construction firm and proceeded to build a secondary college in Melbourne’s sister city, Tianjin, 30 minutes from Beijing.
When the school’s enterprising principal, Derek Scott, dropped into my electorate office a couple of years ago to tell me of it’s opening, he showed me some photographs: I thought I was looking at Melbourne Grammar, except it had the back-drop of a beautiful river.
The school has a capacity of 1350 students, and is the first full campus of a foreign school permitted in China.
The school teaches the Chinese curriculum in years 7, 8 and 9. In years 10, 11 and 12 permission was granted to teach the Chinese students Australia’s VCE curriculum. As a consequence the first graduates complete the VCE in a few weeks, and will be immediately assessable for entry to Australian universities. The school’s success is such that it is considering opening a second China campus.
At the moment, within Australia, we teach around 700,000 foreign students, mostly from the region, at secondary, tertiary and vocational education institutions. It has been an outstanding achievement, with education our third largest export.
If we seriously seek to take the next step and position our educational services out to the region with models not just reflecting the Haileybury experience, but many others involving on-line courses, joint ventures, often involving jointly badged qualifications, the teaching of skill sets rather than full qualifications in underprivileged, poorly educated areas and various other models, we could be teaching a further 10 million in our neighbouring countries well within 10 years. But to do this our educational institutes need to establish a presence, in country, with our Asian neighbours.
Property calibrated, versions of these approaches have application in so many other services areas.
And as Haileybury College demonstrates the middle class markets already exist.
We know the China story, which is on-going, but look what’s happening in other Asia countries.
At the turn of the century Indonesia had an estimated 4 million of its 250 million population in the middle class – 16 years later those middle class numbers have grown to 50 million people – twice our population.
India now has 150 million of its 1.2 billion population in the middle class, and, every minute of every day, an average of 30 people leave the regions for the cities – that’s 43,000 people on average each and every day. Prime Minister Modi told me that that rate of migration to the cities will continue for 20 years - that is 320 million over the next 20 years, or 32 new cities of 10 million people each. What are we doing across business, large and small, across our not-for-profit sector, our government sectors, our sporting and cultural sectors to seriously engage?
Through these last two hundred years Australia’s economic development has been driven in large part by foreign investment, yet it almost always has been a bone of contention in our political debate.
Australia is the 6th biggest land mass among countries around the globe, we are the 12th biggest economy, yet we rank 51 in population size.
For these reasons we have never been able to save enough as a nation to develop the endless opportunities that exist in Australia.
Foreign investment has filled the gap in order to drive our growth, our potential and our significant prosperity. This is as true today as it was 200 years ago.
English company, Vesty’s, owned and developed large tracts of the top half of Australia for almost a century. Yet today, much of it has been sold back to Australian companies, and Vesty’s is but a memory for people of my age or older. And, for good measure, in my lifetime I have yet to see an Australian farm leave Australia.
The United States remains by far the largest foreign investor with 28 percent, or around $660 billion of capital invested in Australia. Britain follows with 16.5 percent, 8 percent from Belgium/Zurich, nearly 7 per cent from Japan and less than 3 percent from mainland China.
This puts the current hand-wringing about Chinese investment into some perspective, and even warrants calling out one of our justifiably most esteemed public servants.
I refer to the former Reserve Bank governor Glenn Stevens, in his outgoing speech, where he suggested that we should have a discussion about the kind of foreign capital we want as Australians.
He suggested that “foreign capital that builds new assets, like some of the capital that funded the mining boom”….was OK.
But Mr Stevens went on explicitly to say that “foreign capital that buys up existing assets….is not creating new capital for the country, it just alters the allocation of who owns the capital that’s here now”.
This very unfortunate statement is demonstrably wrong, and is quite dangerous to the extent that it gives succor and credence to those who oppose foreign investment, often for unrelated motives.
Most State and Federal government privatizations over recent decades have very large foreign investment components. In many, if not most cases the proceeds of these privatizations are used to finance other new infrastructure assets. So buying existing privatized assets creates new capital for our country.
For that matter the sale of any asset to investors from other countries means the Australian seller can reinvest in creating new assets, or put it with the finance sector to invest in new assets.
Even more importantly, many foreign purchases take place because the foreign investor feels that by deploying greater experience and further capital and innovation, they can make the business more competitive and more profitable. In other words, they feel that they can grow the business.
For example, look at the purchase 5 years ago of the very poorly performing abattoir at Kilcoy in Queensland by the large Chinese agricultural company, New Hope Pty Ltd.
With huge further investment largely in new technology, the fortunes of the abattoir business, and the town of Kilcoy have been dramatically turned around.
The output of the plant is in the process of being doubled from 250,000 head of cattle a year, to 500,000 head. Five hundred new jobs are being created in a town of 3,500 people, and every dollar of profit to date has been poured back into making the abattoir technically the equal of any in the world.
This is the 200 year story of foreign investments in Australia, as waves of new investment come in from time to time to enhance the efficiency of our productive enterprises and all the associated supply lines, and also to create new greenfield assets.
As a small number of Australians, in a relatively large country and large economy, we simply have never been able to save the money necessary to fully finance the maintenance and expansion of many of our existing industries or the development of new green fields projects.
Security issues aside, we should welcome new foreign investment and absolutely resist putting more barriers in the way. In this regard the tone of the current debate is very disturbing.
The number of “free trade” treaties concluded with much of Asia over recent years are in fact “freer” trade and “freer” investment treaties. One goes with the other.
To discourage foreign investment will see so many of the opportunities I have mentioned, being lost; and, for no good reason. It means slower growth, lost jobs and less prosperity.
Finally, let me conclude with some observations regarding the impact of geo-politics on the potential prosperity of the region.
So much of the commentary is couched in terms of which country will remain, or attain, the position of dominant global or regional power.
We see endless propositions and questions being raised about “should Australia strengthen, or weaken, the alliance with the US?”, “will China rule the world?”, “should the US remain the dominant global power?”.
So much of this binary, black and white approach to power sharing in our region often seems designed to deliberately create straw men, which are subsequently torn down with the result of unnecessarily fueling regional tensions.
In my view John Howard captured the right path for Australia, while remaining true to our long running and successful alliance with the US, when he said “you don’t have to lose one friend, to make a new friend”.
Yet, in many quarters the issue is being conducted like “two bulls in a paddock” where every muscle twitch, every action is analysed for adversarial intent.
In all of this Australia often finds itself the meat in the sandwich, being urged to take sides, by both sides – whether it be issues such as the Asia Infrastructure Investment Bank, the South China sea issues, the One Belt One Road project.
The facts are that the US is our biggest investor by a large margin, as well as being our alliance partner, while China is our biggest trading partner by a large margin, with scope for much more commercial engagement through the first major free trade agreement between China and a large exporting advanced economy, Australia.
Our prosperity relies critically on both countries.
No other approach makes sense, other than the one Australia has adopted, namely seeking to be a constructive partner of both countries, and other countries in our region.
A constructive partner should be free to voice their desire to see a rules based system adhered to, and to run a policy towards partner countries based on our national interest; to exercise one’s sovereignty.
The ‘two bulls in a paddock’ approach fuels regional tensions; it ignores the medium term reemergence of India as a major global power, it ignores the instability that such an approach engenders in our region and it ignores the potential destruction of the opportunity for billions of people to see prosperity flow from the biggest economic phenomena experienced by Asia in more than a millennia.
Every effort by the United States and China should be made to engage in a comprehensive way which seeks to build mutual trust.
While tensions and differences always exist between major powers, and smaller countries for that matter, there is no reason to assume that to accommodate China’s and India’s eventual re-emergence as great powers, we would need to sacrifice our sovereignty and liberal democratic values.
Much of world history is defined by major powers finding effective ways to share power.
This is the way forward.
To this end we should follow the leadership and ever-present instinct of the AIIA’s former patron, Sir Zelman Cowen, for whom this oration seeks to honour.
Sir Zelman was a man who dedicated his life to helping shape a rules based world, a world where he saw common sense, mutual trust and integrity being the way we deal with others in a complex world.
Long may his example prevail.