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Re-Engaging With South East Asia: The Business Case for Canadians

The Hon. David Kilgour, Secretary of State (Asia-Pacific) and

Member of Parliament for Edmonton Southeast at a

Reception hosted by the Canada-Singapore Business Association, the Malaysia-Canada Business Council, the Hong-Kong Business Group and the Philippines-Canada Trade Council

Hyatt Regency Hotel, Vancouver, British Columbia, April 12, 2002

A hearty thank you to our hosts: the business associations of Malaysia, Singapore and the Philippines, which are essential bridges for Canadians to the businesses and communities of these important economies in South East Asia.

Indeed, thinking about re-engineering relationships and forging new ones has been a large part of my job since becoming Secretary of State in January.

A recent visit to Sri Lanka, Thailand and Bangladesh reminded me of the important role business councils play, not only in creating commercial opportunities, but in facilitating networking, which is critical in fostering stronger bilateral relations. During the visit, Mac Harb, M.P. and Chair of the Commons International Trade Sub-Committee, and I were pleased to launch a new joint business council to promote trade and investment between Canada and Bangladesh. We consistently enjoy excellent cooperation with business councils such as your own, both in Canada and throughout South East Asia.

In light of the importance our national government places on our relations with South East Asia, we have been seeking the views of business people, academics and other civil society representatives for a comprehensive review of our relations with the region as a whole.

Why the review?

For two decades now, that there has been sound, long term business case for investing in what it takes to maximize commercial relations with South East Asia.

By the end of 2001, two-way trade between Canada and the ASEAN countries was over $9 billion, about seventeen times what it was in 1977. Indonesia, Singapore, Thailand, Philippines and Malaysia each have bilateral trade of between $1.5 to almost $3 billion with Canada. These five markets account for 96% of Canada's trade with ASEAN members.

Trade and investment are only part of a larger story. Canada has extensive bilateral relations with most ASEAN countries. We recently celebrated 50 years of diplomatic relations with the Philippines, and we will also do so this year with Indonesia as well. Collaboration occurs in many areas: immigration, development assistance, work on sustainable development, shared membership and interests in various multilateral organizations, including the ASEAN Regional Forum, APEC, etc. Educational links -- such as student exchange programmes or twinning arrangements like the proposed MBBS degree programme between the Institute of Medicine of the University Brunei Darussalam and the University of Calgary -- provide key areas for cooperation that underpin the successful trade and economic relationship.

Post 9-11

Since September 11th, Canada has focused even more strongly on meeting our security needs in partnership with governments also committed to combating terrorism. The Philippines has been at the forefront in supporting the international campaign; Indonesia, Malaysia, and Brunei have also been discussing arrangements for a regional coalition on terrorism. Singapore and Thailand are participating in these discussions as observers and we hope that they will take a more active role as well.

Doing reality checks on strategies is part of the work of any prudent business or government. Doing business successfully in South East Asia changed with the onset of the Asian flu in 1997, then for a second time when the region began its revival, and for a third after the events of September 11th .

My purpose today is twofold: to outline what we have learned so far from this review, and to invite you to contribute your expertise to an action plan for renewal.

These are important exercises. Some of the work we are doing in the review is internal, about the workings of the department and how to improve effectiveness and efficiency as a department. Much more involves you directly, in terms of how we provide value-added service to partners in the business community.

As everyone knows, our trade is currently heavily focused on the U.S. (about 87% of exports). Why wouldn't we want to do as much business as we can with our neighbour -- and the largest, most sophisticated market in the world?

Softwood Lumber Crisis

The softwood lumber crisis has made us all aware of the troubles that can arise from putting most of one’s eggs in one basket. The direct and indirect devastation caused by this dispute for thousands of workers in British Colombia and across Canada is unacceptable - its effects probably even more damaging than a full frontal attack on Ontario’s auto industry.

We take the problems faced by men and women who have been laid off as a result of U.S. government actions very seriously. We’re going to continue to work closely, of course, with the industry and the provinces to evaluate and counter the effect that these unfair actions have on Canadian workers and communities.

Currently, there are a number of programs to help individuals and communities through difficult periods. We’re looking at whether the existing safety net is sufficient, or whether further assistance is necessary.

My colleague Herb Dhaliwal was quoted in today’s Vancouver Sun saying, “We need to look at new money. We’re looking at a whole new set of options.” He indicated that these might include an acceleration of the release of funds for promoting export markets, the government paying the entire cost of the duties, and/or offering loan guarantees.

Right now, the industry is hemorrhaging - and our government is serious about stopping the bleeding. In the shorter term, as we try to heal the wound, we need to find ways to support our softwood industry. In the longer term, export market diversification is one of the best ways for us to reduce the risk of future injury.

We will always be close partners of the United States. As one former prime minister said, “The Americans are our best friends - whether we like it or not!” However, the importance of developing new markets for softwood lumber and other Canadian products cannot be understated.

South East Asia is a perfect candidate. Someone told me the other day that in one major city there is a huge need for lumber for in burgeoning housing sector.

Canadians need to start seeing South East Asia, for all its diversity, more clearly as a region rather than through the lens of purely bilateral configurations.

After all, the broader the basis of a relationship, the less likely temporary fluctuations are to throw it off course.

New Regional Forum

That is why Canada's tactics for developing trade, investment and technology exchange with each individual country will be implemented with a focus on a long term strategy for the region as a whole.

Thinking about business ties that way will perhaps take some time getting used to. It isn't just that globalization has made the world a smaller place. It is that globalization, immigration and technology have made this a global town square in which issues like economic development, human rights, corporate social responsibility and environmental protection are now everyone's business - everywhere.

Many of South East Asia's business and government leaders know this as well. ASEAN plus an ever growing variety of partners including China, Korea, Japan, India, and the EU, as well as ARF and APEC all are expressions of a desire to dialogue in ever expanding regional fora. We too want to engage in these discussions more fully.

Investing in what is required to create a better governance model for states and business alike in the region will be a strategic priority for Canada. Good governance is a mechanism through which progress in human security translates into economic advancement.

Sri Lanka

During a recent visit to Sri Lanka I was reminded again and again that without stability, transparency, respect for human rights, and the impartial application of the rule of law, foreigners and nationals will be reluctant to invest. Without foreign investment, there can be little prosperity, without prosperity, no incentive to remain engaged in the peace process, and without peace - continued human suffering.

Improvements in governance and accountability in areas such as democratic development, freedom of opinion and expression, combating corruption, enhancing transparency, and security sector reform are essential.

Pushing the envelope of good governance further - much further - must be a priority.

Relationships across the Pacific are in need of dramatic readjustment. During the boom years of the 1990s, the justification for a business presence in the region was more apparent to many Canadian business leaders. Now the boom and bust have both passed and a steadier growth cycle has begun. Paradoxically though, a caricature of the region as a problem zone is the mental view many Canadians have, now hold especially post 9/11. Many want to redesign the mental software of Canadians generally, giving South East Asia the profile it deserves as a region of vast promise and potential.

Unfortunately, Canada's brand in the region isn't faring too well. You can do a great deal to break down misperceptions, which can be as potent a disincentive to trade and investment as any tariff or tax. We in government can also do much more to help out - and we will.

Branding Canada

A “Branding Canada” initiative is now underway that ranges from the digital to the dance floor, and focuses on Canada as a sophisticated, cosmopolitan, high tech and competitive society. We hope that business will buy into this effort to renew Canada’s image abroad, perhaps by incorporating such themes into marketing strategies.

Ways to enhance the perception that Canada is a potent player in industrial and post - industrial enterprises are what we want to get into your hands. The fact that Canada is fully engaged from a policy perspective, with a greater focus on South East Asia as a region, should be a potent selling vehicle in its own right.

Of course, we are also going to keep a watchful eye on building on concrete commercial achievements, such as those with Singapore, the Philippines and Malaysia.

Let's take a brief look at what we have accomplished to date, and what we what we want to accomplish in the immediate and medium terms, as a business/government team.

Singapore

The Canada-Singapore Free Trade Agreement negotiations underway are about more than just engaging our two countries in liberalized trade.

They take the concept to a whole new level.

Negotiators have tackled a comprehensive range of topics, including: market access, trade in services, financial services, investment, government procurement, dispute settlement and competition. Bilateral co-operation in promoting culture and small and medium enterprises is also being discussed.

Labour issues are also on the table in parallel meetings as part of the pursuit of a possibly ground breaking cooperation agreement with Singapore labour. Discussions in respect of an agreement on environmental cooperation have also taken place.

There is also an intriguing affinity in the way our two governments view the Internet. Canada is ranked number one for providing government services on line (GOL), worldwide. Singapore is ranked number two with a $1.5 billion investment that any number of Canadian companies should explore.

Biotechnology is another intriguing aspect of Singapore's knowledge economy. There are now over 80 companies in the cluster engaged in activities ranging from R&D and clinical development, to manufacturing and sales/distribution, with output of over $9 billion annually.

The National Research Council of Canada has an agreement with the National Science & Technology Board (NSTB) here to engage in joint research projects. We are also working closely with the Singapore Economic Development Board (EDB) to raise the profile of Canadian biotechnology. The EDB is scheduled to visit Toronto in June to participate in BIO 2002, the world's largest biotechnology exhibition.

Philippines

The very successful visit of the President of the Philippines, Gloria Macapagal-Arroyo, to Canada this past January was a good occasion to sign six bilateral agreements under which Canada will contribute $25 million over five years to support projects in the areas of judicial reform, information and communication technology and small business development.

These agreements exemplify the bilateral harmony that Canada has enjoyed with the Philippines for many years, and the nature of re-engagement with the region for the years ahead.

Headquartered in Manila, the Asian Development Bank (ADB) is an international development finance institution (IFI) which can be of immeasurable value to Canadian companies looking to engage South east Asia on a regional basis. Canada has enjoyed and continues to enjoy success in winning ADB related contracts. This is particularly true in regard to consulting services opportunities, an area where Canada ranks consistently as one of the top supplier countries for such services. Our achievements in industrial procurement have been less impressive; this is an area of substantial opportunity.

Malaysia

In the 10-member ASEAN market, when imports and exports are totaled, Malaysia is Canada's largest trading partner with $2.5 - $ 3 billion in annual two way trade.

Like most economies in Southeast Asia, Malaysia was affected by the global economic slowdown which took place last year, in particular its steep drop in tourism. Nevertheless, it is poised for recovery in 2002 and offers a good environment for doing business: sound macro-economic fundamentals; transparent regulatory framework; a strong financial system; a liberal trading regime; and political stability.

Malaysia's ability to weather this latest storm is owed to sound economic management that has allowed the government the flexibility to pursue pro-growth policies, including fiscal stimulus and monetary easing.

Activity by Canadian companies in Malaysia continued in late 2001 and early 2002. In the past few weeks alone, Canada has recorded three major export successes.

Harris Corporation of Montreal has just signed a $60 million contract to supply its local Malaysian partner with wireless broadband equipment. A Canadian consulting engineering company has won a power project valued at $40 million. And PUTRA, Kuala Lumpur's Light Rail Transit system, will purchase 70 more cars manufactured by Bombardier at an estimated $110 million value. The government is also considering the purchase of two Bombardier amphibious aircraft to improve fire-fighting and maritime search/rescue.

In May, Rakan Muda Team Malaysia 2002 will arrive on a trade mission to Canada. Founded in 1998, Rakan Muda Team Malaysia was created in partnership with Global Vision, a Canadian youth organization dedicated to helping youth get the skills that matter in today's global economy.

Please give them a warm Canadian welcome.

Politically, Malaysia is also an important Canadian partner. As partners in many international organizations (the UN, APEC, Commonwealth) Canada and Malaysia share a long history of cooperation in multilateral diplomacy. Malaysia is also a significant contributor to UN peacekeeping missions and we have worked together within the ASEAN Regional Forum to share best practices with regard to peacekeeping policy.

Malaysia is also an important partner in the campaign to eradicate terrorism. As a moderate Muslim-majority nation, which has experienced significant economic growth, it can play a constructive role in the wider debate on how to combat terrorism.

Canada's re-engagement in the region depends strongly on crucial mechanisms to foster enhanced business- to- business networking.

A major Canadian Oil and Gas mission to South East Asia in October, 2001 helped many companies gain access to major contacts from across ASEAN.

High level business and government delegations from Malaysia, Thailand, and the Philippines were in Vancouver last month for Globe 2002, the most important business and environment conference and trade show in Canada.

For the future, Canadian companies are invited to take part in a Canadian mission to CommunicAsia/BroadcastAsia 2002 in Singapore in June to meet leading business people from all ASEAN countries. A number of the Canadian firms will also be visiting Malaysia during this mission.

And the Canadian High Commission, Kuala Lumpur is already working closely with The Malaysia Canada Business Council (BC Chapter) to organize a business mission to Malaysia for the fall of 2002.

Conclusion

Integrated efforts meet our business objectives and promote our interests in a classically Canadian way. Working together with our partners in the region, we can foster our Canadian values of transparency, respect for the rule of law, good governance, and win-win partnerships. It can also demonstrate the importance Canadians attach to democratic development, and respect for human and rights and dignity for all.

The progress we make in pursuit of those priorities will help speed the process of creating a more level and predictable playing field throughout the region, and creating an even better environment for trade and investment relations, global security, and prosperity.

Thank you.