Resetting Southeast Asia Strategy.

A suite of ideas to refresh how Australia engages with Southeast Asia on development.

What's the idea?

A suite of ideas to refresh how Australia engages with Southeast Asia on development.  

This dynamic region that Australia has given inadequate attention to over the last decade demands a clear vision from Australia — simply adjusting a project here or there is not enough. That vision must involve stepping outside the aid model and into the world of integrated international relations for development. It would see a shift away from ‘thematic investments’ towards the selection of three or four intended ‘effects’ of the development spend, and using policy and portfolio levers beyond the development budget.

What problem does it solve?

Australian interest in Southeast Asia has been displaced in recent years as our focus has shifted elsewhere.

However, we now have a chance to capitalise on renewed interest arising both from geo-strategic contestation and a recognition of the rapidly increasing economic and political weight of the region.

In both relative and absolute terms, Australia invested inadequately in Southeast Asian relationships over the past decade. Notwithstanding the 2017 Foreign Policy White Paper noting that ‘Australia places high priority on our bilateral relationships in Southeast Asia and on our support for ASEAN’, the region had slipped down the priority list until recently. Australia’s focus has been on the Pacific and cultivating alliances such as the Quad and developing new ones such as AUKUS.  

Our relative absence from the region has resulted in waning Asia literacy and a ‘trust deficit’. Australia’s lack of focus on Southeast Asia has generated something of a ‘trust deficit’ according to former Lowy Institute researcher Dr. Teesta Prakash. A team from the Asia Pacific Development Diplomacy and Defence Dialogue (AP4D) also pulled no punches in a 2021 report stating: ‘Australia’s bilateral development programs have been halved, as other countries have increased their economic engagement, pushing Australia to the rear of Southeast Asia’s top 10 development partners. Export growth has been underwhelming, and Australia’s Asia literacy has waned.’  

Meanwhile, development challenges are changing, becoming more complex and demanding. They cannot be solved by Australia taking a project-based approach to assistance. Whilst pockets of poverty persist in some parts of the region, requiring traditional community development programming responses, the development support needed elsewhere is different. It spans large-scale infrastructure needs; high-end policy advice, including to help prevent trade coercion; unlocking catalytic economic opportunities through business-to-business networks; and sophisticated support to build resilience to autocracy. Much of Australia’s development impact will be made by working in coalitions with other like-minded entities, under clear local leadership. The development tools Australia must deploy in Southeast Asia differ substantially to what we deploy into the Pacific.  

Our previous piecemeal approach to engagement in Southeast Asia risks Australia being an incoherent actor in the region. Melissa Conley Tyler and Richard Moore saw such incoherence in Australia’s Future Fund investing in companies linked to Myanmar’s military, contrary to diplomatic efforts to end such assistance. This is exemplified in the splintered quality of how Australia approaches the region: through prisms of ASEAN; country programs; and a separate ‘Mekong Australia Partnership’ focussed on five countries. Plus, there’s Timor-Leste, which is seeking membership in the ASEAN family, but Australia continues to place in the Pacific. 

Why now?

An Office of Southeast Asia was recently established within DFAT with the remit of leading a ‘whole-of-government’ approach to the region. Creating an envoy to Southeast Asia was a Labor manifesto commitment, with the appointment of former Macquarie CEO, Nicholas Moore. With a new body and a new heavy-hitting role, there’s no better time to test out some new ideas to reflect new realities.  

And there’s no shortage of good ideas; a lot of thinking has gone into how Australia should rejuvenate and institutionalise its Southeast Asia policy. AP4D has proposed close to 20 pathways that apply multiple forms of statecraft in engaging the region. These ideas range from climate to energy policy, to the boosting of Australia’s slashed development spend. However, while all these are sensible, few have made the leap from advice on a page to actual policy. Meanwhile, The Asia Society has developed a menu of 10 policy options for governments to consider in responding to trade coercion, and considered the pandemic’s impact on the region.   

It’s also timely, five years on, to update the sections of foreign policy as they relate to Southeast Asia. The White Paper placed ASEAN at the centre of things and was relatively prescient on the future, misestimating only the pace of change. However, while ASEAN has emerged with a more important regional architecture — evidenced by steering the largest free trade agreement in the world (which includes Australia) — there’s been almost no growth in our trade with the region when considered as a proportion of the total.

That’s extraordinary given the economic development that’s taken place in the region and its rising middle class. It suggests we’ve been missing the boat because we haven’t done what it takes to sell into the region. A further example, if one is needed, is Allan Gyngell’s observation that ‘Australia has more direct investment in New Zealand than in all 10 ASEAN states combined’. This underlines just how undercooked our regional economic relations are, and we should be doing much better, but it will be the work of decades.

The region is also evolving, growing further still in political and economic heft. The World Bank already classifies China, Thailand, and Malaysia as upper-middle income countries. Indonesia and the Philippines will join this group soon, with Vietnam not far behind. The region accounts for two-fifths of global economic growth. It’s changing politically too, and while that’s not always in a democratic direction, the push and pull of autocracy and democracy is ever-changing. Singapore has become more liberal in some respects and Malaysia may be on that that road, albeit it fitfully. The Indonesian democratic transition has been remarkable, even if it remains vulnerable, and in the Philippines there’s more good news than bad.  

Challenges emanating from Southeast Asia remain, and in many ways are becoming more acute. The Covid pandemic had a negligible impact upon narcotics flows, rates of child sexual exploitation, or illicit financial flows, but impacted severely upon interdiction efforts. Other transboundary threats relate to health, zoonotic diseases and issues related to biosecurity.

How would we implement this?

First steps would be ...

Understanding how we are received and valued in the region by convening Southeast Asian interlocutors such as community groups, business, government, universities and think tanks to understand their perspectives on Australian engagement and development assistance. The purpose of doing this is to reveal perspectives on Australian strengths, weaknesses, and approaches to the region so that any subsequent strategy and allocation of efforts generate the desired outcomes. This would also test Australia’s own assumptions about our approaches.  

Convening learning opportunities with informed development observers who have thought about these issues, like-minded partners (and implementing organisations such as The Asia Foundation, NGOs, impact investors and delivery partners) for ideas and to better understand how they are approaching this changed moment. This would prioritise working through the adequacy and practicability of policy recommendations. There has been very little contestability or new Australian policy development in the region for years. Such a forum will provide an evidence base for contesting and remaking policy. 

Better knowledge management that captures what we know and makes sure we’re all operating off the same base. This ties in with the previous Pitch in this inquiry, advocating for more informed situation analysis to better appreciate the interests and challenges countries in the region face. This will mean the Australian Government can determine where, how and to what end its development dollar should be spent in Southeast Asia.    

Bigger steps would be ...

More integrated operations at post, with development and other agencies — such as Defence — working more closely together. However, this needs to go beyond talking; there needs to be a game plan, a hierarchy and better means for DFAT and/or PM&C pulling rank.    

Instituting a new approach to development by shifting away from ‘thematic investments’ towards the selection of three to four intended ‘effects’ of the development efforts, and tracing policy and portfolio levers beyond the development budget. Work already goes into country strategies to try to consolidate ‘whole of government’ activities; this proposal builds on that. Resourcing and serious commitment would be needed to make it happen.

Review the development program’s setting with countries that have crossed the threshold into ‘upper middle income’ — such as Indonesia and the Philippines — to understand if Australia is on track in terms of its approach and positioning.  

A comprehensive response would be ...

Building on the previous steps, Australia could consider a completely new approach that radically reframes problems, solutions and development relationships. This means us asking — and answering — the question: what’s our big development idea in Southeast Asia? Is it deeper integration with the economies of the region? Is it drawing them together to provide alternative strategic choices? These are questions that are well-suited to the new Office of Southeast Asia, since its whole-of-Government remit will see it drawing in the intelligence and expertise of departments such as Treasury and Defence.

This could feed into a UK-style integrated review that assessed Australia’s relationship with Southeast Asia. As Richard Moore and Melissa Conley Tyler point out, the key here would be that such a review follows the UK’s lead to be a more forward-looking project, rather than simply a review for the sake of a review.

What's the policymaker's take on this?

Australia has neglected Southeast Asia over the past decade, at least compared to other regions of the globe, and we’ve shown an inability to work the region as intensively as we must to achieve national interest goals. A symptom of this has been our level of development spending. While October’s budget boosted total spending by 1.4 billion dollars over four years, the lion’s share is going to the Pacific, with Southeast Asia receiving 470 million dollars over four years. 

The region is changing rapidly. These stepped suggestions are practical to meet the moment. Reviewing our strategy shouldn’t be feared or regarded with trepidation. Relationships are never static nor simplistic. It is time we asked ourselves what our goal in the region is, and how we might best achieve that — its importance to us isn’t going to decline, we need an approach that reflects that reality.

What inspired this idea?

The Asia Pacific Development Diplomacy and Defence Dialogue paper: ‘What does it look like for Australia to be a strategically coherent actor in Southeast Asia?’ notes that the region has always played a significant role in Australia’s international relations. However, Australia's rhetorical acceptance of ‘ASEAN centrality’ has been undermined by announcements that take the region by surprise.  

Writing in the Strategist, Richard Moore and Melissa Conley Tyler sang the praises of the UK’s integrated review of security, defence, development and foreign policy, titled Global Britain in a competitive age. They also wrote on the value of strategic coherence, with the need for a body that takes the lead in international coordination. 

Meanwhile, The Asia Society developed a suite of policy options for governments to consider in responding to trade coercion, and looked at the pandemic’s impact on the region and the outlook for the region in its wake. 

Research and analysis team

Gordon Peake, Richard Moore, Bridi Rice, Izzy Coleman and Jason Staines.

Australia’s focus has been on the Pacific and cultivating alliances such as the Quad and developing new ones such as AUKUS.

Whilst pockets of poverty persist in some parts of the region, requiring traditional community development programming responses, the development support needed elsewhere is different.

The White Paper placed ASEAN at the centre of things and was relatively prescient on the future, misestimating only the pace of change.