Annual Report 2005-2006

Annual Report home |

Table of Contents |

Userguide |

Download versions

1. Overviews2. Performance3. Corporate4. Appendixes5. Financials6. Glossaries and Compliance Index

Your location: Performance > Outcome 1 > Output 1.1 > 1.1.2 South and South-East Asia

OUTPUT 1.1: Protection and advocacy of Australia's international interests through the provision of policy advice to ministers and overseas diplomatic activity

1.1.2 South and South-East Asia

On this page: Overview :: South-East Asia :: ASEAN and regional issues :: South Asia :: Outlook


The department advanced Australia's political, strategic and economic objectives in South and South-East Asia. We built on Australia's generous assistance and practical cooperation in response to the Indian Ocean tsunami to advance relations with Indonesia and Thailand. We maintained the momentum in Australia's growing relationship with India.

The department coordinated the Government's response to the April 2006 breakdown in law and order in East Timor, which included the deployment of troops and police as part of an international stabilisation force and evacuation of Australian and foreign nationals.

We made continued efforts to engage regional countries on security and counter-terrorism issues. We consolidated Australia's framework for bilateral counter-terrorism cooperation, including by concluding a counter-terrorism memorandum of understanding with Afghanistan and building practical cooperation with Indonesia, Thailand, the Philippines and Bangladesh.

We continued to expand our dialogue and interaction with regional governments on transnational crime issues, including drug trafficking, people smuggling and money laundering, to advance Australian policy objectives. We promoted regional cooperation through the Association of Southeast Asian Nations (ASEAN) and the Interfaith Dialogue process. Australia's engagement with ASEAN was strengthened by the Prime Minister's attendance at the inaugural East Asia Summit (EAS) in Kuala Lumpur in December 2005.

The department's support for a range of high-level visits in both directions, including visits by Prime Minister Howard to Indonesia, India and Pakistan, helped maintain the strong political momentum in our relations with partners in South and South-East Asia.

We promoted Australian commercial interests by pushing for increased market access and helping companies strengthen their presence in the region. We concluded a Trade and Economic Framework (TEF) with India and a Trade and Investment Framework (TIF) with Indonesia. We continued to implement and enhance the Thailand–Australia Free Trade Agreement (TAFTA) and refine the provisions of the Singapore–Australia Free Trade Agreement (SAFTA).

The department successfully concluded negotiations allowing the signing of an agreement with East Timor on maritime boundary and resource issues.

South-East Asia


The department strengthened bilateral cooperation with Indonesia on security and commercial issues and facilitated stronger people-to-people links.

The bombings in Bali in October 2005 highlighted the importance of continued work to expand and strengthen bilateral counter-terrorism cooperation. The department coordinated consultations with Indonesia on the Australia–Indonesia agreement on a framework for security cooperation and supported the expansion of counter-terrorism cooperation in law enforcement, border protection, transport security and countering extremism. To advance regional counter-terrorism cooperation, Australia and Indonesia agreed to co-host a sub-regional counter-terrorism conference.

The signing of a Trade and Investment Framework (TIF) in September 2005 by Mr Vaile and Indonesian Minister of Trade Dr Mari Pangestu created opportunities to enhance commercial ties. The department began implementing the TIF in cooperation with Australian business. We continued to advance Australia's market access interests in Indonesia, advocating the need for improved conditions for agricultural products and ensuring the interests of Australian exporters were represented in processes to reform Indonesia's tariff system.

Efforts to solve the problem of illegal fishing in Australia's northern waters were assisted by a package of bilateral measures announced by Mr Downer in December 2005. The measures will tackle the problem at source in Indonesia and at sea in Australia through enforcement, education and capacity building. Australia and Indonesia have also agreed to convene a regional ministerial meeting to discuss measures to address the shared problem of illegal fishing.

The department advocated Australia's interests with Indonesia in the period following Australia's decision to grant protection visas to 42 Indonesians from Papua province in March 2006. The department facilitated a range of high-level bilateral consultations to address issues arising from the visa decisions.

We facilitated visits by Australian ministers and officials to Indonesia, including a visit by Prime Minister Howard in June 2006 and four visits by Mr Downer. We coordinated the five-minister delegation to the 8th Australia Indonesia Ministerial Forum in Bali in June 2006. We supported the visits to Indonesia by the Treasurer, Peter Costello, the Attorney-General, Philip Ruddock, the Minister for Health and Ageing, Tony Abbott, the Minister for Immigration and Multicultural Affairs, Amanda Vanstone, the Minister for Education, Science and Training, Julie Bishop, the Minister for Justice and Customs, Chris Ellison, the Minister for Fisheries, Forestry and Conservation, Eric Abetz and the Minister for Vocational and Technical Education, Gary Hardgrave. This high-level and diverse political contact demonstrated the strength and range of our shared interests with Indonesia.

Implementation of the $1 billion assistance package under the Australia–Indonesia Partnership for Reconstruction and Development (AIPRD), announced by Prime Minister Howard and President Susilo Bambang Yudhoyono in January 2005, has continued. All of these funds have now been allocated to high-priority activities, such as rebuilding communities in Aceh and other disaster-affected areas of Indonesia. AIPRD funds are also being used to promote economic growth across Indonesia by providing critical economic and social infrastructure, increasing educational opportunities and skills, strengthening the base for sound economic management and enhancing Indonesia's emergency preparedness and response systems.

In recognition of Indonesia's status as Australia's largest development partner, Ministers at the 8th Australia–Indonesia Ministerial Forum launched the Australia–Indonesia Partnership as the banner under which all of Australia's development assistance efforts in Indonesia will be promoted, including those originally designated under the AIPRD.


The department strengthened Australia's cooperation with Thailand in trade and investment, law enforcement, counter-terrorism, education, defence, migration and tourism. We facilitated visits to Thailand by Mr Downer in July 2005 and by Mr Vaile in September 2005. The visits demonstrated deepening bilateral ties with Thailand and resulted in closer political and economic cooperation.

Minister for Industry, Tourism and Resources Ian Macfarlane visited Thailand in September 2005 to explore trade and investment opportunities in the automotive and mining sectors. We conducted senior officials' talks with Thailand in February 2006 to strengthen dialogue on issues of mutual interest, including counter-terrorism and regional developments.

The department continued to implement the Thailand–Australia Free Trade Agreement (TAFTA), which came into effect on 1 January 2005. We maintained an active TAFTA advocacy program promoting the agreement's benefits to Australian businesses to ensure they took full advantage of new market access opportunities. Over 600 Australian companies registered as active exporters to Thailand under the agreement and almost 8000 individual TAFTA certificates of origin have been issued for shipments to Thailand since the agreement came into force.

With our Thai counterpart, the department reviewed the operation of TAFTA at the inaugural TAFTA Joint Commission meeting in Bangkok in December 2005. The two sides agreed to begin negotiations on services, investment, competition and business mobility and to establish a working group to consider improved market access.

On counter-terrorism, the department worked closely with the Department of Defence, the Australian Federal Police and relevant Thai authorities to build support for Australia's counter-terrorism policies and improve cooperation. Under the Muslim Cultural Exchange Program with Thailand, we hosted a series of visits to Australia by delegations of Muslim community leaders from southern Thailand to expose them to the role of the Australian Islamic community in Australian society and to build mutual understanding of our cultures, societies and educational institutions.


The department maintained a close dialogue with Singapore on issues of mutual interest, including regional security, the development of regional institutions and international economic and trade trends. Cooperation on counter-terrorism was an important feature of our security engagement with Singapore.

The department's consultations with Australian business in preparation for the ministerial review of the Singapore–Australia Free Trade Agreement (SAFTA), will ensure that proposed changes to SAFTA respond to Australian business interests. The department led three rounds of negotiations with Singaporean officials in preparation for the review, with Australia's principal objectives being to gain improved access to Singapore's legal, education and telecommunications sectors.

High-level exchanges continued to reinforce the strength of the bilateral relationship. The 5th Singapore–Australia Joint Ministerial Committee Meeting, held in Perth in August 2005 and involving foreign, defence and trade ministers from both countries, was an important feature of this high-level engagement, as was a visit by Mr Downer to Singapore in May 2006. Underlining the closeness of the bilateral relationship, Singaporean Prime Minister Lee Hsien Loong visited Australia in June 2006. Both sides publicly stated their appreciation for the close and frank dialogue at ministerial and officials' level. The Government's decision not to allow Singapore Airlines to fly on the trans-Pacific route did not overshadow positive aspects of the relationship.


As key elements of our strategy to enhance bilateral relations, the department advanced joint activities agreed during the visit to Australia by Malaysian Prime Minister Abdullah Badawi in April 2005. For example, following their launch during Prime Minister Abdullah's visit, two rounds of negotiations were held on a Malaysia–Australia Free Trade Agreement (MAFTA). The department, which led Australian agencies in the negotiations, is seeking to conclude a comprehensive, high-quality agreement that will provide significant economic benefits to both countries.

The 12th Joint Trade Committee meeting, held in Kuala Lumpur in August 2005, provided a mechanism for forward-looking cooperation in a range of sectors of interest to the Australian business community, including franchising, agriculture, health, construction and coal/energy. The department continued to work closely with the Department of Agriculture, Fisheries and Forestry to remove barriers in the halal beef export trade. In an effort to stimulate further interest in trade with Malaysia, the department supported the Australian High Commissioner and Senior Trade Commissioner to Malaysia in undertaking a joint trade road show in key Australian cities in February 2006.

Personal profile: Margaret Twomey, Ambassador to East Timor

Photo - See caption below for description
Ambassador Margaret Twomey with traditional East Timorese dancers at the Motaain border post with Indonesia, August 2005.
Enlarge image :: Photo gallery

As a major aid donor, strategic partner, friend and neighbour to East Timor, Australia has worked closely with the Timorese people to support its ongoing efforts towards a sustainable future. Margaret Twomey has been Australia's Ambassador to Timor since August 2004, two years after the country achieved independence. But the challenges of statehood are complex, exemplified by the political and security crisis which beset from April to July this year.

Margaret described the crisis as a 'major professional challenge.' The rapid unfurling of events 'took the post through the full gamut of crisis management.' This included coordinating a military-assisted consular evacuation and establishing an Australian-led international stabilisation force. In the midst of working for these outcomes, Margaret remained acutely aware of her responsibility for maintaining 'embassy security and staff welfare' and administering the post during a period where East Timor's government had all but ceased to function.

At the invitation of leadership, Australia responded to the crisis by sending around 2600 troops and 200 police as part of an international stabilisation force to re-establish security. The department also coordinated the evacuation of 211 Australian nationals. While East Timor continues to face many long-term challenges, Margaret is committed to building the best relationship possible between both countries. Managing bilateral relationships with the 'complexity, depth and breadth of ours with is never easy. As the Australian Ambassador, my overriding objective is to develop and maintain good communication and mutual respect.'

Margaret joined the department in 1988. She has also served overseas at Australia's missions in Suva, London and Belgrade. In Canberra she has worked on a range of bilateral and multilateral issues.

A visit by Mr Downer to Malaysia in December 2005, as well as a visit by Malaysian Foreign Minister Syed Hamid Albar to Australia in June 2006, enabled high-level exchanges on regional security and defence issues, notably counter-terrorism, proliferation of weapons of mass destruction and the security situation in East Timor. The ministers discussed cooperation between Malaysian and Australian forces deployed to East Timor to restore stability.


The department supported the inaugural Philippine–Australia Ministerial Meeting held in Sydney in August 2005. Involving participation by foreign and trade ministers from both countries, as well as representatives of the business community and senior officials, the meeting agreed to pursue an ambitious program of bilateral engagement over 2005–07.

At the meeting ministers agreed to inaugurate bilateral counter-terrorism talks—the latest initiative in our extended engagement with the Philippines as part of a shared effort to eliminate terrorism in our region. The first round of talks was held in Manila in June 2006. In implementing other decisions from the ministerial meeting, the department coordinated a range of bilateral visit programs and increased efforts to promote Australian investment in the Philippines' mining sector. In response to the commitment made by ministers, we worked with other agencies to improve aspects of the commercial relationship. A long-standing irritant was removed from the commercial relationship with the entry into Australia of the first test shipment of Philippine pineapples and we continue to work with the Philippines to resolve other quarantine issues affecting bilateral trade.

Australia cooperated closely with the Philippines in co-chairing the second Regional Interfaith Dialogue (with Indonesia and New Zealand). The dialogue, held in Cebu in the southern Philippines in March 2006, brought together faith leaders from across South-East Asia to promote moderation and mutual understanding among the region's religions.

East Timor

The department coordinated the whole of government response to the breakdown in law and order in East Timor in May 2006. At the invitation of East Timor's leadership, the Government responded to the crisis by dispatching troops and police as part of an international stabilisation force to re-establish security. The department facilitated the evacuation of Australian and foreign nationals seeking to leave the country. The crisis temporarily impeded the delivery of the Government's bilateral development assistance to East Timor, although Australia was at the forefront of international efforts to provide assistance to alleviate short-term suffering resulting from the deterioration in the security situation. Through intensive lobbying in key capitals and at the United Nations in New York, the department advocated a new expanded United Nations mission to East Timor to help meet the country's immediate need for assistance and longer-term challenges.

Negotiations with East Timor on maritime boundary and resource issues, led by the department, successfully concluded with the signing of an agreement on 12 January 2006 (see sub-output 1.1.7 for more information).


The department continued to promote Australia's close cooperation with Vietnam in counter-terrorism, defence, law enforcement, immigration and education.

In view of Vietnam's hosting of APEC during 2006—before it passes the mantle to Australia in 2007—the department intensified cooperation with Vietnamese agencies on APEC issues. We facilitated a visit to Vietnam by the Parliamentary Secretary for Trade, Mrs Kelly, to attend the APEC Ministers Responsible for Trade Meeting in June 2006. We supported the visit by the then Parliamentary Secretary for Foreign Affairs, Mr Billson in October 2005 which advanced Australia's cooperation with Vietnam on landmine clearance. We supported the visit by Minister for Health and Ageing, Tony Abbott, in June 2006 to extend Australia's cooperation with Vietnam on combating avian influenza.

Through sustained trade advocacy the department concluded bilateral negotiations with Vietnam in May 2006 as part of Vietnam's process of accession to the WTO. The negotiations resulted in Vietnam markedly improving its offers on market access for Australian goods and services (see sub-output 1.1.6 for further information).

The department pursued closer dialogue and cooperation with Brunei on counter-terrorism following the signing of a bilateral memorandum of understanding on counter-terrorism during the Sultan of Brunei's visit to Australia in February 2005. The department continued to lobby Brunei in support of Australian commercial interests, with three proposals for sizeable investment projects currently under consideration.

Australia's relations with Laos continued to expand. Australia's ongoing development assistance program, cooperation to combat terrorism and transnational crime and growing investment interests contributed to the expansion. The department organised visits to Laos by Mr Downer in July 2005 and Mr Vaile in September 2005. The visits resulted in improved cooperation on human rights and better access for Australian mining investment. Parliamentary Secretary for Foreign Affairs, Ms Gambaro, visited Laos also to advance cooperation in mine clearance and rehabilitation activities in June 2006.

Australia continued to promote constructive relations with Cambodia on a range of issues, including defence, counter-terrorism, transnational crime and democratic institution-building. With Cambodian cooperation, we held successful workshops on the implementation of obligations under the Chemical Weapons Convention and building counter-terrorism capacity. The then Parliamentary Secretary for Foreign Affairs, Mr Billson, visited Cambodia in October 2005 when he announced additional Australian funds for mine clearance projects in Cambodia over the next five years under a United Nations Development Programme multi-donor project.

The department made regular representations to regime leaders in Burma calling for democratic political reform, national reconciliation, respect for human rights and release of political prisoners, including Aung San Suu Kyi. In the United Nations and the International Labour Organisation, Australian delegations urged Burma's regime to improve the human rights situation there. Consistent with our interest in a secure region, we maintained limited interaction with the regime to tackle transnational crime and public health issues, including narcotics and people trafficking, counter-terrorism, money laundering, HIV/AIDS and avian influenza.

ASEAN and regional issues

Australia's close and long-standing engagement with the Association of Southeast Asian Nations (ASEAN) and other East Asian countries was strengthened further when Prime Minister Howard attended the inaugural East Asia Summit (EAS) in Kuala Lumpur on 14 December 2005. The EAS brought together leaders from the ten ASEAN countries as well as Australia, China, Japan, India, New Zealand and the Republic of Korea to discuss issues of strategic and economic importance to the region. The Summit demonstrated the value of a leaders dialogue at a time of dynamism and challenge in East Asia.

The department managed Australia's accession to the Treaty of Amity and Cooperation paving the way for Australia's inclusion in the EAS. While in Kuala Lumpur for the EAS, Mr Downer also announced a $10.5 million package of support for trade and economic cooperation between Australia, ASEAN and other EAS members.

FIGURE 9. Australia's trade in goods(a) and services with ASEAN

Figure 9: Australia's Trade in Goods and Services with ASEAN

(a) Goods data is on a recorded trade basis.

Source: DFAT Stars database; ABS Regional services data 2005

South Asia

The importance of South Asian countries as strategic and economic partners for Australia continued to grow in 2005–06 (see box below).

South Asia: Australia's rising strategic stake

South Asia is an important strategic priority in Australian foreign policy. In a relatively short period, particularly during 2005–06, our economic, trade, military, political and cultural interests in the region have expanded rapidly

But it is not just in India where Australia's South Asian focus has sharpened.

With India's continuing rise and Australia's activist counter-terrorism strategies, Australian interests in South Asia are set to increase further. The department is well placed to advance the Government's interests in South Asia—a centre of global economic growth and strategic importance.


Photo - See caption below for description
High Commissioner to Pakistan Zorica McCarthy visits the town of Maciara Dana, in Pakistan’s Neelum Valley, in the Muzaffarabad district to oversee the distribution of Australian-provided supplies to the earthquake-devastated village. The Government contributed approximately $84 million to earthquake relief in Pakistan. Photo: Caroline Chaumont, WFP
Enlarge image :: Photo gallery

The department maintained the momentum in Australia's growing relationship with India. We provided significant input and support to Prime Minister Howard's visit to India in March 2006, which underscored the increasing convergence of India's economic and strategic interests with Australia. During the visit, six bilateral agreements or memorandums of understanding were signed, including a Trade and Economic Framework to provide impetus and direction to our commercial partnership.

The department assisted an increasing number of Australian companies seeking access to the Indian market. Trade continued to grow strongly and India now ranks seventh as a market for Australian exports and 12th as a trading partner overall. With India emerging as a tourism market of significant potential for Australia, we promoted Australia as a major tourism and education destination for India's expanding middle class.

The department played a central policy role and provided logistical support for bilateral senior officials' talks and the strategic dialogue in New Delhi in February 2006. The two sets of talks highlighted our shared interest in strengthening cooperation in counter-terrorism and maritime security. We welcomed India's participation in the East Asia Summit as a further tangible sign of its increasing engagement with our region.


The department provided support for Australia's contribution—valued at approximately $84 million and including a large Australian Defence Force mission—to relief and reconstruction efforts in northern Pakistan following the devastating earthquake in October 2005. We provided policy and administrative input for the visit to Pakistan by Prime Minister Howard in November 2005 which focused on disaster relief and counter-terrorism. We conducted inaugural senior officials' talks with Pakistan in March 2006 to strengthen bilateral cooperation on issues of mutual interest, including the situation in Afghanistan. With other Government agencies, we intensified Australia's engagement with Pakistan on counter-terrorism and transnational crime issues.


The department continued to give priority to Australia's efforts to assist Afghanistan's democratic transition. We facilitated high-level visits to Afghanistan, including by Prime Minister Howard and Mr Downer. We supported AusAID's contribution to international reconstruction efforts and Australian Defence Force deployments to Afghanistan. Australia renewed its bilateral aid commitment at the London Conference on Afghanistan and encouraged the international community to help maintain support. We signed a memorandum of understanding on counter-terrorism cooperation, providing a framework for cooperation in law enforcement, finance, defence, intelligence, security and border control.

Following the Government's decision to open an embassy in Kabul, the department led a whole of government effort to prepare for the embassy's opening, with a particular focus on the security of the future chancery and safety of staff.

The department supported Australia's trade and investment interests in Sri Lanka and Nepal. In Bangladesh, we continued to promote Australia's commercial interests and bilateral cooperation on counter-terrorism, as well as maintaining our development assistance program (with AusAID).

TABLE 6. Australia's trade in goods and services with South and South-East Asia
  Export Export   Import Import  
Goods(a) and services 2004 $m 2005 $m Trend growth 2000–2005 2004 $m 2005 $m Trend growth 2000–2005
Indonesia 3 999 4 297 0.8% 4 667 4 546 3.5%
Malaysia 3 403 3 563 1.4% 6 289 6 877 7.1%
Philippines 1 113 1 005 –10.0% 1 020 999 7.4%
Singapore 5 417 6 379 –6.2% 8 787 11 458 13.6%
Thailand 3 584 4 669 11.7% 4 640 5 732 10.7%
Vietnam 862 893 7.2% 2 814 3 769 8.7%
Other ASEAN 196 223 5.5% 818 859 17.6%
Total Asean 18 575 21 029 –0.3% 29 035 34 239 9.3%
India 6 106 8 010 28.7% 1 368 1 516 10.3%
Other South Asia 1 252 1 157 –0.2% 424 369 –3.5%
Total South Asia 7 358 9 166 21.6% 1 792 1 886 6.5%
Total 25 933 30 195 4.1% 30 827 36 125 9.2%

(a) Goods data is on a recorded trade basis.

Source: DFAT Stars database and ABS International trade in services by partner country 2005


The department will continue to advance Australia's political, strategic and economic objectives in South and South-East Asia with particular focus on counter-terrorism, transnational crime and market access. We will remain alert to the possibility of an outbreak of avian influenza and its impact on the region and our interests.

The department expects to enhance practical cooperation with Indonesia in counter-terrorism, illegal fishing, Trade and Investment Framework implementation and parliamentary links. Differences of approach may continue to arise on some issues. Effective management of these differences will be important.

Political and security developments in East Timor underscored the need for ongoing assistance from the international community. Efforts to address this situation will remain a priority for the department.

The department will give continued impetus to Australia's relationship with India, building on the strong momentum of recent years. We will continue to support Afghanistan's transition, working with other agencies including the Department of Defence, the Department of Immigration and Multicultural Affairs and AusAID. We will also continue to expand our cooperation on counter-terrorism with Pakistan and Bangladesh.

Return to top of page