SPEECH BY HE JAMES BATLEY AUSTRALIAN HIGH COMMISSIONER TO FIJI HOLIDAY INN, SUVA, 22 AUGUST 2007

Mr Malcolm Barrow, distinguished guests, ladies and gentlemen. Good evening. May I start by thanking our hosts, Freudenberg Vilene Interlinings, for their hospitality. I commend their faith in the future of Fiji’s textiles, clothing and footwear industries, and wish Freudenberg and all Fiji manufacturers present continued success.

I’d like to take this opportunity to introduce Australia’s temporary Trade Commissioner, Mr Amit Misra. When we move outside for drinks, Amit will be more than happy to talk to anyone present about doing business with Australia.

What I’ll be focussing on in these remarks is the government policies – both in Fiji and in Australia – that have been a critical factor in the garment industry’s development and its more recent challenges.

The Fiji Government’s 13 year tax holiday for export industries no doubt helped attract investment into this sector.

But a range of Australian policies gave the TCF industries a real boost in the late 1980s and the 1990s. These policies included:
 SPARTECA, providing duty-free access to Australia;
 high tariffs (Australia’s average tariff on TCF goods was 68% in 1987);
 quotas on the importation of TCF goods; and
 the Import Credit Scheme.

It’s a very different picture today. SPARTECA is still with us but Australia’s tariff on garments is now 17.5% and falling. Quotas and the Import Credit Scheme both ended years ago.

One new feature on the policy landscape is the SPARTECA (TCF Provisions) Scheme, which came into operation in 2001. This is a rather complex scheme, far more suited to a USP economics lecture than to an after-dinner speech. In summary, it allows manufacturers to earn points on garments exported with a high Forum content and to use points to top up Forum content on garments with a Forum content as low as 35%. If topped-up to 50%, the garments can enter Australia duty free. It has safeguards to protect Australian industry, including the exclusion of fabrics made from or incorporating wool.

As Mark mentioned, the changes in policy have taken their toll on Fiji’s garment industry, with sales and employment significantly down on their peak in 1999.

It was not only Australian policies that have affected Fiji. The abolition of the remaining quotas in 2005 under the WTO Multi-Fibre Agreement hit many countries hard, including Fiji.

Australia’s current tariff of 17.5% and the additional flexibility provided by SPARTECA TCF does still provide benefits, allowing those operators with a view to longer term survival time to prepare for 2010, when Australia’s tariff on garments will fall to 10%. But the conclusion is clear: Fiji industry can no longer rely on Australian or other countries’ tariffs or policies for its survival – it must increase its international competitiveness.

Fiji is not the only country to have confronted such challenges – Australia’s own TCF industry has changed dramatically in the past 20 years. Employment has fallen from around 116,000 in 1986 to fewer than 60,000 now.

And here I must say that it is not the Australian Government’s view that Fiji’s TCF industry is doomed. If we believed that, we would not be providing the assistance that we are currently providing. However, the industry is not the same today as it was 20 or even 10 years ago, and it will be different five years from now.

Let me note here, by the way, that the development of our program of assistance to the industry has continued following the coup of last December. Like other donors, we did suspend some important areas of our aid program in response to the coup. Our ongoing support for this particular program does not in any way represent a softening of our view on the coup. That is well known, I hope. But we see our support for the sector as consistent with the principles enunciated by Australia’s Foreign Minister Alexander Downer in determining our response to the coup.

Under our program of assistance, Australia is providing some F$3.28 million on training and related support to Fiji’s TCF industry over three years. The program has four main components:
 Component 1 is Technical Assistance. The objective here is to improve productivity and efficiency levels of TCF firms through operational improvements in production processes and quality of products.
 Component 2 is Training Assistance: The objective is to improve labour productivity and human resource management in the Fiji TCF industry. Areas of focus include: leadership and management; planning and organisational skills; and production line skills.
 Component 3 is Business Development Assistance: The objective is to improve business planning and market development capacity of TCF firms.
 Component 4 is Productivity Improvement Measurement: The objective is to measure productivity improvements of the Fiji TCF industry.

In addition to this assistance, last year Australia agreed to improvements to the SPARTECA-TCF Scheme. The deeming provision was removed last September, on a trial basis, reducing the points required for most exports under the Scheme. A process is underway with the intention of reducing the minimum local area content to 25%. I emphasise intention, because last year the Australian and Fiji Governments agreed that this change will be made only if three conditions are met:
 the first condition is greater uptake of the training opportunities being funded by Australia;
 the second is demonstrated productivity increases; and
 the third condition is a credible audit and compliance program in place.

I must emphasise: the reduction in minimum local area content will proceed only when the Australian Government is satisfied that all three conditions have been met.

In this regard, it was disappointing to hear that a number of companies receiving assistance have not been regularly providing the data required by the program. All firms receiving assistance have signed an MOU stating they will fully commit to participation on all components and allow the collection of select operational and financial data. This data is critical to ensuring that performance gains made by the industry as a result of the program can be accurately measured and reported – essential to demonstrating that the second condition has been satisfied. We need your cooperation with the provision of this data.

Likewise, it is concerning that a number of business principals appear not to have understood the value or importance of the training program that has been developed. With what is at stake for the industry it is difficult to understand why any business owner would fail, for example, to nominate staff to attend a supervisory skills course, or presume that there was no need to participate in leadership or change management programs.

Since SPARTECA was signed, Australia has entered into several free trade agreements, starting with New Zealand in 1983. We now have FTAs with Singapore, Thailand and the United States, and are negotiating with ASEAN (along with New Zealand); Malaysia; China; Chile; the Gulf Cooperation Council; and Japan. We are also conducting a joint study on the possibility of a FTA with South Korea.

We are willing to enter into a FTA with our Pacific island neighbours. The Pacific Agreement on Closer Economic Relations, or PACER, commits all members to begin negotiations on free trade agreements by 2011 at the latest. We consider that, as the world becomes smaller through increased globalisation, the best way forward for island countries is to integrate themselves into the world economy.

Indeed, at a major speech on Australia’s relations with the Pacific region delivered less than two weeks ago, Foreign Minister Alexander Downer raised the possibility of some countries in the region wanting to move faster and further than PACER. For those countries committed to economic and governance reforms, Australia could provide additional assistance targetted at economic growth, assistance in attracting investment and promoting trade; and help with meeting Australian requirements for exports. This proposal underlines Australia’s commitment to working with the countries of the Pacific, over the long term, to address their economic and governance challenges.

In a complex and fast changing world, there can be no doubt that the Fiji TCF industry faces some real challenges. But I trust I have made it clear that Australia stands ready to assist the industry in looking to the future to meet those challenges.

Once again, thank you to our hosts, Freudenberg, and thank you for your attention.