Address by Deputy Minister Aziz Pahad to the Africa - Asia Society, 02 October 2000

Chairperson,

Your Excellencies, members of the Diplomatic Corps, fellow participants

President Mbeki at the recent historical UN Millennium Summit said : "The poor of the world stand at the gates of the comfortable mansions occupied by every King and Queen, President, Prime Minister and Minister privileged to attend this unique meeting. The question these billions ask is – what are you doing …. to end the deliberate and savage violence against us that, everyday, sentences many of us to a degrading and unnecessary death! ….."

The fundamental challenge that faces this Millennium Summit is that, credibly, we must demonstrate the will to end poverty and underdevelopment!

We are very encouraged by the The Millennium Summit Declaration which stated:

"The central challenge we face today is to ensure that globalisation becomes a positive force for all the worlds people. While globalisation offers great opportunities, at present its benefits are very unevenly shared, while its costs are unevenly distributed. We realise that the developing countries and countries with economies in transition face special difficulties in responding to this central challenge.

Thus only through broad and sustained efforts to create a shared future, based on our common humanity in all its diversity, can globalisation be made fully inclusive and equitable."

South-South relations, and SA and African relations specifically with the Asian continent, is a foundation which will ensure that globalisation is fully inclusive and equitable. Therefore, it gives me great please to be here today, to exchange ideas on the importance of African-Asian relations, and in this context, share with you some thoughts on my recent visit to Singapore, Thailand and Vietnam.

Our host, the African Asian Society plays an important role in stimulating interest in Asian affairs in South Africa. It is important that Africans & Asians should breach the knowledge divide and open the curtain of ignorance that unfortunately still exists on many issues relating to our two regions.

I recently visited Singapore, Thailand and Vietnam. The main aim of my visit was to consolidate and strengthen our bilateral political and economic relations and to open the curtain of ignorance. We also explored new opportunities for South Africa to establish relations of substance with these three countries in areas such as interaction at multilateral fora, the utilisation of business and investment opportunities and the development of SMME’s. Furthermore to look at the similarities and complimentaries of ASEAN and SADC.

It was also an opportunity for me to participate in our Asian and Middle East Heads of Mission meeting which was held in Singapore.

I was surprised that our invitation to Chambers of Commerce, SACOB, AHI, NAFCOC and others for business representatives to accompany our delegation rendered poor results.

Is this another manifestation of the curtain of ignorance that exists in South Africa about the potential of economic relations with Asia?

Concretely, why is Asia, important to South Africa and Africa? Asia affords us excellent opportunities to significantly expand our economic relations, tourism, science and technology co-operation (including technological transfers), research co-operation and exchange of expertise.

According to the 1999 Annual report of the World Bank.

East Asia

Reputed for its fast growth, sound management, income equality, it is now recovering from the worst economic collapse in modern times. Current account balances, dangerously in deficit in 1997 have swung by more than 100 billion dollars into large surpluses. Region enjoy more stable exchange rates and interest rates have fallen to pre-crisis levels.

However, recovery remains uneven, but profound changes are taking place. East Asia is on its way to becoming the fastest growing region among developing countries in 2000.

South Asia

GDP grew at an estimated 5.2% in 1998. This was slightly below the 1991-1997 average of 5.7%, but faster than in other regions. South Asian economies were largely insulated from the immediate fallout of the East Asian crisis.

Slower growth was a result of a slackening of export markets, loss of momentum in policy reforms, political instability, the century’s worst floods in Bangladesh, the fall in tourism to Sri Lanka and other areas and G-8 economic sanctions against India and Pakistan.

The region contains a little more than 20% of the world’s population, it is a home to 40% of the wolds poor.

The World Bank identifies some reasons :

under investment in human capital

the region is the least integrated in the world economy : it accounts for only 1% of world trade and receives just 3.6% of net private long term capital flows to developing countries

civil conflicts inter alia in Afghanistan, Sri Lanka, Nepal and Kashmir

These are some of the same problems inflicting sub-sharan africa together we can begin to tackle these problems.

South Asian countries are taking major steps to deal with their problems and analysts believe that there will be a "take off" in many of these countries. South Africans must position themselves to take advantage of the opportunities

Our bilateral trade with the ten member countries making up the Association of Southeast Asian Nation (ASEAN) in 1999 amounted to more that R10,4 billion Rand. South Africa exported goods worth R4,2 billion and imported goods to the value of R6,2 billion. Statistics for the first six months of this year indicate that the trend towards increased trade is being sustained.

The region has a potential market of almost 500 million people which recorded the strongest economic growth patterns in the pre-crisis era. Although the Asian Economic and Financial Crisis devastated many economies, the member countries of ASEAN are all in various stages of economic recovery.

Reputed for its fast growth, sound management and income equity, the region is now emerging from its worst economic collapse in modern times – a collapse that pushed millions back to the brink of poverty and decimated the savings of a whole generation of new middle-class citizens. At the recent ASEAN Summit meeting in Bangkok in July, the ASEAN Foreign Ministers noted that ASEAN’s economy grew by 4,6 percent in 1999 and is projected to grow by between 4,5 and 5 percent this year. This is impressive given South Africa’s own modest economic growth forecasts for this year.

Economic recovery and regeneration brings renewed growth and the possibility to utilise new opportunities to boost our exports to the region and attract new investments from Southeast Asia.

In order to sustain business and investor confidence, the ASEAN leaders in December 1998 agreed to further accelerate the implementation of the ASEAN Free Trade Area (AFTA). The six original members of the ASEAN (Brunei Darussalam, Indonesia, Malaysia, Philippines, Singapore and Thailand) will advance the implementation of AFTA by one year from 2003 to 2002. This decision was made in the midst of the economic crisis and underscores ASEAN’s commitment to continue regional economic liberalisation and integration.

Equally, the member countries of SADC have created strong regional institutions which are aimed at making regional trade easier, cheaper and more tariff-free. A key development took place on 1 September 2000 : The implementation of the SADC Trade Protocol, which will free up the SADC region and make doing business in the region much easier. There is much work still to be done in implementing the protocol, but September 1 marks an important stage in the realisation of a region-wide market. Intra-regional trade is still relatively underdeveloped, currently standing at 10 percent of total exports (as compared to 70 percent of APEC, 55 percent of the EU, and 52 percent for NAFTA). The SADC region is developing into a substantial regional economic entity and this offers great trading potential and long-term economic partnership for ASEAN members.

In reading the documentation emanating from the recent ASEAN meetings in Bangkok, I was also struck by both the political and economic similarities with SADC’s approach. We thus find a comforting congruence in our views.

Our common challenge is to mobilise all the forces in the South and in the North, to ensure that the developed countries, take certain concrete measures, interalia;

while accepting that the solution of the debt problem is not a magic wand for the solutions of underdevelopment and poverty, for HIPC countries to have any possibility of tackling their problems of underdevelopment,

the debts of the highly indebted poor countries must be cancelled.

There must be substantial increases in foreign direct investments in the South. If after the Second World War millions of dollars poured into Europe through the Marshall Aid Plan, because of the "spectre of communism", why is it not possible for us to mobilise the same amount of resources to take countries of the South out of the straits it is in. Our objective is a special program for the African Renaissance.

The reduction of overseas development assistance must be halted. It is unacceptable that as the developed countries get richer they cut their development assistance rather than increase it.

There must be greater market access for the products of the South, including agricultural products.

Non-tariff restrictions, which all developed countries without exception impose must be tackled

We need to mobilise against the developed countries, policies of agricultural subsidies, which is helping to sustain their agricultural sector while keeping the prices at an artificially low level

There must be a new transparent financial architecture

The Bretton woods Institutions must be transformed

The "technological devide" must be transformed into the "digital opportunity". Therefore we must ensure that Africa receives relevant and affordable technology.

We have seen a number of important visits to South Africa and from South Africa to the Southeast Asian Region this year. South Africa received President Wahid of Indonesia for a visit in April, we also received Mr Xanana Gusmao from East Timor. The Indonesian Minister of Trade and Industry also visit South Africa for bilateral consultations with Minister Erwin. In addition, the Deputy Trade Minister of Vietnam accompanied by officials and a business delegation visited South Africa in March to sign a bilateral trade agreement.

Chairperson,

On instruction from our host let me deal specifically with my recent visit.

Singapore has been an active economic partner and investor in South Africa and statistics re economic relations has submitted a proposal on developing South Africa as a hub between Southeast Asia and Latin America and this proposal is currently being given renewed attention. As a country with few natural resources, it has developed its human resources to a level where it is recognised world-wide as an important exporter of high tech goods and services. Its port, airport and national air carrier are also examples of well-managed entities.

Singapore’s senior parliamentary secretary to the ministry of trade and industry, Guan Seng Tang, who is leading a delegation from the Singapore Trade Development Board, the Singapore Chinese Chamber of Commerce of Commerce and Industry and businessmen said the lack of a co-ordinated system enabling foreign investors quickly to identify potential partners to act is a stumbling block to foreign investment in countries such as SA.

Tang said there was a need for regular trade missions between SA and Singapore. While there had been several missions to SA, Singapore has not seen as many SA missions in that country, except for representations of SA Companies at the Singapore trade fairs.

Singapore was mainly importing petroleum products, vegetables, textiles, dried nuts and frozen pork from SA. "There is more we can import from SA and that is why we have a delegation in the country".

SA buys telecommunications, information technology equipment and other products from Singapore. Tang said Singapore’s shipping line – the Pacific International Liner – has launched services between Singapore and Durban. There are intentions of extending the service to Cape Town.

Thailand has taken over the chair of the UN Conference on Trade and Development (UNCTAD) from South Africa in April this year and in 1999 became South Africa’s largest trading partner in ASEAN. Thailand is South Africa’s 23rd biggest trading partner at present. An overall long-standing economic relationship exists and this stable country provides South Africa with many opportunities. Thailand is also a source of tourists to South Africa. Bangkok is the regional hub for SAA and Thailand is a popular tourist destination for many South Africans.

The decision of the Government of Vietnam to open an Embassy in South Africa, which followed the placement of a Trade Counsellor in SA during 1999 and the signing of a bilateral trade agreement this year, will further enhance bilateral political and economic interaction. Vietnam currently chairs the ASEAN Minister’s Standing Committee and the country is making the transition from a state controlled economy to a free-market enterprise system. It is following the Chinese process which if, as successful as in the PRC, will afford South African enterprises the opportunities which were not available when China opened up. South African involvement and investment at this early stage could be profitable.

The bilateral trade agreement with Vietnam which was signed during March 2000 with the visit of the Deputy Minister of Trade of Vietnam to South Africa, will strengthen bilateral economic ties. South African exports to Vietnam in 1999 amounted to R25,7 million. During the first five months of 2000, South African exports to Vietnam increased by 48 percent, compared to same period in 1999. Vietnam’s exports to South Africa in 1999 amounted to R101,5 million. During the first five months of 2000, Vietnam’s exports to South Africa increased by 53 percent, compared to same period in 1999. Vietnam currently enjoys a substantial trade surplus.

Vietnam requires investment to upgrade and modernise its infrastructure – especially in sea, road, railway and aviation transport. In the shipping industry, Vietnam has the capacity to build ports but lacks the capacity in seaport drainage, maintenance and repairs. South African companies were encouraged to invest and become actively involved in Vietnam’s transport industry. It was also interesting how often Vietnamese interlocutors stressed and acknowledged the need for ongoing administrative and financial reforms to provide for an easier business climate.

Although Vietnam is not yet a member of the World Trade Organisation (WTO), its role as a major regional player is unquestioned. From a business perspective, Vietnam offers great business and investment opportunities which should be exploited in terms of a highly literate population (second after Singapore), abundant labour resources, a potentially large market of more than 70 million people, accessibility to regional markets, political stability and a variety of untapped resources.

Addressing business representatives, members of local Chambers of Commerce, Boards of Trade and Investment and Government officials, I stressed that Asia and South Africans need to know more about each others countries, given the fact that diplomatic ties between the two countries were relatively new. I also encouraged business representatives to visit South Africa in order to gain first-had experience of the South African business culture and emphasised that South Africa was not only a producer of raw materials, but also possessed world-class technological expertise.

In doing business with Asia, it was forcibly brought home to me by my interaction with expatriate South Africans and other business persons of the importance of the personal approach in dealing with persons from these three countries in particular. One cannot just rush in and do cold business. An example was given of a South African exhibitor who could not understand why an Asian businessman asked him to lunch every day. When asked whether the Asian had taken his brochures and asked about the product, he answered "yes, on the first day". The point that the South African entrepreneur failed to understand was that his product had passed muster. What was now required was to get to know the individual.

In the 3 countries, I visited industries, such as food processing, tourism, infrastructure development, information technology, jewelry manufacturing and transfer of technology, mining were identified as important areas where cooperation could lead to mutual economic benefits. This will be further explored in the next few weeks.

30 Years ago much of Asia was caught up in an endless cycle of conflict, underdevelopment and abject poverty.

Guerrilla wars, ethnic tensions, super power rivalries, imperialist aggression against Vietnam, Cambodia Laos was the order of the day.

Indeed much of the characterisation of Africa, I previously described could be found in much of Asia.

How did some Asian countries achieve their "miracle"? Analysts have identified:

Outward orientation

Macro economic stability

Investment in people

Creation of institutions and policies

Dramatic increase in domestic savings, matched by increased domestic investment

Peace and stability

These are the same challenges Africa faces today.

What are the lessons for Africa? Specifically what are we doing to tap Asia’s experience, expertise and resources?

In conclusion, I want to emphasise that we want to open doors and assist South African business to develop ties with these new markets. Together with the Department of Trade and Industry, we are there to serve and promote South African business because, economic growth and the creation of jobs in South Africa is an important aspect of our foreign policy objectives.

Together, in genuine partnership, we can make South Africa and the continent of Africa a winning team.

Thank you.

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