Annual reports are not noted for their fast pace or thrill factor. They contain lists of activities and achievements; they laboriously detail outputs and summarise outcomes. They sugar-coat and they are often self-congratulatory.

So the 2011-2012 DFAT Annual Report, released two weeks ago, was not expected to walk off the shelves. There was no fanfare, no media release. It was just quietly listed on the DFAT website, and I stumbled on it while looking for some financial data.

But it deserves a much broader audience than the occasional bean-counting researcher. The Secretary's Review, traditionally a fairly anodyne piece, is a beautifully written, candid, panoramic (yet enchantingly brief) assessment of the challenges facing not just the Department but the Australian nation in the conduct of its foreign affairs.

It is the valedictory gift of former DFAT Secretary Dennis Richardson, appointed as Secretary of Defence in mid-October, the cover letter written three days before his commencement at Defence. It's a compelling parting gesture from a 'gritty and fearless' diplomatic stalwart.

Richardson has been a staunch advocate of the Department from the moment he took on the job, and his determination to rebuild it in the face of relentless budget pressures was unwavering. So as not to destroy the eloquence by clumsy paraphrasing, the Secretary's summary of the four big challenges facing the nation is reproduced in full below.

Watch out for some spinning tin hats over there at Defence.

The Challenge

Organisations always have multiple challenges. There is never an end point and there is never a point of perfection which, once reached, does not require adjustment. There are always moving parts, so needs and requirements are always changing. At present, in addition to the challenge outlined above in ‘the policy context’, there are four big challenges which stand out.

The first challenge concerns our own capacity as a nation to seize the opportunity of the forums to which we now belong and to develop integrated strategies in the pursuit of our national interests. Twenty years ago the two forums which Australian Heads of Government attended on a regular basis were the Commonwealth Heads of Government Meeting (every two years) and the Pacific Islands Forum (annually). Today Australian Prime Ministers attend annually the APEC Leaders’ Meeting, the East Asia Summit and the G20 Leaders’ Meeting.

It is important to stand back and reflect on what this means. For the first time, Australian leaders now sit at the same table, a minimum of three times a year, with each of the leaders of the United States, China, Japan, Russia, Korea and Indonesia. We are at the same table a minimum of twice a year with the leader of India. For the first time Australian leaders are now involved in annual meetings with the leaders of important emerging countries such as Brazil, Turkey and South Africa, and with the leaders of the UK, France, Germany and Italy.

APEC, the EAS and the G20 each have a specific purpose but a country such as Australia should not view them as exclusive domains covering economic, strategic and financial matters. They are much more than that. The new forums which Australian leaders now attend should be seen as opportunities to further particular bilateral relations and to pursue particular multilateral objectives. They should not be pigeon-holed and be seen as separate and distinct from each other.

The second big challenge is to secure a global and regional environment in which the private sector can prosper. This means not just turning back the forces of protectionism, but also supporting Australian businesses in their efforts to trade and invest in global supply chains and tap into areas of high economic growth. This challenge is even more important as the Australian economy undergoes profound changes. The Department of Foreign Affairs and Trade has a key role in opening markets and working with businesses as they seek to compete in an increasingly integrated global economy.

It is important in the changing global landscape to see trade agreements in both economic and broader terms, for instance with countries such as India and Indonesia.

The third big challenge is to continue to manage our near neighbourhood relations with deftness and sensitivity, consistent with our national interests. This is a challenge which confronts successive generations of Australian foreign policy advisers and decision makers. We have had mixed success. But the environment is changing. It is only a matter of time before we have a neighbour in Indonesia which has a bigger economy in nominal terms than our own. We are not used to that. As Indonesia grows wealthier and more confident it will become increasingly difficult for Australia to gain the attention of Indonesian decision makers to the extent that we think our interests might warrant. In other words, we may need to become more selective in what we push and what we ask for.

The fourth big challenge is the obvious one of resources. It is clear that the fiscal environment will remain tight for some time to come. The Department of Foreign Affairs and Trade will need to continue to absorb its fair share of pain. And the pain for the department will be more acute than for some other parts of government, given that we did not grow during the times of plenty in the late 1990s and the early 2000s. Australia’s under representation abroad compared to other countries has been well documented in studies by the Lowy Institute and others. The challenge will reside, in large part, within the department itself. In recent years, the department has excluded training and staff development, including language training, from budget cuts. The department has also managed to grow the number of officers abroad despite the budget cut-backs. The department has done this through its own internal management processes, recognising that the value it brings to the table in government is the value derived from its global network. That network will face increasing difficulties over the next few years, especially given the fact that the cost of keeping someone abroad is so much greater than the cost of employing someone in Canberra. So the challenge for the department will be to maintain a clear sense of balance and perspective about its purpose.

Based on past performance, the department can be expected to maintain that balance and perspective.

Dennis Richardson

Secretary