Diplomacy used to be the prerogative of national governments, handled by a small group of leaders, officials, diplomats, and militaries. The acceleration of globalisation and interdependence since the 1970s led to the emergence of new, interconnecting issues other than security and military affairs and new channels connecting nations, such as informal ties linking governmental and non-governmental elites. Often these new connections were ignored, or perhaps misunderstood and underrated, by national leaders and diplomats.

International diplomacy is no longer the exclusive area for national leaders. Subnational diplomacy ^[1], which refers to engagement activities involving local actors and institutions, offers Australia many new opportunities to engage southeast Asia.

Subnational diplomacy is an effective tool for local actors to seize new opportunities and address specific issues that affect a limited constituency. Economic opportunity often drives these initiatives, with strong incentives at the local and state levels. Local leaders can capitalise on it quickly, by identifying issues that directly affect their constituencies, offering material benefits to the local population, and gaining stronger local political support.

Australian states and territories are aware of the benefits of greater economic linkages with Southeast Asia, and some are building initiatives with Southeast Asian counterparts.

In September 2020, Western Australia released its own engagement strategy ^[2] with Asia. The strategy has been implemented through measures such as the signing ^[3] of a memorandum of understanding (MOU) with Ba Ria Vung Tau province in Vietnam to facilitate cooperation in trade and investment, tourism, education, and cultural exchanges.

In 2023, the government of New South Wales and the Jakarta capital city government renewed ^[4] an MOU on cooperation with particular emphasis on agribusiness, food and beverages, technology, tourism and education.

The Northern Territory government and the West Nusa Tenggara provincial government in Indonesia also signed ^[5] an MOU in July 2023 to establish a sister province arrangement, promote education and tourism opportunities and encourage knowledge and skill sharing in their respective service industries. The NT also signed an MOU with the Indian state of Kerala ^[6] in October 2023.

Subnational diplomacy also poses challenges. Within federal systems, due to the principle of power-sharing—in Australia the division of powers among the three levels of government—local authorities possess ^[7] a certain degree of autonomy and independence in initiating and implementing policies tailored to local needs.

But this autonomy does not necessarily extend to international diplomacy, and it can lead to the conflicting implementation of foreign policy.

When then President Donald Trump announced the US withdrawal from the Paris Agreement on climate change, American state governors, mayors and businessmen stepped in ^[8] to fill the void through own initiatives, such as the US Climate Alliance and Climate Mayors.

Having too many subnational actors pursuing diplomatic initiatives can also cause coordination issues, internal competition among local entities, and fragmentation of national strategies, especially when the national and subnational actors are competing to engage the same foreign partner. For example, Western Australia ^[9]’s and Victoria ^[10]’s efforts to engage with China’s Belt and Road Initiative (BRI)  raised some concerns over coordination issues when these efforts occurred against the background of Australia’s reserved attitude towards BRI.

The lack of coordination between the state and local levels can have serious implications ^[11] for defence and national security as foreign actors take advantage of these subnational engagements to sow internal divisions and undermine national policies. Victoria’s MOUs ^[12] with China—including one on BRI—came under intense scrutiny as Australia-China relations deteriorated.

State and territory governments are expected to continue to bolster ties with Southeast Asian local entities. A recent report ^[13] from Australia’s Department of Foreign Affairs and Trade (DFAT) projected that Southeast Asia would drive global economic growth through 2040 and beyond. Australia will benefit from Southeast Asia’s economic dynamism in multiple ways, as a provider of commodities, quality products and services and as an investor in infrastructure and green energy transition.

DFAT’s report promotes a whole-of-government approach to enhance Australia’s economic engagement with the region. This strategy highlights the importance of Australian federal and territory governments in strengthening the country’s linkages to Southeast Asia. In 2022, Australia’s Ministerial Council on Trade and Investment ^[14] was established to advance trade and investment opportunities with Indo-Pacific partners. The council comprises trade ministers from all states and territories and had its first meeting in 2023 to align trade and investment priorities.

Australian state, territory and federal governments should continue to support subnational diplomacy initiatives with Southeast Asia.

The region’s priority, like that of many states and territories, remains economic development, especially as climate change and geopolitical tensions have made regional leaders more aware of the importance of resilient and inclusive development.

State and territory authorities should focus on projects consistent with this vision, such as building critical infrastructure, supporting energy transitions, and enhancing skills and knowledge. Oversight and coordination by the federal government should continue to ensure that all projects are consistent with Australia’s strategy of engagement with the region and its national security interest, but the strong local incentives for state and territory leaders may yield quick results.