Briefing MONTHLY #33 | November 2020
ASEAN STEP UP
Australia’s prime minister will now meet Southeast Asian leaders every year in a new piece of regional architecture overshadowed by other initiatives during this month’s summit season including closer military relations with Japan and a regional trade deal.
Australia became the first external dialogue partner of the Association of Southeast Asian Nations (ASEAN) in 1974 but has been somewhat diplomatically overshadowed in recent years by ASEAN’s annual summits with China, Japan and the US. Now, two years after Australia convened a rare summit of ASEAN leaders outside their own region in Sydney, the countries have declared a new chapter in relations with an annual leaders gathering.
The decision came as Australia announced a diverse collection of new aid initiatives focused on Southeast Asia which in effect rebalance spending compared with the South Pacific. They also implicitly highlight points of strategic and economic weakness in the region which concern Australian foreign policymakers.
The government now refers to overall Australian aid spending in Southeast Asia of $1 billion a year, which conveniently is the same as the official figure for the South Pacific. Southeast Asia has been subject to aid cuts in the years since the Sydney summit as the government has given a higher aid priority to the Pacific.
The new initiatives include a Strategic Partnership with Thailand despite the democracy protests there; a $1.5 billion loan to Indonesia to help with COVID-19 recovery which compares with stand-by loans in the past; and a $232 million Mekong region program which highlights specific challenges in that emerging sub-region. Other new spending includes assistance for infrastructure, technology, maritime issues and $45 million to help some poorer countries implement the newly signed Regional Comprehensive Economic Partnership trade deal.
While most Australian tourists and businesses view this region as individual countries, the new measures underline how Australia has important regional economic and security interests in the stability of these countries as a whole.
- See Asia Society Policy Institute senior fellow Richard Maude on Australia’s Southeast Asian refocus here.
- And the joint statement from Scott Morrison’s virtual summit with ASEAN leaders is here.
RCEP: BIGGER THAN?
During more than thirty formal rounds of negotiations over eight years, the Regional Comprehensive Economic Partnership (RCEP) trade deal has prompted both hyperbole and scorn amongst journalists, politicians and business alike. And so, it was little surprise that its signing during this year’s Asian summit season was greeted with a rewarming of both. Optimists see it as the newest foundation for a more economically integrated Asia as the world’s biggest trade deal after the World Trade Organisation system, while critics see it as lacking teeth with an excessively long implementation schedule. But regardless of those older arguments, coming amid a scramble for new sources of economic growth post pandemic and rising desperation about dependence on China, the 15 country agreement has now been vested with even more expectations. On the measurable outcomes for trade barrier removal, Australia is one of the lesser beneficiaries from RCEP because it has existing agreements with all other members. But in the details for each sector – particularly in services – there are significant barriers reductions for some Australian businesses.
The Federal government says the highlights are:
* A single set of rules and procedures for exporters and increased opportunities to access regional value chains.
* Mechanisms to tackle non-tariff barriers by promoting compliance with WTO rules and transparency. Intellectual property and e-commerce rule will boost ecommerce.
* New market access commitments for service suppliers and investors in China and ASEAN markets such as Malaysia, the Philippines and Thailand.
- In this Australian Outlook piece, Macquarie University’s Alan Cormack says there is little understanding in Australia of the role RCEP can play in bringing together Asia’s diverse mix of developed, developing, and least developed economies containing 30 per cent of the world’s population.
- Some of the best RCEP analysis can be found at the Asian Trade Centre, where Deborah Elms says: “Getting an agreement that could successfully navigate the domestic constraints and starting points in all 15 countries is an important accomplishment.”
BACK TO THE BARRACKS
Myanmar’s military will be relieved it has written itself into power in Asia’s newest emerging democracy because its political associate is not doing well at the ballot box. While Aung San Suu Kyi’s National League for Democracy has lost support outside the country due to its management of the Rohingya refugee crisis, it won a strong re-election on November 8. The party won a combined 396 seats in both chambers of parliament, up from 390 in the previous 2015 general election and more than 80 per cent of the contested seats. It also won a majority of elected seats in 12 of the 14 state and regional parliaments. But the military-aligned Union Solidarity and Development Party, which is the largest opposition force, won only 33 seats, eight less than in 2015. However, the actual military is allocated 25 per cent of seats in each chamber and the main security minister jobs. Whether Suu Kyi can use this re-endorsement over the military to deal with lingering issues including economic reforms, the Rohingya exodus and peace talks with other ethnic minorities will determine whether Myanmar can continue its democratic evolution.
- In this East Asia Forum piece, the National University of Singapore’s Gerard McCarthy says the NLD now has a chance to remake Myanmar after a troubled first term in office.
The country got a Budget, but Scott Morrison missed his meeting. A day has proved more than a long time in Papua New Guinea politics with Prime Minister James Marape apparently fending off an unexpectedly fast attempt to remove him. Morrison was due to meet his counterpart on the way back from his Japan trip. But the meeting was cancelled due to the moves against Marape, who was coming to the end of an 18 month period protecting him from a no confidence motion. Opposition MPs seized control of the Parliament to suspend it ahead of the Budget being passed laying the groundwork for a future no confidence motion. But within days the Speaker rejected the suspension allowing the Budget to be passed under unusual circumstances and Marape to defer a new parliamentary session until next April. But the opposition is challenging both moves in the courts. Australia has stepped up its engagement with PNG since Marape took over from long serving Peter O’Neill, reverting back to direct loans to fund the Budget and agreeing to a Comprehensive Strategic and Economic Partnership only in August. But with some opposition politicians claiming Morrison was trying to shore up Marape with his planned visit, the bilateral landscape may have become more challenging.
- Michael Kabuni says in this DevPol piece that the courts may now decide who PNG’s next prime minister is.
BROTHERS IN ARMS
Animation by Rocco Fazzari.
The long running issue of Australian soldiers facing the death penalty for any crimes committed in Japan remains a cloud over the signing of a military Reciprocal Access Agreement between Australia and Japan. Despite making his first overseas trip for the year to discuss the agreement with Prime Minister Yoshihide Suga, Scott Morrison provided no clarity on the death penalty issue saying Australia would meet its international obligations. After reaching in-principal agreement, the plan is now for a signing ceremony when Suga visits Australia next year. While the Australian government has tended to talk up the deal as though it is a formal treaty between the two countries, it is really an agreement to improve cooperation between the two countries’ military forces. However, is also represents a significant stepping up of middle power cooperation in Asia amid uncertainties about the long-term approach to the region by the US.
- The two leaders also talked about trade and the environment in their joint statement here.
- In this East Asia Forum piece, Toshiya Takahashi cautions amid some hyperbole about the agreement that Suga is more focussed on domestic matters than foreign policy.
- But James Curran says the agreement bonds the countries without creating mutual assistance obligations in this Australian Financial Review piece.
Allowing one per cent of the South Pacific population to work in Australia under an expanded guest worker scheme could deliver more benefits than Australia’s development aid, according to a new study. It also says Australia should work towards creating bilateral or regional plans to help Pacific Islanders move more freely, and consider developing a special humanitarian visa for people whose lives are at risk on account of disasters or the impacts of climate change. The report from the Kaldor Centre for International Refugee Law says that although most Pacific island citizens want to remain in their countries despite climate change risk, their youth population bulge and weak employment growth mean they will have to face up to overseas work.
NO RETREAT FOR UNIS
Australia’s universities have no choice but to continue taking large numbers of foreign students unless governments are willing to embark on a major increase in real direct funding for domestic students, according to a new discussion paper. It concedes there is a clear downside to the university sector’s high exposure to the international students, particularly from China, but says the critics of this dependence ask the wrong questions and offer simplistic answers. What the paper describes as a “retreat to educational nationalism” of largely focussing on domestic students would leave the universities with a future of shrinkage, low horizons, reputational decline, infrastructure decay, research mediocrity and minimal services for local students themselves. The paper is part of the series of discussions papers dealing with underlying issues in Australia’s business relationship with Asia which have been published as part of the Business Council of Australia/Asia Society Australia Asia Taskforce.
- See the Business Taskforce paper here.
NSW STEPS OUT
New South Wales is planning to almost double its overseas trade and investment promotion posts as it seeks higher trade growth to fuel its recovery from the pandemic. Despite being the largest state, NSW has long lagged behind Victoria’s extensive overseas relations infrastructure and even been rivalled by Queensland and West Australia in recent years. But the recent state Budget laid out plans to spend $112 million doubling the State’s overseas offices to 21, saying trade will be a “cornerstone” of post-pandemic recovery. But that still falls short of Victoria’s 23-strong diplomatic service when it opens its latest post in Ho Chi Minh city soon.
A new venture to foster more collaboration by media organisations in Asia has been launched by the Judith Neilson Institute for Journalism and Ideas (JNI) with the aim of bringing encouraging greater engagement between Asian and international journalists. The initiative comes amid a decline in the number of traditional foreign correspondents in Asia due to cost pressures and the closure of some pan-Asian print publications. The Asian Stories project will start next year with collaborations between media organisations from different countries examining digital crime and the intersection of energy and the environment. The second part of the project will be a News in Asia report, published by JNI in association with the Journalism and Media Studies Centre at the University of Hong Kong and the News and Media Research Centre at Canberra University, the Australian partner institute of the Reuters Institute at Oxford University, which publishes the annual Digital News Report.
JNI executive director Mark Ryan said: “Asian Stories is a long-term investment by JNI. In coming years, we will add new elements to the project to do what we can to encourage more and better reporting and deeper analysis of the world’s most important region.”
DEALS AND DOLLARS
DIRECTORS LOOK TO ASIA
Australian company directors appear to be turning their attention more to Asian business opportunities as they contemplate how to move beyond COVID-19. The latest Australian Institute of Company directors sentiment survey shows a sharp increase in directors nominating engagement with Asia as a priority for the Federal Government. It ranked as the seventh most important short-term policy issue (out of 26) and the sixth most important long-term issue. That was a rise from being ranked 15 and ninth earlier in the year. Two years ago it was ranked 14 as a short term and ninth as a long term issue. The directors also identified China is the only major economic region where sentiment for the health of the economy over the next 12 months is in positive territory. Amid the growing debate about China’s assertiveness, they were quite divided over the government’s approach to China, with 28 per cent worried that Australia was too confrontational, 27 per cent saying policy was about right and 26 per cent saying the government was too accommodating. AICD chief economist, Mark Thirlwell, said the survey flagged the importance of regional engagement in general and of the China relationship in particular, but also reflected the complex challenges around managing ties with Australia’s largest trading partner.
… BUT SELLING THE FACTORIES
The looming sale of two of the longest running Australian-owned manufacturing businesses in Asia has underlined the challenges of investing in Asia and diversifying regional business. Building company Boral is selling its plasterboard business in seven Asian countries to its German partner Knauf. And Coca-Cola Amatil is facing a takeover from Coca-Cola European Partners, which means Australian-owned operations in Indonesia, Papua New Guinea and Fiji will also change hands. The three-decade old Boral and Coca-Cola Amatil Asian businesses have been through changing investment structures and geographic footprints over the years amid mixed financial performances. But they have both been cited as examples of Australian companies persevering with plans to service emerging Asian consumer markets in housing and food.
These announcements come as recent reports by the Asia Taskforce (led by Asia Society Australia and the Business Council of Australia) and then Asialink Business have urged policy reforms and better public-private cooperation to facilitate more Australian investment in Asia to take advantage of the region’s high economic growth. Meanwhile, although the Federal government’s economic sovereignty strategy is mostly focussed on trade diversification after recent tensions with China, there is nevertheless a secondary focus on investment diversification. For example, one of the key new ideas in former senior diplomat Peter Varghese’s India economic strategy was to focus more on investment in India rather than trade. And the new Indonesia-Australia Comprehensive Economic Partnership Agreement contains significant investment concessions. The sales follow the recent release of the first detailed survey of Australian offshore investment in 15 years by the Australian Bureau of Statistics which showed that the number of businesses in Asia had risen only modestly in that time and the proportion remains stuck at about 22 per cent of all offshore businesses.
HOSPITALS FOR INDONESIA
Two Australian companies have sealed a $1.3 billion agreement to build and operate 650 healthcare clinics and 23 hospitals across Indonesia's most populous province of West Java. The deal will see Canberra-based Aspen Medical and Sydney’s Docta partner with state-owned enterprise PT Jasa Sanara to develop healthcare infrastructure to meet growing demand in Indonesia's universal health coverage system, established in 2014. The two companies will build 40 clinics and one hospital by the end of 2021, 400 clinics and five hospitals by the end of 2023, and the remaining 250 clinics and 18 hospitals over the following 20 years. West Java Governor Ridwan Kamil said the public-private partnership, with some funding through Export Finance Australia, would overcome a shortage of hospital beds quicker than could be done through public funding.
REA EXPANDS THE HOUSE
The REA Group has increased its presence in Asian property with 99 Group, in which it holds a 27 per cent stake, acquiring the Singapore Real Estate Exchange (SRX). The online real estate company which also operates iproperty.com.sg in Singapore and rumah123.com in Indonesia, is also increasing its stake in an Indian property portal Elara Technologies, India’s fastest-growing digital real estate business in terms of audience. SRX’s digital platform provides property listings, property buyer support tools and operates a property data business.
WOODSIDE’S CHINA BLOW
Chinese investors have pulled out of Woodside Petroleum plan to sell a stake in its $16 billion Scarborough gas project in Western Australia in the first sign tensions with China have entered the gas export business. Woodside chief executive Peter Coleman said that while relations between the company and its existing Chinese customers had not been affected, the plan to forge new Chinese equity partnerships had been damaged. He partly blamed Australia’s tighter foreign investment approval process.
The Woodside set back came as several senior executives from Australian companies including BHP’s Mike Henry, former Business Council of Australia president Graham Bradley, Elders’ Mark Allison and A2 Milk’s David Hearn have started calling on the Federal government to wind back some of its policy changes which have angered China.
"Our actions are wrongly seen and interpreted by some only through the lens of the strategic competition between China and the United States. It’s as if Australia does not have its own unique interests or it’s own views as an independent sovereign state. This is just false. And worse it needlessly deteriorates relationships.
If we are to avoid a new era of polarisation, then in the decades ahead there must be a more nuanced appreciation of individual states’ interests in how they deal with the major powers. Stark choices are in no-one’s interests. Greater latitude will be required from the world’s largest powers to accommodate the individual interests of their partners and allies. We all need a bit more room to move."
- Prime Minister Scott Morrison speaking to UK Policy Exchange November 23
"Today, one of the most vital security practices in the face of the threat of COVID-19 is handwashing and good hand hygiene, a measure which is as far removed from the appearance and character of a complex weapon system and yet of more importance to the current security of the population than every weapon in our armed forces."
– Department of Home Affairs secretary Mike Pezzullo
Directors are evenly distributed in assessment of the Australian – Chinese relationship, with even levels feeling the relationship has been too confrontational, to accommodative and about right. Source: AICD Sentiment index
WHAT WE'RE READING
The Elite Embrace by Rowan Callick (Centre for Independent Studies)
Bridging the divide between China’s rising authoritarianism and Australia’s expanding dependence on the country is now clearly now the biggest foreign policy challenge Australia has faced since the Pacific War. This new paper Rowan Callick, The Australian’s former China correspondent, tackles a less traversed aspect of this challenge: the chasm between continued elite engagement with China and an emerging general public loss of confidence in the country. He argues that China remains skilled at cultivating members of elite audiences in the West but has paid little attention to its declining reputation in opinion polls. “Such polling reveals that while continuing to engage with China, mass populations – unlike their constantly-courted elites – are now preparing to live with a continuing degree of unresolved friction in the relationship,” he says.
While Callick provides an exhaustive list of how China continues to successfully woo foreigners, he doesn’t take up one of the interesting ramifications of the change in public opinion — how much has this contributed to the tougher Australian government decisions on China in the last few years? He argues that reconciling the risks of the “elite embrace” and the rising anti-China popular sentiment is yet another challenge for a government in a country where: “Returning the relationship with China to its former state is not an option... Nor is bald decoupling an option; the range of continuing connections, including those based on economic complementarity, remains too extensive.” The answer is to better understand contemporary China and its drivers so as to rebuild the relationship appropriately, but this is getting harder with less students studying the country and difficulty running popular bilateral engagement programs.
ON THE HORIZON
INDONESIA'S COVID VOTE
Political dynasty: Joko Widodo (left) and his son Gibran. Photo: Antara
Indonesia’s management of the COVID-19 pandemic will come under fresh scrutiny on December 9 when up to 100 million people may vote in regional elections. They will be choosing nine provincial governors, 224 regents or local leaders and 37 mayors in 270 regions across the country.
But a COVID-19 task force said this month that there were 17 towns with a high risk of disease transmission and 215 towns at medium risk. The General Elections Commission has also called off its plan to use an electronic vote counting system due to concern about poor internet connectivity which will mean more people will be in contact during manual counting.
These elections are secondary to the five yearly presidential and national legislative elections which saw President Joko Widodo returned to office last year. But they come at a time when the three-tiered system of direct elections for leaders across the country is coming under some pressure from people who want a return to a system where legislatures choose leaders.
But these elections are personally important to Widodo because his son Gibran Rakabuming and son-in-law Bobby Nasution are running for mayor in their hometowns in what might be the first step towards building a family political dynasty as is increasingly common in Indonesia.
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Briefing MONTHLY is a public update with news and original analysis on Asia and Australia-Asia relations. As Australia debates its future in Asia, and the Australian media footprint in Asia continues to shrink, it is an opportune time to offer Australians at the forefront of Australia’s engagement with Asia a professionally edited, succinct and authoritative curation of the most relevant content on Asia and Australia-Asia relations. Focused on business, geopolitics, education and culture, Briefing MONTHLY is distinctly Australian and internationalist, highlighting trends, deals, visits, stories and events in our region that matter.
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