SOFT POWER SETBACK

Preferred country for tertiary education. Source: ISEAS State of Southeast Asia

Australia’s attractiveness to Southeast Asians appears to be waning despite a series of diplomatic initiatives from the 2018 Sydney regional leaders’ summit to last year’s aid spending increase. A new survey shows Australian education and tourism have lost favour over the past three years amongst regional opinion makers, although they still view the country as their third choice as the best partner to deal with rising US-China tensions.

The findings about Australia are overshadowed by many other issues in the latest wide-ranging survey of regional opinion by the ISEAS-Yusof Ishak Institute. But they provide an intriguing insight into the country’s soft power across the ten Association of Southeast Asian Nations (ASEAN) members when the Morrison government, and its predecessors, have been elevating this region as a strategic and economic partner.

The annual State of Southeast Asia survey shows that opinion remains quite divided over US-China tensions. However, the mood towards the US has improved with the new president and suspicion towards China has grown. If forced to choose between the two superpowers, 61.5 per cent of respondents would choose the US which was up from 53.6 per cent last year. Only 38.5 per cent would choose China which was down from 46.4 per cent last year. But there was a more significant swing towards the US at the country level, with a majority of people in only three countries choosing China compared with seven countries last year.

The survey shows Australia’s rank as the preferred country for tertiary education has fallen from third choice behind the US and Europe in 2019 to fifth choice in this year’s survey, now also behind Japan and Britain (broken out of Europe). But in another blow for the education export sector, the proportion of people choosing it has fallen from 21.2 per cent to 12.3 per cent. The survey does not explain whether the decline last year was due to Australia’s more severe pandemic shutdowns than some competing education exporters, such as Britain.

At the same time Australia’s rank as the preferred holiday destination has slightly improved from fifth to fourth behind Europe and Japan, but the proportion of people choosing it has fallen from 10.7 per cent to 5.6 per cent over the three years. And notably in this year’s survey New Zealand has overtaken Australia for the second year in a row as the preferred destination of 9.8 per cent of people.

More remarkably when the Morrison government has included Southeast Asia in a $500 million three year COVID vaccine distribution program, Australia also ranks behind NZ for providing pandemic assistance. Only 4.3 per cent of respondents chose it as ASEAN’s top COVID partner, which was behind New Zealand on 4.7 per cent despite their assistance being more focussed on the Pacific. More significantly from a bigger picture perspective, China stands out as the top COVID partner chosen by 44.2 per cent which was more than twice Japan.

However, despite this faltering soft power in education, tourism and healthcare, Australia is still seen as a credible ally in the context of US-China rivalry. While Europe and Japan are each consistently chosen by about one third of respondents as the preferred third-party hedge country, Australia was chosen by a relatively steady 7.5 per cent. That ranking has always been ahead of India, South Korea and New Zealand. And when asked to identify an alternate partner to the US, Australia was again ranked third behind Japan and the EU.    

• This article from The Diplomat says the ISEAS survey shows how Southeast Asian elites are impressed by China’s power, but fearful of it.
• And ISEAS - ASEAN Studies Center coordinator Sharon Li-Lian Seah says assistance from ASEAN partners including Australia has been crucial to the region’s response to COVID.

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NEIGHBOURHOOD WATCH

Illustration by Rocco Fazzari. 

BABY BUST

North Asia’s demographic challenges have returned with a vengeance in the opening weeks of this year in a reminder that these countries still face major social and economic conundrums, from aged care to women’s rights, despite their relatively successful management of COVID-19.

South Korea’s population declined for the first time last year earlier than some analysts expected as the number of new babies fell to a record low. The government has embarked on a series of family incentives to address the birth rate. But analysts say they fail to deal with broader issues from the high cost of education to unrealistic expectations of women as mothers, wives and workers.

Similarly births in China fell 15 per cent last year, underlining how liberalisation of the one child policy in 2015 has failed to work. Despite the Chinese economy’s rapid rebound from the pandemic, analysts said the falling numbers of births appeared to reflect uncertainty caused by COVID-19. In parallel to South Korea, China has announced plans to further lift remaining birth restrictions in some provinces but to a lacklustre response. The Taiwan population also fell for the first time on record last year.

Meanwhile in Japan, ground zero for the region’s demographic challenges, government promises to improve the status of women have been undermined by a crisis over the role of women in running the Tokyo Olympic Games. Former prime minister Yoshiro Mori was forced to resign as the Games president due to an unusual public backlash over his complaints about female directors. But the saga has only drawn new attention to how little progress Japan has made on former prime minister Shinzo Abe’s promises to allow women to participate fully in the workforce. Japan ranks 121 out of 153 countries in the World Economic Forum's gender gap ranking and is last amongst major advanced economies.

• At Nippon.com Tsuchiya Hideo says predictions of a new East Asian era due to successful pandemic management are premature given the demographic time bomb.
• In this JoongAng Daily piece, economist Kim Young-chul describes young Koreans as a “generation without hope”.

DEMOCRACY DIVIDE

Source: Economist Intelligence Unit Democracy Index

As public resistance to the Myanmar coup mounts, the country’s fate as one of the region’s newest democratic experiments may well depend on competing perceptions of what constitutes democracy in the region. The latest Economist Intelligence Unit Democracy Index suggests the practice has been waning across Southeast Asia since the more optimistic time around when Aung San Suu Kyi’s National League for Democracy and Indonesia’s President Joko Widodo came to power.

Now amongst neighbouring countries Indonesia has taken the most public role in pressing for action over the coup with pressure for a special meeting of the Association of Southeast Asian Nations (ASEAN). Significantly Indonesians have the most recent memory of ending a long running military influenced “guided democracy” two decades ago.

The two countries ranked above Indonesia on the list Malaysia and the Philippines, which are arguably the region’s two longest standing democracies, each have their own issues. Malaysia has been supportive of action on Myanmar, but it has its own challenges defining democracy with the Parliament failing to sit to test whether Prime Minister Muhyiddin Yassin actually has a majority. Meanwhile the Philippines, which has usually been a supporter of democratic principles within ASEAN, has described the coup as an “internal matter.”

While the Index shows Thailand as having had the biggest recovery in democratic stature after the military coups of 2006 and 2014, it is now offering two completely different visions of the way ahead to Myanmar. Its military linked government party offers a model way out for to the Myanmar military with a carefully reconstructed Constitution and proportional representation-based electoral system.  Meanwhile its newly emboldened protesters against those changes are providing inspiration to counterparts in Myanmar about how to maintain a disruptive campaign against a military dominated regime. 

• As western countries, including Australia, consider sanctions on Myanmar, Dan Slater argues at East Asia Forum that: “Democracy is most appealing when expressed as a universalistic value and practice, not as a status marker to join an exclusive club.”
• And in an insight into his country’s latest divisions, 1988 Burma protest leader Min Zin says in this Straits Times/New York Times piece that: “Many ethnic political parties and ethnic armed groups, and even some Bamar political groups, have felt marginalised and alienated by what they see as Ms Suu Kyi's insensitive majoritarianism.”

A PACIFIC WAY (OUT)

The Morrison government has now redirected more than $2 billion in spending to Pacific nations via the 2018 Step-Up initiative and now the pandemic economic recovery and vaccine distribution programs. But the implosion of the Pacific Islands Forum (PIF) over the appointment of a new secretary general is set to make the management of policy towards the region more fragmented. Five Micronesian nations plan to leave the 17 member PIF because the dominant Polynesian and Melanesian members broke with a tradition of rotating the leadership between the three geographic groups.  The pressure is now on major aid donors including Australia and Japan, who are concerned about rising Chinese activity in the region, to reconcile the differences.

• Lawyer and former official Transform Aqorau says in this Devpolicy Blog piece that Australia will now have to navigate through a myriad of sub-regional organisations to deal with the region.
• Former Prime Minister Kevin Rudd says the Forum row may turn out to be “one of those seminal moments when the region began drifting away from Australia altogether.”

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ASIAN NATION

KONICHIWA REDUX

A business consultant tells the story of attending a two-day workshop between teams from Japan and Australia to design a new product, only to discover at the end that the Tokyo parent company had already decided on a design.  The Japanese management explained to the surprised Australians that the exercise had still been held to ensure everyone felt they had an input into the design and would be ready to make team level decisions in the future.

This is one of many anecdotes told in a new guide to doing business in Japan which draws on real life experiences of Australian businesspeople trying to understand a culture that remains confounding despite half a century of close economic engagement. Bridging the Cultural Divide has been published by the Australia Japan Business Cooperation Committee (AJBCC) Future Leaders Program to underline that despite these examples of cultural misunderstanding the business relationship shows no signs of waning.

The editors say that “true cultural literacy can take significant time without a little help from those who have crossed this bridge before you.” But they go on to warn that: “Static relationships run the risk of becoming obsolete and complacency through familiarity can damage even the most longstanding friendships. Time, effort and innovation are required to engage both sides of the cultural divide and ensure that existing partnerships continue to flourish.”

The book has been published in memory of the late David Jacobs, the former AJBCC chief executive and one of the key figures bridging organisational business links between the two countries over the past three decades.

RACISM WORRIES

Asian Australians have returned mixed responses about levels of discrimination experienced during the pandemic in the latest Scanlon Institute survey of social cohesion. Thirty-nine per cent of people of Asian background reported they had experienced discrimination which was roughly the same as the proportion who reported discrimination in 2019. But when people who experienced discrimination were asked if they had experienced more or less discrimination than in the past, 39 per cent of Asians said it had risen compared with only 14 per cent of Australian born people. Out shopping was the most common time this discrimination happened, followed by on public transport and at work. A separate smaller survey of Chinese Australians found that 32 per cent had experienced about the same amount of discrimination while 41 per cent experienced more or much more. Twenty-five per cent did not want to answer which the survey interpreted as an underreporting of discrimination. “The survey provides evidence of relatively high level of negative opinion towards Asian Australians – and evidence of high levels of concern indicated by Asian Australian respondents,” the authors say.

TAIWAN: TO THE BRINK

The Australian government has been warned to prepare for a carefully calculated approach by China to gain control of Taiwan using a strategy of “all means short of war”.  China Matters founding director Linda Jakobson argues that President Xi Jinping has abandoned the longstanding previous pragmatic strategy of leaving unification of the mainland and Taiwan to future generations, in favour of achieving this during his lifetime. “Beijing does not want to fight a war over Taiwan. A much more likely scenario entails step-by-step coercion of Taiwan – the use of ‘all means short of war’ – to destabilise Taiwanese society and force it to accept unification talk,” she writes in a new edition of China Matters Explores.  “In an attempt to break the will of Taiwan, Beijing could adopt an aggressive mix of new technologies and conventional methods to apply pressure.” The aim would be to get enough Taiwanese who want to avoid war to enter into new negotiations with Beijing on the basis that there is only one China even if those negotiations were to continue for a long time.

“Despite the improbability of war, Australian decision makers need to make every effort to understand the complexities of the standoff over the unresolved political status of Taiwan,” she says.

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DEALS AND DOLLARS

GANBEI TO CHINA

Winemaker Treasury Wine Estates is giving some practical substance to what is becoming the new mantra for doing business in China: that it must be China plus rather than China or. The company used its interim profit announcement to declare it had not given up on the country but was pushing ahead with two countervailing strategies to deal with last’s years 169 per cent on its exports to China. The first is to focus on offloading wine intended for China to other Asian countries ranging from Japan to Thailand although the company says this could take two to three years. The second is to direct wine from its non-Australian operations in the US back to China and step-up work on its own branded product made from Chinese grapes. What Treasury, which owns the Penfolds brand, does in response to the Chinese tariffs matters because its wine exports constitute almost 40 per cent of the total Australian wine exports to China of $1.3 billion. And to underline the continued long-term confidence in China the company said the managing director of its new Penfolds division will remain based in Shanghai. “There’s absolutely a long-term ambition of having a China-sourced Penfolds portfolio,” chief executive Tim Ford said. “We’re not giving up on China at this point.”

MADE IN INDIA

Trade minister Dan Tehan has backed increased Australian investment in Indian ports and grain milling to pave the way for more Australian grain exports to the country. With negotiations on a second attempt at a bilateral trade deal due to start in March, agriculture will be particularly sensitive because the farmer protests in Indian against price deregulation. Indian resistance to Australian farm exports was one of the issues which undermined the last trade deal talks which began in 2014.  “One of the ways that we think we could support and help is by getting further investment into India, into their milling capacity,” Tehan said in an interview with Sky News.

“You might do that in ports, which would enable us to be able to get our grain in to help their milling capacity. So, these are the types of suggestions that we need to be putting to the Indian Government as to how we can work with them, so we can build the capability of their agricultural sector.  With the growing emphasis on how to bolster economic ties to parallel the closer bilateral security ties, the comments raise the question of whether the government might resort to providing soft loan support though Export Finance Australia to solve this agriculture impasse to the trade talks. KPMG recently estimated that the bilateral economic strategy released by India in December in response to Australia’s 2019 India Economic Strategy showed the potential for a four-fold increase in the two way trade.

LYNAS MINES CHINA STRIFE

Mineral processing company Lynas is continuing to pull off a rare double at a time when most Australian companies are worrying about, if not suffering from, tensions with China. Instead, the rare earths company is benefitting from both rising Chinese industrial demand for rare earths and US efforts to reduce dependence on China for these inputs to a range of technology products.

In January after US President Joe Biden took office the company said his emphasis on advancing green technology was a “very good thing” for its business and potentially other Australian producers of critical minerals.  Lynas has signed a deal with the US government to build a light rare earth separation plant in Texas with partial funding from the US Department of Defence and is in the running for another heavy rare earths processing plant.

Then in February the threat of Chinese action to restrict the export of its own rare earths production to the US for use in defence equipment manufacturing caused the company’s shares to jump once again. The company is the world’s biggest non-China producer of rare earths.

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DIPLOMATICALLY SPEAKING

THE MAHUTA DOCTRINE

"China is one of the big countries that have a significant influence worldwide, as is the US. We are a small country at the bottom of the Pacific mindful of our size and our ability to use our voice in areas where there is common interest among other communities with the same values as ours. We continue to express the issues of concern in relations to countries like China and we continue to find a way where we may be able to work together … China has made some significant gains in the arena of climate change. We’ve been able to sign the upgrade of our free trade agreement. We have a maturing relationship and that means we are predictable and China understands the issues that we will stand apart on."

- New Zealand foreign minister Nanaia Mahuta on ABC 7.30, January 28

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DATAWATCH

Source: Lowy Institute COVID Performance Index

The chart shows average performance over time dealing with the pandemic.  But China has been excluded due to inadequate comparable data on testing. Asia-Pacific’s average score was 58.2 compared with 51 for Europe, 49 for the Middle East and Africa and 33.8 for the Americas.

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ON THE HORIZON

APEC: VIRTUALLY ON

After three years of summits troubled by superpower rivalry, civil turmoil or pandemics, New Zealand’s online only Asia Pacific Economic Cooperation (APEC) group summit year is now up and running.

The first senior officials meeting started in February ahead of the first meeting of finance officials on March 16. And the New Zealand government has signalled it plans to use its host year to push for a global approach to free trade in goods necessary to beat the COVID-19 pandemic.

Disruption of the last three summits of the 21 member group by super power rivalry (PNG), civil turmoil (Chile) and the pandemic (Malaysia) have cast some doubt on APEC’s traditional stature as a hub for high level meetings of regional leaders.

But the Ardern government has taken the challenge head on and says New Zealand will be showcasing a “different kind of APEC, as it becomes the first host of a fully virtual APEC year.” It says: “This is an opportunity for New Zealand to help pioneer digital diplomacy, and involves hundreds of meetings and events with 21 economies in 11 time zones.”

Some APEC nations promised last year to keep health goods supply chains open to help fight the pandemic but only NZ and Singapore took the step of eliminating tariffs on products they deemed essential.

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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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