Briefing MONTHLY #38 | May 2021
Illustration by Rocco Fazzari.
Asia’s latest COVID-19 wave has claimed two of the region’s premier planned recovery gatherings for this year, leaving only the biggest one yet to be decided – the Tokyo Olympics.
On May 17 the World Economic Forum abandoned its plan to hold the annual Davos gathering of the global economic elite in Singapore, only to be followed within days by the International Institute for Strategic Studies, which cancelled the Shangri-La Dialogue of Indo-Pacific defence boffins.
Less than a week later the U.S. put the Olympics under new pressure when the State Department raised its travel advisory for Japan to the same category as a wide range of countries from Latin America to Europe that Americans are urged to avoid due to the pandemic.
The move by Japan’s closest security ally only added to challenge the government faces persuading Olympic athletes and its own public that it is ready to host the Olympics on July 23, following their postponement last year. The country now seems set to be under some sort of state of emergency until weeks before the Olympics are due to start, with a remarkable more than 60 per cent of the population opposing the event.
Japan has struggled to control four waves of COVID-19 due to internal tensions over how to implement lockdowns, a slow vaccine rollout, and a persistent focus on the longer-term Olympic commitment rather than the shorter-term pandemic challenges. According to Bloomberg’s vaccine tracker it has the lowest level of vaccination in the developed country world despite planning to use the Olympics to celebrate its modern high-tech economy and new tourism capacity.
The Shangri-La Dialogue has made itself the premier event for debating regional defence issues since it was launched in 2002, with the public highlight increasingly turning on how U.S. and China defence leaders conduct themselves in the public arena.
The World Economic Forum decision last year to move its snow-bound January Davos gathering to sweltering Singapore in May (later moved to August) to avoid Europe’s pandemic risks was then seen as a testament to Asia’s management of COVID-19.
It was only the second time in the event’s 50-year history it had been moved. In 2002 it was held in New York to show solidarity with the U.S. after the 9/11 terror attacks.
"Regretfully, the tragic circumstances unfolding across geographies, an uncertain travel outlook, differing speeds of vaccination roll out, and the uncertainty around new variants combine to make it impossible to realise a global meeting with business, government and civil society leaders from all over the world at the scale which was planned," the WEF said in a statement cancelling the Singapore event.
A year ago, diverse Asian countries, from South Korea to Thailand, seemed to be managing the pandemic better than most parts of the world through a mixture of soft authoritarianism and civic responsibility. But the fact that the region’s two most sophisticated economies in Singapore and Tokyo may now not be able to host global events has once again confounded the latest iteration of a new Asian values model.
- Roland Kelts in Nikkei Asia says Japan’s management of the pandemic and the Olympics has reflected an obsession with detail over the bigger picture. He says: “While Japan's image abroad is more attractive than ever, its systemic myopia at home creates a muddled micro-focus that lacks vision.”
- William Choong in The Straits Times considers whether the Shangri-La Dialogue will recover its cachet after being cancelled two years in a row. He says it will, because the Chinese military likes to use it to muscle-up to the U.S. in front of other Asian nations.
ASEAN’S TIPPING POINT
A month after the Association of Southeast Asian Nations (ASEAN) won credit for its “five-point consensus” on Myanmar at a meeting of regional leaders with coup leader General Min Aung Hlaing, the group’s authority is looking as questionable as ever.
The consensus provided other countries from the U.S. to Australia with what looked like the best option available given the apparent reluctance of the U.S. to use the sort of economic sanctions it has applied to North Korea, and Australia’s reluctance to stray far from ASEAN’s approach.
But the delayed announcement of the promised ASEAN special envoy, the Myanmar’s military undermining of the consensus, and the growing displacement of people to border states is leaving ASEAN looking inadequate.
Indeed, the aspiring regional diplomatic hub is being overshadowed from unexpected economic quarters. Japan has threatened to cut all aid to Myanmar including for existing projects. Oil companies Total and Chevron have suspended some cash payments to their Myanmar state-owned partner. And even the Peninsula hotel chain has suspended a Yangon property development.
- In an unusual break with the usual Southeast Asian political establishment consensus on ASEAN’s value, former Thai foreign minister Kasit Piromya says the time has come to rebuild the group as an organisation of democracies. “The only possible conclusion is that ASEAN lacks both the will and the competence to serve the common good,” he writes in this Nikkei Asia article.
- Meanwhile as Myanmar’s democracy activists step up their armed resistance to the military takeover, Andrew Seith, at The Interpreter, says they run the risk the military regime will present them as terrorists.
Australia’s return to providing aid to India in the May federal budget just two months after Prime Minister Scott Morrison declared a “new dawn” of strategic trust at the Quad leaders meeting provides a small window into how the country’s image is under challenge due to its COVID-19 outbreak.
From the country’s top vaccine manufacturer fleeing the country for London to India Today’s front cover The Failed State, questions are arising about just how Prime Minister Narendra Modi’s seven years in office have changed the country.
Modi’s public support is still remarkably strong above 60 per cent but that is down from above 70 per cent before the second wave. And the latest Reuters economists survey forecasts economic growth this year at 9.8 per cent which is down only slightly on a month ago.
But bigger questions remain over how Modi’s dominance in national management has hollowed out parts of the state, whether India will turn more inward economically, where an alternate political leadership will come from, and the capacity of the business elite to respond to crisis.
- This article from Scroll.in ponders whether the striking image of funeral pyres across the country will rebound on the current government as they once did for the British colonial administration.
- Meanwhile, Aarti Betigeri says at The Interpreter that the crisis at home in India has only increased the political influence of the growing Indian diaspora in Australia.
Australia’s dilemma standing up for democratic principles in the region has once again been illustrated by the political showdown in the once predictable environment of Samoa.
Prime minister-elect Fiame Naomi Mata’afa was sworn in as leader in an impromptu ceremony in a tent outside parliament when her predecessor, caretaker prime minister Tuilaepa Sailele Malielegaoi, refused to allow the building to open. Malielegaoi’s Human Rights Protection Party (HRPP) has been in power for thirty-nine years, but Mata’afa, who left the HRPP to lead her FAST Party, claimed a narrow victory at the polls.
Australia is the longstanding economic and security power of last resort in the Pacific and is likely to be seen as responsible for helping maintain stability in the country. But it is also often quickly accused of being insensitive to local customs and practices.
While Palau and the Federated States of Micronesia have recognised the putative new government, Australia (like New Zealand) has taken a more standoff position despite calls for support from Mata’afa and many Samoans in Australia.
But with a split between the head of state and the judiciary over who should be in power and many individual election results still unresolved, the Morrison government faces a dilemma of being on the wrong side of an unclear resolution in a deepening crisis.
- This Radio New Zealand analysis is the most comprehensive backgrounder on the region’s latest challenge to an old political establishment.
UNIS TAKE ON THE WORLD
Elite universities have claimed a key role in Australia’s foreign policy in the latest effort by tertiary education institutions to repair relations with the Federal government after differences over funding and the pandemic.
In a submission to the government review of international education for the next decade, the Group of Eight (G8) universities have wrapped themselves in the rhetoric of sovereign capacity and geopolitical rebalancing which is more commonly associated with the government’s post-China boom language.
They argue the “international education sector must be viewed as a key pillar of our national foreign policy and defence sector strategies to build multi-lateral alliances across the Indo Pacific region and promote perceptions of Australia as a trusted regional partner.”
In an implicit concession that the longstanding arguments about the export value of education have been undermined by high dependence on Chinese students, the submission seeks to take a broader perspective than the value of international students to the economy.
It says that with the Indo-Pacific region becoming the centre of economic and geostrategic power, international education should play a role in boosting the country’s soft power through returning graduates and by building a cohort of native Asian language speakers who can be “leveraged to the advantage of Australian industry” and be a “critical asset in the current geostrategic context.”
With more senior former government officials serving as university chancellors these days, who are reportedly unhappy with the way universities have managed government relations, the submission appears to be aimed at positioning the elite universities differently.
As noted in Briefing MONTHLY last month, the government set the scene for this new G8 emphasis by telling universities to reduce dependence on Chinese and Indian students and issuing a consultation paper for the review which put “rebalancing of global political and economic power” alongside online education and university viability as reasons for a new approach.
The new Foreign Relations Act threatens to hold back the education sector’s push to reduce dependence on Chinese students, according to a report which calls for a less bureaucratic approach to policing university foreign agreements.
The National Security College policy options paper says Australia remains vulnerable to China cutting back the flow of its students – valued at more than $10 billion a year in export revenue. And the Foreign Relations Act is inhibiting new arrangements to recruit students elsewhere.
It cites unsourced concerns that university efforts to develop new cooperative arrangements in Vietnam, Singapore and Malaysia have been hampered by uncertainty about how they would be regarded under the new Act, which prevents states, local governments and public universities from entering into international arrangements that are against the national interest.
“The Act’s reporting requirements increase the resources and bureaucratic processes required for universities to pursue arrangements with universities with less autonomy,” the paper by Dirk van der Kley and Benjamin Herscovitch says.
BUDGET: DIVERSIFY OR BUST
Shifting Australia’s trade reliance away from China was the key international relations theme in the latest Federal Budget, in a shift away from the unexpected increase in development aid funding in last year’s budget.
The Department of Foreign Affairs and Trade won most of $198.2 million over four years (and $33 million a year after that) to be spent on “Enhanced Trade and Strategic Capability”. This funds export diversification, World Trade Organisation reform, the free and open Indo-Pacific policy, and an expanded diplomatic network. Depending on definitions, there is at least $500 million of obvious new money over four years on trade diversification initiatives covering supply-chain resilience, simplified trade, anti-dumping, and farm exports.
The downgrading of China can be seen in the way the 300-plus pages of the core Budget Strategy and Outlook paper refer to China only seven times, compared with 30 times back in 2015 when the bilateral trade deal was getting underway.
Last year’s Budget (and announcements after it) outlined $1.3 billion in new spending over about four years on COVID-19 vaccines, economic recovery, and other aid measures. This year the only new aid spending is $37 million over two years for COVID-19 assistance to India.
Total identifiable aid spending on the Pacific ($1.441 billion) and Southeast Asia ($1.012 billion) next financial year are only marginally higher than this year, within the overall $4 billion Official Development Aid spending, which is unchanged.
SISTER CITY DIPLOMACY
Japan might have been overtaken as Australia’s biggest export market a decade ago, but a new report argues that the bilateral relationship is really based on people-to-people links rather than economics.
Australia has more sister-city and sister-state relationships with Japan than any other country, with 107 such arrangements. And it ranks fourth for these links in Japan (after the U.S., China and South Korea) despite its relatively smaller population.
The two countries also have 553 sister-school relationships at the high school level, making Australia the most popular partner country in Japan for these arrangements. And Japanese is the most widely taught foreign language in Australia with more than 405,000 students across the primary to tertiary levels. This ranks Australia fourth globally (behind China, Indonesia and South Korea) and first on a per capita basis.
The Australia-Japan Stocktake Report 2020 provides a snapshot of the Australia–Japan relationship with the aim of providing a foundation for future of research and the planning of future cooperation.
“Australia and Japan have a deep, broad and close relationship that is anchored in strong complementarity in economic relations, rich people-to-people connections, and diplomatic and security cooperation characterised by a shared commitment to stability, peace and inclusive regional order building,” Ben Ascione writes in the report funded by the Australia-Japan Foundation.
See DATAWATCH below.
CHINA’S COVID COMEBACK
China has recovered substantial ground in the Australian population for its management of the pandemic this year compared with last year, despite the widening bilateral trade tensions.
Forty-five per cent of respondents to a Lowy Institute poll say the country has handled COVID-19 very or fairly well which is up 14 points from last year. By contrast, 19 per cent say the United Kingdom has handled the pandemic well, and only seven per cent say the United States has handled it well.
The polling has revealed Australians to be more supportive of using foreign aid to deal with COVID-19 than has been seen in previous polling on broader aid issues of aid. For example, 83 per cent of people support paying for vaccines in the Pacific countries and 60 per cent support help for Southeast Asian countries.
DEALS AND DOLLARS
Early-stage investor HEAL Partners has made another investment in Indonesian telehealth start-up Halodoc, as part of a US$80 million Series C funding round. Halodoc is a mobile platform that allows patients to access doctors, book hospital consultations and lab tests, and secure medication through its pharmacy delivery services across Indonesia. HEAL Partners is a health and lifestyle investor which first invested in Halodoc in 2020. The new funding round was led by Indonesian conglomerate PT Astra International, alongside Singapore sovereign investment fund Temasek Holdings, Indonesian telecommunications firm Telkomsel’s venture arm TMI, and Bangkok Bank.
REA REVIEWS ASIA
Online real estate company REA Group is reportedly reviewing its big expansion into Southeast Asia as it devotes more attention to its Australian interests. The Australian Financial Review reported that Goldman Sachs was examining the Asian online business which spans Indonesia, Malaysia, Thailand, Singapore, India, Hong Kong and China to see if it would be worth more to another owner. REA, which is 60 per cent owned by News Corporation, embarked on a big regional expansion in 2016 with the purchase of iProperty.
NOT SEEKING CHINA
Online employment company SEEK has sold most of its stake in Chinese jobs platform Zhaopin. largely ending a big expansion into China which began in 2006. The sale, which was flagged earlier in the year, will see the company cut its stake in Zhaopin from 61.1 per cent to 23.5 per cent as bilateral relations with Australia deteriorate. The company invested $27 million in the Chinese platform in 2006 and then built its stake. The sale will net it $560 million, which will be used to pay down group debt.
Defence equipment exporter and shipbuilder Austal is moving to exit China and enter the Philippines in a switch which appears to align with the changing regional strategic outlook. The company is reportedly trying to sell its 40 per cent stake in a Chinese shipbuilding joint venture Aulong Shipbuilding, which was set up five years ago to make ferries. At the same time, it is reported to be close to buying the Hanjin shipyards at Subic Bay in the Philippines in partnership with U.S.-based Cerberus Capital Management. Australian ambassador to the Philippines, Steven Robinson, suggested the Philippines venture could act as a service facility for U.S. Navy vessels and others in the region. Austal owns shipyards in Australia, the U.S., the Philippines and Vietnam.
We are uncomfortable with expanding the remit of the Five Eyes. We would much rather prefer to look for multilateral opportunities to express our interests.
– New Zealand Foreign Minister Nanaia Mahuta (April 19)
We are absolutely reaffirming our commitment to that Five Eyes partnership. Statements we'll make collectively will be appropriately be made by Five Eyes together.
– New Zealand Prime Minister Jacinda Ardern (April 20)
My view is that countries will choose to address issues of concerns in whichever forum they themselves determine appropriate and consistent with their respective national interest.
– Australian Foreign Minister Marise Payne (April 22)
I said exactly what I meant in terms of the Five Eyes alliance being a security and intelligence framework … if we are going to stand up for universal human rights within our region, we look to build a broader consensus of support.
– Nanaia Mahuta (April 24)
As China’s role in the world grows and changes, the differences between our systems – and the interests and values that shape those systems – are becoming harder to reconcile. This is a challenge that we, and many other countries across the Indo-Pacific region … are also grappling with.
– Jacinda Ardern (May 3)
ONE WAY EXCHANGE
Japanese students visiting Australia
Australian students visiting Japan
Source: Japanese Ministry of Education, Culture, Sports, Science and Technology
ON THE HORIZON
BIDEN BETS ON ASIAN ALLIES
The leaders of the U.S., Japan and South Korea are considering a meeting on the sidelines of the June Group of Seven summit, in a significant step forward for U.S. President Joe Biden’s focus on Asia.
The meeting with Japanese Prime Minister Yoshihide Suga and South Korean President Moon Jae-in would be the first such trilateral meeting Biden has held since taking office.
Japanese and Korean media have reported the plans for the meeting after Suga and Moon have travelled to Washington to become the first foreign leaders to meet Biden in person as president.
The meeting at the G7 summit in the United Kingdom is likely to be presented as trilateral cooperation amongst the three countries on how to deal with North Korea at a time when the U.S. and China are still trying to define the areas in which they can still cooperate.
Moon has been invited as a special guest to the June 11 summit along with Prime Minister Scott Morrison as part of the U.S.-led push to create an expanded group of large democracies to cooperate on managing China’s rise.
But such a summit could be seen as a success for Biden’s promised foreign policy focus on Asia because, while Japan and South Korea are U.S. military allies, they remain deeply divided over historical grievances dating back to Japan’s colonial control of the Korean peninsula before World War 2.
Both Suga and Moon are suffering from falling public support at home which would normally limit their ability to embark on any bilateral reconciliation initiatives. But Biden may be able to use his high global profile and foreign policy experience to broker some form of new cooperation between his fractious north Asian allies.
WELLINGTON’S APEC CHALLENGE
After three troubled years for the Asia Pacific Economic Cooperation (APEC) group, New Zealand’s effort to find some new stability really gets under way on June 5 with a meeting of trade ministers.
So far New Zealand has focussed its year running APEC on pushing to remove tariffs on pandemic related goods trade. But this is already a vexed issue for the APEC group given the geopolitical competition surrounding the cause of the COVID-19 pandemic and the global supply of vaccine.
But as a small country with a free trade reputation which has been steering a relatively neutral course between U.S.-China tensions, New Zealand also has an opportunity to restore some productive cooperation to other parts of the APEC trade facilitation agenda.
This National Bureau of Asian Research briefing examines how four quite different APEC members view the trade ministers’ meeting, which like all of this year’s activities will be held online.
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