Briefing MONTHLY #49 | April 2022
A Pacific election? | Regional economic outlook | Singapore’s new PM | Asian student jobs | PNG business
Illustration by Rocco Fazzari.
VOTE ONE: ISLANDS, Solomon
Spare a thought for Jose Ramos-Horta, who probably thought he would be the biggest Asian region election newsmaker this month with a strong return to power in the Timor Leste presidential poll.
But that didn’t account for his Solomon Islands colleague Mannaseh Sogavare, who has managed to create something that Australia’s voluble class of election pundits has rarely countenanced: a competitive federal election over national security.
Not since the Vietnam War, when Labor lost (1969) and then won (1972) elections amid a deep national divide over participation in a regional conflict and conscription (although there were other issues), has a direct external threat been such an election issue. National security has been an election feature since then but viewed through a more domestic lens like in 2001 with asylum seeker boats sparking a debate about immigration border controls.
The twist this time is the Liberal-National Party government went into the campaign apparently confident that any “khaki election” held in the wake of the Ukraine war would play to the recurring opinion poll finding that the Coalition is viewed as the better manager of national security.
How fast things change. On April 12 former diplomat John McCarthy was lamenting as the campaign got under way that a muscling up to Russia election strategy would run counter to Australian regional diplomatic interests. “We have not fully grasped the reality that western perspectives on Russia are not shared – or are only partially shared – by much of the world including in our own region,” he wrote.
By April 20, Labor found itself in the unexpected position of actually welcoming an international relations election when the Solomons-China agreement allowed it to claim the “biggest foreign policy blunder since World War II”.
Election issue monitoring by Streem Media shows that defence and security is quite highly ranked as the fourth out of the top ten most mentioned issues since the campaign began. That is after employment, the environment and health.
However, this level of attention hasn’t produced a commensurate amount of new foreign policy so far with the main new government initiative being further military assistance to Ukraine and Labor’s five-point package of Pacific engagement measures led by a new permanent immigration visa.
As novel as a serious national security debate in an election may be, the big question is whether it will be sustained in the next three weeks with the Reserve Bank of Australia set to change the narrative back to economic management with a possible interest rate rise on Tuesday. The conventional wisdom is that both economic management and national security are meant to be the election high ground for the Coalition. So, it will be telling to see which part of this shrinking high ground will now be seen as the best route to staying in government.
Opposition leader Anthony Albanese has already apparently made his bet by downgrading national security and opting for more of an economic management focus. In his campaign launch on Sunday, he listed “a secure nation” as only the eighth out of ten reasons to vote for a Labor government.
Meanwhile, one of the highlights of Australian elections is the way politicians tend to embark on a frank assessment of the state of play as the votes roll in with unexpected results on election night.
But a khaki election campaign – however brief – seems to have brought forth an earlier frank but not necessarily entirely consistent series of revelations from some of the country’s top national security practitioners.
Here’s Office of National Intelligence (ONI) director Andrew Shearer speaking at the Raisina Dialogue in India as government ministers were at odds about when they first knew about the Solomons-China pact: “It wasn’t an intelligence failure, this strategy has been unfolding for a number of years. I think for those of us watching closely there were signs of this well over a decade ago.”
Here's former ONI chief Nick Warner writing in The Australian Financial Review about how Australia has squandered opportunities to build enduring Pacific relationships: “Sometime after 2015 it became clear in Canberra that China was looking at sites for a naval base in the South Pacific. Oblivious until that point, we were sleepwalking into a new and dangerous strategic environment.”
Here’s outgoing Australian Strategic Policy Institute executive director Peter Jennings on “dumbed down" policy making: “Note how big policy announcements are made: decisions to double the size of our submarine fleet, stage a Pacific step-up, restart the Quadrilateral Security Dialogue and set up the AUKUS defence technology partnership—these are political judgement calls, often made in haste and in some desperation.”
Here's defence minister Peter Dutton in The Australian Financial Review on when he first realised China was a threat during the Huawei 5G review: “The industrialisation of their intelligence collection, the invasive approach not limited by morals or by law. The hoovering up of health records for coercion – the bribery is at a scale that none of us have seen in our lifetimes.”
Here's former foreign minister Alexander Downer on how rivalry between China and Taiwan destabilised the Solomons: “The competition between Taipei and Beijing undermined attempts we were making to improve the governance of Solomon Islands. Suffice it to say Solomon Island leaders were subjected to enormous temptations that only the godly could resist.”
- The campaign might be light on actual new Asian policy but the Asia Society Australia election policy briefs are filling the gap. The latest ones cover technology, diplomacy and China.
- Whether the Pacific remains an election issue or not, it will remain a foreign policy challenge. The campaign has overshadowed the final report in a three-report series from the Federal Parliament’s Joint Standing Committee on Foreign Affairs, Defence and Trade on the Pacific. See ASIAN NATION below.
- DIPLOMATICALLY SPEAKING has the key quotes from the national security campaign so far.
- And as Jose Ramos-Horta’s return to power in Timor Leste shows, there are also some interesting elections in Asia this year. See the Briefing MONTHLY preview here. The Philippines presidential vote (see below) on May 9 may be the most remarkable of all.
It has been a big month for pondering the economic outlook across Asia from global and regional forecasting agencies as the region copes with a series of shocks since the beginning of the year when it appeared to be on a path of sustained recovery from the pandemic.
The bottom line from these reports is that growth for this year has been cut by around half a percentage point from late last year to around an average of five per cent, with warnings that could fall to four per cent under worse case circumstances. That compares with almost seven per cent for 2021. But the impact across the region is very mixed as, indeed, are the causes of the more negative outlook.
The World Bank captures this very nicely in two useful charts.
1: The recovery is uneven across countries …
2: The outlook is hard to judge because the negative shocks causing the growth reductions include rising interest rates in the US, China’s uncertain management, the Ukraine war and a slowdown in the rich world.
The World Bank’s outlook for East Asia and the Pacific says: “These shocks are likely to magnify existing post-COVID difficulties. Struggling regional firms, more than 50 per cent of which reported payment arrears in 2021, will be hit by new supply and demand shocks. Households, whose eight million members fell back into poverty during the pandemic, will see real incomes shrink even further as prices soar.”
But it nevertheless sees three more positive opportunities:
- There will be manufacturing export prospects for some countries as production shifts out of China and due to digital delivery of services.
- Digital technologies could boost productivity in the inefficient interior of some countries rather than just at the higher end frontier.
- New green technologies could allow countries to cut carbon emissions without unacceptable cuts in consumption or growth.
Over at the International Monetary Fund, the latest World Economic Outlook regional focus is on how China’s repeated COVID lockdowns and weak employment recovery in urban areas is preventing a consumption bounce back. It says: “Recent lockdowns in key manufacturing and trading hubs such as Shenzhen and Shanghai will likely compound supply disruptions elsewhere in the region and beyond.” For the broader region, it says the limited direct trade links to Russia mean that spillover effects from the war will be limited to the commodity price channel and indirect impacts due to weaker demand from trading partners in the euro area.
- The IMF Asia and Pacific outlook briefing is here.
At the ASEAN+3 Macroeconomic Research Office, with the Ukraine war just underway at publication time, the regional economic outlook focuses on the pandemic recovery. It says the level of vaccine coverage should mostly protect this region from new lockdowns undermining the nascent economic recovery. But economic managers face a difficult balancing act avoiding a premature withdrawal of pandemic assistance while trying to shift spending to newer growth and productivity initiatives. And the report examines how the region faces big questions about its role in highly complex and integrated regional production networks amid the global business move to reduce long supply chain risks.
The Asian Development Bank (ADB) outlook was the first out from this group before the fuller impact of the Ukraine war and the China lockdowns. It notes Omicron’s less severe impact has allowed economic recovery to continue at a slower rate with even tourism showing signs of “incipient recovery”. But notably it estimates that the school closures across Asia due to COVID could cost the affected students future income losses of US$3.2 trillion or 13 per cent of developing Asia’s total economic output in 2020. The report focuses on the need for Asian countries to raise higher tax revenue to achieve climate change benchmarks and manage healthcare inadequacies revealed by the pandemic.
- See DATAWATCH below for a summary of the individual country economic growth forecasts drawn from these reports.
Generation 3: the Marcos family’s newest politician. Picture: Visit Ilocandia
The character of democracy across Southeast Asia is set to come under new question with the likely return of the Marcos family to the leadership of the Philippines in the May 9 election.
Thirty-six years after Ferdinand Marcos was forced out of power by a military-backed popular revolt, his son Ferdinand junior (also known as Bongbong) appears set for a decisive win. And to underline to renaissance, the family’s third generation will start its political rise with Marcos junior’s son Ferdinand Alexander Araneta (Sandro) Marcos (pictured above) running for office in the family’s Ilocos Norte home province. Marcos senior’s wife Imelda was the Manila governor during his time in power and his daughter Imee has been both a provincial governor and is a current national senator.
Some opinion polls suggest Marcos could win as much as two-thirds of the presidential vote, compared with only a quarter for his closest competitor and incumbent vice-president Leni Robredo. And he has only doubled down on the way his father’s martial law regime appears to have disappeared from the memory of most Filipinos by declaring during the campaign: “My father is the statesman, he is the political genius, he is all that.”
Robredo has been drawing bigger crowds than Marcos across the country and winning endorsements from a growing band of lower-level political figures, but the failure of the anti-Marcos forces to align behind one alternative has undermined their campaign.
The election result will only underline the enduring power of family dynasties in politics across most of Southeast Asia compared with policy or ideological political parties. It will also highlight how the region now has regular, relatively well-organised elections but they rarely shakeup establishment interests.
- Manila Times columnist Rigoberto Tiglao argues that the return of the Marcos family has been foreseeable for a long time.
SINGAPORE’S ZEN PM
Singapore has a well-established tradition of grooming its new leaders like a well-oiled corporation with long transitions to introduce them to their citizens and the region.
But the newest leader designate Lawrence Wong faces a challenging time fitting into this matrix with a previously-nominated successor dropping out a year ago, the spectre of Singaporeans losing faith in the long-ruling Peoples Action Party, and an incumbent Prime Minister in Lee Hsien Loong vacillating about the handover.
Wong, the current finance minister, emerged as the new heir apparent on April 14 when Lee announced on Facebook he had been chosen through an independent private interview process with his ministerial colleagues. Two other colleagues had also been in the running to be the so-called fourth generation leader in a procedure which is yet another twist in the country’s transition towards a more open and competitive political system.
But as if to emphasise what an idiosyncratic evolution this is, Lee said after the announcement that the interview process was intended to “encourage candour, introspection and objectivity, yet without impairing mutual relations and trust amongst the team” and which meant the decision was made with a “collected, dispassionate, almost Zen state of mind”.
Lee, whose father was Singapore’s first prime minister, had previously said he wanted to handover before he turned 70 last February. But that was delayed by the onset of the pandemic and the sudden loss of the previous preferred successor.
However now with an election due by 2025, it is unclear who will be the leader by then. Lee says: “It will depend on how things evolve, it's something which we'll decide later on.” To which Wong has responded: “I will certainly let the Prime Minister know when I'm ready. And I am also very sure that before too long, he will be reminding me and chasing me for a response.”
- The Jakarta Post columnist Kornelius Purba says Wong is surprisingly little-known amongst his regional peers and will need to fix this to sustain Singapore’s important role in Southeast Asia.
NEW PACIFIC SOLUTION
The federal election campaign battle about the Solomon Islands has quickly overshadowed the final part of a three-report parliamentary committee inquiry into new pathways for Australian policy in this region.
Combined with parallel earlier committee reports on trade and defence ties, the Joint Standing Committee on Foreign Affairs, Defence and Trade report on the Pacific Step-up provides the sort of building blocks for moving beyond the Solomons, China and aid funding rows to a more sustainable longer term relationship.
The report says it had been difficult to properly quantify the outcomes from the 2018 Step-up due to the pandemic and the resultant shifts in the aid, health, and economic environment. So, while it treads delicately around the issue in its recommendations, the underlying theme in the report is the need for careful progress towards a new, formal and different relationship with at least some Pacific nations.
This is best captured in the report sub-committee chair Dave Sharma observations in his introduction: “The Committee heard several bold and ambitious proposals for strengthening Australia’s relationships with the Pacific, including for ‘deep integration’ and ‘compact of association’ arrangements. Some of these ideas may prove to be non-starters, for a range of reasons. Nonetheless, the Report recommends that these ideas be further scoped and evaluated, and openly discussed, with a view to informing the long-term future of Australia’s relationships with the region.”
And in a relatively positive outlook given the election campaign debate the report itself says: “Pacific island countries place differing weight on aspects of their relationship with Australia. However, during this inquiry the Committee heard that there is a universally positive association with Australia’s status as a reliable first responder after Pacific natural disasters and other difficulties; and there is a recognition that Australia takes a principal role in development partnerships.”
Only 16 per cent of the 1.6 million international students who studied in Australia between 2001 and 2014 were given permanent residency and this proportion may have even been reduced by the changing migration situation surrounding the pandemic.
So, a new examination of the employment situation facing Vietnamese students returning home from Australia to work provides some timely insights for Australian universities seeking to boost their attraction to Asian students now borders have opened.
The study by Deakin University’s Ly Tri Tran and three colleagues says returning students face quite diverse employment outlooks at home due to different attitudes of employers and cultural factors which may frustrate their expectation that a fording education makes them more attractive.
It says the research underscores the importance of how home
and host policymakers in the international education can work together to support host universities to provide international students with the platforms to keep abreast of the home labour market conditions, update the local regulative systems, and keep them abreast of cultural practices to manage returnees’ expectations and maximise their employment outcomes.
Apart from embedding employability skills into the curriculum, knowledge and understandings about home labour market can be gained through alumni mentoring schemes where international students and graduates have an opportunity to interact with alumni from their home country,” the study in International Migration Journal argues.
Given tertiary education is a key focus of Australia’s new Vietnam economic engagement strategy, these sort of measures may well be as important to the strategy’s success as the upfront promotion of Australian education.
- See Asia Society Australia’s Vietnam education roundtable here. And Generation Asia’s Keeping Connected report here on maintaining youth connections.
CHINESE AUSTRALIANS SPEAK
The proportion of Chinese Australians with a sense of belonging to Australia has fallen over the past two years amid the deteriorating relationship with China, the foreign interference debate and the COVID-19 pandemic. The latest Lowy Institute poll found 64 per cent had a great or moderate sense of belonging compared with 71 per cent the previous year and 92 per cent for the general population. But while fewer people reported being treated differently because they were Chinese, a consistent 18 per cent said they had been physically threatened or attacked.
While Chinese-Australians remain much more trusting of China than the broader Australian population, and have far higher levels of confidence in China’s President Xi Jinping, they have also become more concerned about foreign interference. In the latest survey, at least half say that the public, politicians and media are paying “about the right amount of attention” to foreign interference, an increase of more than 20 points since 2020.
Half the Chinese-Australian population are concerned about foreign influence from China on Australia’s political processes, while 36 per cent are concerned about influence from the United States.
The majority of participants continue to see China as “more of an economic partner to Australia”, in contrast to the broader Australian population that see China as “more of a security threat”. However, Chinese-Australians are less optimistic than other Australians about Australia’s position in great power competition, with only 53 per cent saying it is possible for Australia to have a good relationship with China and the US at the same time. This view is held by 72 per cent of the broader Australian population.
INDONESIANS ON AUSTRALIA
Only 55 per cent of Indonesians express faith in Australia to act responsibly in the world in a 20-percentage point drop since the Lowy Institute last surveyed Indonesian public opinion. But in an indication that trust and fear don’t necessarily correlate, he proportion of Indonesians who see Australia as a threat has only risen slightly from 30 per cent to 34 per cent.
The latest poll of 3000 people found that very few Indonesians had heard of Australia’s key foreign policy initiatives, with seven per cent knowing about the Quadrilateral Security Dialogue and 11 per cent saying they had heard about the AUKUS submarine partnership.
Meanwhile feelings towards Australia have also declined slightly from 62 degrees on a thermometer in the 2011 poll to 58 degrees last year. Significantly, this places the two countries on a similar warmth level, with Australians giving Indonesia a 55 degree ranking in last year’s poll of Australians on foreign policy.
The more general questions in the poll reveal diverse attitudes in Indonesia, with high warmth and awareness of Middle Eastern countries and their leaders but Japan, the United States and South Korea still emerging as the favoured countries for study and work abroad.
The poll report observes: “Most Indonesians support democracy, but they also respect authoritarian leaders overseas. They are more confident in their own county and institutions than in the past, but have lost trust in most major powers.”
“They are increasingly wary about China, and particularly Chinese investment, and are not overly enthusiastic about the United States and Australia. They see domestic issues as the most significant threats to Indonesia’s interests, but would also support the country playing a larger global role.”
DEALS AND DOLLARS
PNG BUSINESS WOES
Papua New Guinea’s relationship with corporate Australia has taken diverse blows in the past month, with a new super profits tax clouding Telstra’s purchase of Digicel Pacific and calls for investment bank UBS to be banned from the country.
The country has imposed a $130 million special tax on Digicel and a parallel tax on Australian Securities Exchange-listed Bank South Pacific in late March on the basis it was recouping the benefits of excessive market concentration. As a result, Digicel executives reportedly fled PNG to avoid jail over the tax, raising questions about who would run the company which Telstra is buying with substantial support from the Australian government via Export Finance Australia. Telstra says the deal is still going ahead but Digicel’s current owner is responsible for the tax.
The Development Policy Centre has calculated that the deal has been structured in a way which will possibly give Telstra an internal rate of return of 17.5 per cent for its US$270 million contribution compared with 7.2 per cent for the government’s US$1.33 billion. Telstra also has other protections for its cashflow and no obligations to provide better mobile phone facilities in the countries where Digicel operates.
Meanwhile the PNG government has stepped up pressure on the Australian government to take a more active role in implementing the recommendations of the PNG Royal Commission into a $1.3 billion loan scheme in 2014 which has cost the PNG government hundreds of millions of dollars. PNG police have launched a criminal investigation into UBS after a referral from the royal commission.
But petroleum minister Kerenga Kua told The Australian Financial Review that Australia should set up its own task force to pursue the recommendation that the Australian Securities and Investments Commission should examine the issue separately.
With Australia under pressure to pay more attention to governance issues in the Pacific countries after the Solomon Islands’ security agreement with China, PNG is likely to be in a stronger position to seek assistance from Australian regulatory agencies and police.
CHINA’S “WISE LEADERSHIP”
High profile investment banker John Wylie has broken out of the negative mood towards China to urge investors to maintain connections to the country in the medium to longer term.
In a private speech reported by The Australian he said China had delivered some of the most “wise and capable leadership internationally” over the past two decades and President Xi Jinping had correctly forced more competition on China’s most powerful internet companies.
“The fact of (Xi) acting to curb the power of technology companies means it’s less likely those companies will have the market power that Facebook and Google have in America, which has become a serious economic and political issue. He’s trying to do something about the education system to make it more equal. And imposing limitations on gaming for the young. Some of these are good things,” Mr Wylie, who chairs Tanarra Capital and is a former Australian Sports Commission chairman, said.
“If you look back over the last 20 years, some of the most wise and capable leadership internationally from an economic perspective has been the Chinese government. They’ve powered through all the challenges that have been thrown at them. These are reasons why we think it’s going to be a good place to invest long term.”
COLES TO SINGAPORE
Coles has entered an agreement with Singapore’s largest supermarket chain, FairPrice, which means its own home branded groceries will be sold in the country.
The Australian reported executives from the National Trades Union Congress-owned FairPrice visited Australia to finalise the export deal, with the Singapore supermarket co-operative keen to gain access to Coles’s branded foods. FairPrice chief procurement officer and head of products Tng Ah Yiam said Australian groceries were well known in the region for their quality and price, and that Australia was an increasingly important source of supply for Singapore.
“Australia is one of our major sources of supply for Singapore, not just for FairPrice, when you look at fresh produce, meat, seafood, dairy products, confectionery, chocolate, breakfast cereal and muesli bars – the whole range of products,” he said.
The ASX-listed mining company which decided to leave Myanmar in response to last year’s coup has suffered another obstacle in retrieving $16 million in proceeds from the sale of its stake in a Myanmar silver mine. It says the Myanmar government issued an “uncertain” regulatory notice as part of its broader suspension of foreign currency transfers.
Mallee Resources – formerly Myanmar Metals – said the Central Bank of Myanmar’s new rules had put a hurdle in front of its plans to repatriate the cash.
The company has been attempting to repatriate $US30 million it made from selling its stake in the high-profile Bawdwin project in the north of Myanmar to a conglomerate with ties to the country’s military.
ASIA’S GROWTH OUTLOOK
These figures are from the latest April forecasts by the International Monetary Fund, the World Bank, the ASEAN + 3 Macroeconomic Research Office and the Asian Development Bank. The institutions have different regional geographic definitions and cover different countries in these reports. Figures for India, Bangladesh and Pakistan are for fiscal years and not directly comparable.
This (China-Solomon Islands agreement) is a massive foreign policy failure on the prime minister’s watch … This isn’t something that has just arisen. Australia has been the security partner of choice for the Pacific for a long period of time, for the entire post-World War 2 period. That’s broken down. We need to rebuild it.
– Labor leader Anthony Albanese 20/4/22
I share the same red line that the United States has when it comes to these issues, and we’re very aware of that and actions that could be needed, working together with our partners to ensure regional security, not just for Australia, but for the whole region working together to ensure that we don’t have any negative influences here in our part of the world … Prime Minister Sogavare has been very clear to me, saying there will be no such bases. So that is what he has said. And so he clearly shares our red line.
– Prime Minister Scott Morrison 25/4/22
This is a hose you have to hold, to put it bluntly. This needs time and attention, you cannot abdicate or step away from responsibility.
– Former prime minister Malcolm Turnbull 26/4/22
The prospect of a Chinese base less than 2,000km from Australia’s coastline is dramatically detrimental to Australia’s security interests. That has occurred on Mr Morrison’s watch. Their response appears to be more chest beating. There is no point in beating your chest if you’re beaten to the punch.
– Labor foreign affairs spokesperson Penny Wong 26/4/22
What (Labor) are effectively saying is they’re going to keep doing what we’ve been doing. There’s one difference though, I sent in the AFP. The Labor Party wants to send in the ABC, when it comes to their Pacific solution. They have a Q&A solution in the Pacific.
– Scott Morrison 26/4/22
Beijing is very clearly aware that we’re in a federal election campaign here at the moment and now we have a significant focus on what is happening in the Pacific Islands, what China is doing.
– Home Affairs Minister Karen Andrews 27/4/22
Even by the incredibly low standards of this government, I thought what Karen Andrews said was remarkably desperate. And remarkably unhinged. The Australian people will determine who wins this election.
– Labor Treasury spokesperson Jim Chalmers 27/4/22
ON THE HORIZON
US TURNS TO ASEAN
The Biden Administration with step up its engagement in Asia on May 12 when Southeast Asian leaders will travel to Washington for a previously postponed summit with President Joe Biden.
This will officially commemorate the 45-year relationship between the US and the Association of Southeast Asian Nations (ASEAN) but in effect follows up the first summit of this sort in 2016 when former President Barack Obama was promoting his pivot to Asia. Australia picked up the idea to host a summit with ASEAN leaders in Sydney in 2018 and is likely to looking at a parallel activity to mark its longer relationship with ASEAN which hits the 50-year point in 2024.
The summit is expected to discuss cooperation across a wide range of areas. But it will also be part of the US progressive marketing of its yet to be released Indo-Pacific Economic Framework which, to some extent, will be trying to revive the ambition which surrounded Obama’s pivot.
The head of the Myanmar junta, Min Aung Hlaing, has not been invited because of the US opposition to the military coup. And outgoing Philippine President Rodrigo Duterte, a frequent critic of the US, is also expected to not attend the event which will be after his country’s election.
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