Briefing MONTHLY #64 | July 2023
Climate tensions | Thailand’s impasse | Japan gas row | Pacific rivalry | Wong v Wang | Mandarin mysteries | PM to China?
Animation by Rocco Fazzari.
United States climate envoy John Kerry may have thought the record 52-degree temperature recorded in China on July 17, the day he arrived for climate change talks, might have helped his cause.
But Kerry’s mission to ease superpower tensions in an area where both countries have acknowledged shared global responsibility melted under increasingly familiar forces. Top officials spoke civilly and apparently productively only to have their bosses return to finger-pointing.
In this case it was President Xi Jinping declaring China would make its own decisions on carbon emission cuts despite Kerry agreeing with his counterparts to return to a previous bilateral cooperation agreement. A month ago, it was President Joe Biden calling Xi a dictator just days after Secretary of State Antony Blinken had met him in Beijing.
Kerry may have made slightly more progress with China than the prior visits by Blinken and Treasury Secretary Janet Yellen. But the triumph of domestic politics over global imperatives is not just contained to the superpowers.
In ASIAN NATION we examine how Australia’s relationship with arguably its two most important close regional interlocutors – Japan and Indonesia – is also experiencing diplomatic heat managing climate change despite the displays of bonhomie whenever the leaders meet. Ministers relatively quietly visited both countries last week to calm things down.
Australia and Indonesia have obvious complementarities in combining their respective endowments with lithium and nickel critical minerals into some form of electric car industry cooperation. But they also have potentially competing ambitions to be electric vehicle battery manufacturers, in what could also be a new variation of their old competitiveness as coal exporting economies.
Criticism of the Albanese government’s gas industry net zero emission and domestic gas reservation rules by Japanese government officials and commentators has stepped up this month. It is a throwback to old diplomatic tensions over whaling and car industry assistance despite the increasingly declared close security relationship.
At the same time the Australian government may face a sensitive foreign investment decision if Indonesia’s state-owned fertiliser company tries to buy Australia’s biggest fertiliser producer. It will have implications for sustainable agriculture in both countries. See DEALS AND DOLLARS.
Climate change has been felt right across the region this month from soaring temperatures amid torrential rain in several countries to tensions at the Group of 20 ministerial discussions on renewable energy in India. And there have been a series of urgent calls to action in new studies.
The United Nations Economic and Social Commission for Asia and the Pacific (ESCAP) says US$145 billion is needed to set up disaster warning systems. The ASEAN+3 Macroeconomic Research Office (AMRO) says its nine members need to spend US$250 billion by 2059 on adaption measures alone. The Economic Research Institute for ASEAN and East Asia (ERIA) points out that Asia faces particular infrastructure costs with seven out of ten of the world’s most natural disaster prone countries. See DATAWATCH.
Meanwhile, we also look at how the China relations rollercoaster continued apace in July with conflicting signals about whether Prime Minister Anthony Albanese will visit as planned this year. New opinion polling shows support for the government’s approach to China despite very mixed views on bilateral relations. And new research shows the Chinese impediments to Australian farm exports had only had a very small impact on the economy.
The debate about the Albanese visit has intensified with some surprising contributions. Foreign minister Julie Bishop says go but Business Council of Australia international engagement chair Warwick Smith says wait. And Chinese ambassador Xiao Qian has called for more defence contact.
Briefing MONTHLY editor
NOT MOVING FORWARD
Pita Limjaroenrat leaving the Parliament floor. Picture: AP
Thailand’s transition to a new government faces another potentially cathartic moment in early August with three events set to occur.
The Constitutional Court reportedly will rule on whether putative prime minister and Move Forward Party (MFP) leader Pita Limjaroenrat is eligible to stand again as prime minister having already lost a parliamentary vote. The parliament will reconvene allowing MFP coalition partner and second biggest party Pheu Thai to seek the top job, possibly breaking with MFP. And exiled former popular prime minister Thaksin Shinawatra is flagging he will return to the country after more than a decade away to face outstanding prison sentences.
At the time of writing these events appeared to set the scene for a potential compromise in the two decade long deadly standoff between the military-led establishment and the Thaksin family-led populist forces which could see Pheu Thai assume the prime ministership.
Many things could change, but youthful reformer Pita appears to have been outmanoeuvred by the country’s military appointed political regulation agencies just as the founder of his predecessor Future Forward Party Thanathorn Juangroongruangkit was after the 2019 election. Thaksin reportedly met Thanathorn in Hong Kong last week to discuss some form of compromise between their political successors.
The Thaksin-aligned Pheu Thai and its predecessors have been forced from power by the establishment several times before by both courts and coups. But they may now be seen by those same military royalist forces as the acceptable face of a more democratic Thailand.
- At The Bangkok Post, Thitinan Pongsudhirak says the international community should censure Thailand if the MFP is excluded from government.
It has been a big month for ticking off diplomatic bucket lists in the South Pacific with the highest profile US government visitors to Tonga and Samoa, the first US defence secretary visit to Papua New Guinea, and the first sitting French president to visit an independent Pacific Island state.
Meanwhile Deputy Prime Minister Richard Marles said Australia was prepared to support the Solomon Islands in setting up its own military after Prime Minister Manasseh Sogavare said he wanted to join PNG, Fiji and Tonga in having his own standing defence force.
The visits by Antony Blinken to Tonga, Defence Secretary Lloyd Austin to PNG, and Vice-President Kamala Harris’s husband Doug Emhoff to Samoa were the latest effort by the US to catch up with China’s diplomatic expansion into the region. The Biden Administration says it will at least match the Chinese diplomatic footprint of embassies in eight out of 12 Pacific countries.
Visiting New Caledonia, Vanuatu and PNG, French President Emmanuel Macron sought to offer an alternative major power presence in the region to the competition between the US and China, declaring the region faced “new-imperialism”.
The island hopping came ahead of the annual Australia-US Ministerial (AUSMIN) meeting of foreign and defence ministers in Brisbane which produced more outcomes than had been expected given Anthony Albanese has a scheduled meeting with President Joe Biden later in the year.
The ministers agreed to:
- Embed US intelligence analysts in the Australian defence department
- Expand northern Australian defence bases to accommodate US aircraft
- Speed-up Australian missile production to become a supplier to the US
- Joint engagement in the military domain of space
Marles said after the meeting: “We've made important steps forward in respect of American Force Posture Initiatives in Australia, building on what currently exists. There is a commitment to increase American Force Posture in respect of our northern bases, in respect of our maritime patrols and our reconnaissance aircraft, further … Initiatives involving US Army watercraft, and in respect of logistics and stores.”
- James Curran in The Australian Financial Review says the key question from the meeting is whether Australia is being transformed into “a base for offensive US operations into Asia”.
HUN SEN'S HANDPASS
It says something about the Cambodian prime minister’s capacity for surviving in a region of both genocide and gerontocracies that that he will likely only be exceeded in office by the hereditary Sultan of Brunei.
Hun Sen, 70, announced he would stand down after more than four decades at least partly running Cambodia to hand power to his son just days after winning more than 80 per cent of the vote in a highly manipulated election. Hun Manet, 45, will takeover the top job from his father in late August after being groomed for the role as army chief following an education in both the US and Britain.
Hun Sen first rose to the top job in 1985 during the Vietnamese occupation of Cambodia after the Khmer Rouge genocide and has clung on through a series of political guises from communist to Khmer nationalist to state capitalist to virtual dictator in recent years.
But his final act seems set to draw on the Singaporean model functioning as a sort of senior minister by retaining his position as Cambodian People’s Party (CPP) head, National Assembly member and Privy Council to the King president. Notably, the region’s current third longest serving leader is Singapore Prime Minister Lee Hsien Loong, whose father deployed the minister mentor idea on retirement.
Hun Sen has maintained close relations with China which extend back to the Indo-China Wars. But his son’s western education raises at least some prospect he may be more open to more diverse foreign policy connections, although he has made few public comments. However, in the meantime, he will have a testing time demonstrating he can run a country where the population is youthful, has had a substantial taste of democracy over the past two decades, and has an activist pro-reform overseas diaspora especially in Australia.
Hun Sen’s scorched earth approach to banning alternative parties at the July 23 election saw the exclusion of the well-established Cambodian National Rescue Party and rising new Candlelight Party. But the once significant Funcinpec Party re-emerged as a vehicle for Cambodians who were brave enough to reject the CPP, underlining how Hun Manet will have a challenging time balancing his father’s old regime and a population looking for change.
- David Hutt examines whether Hun Manet can reset ties with the West at Asia Times.
The Peoples Republic of China and the Republic of Singapore are sometimes counterposed as different faces of a more Confucian-based approach to managing a modern country.
And, so their different approaches to simultaneous political scandals this month have provided an insight into how much these models have in common and how much they diverge.
Singapore Prime Minister Lee Hsien Loong appeared to be moving quickly when it was announced on July 12 that Australian-educated Transport Minister Subramaniam Iswaran was helping the country’s corruption investigator with an inquiry and would be standing down from his job. Lee had been told about the investigation on July 5. It has now emerged that Iswaran was actually arrested on July 11 along with a prominent businessman Ong Beng Seng, something which was not announced until July 14.
By contrast China’s Foreign Minister Qin Gang had not been seen in public for more than two weeks when it was announced on July 11 he was not at an ASEAN foreign ministers meeting because he was sick. Then it took the Chinese government until July 25, amid spiralling rumours, to announce Qin was no longer the foreign minister, with no reference to his health.
The Iswaran investigation is being described as the most serious corruption investigation since 1986 in Singapore, but is made more remarkable because it comes amid a series of political scandals. Likely future prime minister Lawrence Wong concedes it is a “setback” for the ruling Peoples Action Party which increasingly appears hypersensitive to the idea of losing power.
Meanwhile in China the public is only left with rumours about whether Qin was removed over a sex scandal, rivalry with peers in the foreign ministry, tensions with his predecessor and now successor Wang Yi, or some sort of embarrassment for his patron in Xi Jinping.
- Katsuji Nakazawa at Nikkei Asian Review says Qin has been punished by Xi for failing to manage relations with the US. Meanwhile, Toh Han Shih, at AsiaSentinel, says Iswaran may be the latest government official to be involved in a Formula 1 car racing scandal.
Better business visa access for Indonesians and more Australian universities in Indonesia were the highlights of what was likely the last bilateral business visit to Australia by Indonesia’s President Joko Widodo before he leaves office next year.
But while Prime Minister Anthony Albanese and his counterpart continued to talk up renewable energy as a major new leg to the relationship after discussions at the Group of 20 summit last year, the inherent tensions over where electric vehicle battery manufacturing will occur appears to be a millstone.
In the key developments:
- There will be improved visa access for Indonesian businesspeople and frequent travellers, mutual professional recognition for engineers and new pathways to support skills exchange under the Indonesia-Australia Comprehensive Economic Partnership Agreement (IA-CEPA).
- Western Sydney University, Deakin University and Central Queensland University will open campuses outside Jakarta in the footsteps of the pioneering Monash University in Jakarta that opened last year.
- Albanese committed to a new scheme to improve the tertiary education experience for Indonesian students in Australia and yet another program to encourage more Australian students to study the Indonesian language.
- Australia put more aid money behind renewable energy cooperation with $50 million from a $200 million election promise for Climate and Infrastructure Partnership to attract private climate finance to Indonesia. Export Finance Australia will establish a US$200 million facility to help Indonesian energy transition.
Albanese said cooperation on energy transition was “an incredible opportunity for us going forward” but the Western Australian led the way with a plan for more cooperation with Indonesia Chamber of Commerce and Industry which could see Indonesian investment in that State.
National cooperation appears to be constrained by Indonesia’s push to process Australian lithium in Indonesian electric vehicle manufacturing plants when the Albanese government has its own election commitments to support battery manufacturing in Australia. Indeed, a series of recent government documents on manufacturing, electric cars and critical minerals pay no heed to Indonesia’s ambitions in this area.
Industry minister Ed Husic visited Indonesia last week to find a way through these competing manufacturing ambitions. But at the same time the government’s independent economic adviser the Productivity Commission questioned the viability of Australia actually producing batteries rather than just partially processing critical minerals.
It suggested batteries would likely best be produced close to the where electric vehicles were made. That will be welcomed in Jakarta, if not Canberra.
STEPPING ON THE GAS
Japanese government officials and commentators have stepped up their criticism of Australia’s net zero and domestic gas reservation policies to new levels this month just has the Albanese government has intensified its push to meet its carbon emission reduction targets.
The government may have hoped the unusual public criticism of one of its core election campaign commitments from its closest Asian security partner would ease after the departure from Australia of outspoken former Japanese ambassador Shingo Yamagami in April.
But after Economy Minister Yasutoshi Nishimura told a Tokyo media conference in June that Australia’s Safeguard Mechanism reforms would” have [an] extremely significant impact on our country's LNG business in Australia,” there has been increasingly negative comments on the policies.
For example, Institute of Energy Economics chief executive Tatsuya Terazawa, who is Asia Society Australia’s newly appointed Victoria Distinguished Fellow, said Australia was no longer a reliable candidate to make up any shortfall in gas supply from Russia after “changing the rules of the game after the game has started.”
Nishimura said Prime Minister Fumio Kishida had already taken the issue up with his counterpart Anthony Albanese and Japan expected to resolve the issue at the highest level. Foreign Minister Penny Wong was forced to acknowledge the tension in the relationship ahead of a meeting with her Japanese counterpart Yoshimasa Hayashi in Jakarta when she conceded: “We understand that for Japan energy security is national security, and I will make that point again to him very clearly.”
Climate Change and Energy minister Chris Bowen visited South Korea and Japan last week reassuring them that Australia would be a cooperative and reliable trading partner during the transition to cleaner energy. He noted pointedly in Japan that the government’s climate policies had been endorsed at last year’s election. He also touted big opportunities for investors from both countries in Australian renewable energy.
Japan’s comments about energy security with Australia have been much more publicly forthright than parallel feelings in other gas buyers including Singapore (noted in Briefing MONTHLY last month), China, and South Korea.
But in an interesting twist amid this criticism of Australian climate change policies, Inpex, the biggest single gas investor in Australia and harshest critic of the government approach, has spent more than $300 million buying a 50 per cent stake in Enel Green Power Australia, a developer of wind and solar electricity.
- See Japan’s message in a gas bottle at The Interpreter and Australia’s natural gas security policy spills over the region at East Asia Forum.
The latest pulse-take on Australian attitudes to China as the Albanese government tries to stabilise relations has again found that people want to build stronger relations with the country China while nevertheless seeing it as a threat.
The third Australia-China Relations Institute opinion poll shows 61 per cent want stronger relations in line with the past two years but 67 per cent express concern about the relationship which is down around six point on the past two years. Seventy per cent of respondents mistrust the Chinese government which is down slightly on past years but 63 per cent see benefits in the relationship which is up slightly on past years.
Meanwhile nearly three quarters of people see China as a military threat which is broadly unchanged over the three years and half think military conflict is a serious possibility in three years. But respondents remain fairly evenly split over whether Australia should send troops to defend Taiwan from Chinese attacks with 37 per cent agreeing and 36 per cent disagreeing.
DEALS AND DOLLARS
CHINA’S OWN GOAL
The Australian government’s independent economic adviser has thrown its weight behind the idea that China’s attempt at economic coercion via impediments to mostly Australian farm exports over the past three years has failed.
After initial concerns the impediments could cost billions of dollars in export earnings, the Productivity Commission has used economic modelling of exports of five products to conclude that loss to the Australian economy was only 0.009 per cent of GDP, or less than $300 million.
The examination of exports and production of cotton, seafood (lobsters), coal, wine, and timber found exporters were relatively quickly able to find alternative markets for the products. And while farm output was down 1.4 per cent, manufacturing output was up 0.4 per cent as capital flowed to other parts of the economy.
The modelling broadly aligns with more anecdotal evidence that many producers of the affected products were able to find new export markets, although this varied across sectors and individual producers. However, some observers have questioned whether the alternative markets – mostly in smaller Asian countries - will deliver the long term prices which Chinese consumers of products such as wine were providing.
The Commission which favours open trade rather than moves to become more self-sufficient has used the positive findings about the China coercion to argue for a continued embrace of an open market approach to trade. It says: “While frequently pointed to as a source of vulnerability, the flexibility of the global trading system is itself a source of resilience and of risk management. By providing access to a more diversified set of suppliers and customers, international trade can help moderate demand and supply shocks that emerge from time to time.”
While the PC findings are a boost to the Australian strategy of quietly resisting Chinese coercion, they are being used by both sides of the debate about whether Albanese should visit China this year. The Opposition says the visit should not occur until all impediments are removed. But advocates say the findings put the prime minister in a position to visit with a strong hand to point out the value of further economic engagement.
Manufacturing company Incitec Pivot has confirmed it has received offers to buy its fertiliser business raising the prospect that Indonesian stated-owned enterprise Pupuk Indonesia could step up its engagement in Australia.
Incitec has had a long-standing plan to separate its explosives business Dyno Nobel from its fertiliser business but has now confirmed that this might be achieved via a sale of Pivot Fertilisers. The Australian Financial Review reported that Pupuk has engaged advisers for a potential takeover.
The Indonesian company presents itself as a key player in providing sustainable food security in Indonesian agriculture. As noted in Briefing MONTHLY in May, the company talked up more business with Australia after providing an emergency supply of urea when this key ingredient of fertiliser and a diesel fuel additive was in short supply due to Ukraine war disruption.
Both the government and DFAT’s Southeast Asian business strategy adviser Nicholas Moore have been emphasising the need for more Indonesian investment in Australia as well as outbound Australian investment in Indonesia in recent times. But as the biggest fertiliser manufacturer in Australia and supplier to farmers, the government would be under pressure from local farmers to ensure any Pupuk takeover of Pivot did not divert supplies to Indonesia.
PHILIPPINES CLEAN ENERGY
Queensland energy entrepreneur Trevor St Baker is planning to build a $10 million lithium-ion battery manufacturing plant in the Philippines to provide the storage back-up facility for homes and businesses reducing their reliance on the electricity grid.
The Australian reported the St Baker Energy Innovation Fund will lead investment in the battery storage plant to be built in the free-trade zone in New Clark City, north of Manila.
The factory is aiming to begin commercial production in the first quarter of next year with the capacity to produce up to 1.2 gigawatt hours by 2030. One gigawatt is enough to power a medium-sized city.
“The giga-factory is positioned to capture the once-in-a-century transition towards a renewable energy electricity system in which lithium-ion batteries are expected to play a pivotal role,” St Baker was quoted as saying. The Philippines factory would target export markets across Asia, Australia, India and the United States.
- See Briefing MONTHLY's special report on Australian business in the Philippines after a visit which included New Clark City last year.
JAPAN THE BUILDER
The Japanese corporate diversification in Australia from resources to more consumer-oriented products is continuing with Daiwa House backing a new build-to-rent market project by Lendlease in Melbourne.
The move follows Mitsubishi emerging as a major backer of Mirvac’s specialist business, as offshore funds continue to make the running in the area. Several Japanese companies have now invested in housing construction in Australia with the latest move focused on renters delivering big returns as the housing shortage bites in coming years.
WONG AND WANG: one year on
"We do have our differences, we do have our differences. I don't intend to give a blow-by-blow account of the meeting for obvious reasons but I think it's a fair summation to say we both recognised it’s a first step for both our nations … We've got a path to walk and we'll see if it can lead to a better place between the two countries."
- Foreign minister Penny Wong in Bali (July 9, 2022)
"Australia must treat China as a partner, not an adversary. We must adhere to a path of seeking common ground while reserving differences. We must adhere to not targeting or being controlled by third parties. We must build a positive and pragmatic foundation of public opinion."
- Then Chinese foreign minister Wang Yi also in Bali (July 10, 2022)
"It was a frank conversation and it was a conversation in which a number of issues were raised. Certainly, in relation to trade impediments, I acknowledged the progress we have seen in recent months and reiterated our expectation that this progress continues … we put forward our position on a range of issues, including relation to Australian nationals detained in China … we did discuss Hong Kong, and whilst I won't go through chapter and verse of everything that was said, you should anticipate it was consistent with what I’ve said publicly."
- Wong in Jakarta (July 13, 2023)
"Facts have once again proved that as long as both sides stay true to their commitment when they established diplomatic relations and adhere to the right way to conduct state-to-state relations, the China-Australia relationship can and should develop well … The two sides should respect each other, treat each other as equals, handle differences appropriately, cultivate a friendly atmosphere of mutual understanding and appreciation, and bring more tangible benefits to the people of both countries."
- Wang (then Central Commission for Foreign Affairs Office director but now again foreign minister) also in Jakarta (July 13, 2023)
Natural disasters by country (1980-2020)
Source: CRED, EM-DAT: The International Disaster Database, Brussels, http://emdat.be (accessed February 2021)
Asia’s climate risk status
Source: World Risk Index 2022
Australian LNG exports (2022, $bn)
ON THE HORIZON
Narendra Modi with construction workers at the new G20 convention centre
MODI’S WAY: G20 + AFRICA
Indian Prime Minister Narendra Modi has kicked off the run-up to the first Group of 20 nations summit in his country with a new convention centre in Delhi, a target to become the world’s third largest economy, and an initiative to invite Africa into the major economies group.
The G20 leaders will meet in Delhi on September 9-11 with Modi under pressure to manage some form of compromise within the deeply divided group to at least match what Indonesian President Joko Widodo did last year. But the divisions over climate change at recent ministerial meetings suggest that the summit will continue fail to fulfill the original ambitions for the group to bridge the divide between the Global South and the rich world.
This has been seen as a tipping point moment in the G20’s evolution with the summit being sequentially hosted over three years by non-aligned Global South powerhouse economies Indonesia, India and then Brazil.
Modi will be counting on a successful summit to help underpin his image as a global stateman ahead of seeking a third term in office for his Hindu nationalist Bharatiya Janata Party at an election next year, amid some revival of support for opposition parties in India.
Underlining the election focus, he opened a new convention centre in Delhi last week for the summit and forecast India would overtake Japan and Germany to become the world’s third largest economy during his third term in office. He said the new Bharat Mandapam centre would allow the world to “witness rising stature of India”.
“At the beginning of our first term, India was the world's 10th-largest economy. In the second term, today India is the fifth largest economy in the world. I assure the country that in the third term, India's name will be among the first three economies of the world,” he said.
Modi will be pitching for the 55 member African Union to be a permanent member of the G20 which might reduce the stature of South Africa within the group but elevate the pan-African group to a stature akin to what the European Union has.
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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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