Illustration by Rocco Fazzari.

THEN AND NOW

The Labor Party managed to make foreign policy uncharacteristically an election issue two years ago by blaming the then Coalition government for “losing” the Pacific to China.

So, it was particularly ironic to see Opposition Leader Peter Dutton, a target of that strategy, provide the government with such a smooth pitch for the first visit by a top Chinese leader in seven years by declaring: “I’m pro-China and the relationship that we have with them.”

Whether this represents a cynical play for the Chinese diaspora vote that deserted the Coalition at the last election or a more subtle approach to foreign policy remains to be seen. But it comes at critical time. Labor’s policy of engaging, cooperating and disagreeing clearly paid dividends with Premier’s Li Qiang’s visit, but there was a distinct undercurrent this might be as good as it gets. See: ASIAN NATION

And now, turning to the other big regional power. Travelling in Uttar Pradesh, the world’s most populous sub-national jurisdiction, during India’s election five years ago left me with a sense of the complex caste foundations of elections in the world’s biggest, if sometimes challenged, democracy.

So, after being told then that the low caste Dalit community was not locked into Prime Minister Narendra Modi’s Bharatiya Janata Party-led National Development Alliance political machine, it was fascinating to see that advice actually borne out at the latest election.  Unfortunately, all a bit late for an aspiring Indian psephologist!

Nevertheless, it’s back to normal in Indian democracy with Modi now forced to get along with two classic powerful state-based political chameleons.

Greg Earl
Briefing MONTHLY editor 

NEIGHBOURHOOD WATCH

INDIA: It’s the economy…

Staying close … Narendra Modi (center) with key partners N Chandrababu Naidu, immediately left, and Nitish Kumar, immediately right, and other coalition members.   Picture: Prime Minister’s Office

The Bill Clinton-era truism about what really drives voters in elections has had another workout in India where voters appear to have spurned Hindu nationalist politics for dissatisfaction over basics like poor jobs growth.

The question now is how much Prime Minister Narendra Modi can refocus his still considerable political power on more jobs rich lower end manufacturing over the more capital-intensive economic development that has marked his decade in power.

That will be accompanied by questions about how such a strongman, who has never had to govern in coalition during 23 years as a state or national leader, will manage to co-exist during a rare third term with two key partners who have switched sides in the past.

The election saw the opposition INDIA alliance, led by Rahul Gandhi’s Indian National Congress party, do better than expected to win 234 of the 543 seats in the lower house compared with Modi’s BJP-led National Democratic Alliance’s 293. The shifts in Uttar Pradesh, with a population of 240 million people, underline the scale of the upset. The BJP won 62 of the state’s 80 seats in 2019, but this time only won 33.

Modi has largely kept his old government intact retaining the existing ministers in the key posts of finance, foreign affairs, defence and home affairs. His two key allies in the NDA – the Andra Pradesh-based Telugu Desam Party and the Bihar-based Janata Dal (United) - were given important portfolios including the Ministry of Civil Aviation and the Ministry of Fisheries, Animal Husbandry and Dairying.  Those two parties won 16 and 12 seats respectively which will give their two state chief minister leaders N Chandrababu Naidu and Nitish Kumar a balance of power role in the Lok Sabha.

The new government’s first actions may provide some insight into how Modi is responding to the electoral setback with new money for existing schemes to build rural and urban poor housing and boost the welfare of 90 million farmers. He then tweeted: “Our government is committed to making the lives of our farmer brothers and sisters across the country easier. It is a matter of good fortune for me that after assuming office as the Prime Minister for the third consecutive time, I have got the opportunity to [take the first decision] for them. In the coming times, we will continue to work for the welfare of farmers and the uplifting of the agriculture sector.”

Amid this the World Bank’s latest economic outlook reinforces that India remains the world’s fastest growing large economy likely expanding 6.6 per cent this year compared with 8.2 per cent last year.

• At East Asia Forum Rojan Joshi says land, labour and agricultural reforms needed to sustain growth are now less likely since they were not achieved when Modi had more power.

JAPAN: She's the winner

Facing off… Yuriko Koike (left) and Renho           Pictures: Kyodo

For a country that ranks 165 in the world for female participation in its main parliamentary chamber, the Tokyo governor’s race may also be a vote for bigger changes at the national level.

Incumbent two term Governor Yuriko Koike, 71, and a former defence and environment minister for the conservative Liberal Democratic Party (LDP), is being challenged by Renho Saito, 56, a former government revitalisation minister in the leftist Democratic Party of Japan (DPJ) government that briefly held power a decade ago. Both women started out as television presenters providing them with the presentational skills that many other politicians lack but also allowing them to raise the profile of women in politics.

While they are both notionally running as independents, they have been endorsed respectively by the LDP organisation and the DPJ’s successor the Constitutional Democratic Party. So, the election on July 7 may also provide an insight into the mood towards the national government which has lost several by-elections or regional elections in recent months.

Koike was once the highest profile woman in the LDP during 24 years in Parliament but fell out with the party factional establishment after failing to win the presidency in 2008 and then the party’s endorsement to run as Tokyo governor in 2016.  She has since been mooted as an alternative political force leader, but has failed to build a constituency beyond Tokyo.

Renho, who unusually goes by her first name, is more distinctive as the daughter of a Taiwanese father and supporter of both Taiwan's right to sovereignty and more work rights for foreigners in Japan.  She has been at the center of opposition politics as leader of the DPJ successor Democratic Party briefly before shifting to the Constitutional Democratic Party in 2017.

• The Asahi Shimbun argues in this editorial that the Tokyo vote will provide an insight into the future of national politics.

THAILAND: Trendsetting

It says something about the hardline attitude to marriage equality in Asia that Australia made a relatively rare appearance as part of Asia for the purposes of counting how few countries Thailand is joining by formally accepting same-sex couples.

That group is perhaps only Australia and Taiwan given that the situation in Nepal has been confused by the Supreme Court not giving same sex marriage equal stature and leaving decisions to local authorities. Indeed, the marriage law shift in three, or four, Asian countries compares with ten jurisdictions where same sex acts are still criminalised.

The new Thai law changes gender-specific words such as “husband” and “wife” to “spouse,” and “man” and “woman” to “individual.” And it provides state welfare, government pensions and personal income tax deductions to spouses regardless of gender. However, it allows exemptions for religions such as Christianity and Islam not to perform marriage rites for same-sex couples.

While Thailand had long been tolerant of same sex couples, last year’s election clinched the legal change with the two biggest vote winning parties - Move Forward and Pheu Thai – backing change. One recent opinion poll showed 82.5 per cent support.

The interesting issue now is how much the region’s more economically developed jurisdictions from Singapore to Japan feel Thailand has made itself more attractive to foreign tourists and potential business residents by making the change.

• At The Korea Times, Min Seong-jae laments that his country is being left behind by a unique mix of evangelical Christianity, Confucianism and collectivist social tradition.  

ASIAN NATION

PEAK CHINA?

Source: Lowy Poll 2024

While Opposition leader Peter Dutton gave the Albanese government an unexpected foundation of support for stabilising relations with China during Premier Li Qiang’s visit, a more significant mood shift was still occurring.

Just take these three observations from across the commentariat: 

“The public may well be registering that when it comes to the Albanese government’s formula for the relationship – ‘cooperate where we can, disagree where we must’ – it is hearing much more the former than the latter … They continue to want a tougher stance, including sanctions on Chinese officials and entities involved in human rights violations.” - Australia China Relations Institute Poll 2024 report

“The Albanese government’s policy of “do more, say less” has worked about as well as it could thus far, in stabilising the bilateral ties ... It will be time, soon, to ‘do more, and say more’ if the government is to bring the public along with it on defence policy.” - Lowy Institute senior fellow Richard McGregor.

“If history doesn’t reveal this to be quite the peak of the government’s ‘stabilisation’ agenda, then we are very likely to be on the plateau.” -  National Security College head Rory Medcalf.

Qiang’s three city visit was certainly event packed befitting the first such exercise in seven years but in the end was best encapsulated by two moments. First, the demonstration that China does have some soft power with the delivery of new pandas to Adelaide Zoo. And then not quite at the end, the ham-fisted attempt to prevent television footage of once detained journalist Cheng Lei attending the closing media statement. How these moments settle into the public imagination may well be what determines the somewhat contradictory opinion poll sentiment towards China.

Nevertheless, there was a lot more substance and diplomatic feinting in between:
* Australian tourists to China will get 15 days of visa-free travel
* An Australia-China ministerial dialogue on climate change will restart after most a decade
* A new system of military communication will be established
* Various agreements were signed on standards, education, climate change, trade and investment, culture, and intellectual property.
* Li continued China’s push to lock Australia into a renewed closer relationship of “steady improvement and development.”
* However Prime Minister Anthony Albanese stuck firmly to the government’s slightly less forthright mantra of “cooperate with China where we can, disagree where we must and engage in the national interest.”

BANKING ON PNG

Foreign minister Penny Wong at the site of the Enga landslide last week.

Buried away in the fine print of last month’s Federal Budget is the little appreciated detail of how Australia has become an annual banker to Papua New Guinea’s government budget after officially abandoning direct budget aid in favour of project development assistance two decades ago.

Over the last four years starting during the pandemic Australia has agreed to $2.5 billion in Budget loans with about half that amount outstanding. Commenting on this backdoor addition to the annual roughly $500 million in official aid, former World Bank PNG representative Carolyn Blacklock suggests Australia is edging closer to China’s debt trap diplomacy. She says Australia should be doing more to underwrite Australian business in PNG which would create deeper economic roots.

But it says a lot about the crisis-driven nature of the official PNG relationship that while this debate is going on, the latest six minister Australian delegation to the country was facing up to more immediate civil security concerns around tribal violence and policing malpractices.

So, the 30th Ministerial Forum signed off on financial support to investigate and prosecute financial crime; programs to improve justice access for young people and remote communities; improvements to jails; and to improve stability in the Highlands, including police weapons management.

This is funded from a $200 million security assistance program agreed by the prime ministers last December which has already been used to build police housing; provide more Australian Federal Police support; train PNG cadets in Queensland; and supply a new patrol boat. Australia is now working in seven provinces on justice issues.

So perhaps the understatement of the Forum was International Development and the Pacific minister Pat Conroy declaring: “We’re working with the Government of Papua New Guinea on their priorities, including strengthening the legal and justice system.”

POLICING THE SOLOMONS

The Solomons new Prime Minister Jeremiah Manele has managed to restore stability to bilateral relations by securing new Australian support to double the country’s police force while simultaneously declaring that Chinese support for policing was “domestically focused”.

Australia will help increase the Royal Solomon Islands Police Force from 1500 officers to 3000 on a long-term path to 5000 in the key outcome from Manele’s first visit as the new leader after long-running tensions with his predecessor Manasseh Sogavare, who remains a minister.

The communique from the meeting appears to cement Australia into a   three-tiered approach to internal security including the strengthened police force, assistance from fellow Melanesian countries, and then support from Pacific Islands Forum members, which includes Australia and not China.

But asked afterwards where China fitted in, Manele said somewhat elliptically: “Our security partnership linked with China is domestically trying to address internal security challenges. We do acknowledge and appreciate that our partners, China and Australia, they have security strategic interests as well.”

DEALS AND DOLLARS

RICH PICKINGS

It has been a mixed year for the richest Asian Australians with a decline in their overall presence in the annual list of wealthy people - although four stood out for wealth gains well above average.

Three long-term Asian members of the AFR Rich List dropped out and six of the remaining 13 suffered declines in their wealth, as well as declines in their ranking.

The overall wealth of the 200 people on the list rose 11 per cent this year. But the combined wealth of the remaining 13 Asian Rich Listers, who hold Australian citizenship, was static at $34 billion – the same as the combined wealth of the 16 Asian background people on the list last year. They comprise about 5% of the Rich List value and about 6% of its membership which is well below the roughly 15 per cent population share for Australia’s Asian background population.

Nevertheless, across manufacturing, mining, telecommunications and technology there are some standout success stories. Delhi-based industrial manufacturer Vivek Chaand Sehgal almost doubled his worth to $8 billion from a global manufacturing empire which has its roots in his move to Melbourne in 1993 to learn about low volume car parts making.

Telecommunications entrepreneur David Teoh’s wealth is up 50 per cent mainly due to his stake in the ASX-listed Singapore telecommunications business Tuas which follows his departure as the chairman of the Australian TPG internet service provider.

Bangladesh-born Robin Khuda is the other interesting fast riser in a list otherwise long dominated by ethnic Chinese businesspeople, including from Malaysia. His wealth is up 36 per cent this year from the data centre business AirTrunk which he founded and is now reportedly worth as much as $15 billion.

LOOKING IN

Just when the Albanese government is encouraging business to take more risks in Asia – particularly Southeast Asia - as part of the China diversification strategy, the country’s de facto sovereign wealth fund is turning inward.

Future Fund chief executive Raphael Arndt says his fund is looking for more returns from domestic investments as the world “looks much more like the world of the 1930s than recent decades.”

The Future Fund’s investment returns are often used to benchmark those of the superannuation funds which have been urged by the government and the Moore report on economic engagement with Southeast Asia to invest more in that part of the world and India.

But Arndt says: “The onset of the Covid pandemic has accentuated a drift away from globalisation with companies and nations now favouring onshoring and “friendshoring” of capacity to overcome risks in global supply chains and national security considerations.”

Foreign minister Penny Wong delivered one of the bluntest government exhortations for businesses to lift their game in Asia in a speech to the Committee for the Economic Development of Australia last week.

“The reality is that Australia's trade and investment with the region has not kept pace with the growth of Southeast Asian economies,” she said, “Our Government's initiatives are designed to make it easier for Australian business to get established in new markets. And now we are asking you to do just that. To create new value for your companies, and for your country.” 

TEMASEK’S BETA BET

Singapore’s government-owned investment fund Temasek Holdings has made its first investment in an Australian financial services business, by paying $300 million for an undisclosed minority stake in fund manager Betashares.

The investment goes against the trend decline in Temasek investment in Australia over the past few years from six per cent of its portfolio to four per cent, as it has stepped up its exposure to Singapore and the United States.

Betashares, which manages $38 billion and is one of one of the largest providers of exchange-traded funds in Australia, said the investment would fund its growth into new products. Temasek is the second global investor on the company’s shareholder register after US-based TA Associates bought a stake in 2021.

Echoing the Future Fund strategy, Temasek chief investment officer Rohit Sipahimalani said in May the fund was investing more in Singapore companies with large, domestic-focused businesses as it seeks to avoid risks tied to simmering geopolitical tensions around the world.

DIPLOMATICALLY SPEAKING

For decades it has been common for Australian strategic policy statements to begin by asserting that the times are more challenging and demanding than any since the 1940s.

This is surely so now as the foundations on which Australian foreign, trade and economic policy have been built – the free and open trade agenda and the liberal rules based order - have been eroded, and we move into a new era.

Our policy makers, while not ‘nostalgists’, will need to remember what the strategists of the 1980s knew: that is, that the nationalistic, beggar-thy-neighbour economic policies of the 1930s were as prominent along the path to World War 2, in Asia as well as Europe, as the jack-booted dictators who sought to re-arrange the political geography of Europe.

• Former diplomat and Department of Defence secretary Ric Smith delivering the inaugural Allan Gyngell Lecture.

DATAWATCH

ALLIES AND PARTNERS

Source: Lowy Poll

ON THE HORIZON

TECH TIME IN CHINA

Picture: Imaginechina

Chinese President Xi Jinping seems set to embrace state-led technological self-sufficiency as the latest pathway out of the country's economic slump when the Communist Party convenes its long awaited five yearly Third Plenum meeting in mid-July.

This particular forum in the CCP's roster of staged-managed political processes has been the launch pad for important policy changes in the past. In 1978 it was used to open the country up to more foreign business and in 1993 it was the platform for a more liberalised currency and the idea of a socialist market.

So, Xi seemed to be pointing the way in a June speech where he said: "Although China's scientific and technological development has made great progress, the original innovation capacity is still relatively weak, some key core technologies are restricted by others, and there is a shortage of top scientific and technological talents. It is necessary to further enhance the sense of urgency."

This month's meeting will be held on July 15-18 after a delay raising expectations of significant changes. It is common for the gathering to set out a long-term economic policy blueprint in a communique on the day it concludes. 

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