Illustration by Rocco Fazzari.

America First v the Xi20

Asian reaction to the re-election of Donald Trump as United States president has tended to be more muted than in western countries where politicians, commentators, and institutions tend to be more intuitively linked to American trends.

Explanations for this range widely. Asia Society co-chair and Singapore Ambassador-at-large Chan Heng Chee argues that many Asian political establishments feel they have managed to work with a Trump Administration before. Economic historian Adam Tooze says the western liberal outrage over Trump is not felt as deeply in cultures where there has been a tendency towards “Oriental autocracy”. (See: Asian agency beyond Trump below).

In China, thinktank researcher Cao Xin says his country has an opportunity to fill a global economic void created by a more insular US. And Times of India US correspondent Chidanand Rajghatta argues: “The biggest relief for India will come on the Russia front, where it has had to carefully calibrate its ties with Moscow so as not to irk Washington, where anti-Russia sentiment ran high in the Biden Administration.”

Time will tell. But perhaps the strongest image has been Chinese President Xi Jinping taking a more active role at the Asia Pacific Economic Cooperation (APEC) and Group of 20 (G20) major economies summits than has been seen for some years, as outgoing President Joe Biden managed to even miss a group photograph.

And the second most evocative image must be new Indonesian President Prabowo Subianto ostentatiously promising to fly anywhere to meet Trump, while repeatedly addressing him as “sir”. However, that came just days after he made his first overseas visit to China and signed a maritime agreement. See: NEIGHBOURHOOD WATCH 

Meanwhile, the new Indonesian President’s policy priorities were front of mind at the Australia Indonesia Business Council (AIBC) conference this month with Australian government speakers embracing his touted step-up in economic growth to a roaring eight percent a year. We’ve devoted DEALS AND DOLLARS to the key themes from the conference, including some early results from the Moore report on Southeast Asian economic engagement.

Greg Earl
Briefing MONTHLY editor

TRUMP IN ASIA

Xi Jinping on the diplomatic circuit

China pressures: China has voted with its feet rather than words in response the Trump victory with President Xi Jinping embarking on a whirlwind of bilateral meetings at the Asia Pacific Economic Cooperation (APEC) group and Group of 20 major economies summit rather than responding to speculation about Trump’s policies. Xi was center stage in pictures, met about 15 fellow leaders at APEC, and opened a new Chinese built port in Peru prompting descriptions of these meetings as the "Xi20". This activism follows stepped up diplomacy in the Global South amid the US election campaign, the resolution of a border dispute with India, and signs of new engagement with Japan.

Meanwhile as Trump has appointed several declared China hawks to his Administration - such as Marco Rubio as secretary of state and Mike Waltz as national security adviser - there is a growing debate about whether this sets up a confrontation or a deal with China.  For example, incoming commerce secretary Howard Luttnick has made pragmatic comments about tariffs and close adviser Elon Musk has business interests in China. As a result Chinese officials appear to be assessing both risks and benefits from the change.

Trump’s announcement this week that he will impose additional tariffs on Canada, Mexico, and China has shifted the balance towards a trade war, but not necessarily closed the door to some form of deal with China. The outgoing Biden Administration has also raised the stakes with the US-China Economic and Security Review Commission last week calling for the repeal of the Permanent Normal Trade Relations (previously known as most favoured nation status) from China which would allow annual review of trade relations.

Japan after Abe: The late Japanese Prime Minister Shinzo Abe was often held up as one of the most effective foreign interlocutors with the first Trump presidency exploiting Trump’s love of golf, hamburgers, and adulation in a way that helped shelter his country from harsh treatment. He was the first foreign leader to visit Trump after he was elected in 2016 and later named a sumo wrestling trophy after him. New Prime Minister Shigeru Ishiba is a less seasoned leader than Abe with a minority government which may not have the same clout to negotiate with Trump on defence spending and trade differences.

Vietnam’s trade dilemma: Vietnam has managed to build a strong relationship with the US in recent years as a trade and investment partner despite its status as one of the few remaining notionally communist regimes in the world. And in recent years it has become one of the main back door routes for Chinese goods to be recycled into the US to avoid the Trump tariffs which were largely retained by the Biden Administration. As a result, it now has the fourth largest trade surplus with the US and that is likely to come under scrutiny from the trade protectionists in the new Trump Administration.

Indonesia - strongman time: With Indonesian President Prabowo Subianto and Trump each having shown an inclination for authoritarian approaches to government and a focus on business deals, the potential exists for a connection between the two new leaders. Prabowo has already tilted towards China on his first global diplomatic mission with a vague agreement on joint maritime development, while meeting with Joe Biden but not Trump in Washington. He may have a backdoor pathway to Trump via Indonesian businesspeople who have done property development with him. Prabowo might benefit from Trump’s lack of interest in human rights in diplomacy, but may find himself on the outer due to Indonesia’s staunch support for Palestine. Finance minister Sri Mulyani Indrawati has warned that Trump’s policies on dumping carbon reduction support and imposing tariffs on imports poses challenges for Indonesia.

Trading out of trouble: Thailand is potentially the biggest loser in the Asian region from a sharp withdrawal by the US from the global trading system under a Trump Administration.

Global Trade Alert has calculated how long it would take countries to recover their trade position after being denied access to the US and found that it could take Thailand until 2049. The other big losers were South Korea (2038), Cambodia (2036), the Philippines (2036), and India (2030).

Australia would recover relatively quickly within a year followed by China in 2027, with other major Asian countries in between: Indonesia (2028), Singapore (2028), Vietnam (2029), and Malaysia (2029). Japan wasn’t calculated.

Philippines family ties: Philippines President Ferdinand Marcos Jr seems to be counting on family connections to give him an edge with the new US President. He said Trump asked after his mother Imelda in a November 19 phone call, reportedly reflecting connections going back to when Marcos’ father ran the country in the 1970s. Marcos has been rebuilding US ties which deteriorated under his predecessor, Rodrigo Duterte, who tilted to China but also hosted a “bromance” style meeting with Trump in 2017. Marcos told reporters the call with Trump was “very friendly” and “very productive”. Nevertheless, the Philippines would be hurt by a cutback in immigration to the US, could not expect much trade support, and possibly would be forced into taking sides with the US in a tussle with China.

As much of the world descended into the rabbit hole of knowns and unknowns of a second Trump presidency in early November, economic historian Adam Tooze provided a quite different way of thinking about this from an Asian perspective.

Speaking to Asia Society Switzerland only a day after the US election, he argued that decisions made in places like Beijing or New Delhi now have a lot more impact on global issues such as climate change than decisions made in the US. While the Trump victory contained all the element of a polycrisis for the western world, this would be less the case in Asia where various players had a growing self-confidence and felt less dependent or driven by the forces underlying the Trump victory.

Tooze argued that anyone wanting to understand the modern world had to come to grips with the emergence of what he called “Asia’s agency” as “both the greatest generator of change and the greatest generator of solutions.”

He said: “We have to understand the relativisation of our own (western) position. We have to understand the climate drama is no longer about us, not as the goodies, and not even as the baddies. You’re not by solving the Exxon problem going to solve the global climate crisis anymore. You have to fix China coal, which is a much, much more serious problem and can only be done by Beijing. We have to understand massive regional diversity and not allow ourselves to be seduced by simple stories about one or two (Asian) countries.”

• See the full speech and a summary here.

Alliance time for Asia?

As Asian countries ponder how to respond to the arrival of the Trump Administration with its promised focus on more protectionist trade policies, less active military intervention abroad, and a reduced focus on international development cooperation, there has been more discussion of Asian regionalism.

• At East Asia Forum, Shiro Armstrong says Australia and Japan should persuade China and the European Union to remain open to international commerce in the face of any US withdrawal.
• In this Nikkei Asian Review piece, Pak Yui argues that trade agreements that do not include the US - such as the Regional Comprehensive Economic Partnership and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership - will become more important to Asian nations.
• At the Council on Foreign Relations, Joshua Kurlantzick says smaller Asian countries are looking to middle powers including Australia for new trade and security ties amid expected greater US-China tension.

JAPAN: minority man

Hapless Japanese Prime Minister Shigeru Ishida is facing a series of challenges after managing to remain in power in a minority government after a poorly timed early election and amid rapidly declining public opinion support.

He has to manage a Diet where the main leftwing opposition party the Constitutional Democratic Party now chairs key committees which control the legislative agenda.  He has to fix the political fundraising scandal which undermined the once dominant Liberal Democratic Party (LDP) during the election at the risk of further damaging his party’s image. And most pressing, he has to produce an annual Budget by the end of the year with cooperation from the rising third parties which hold the balance of power.

And all this must occur within the context of the LDP potentially losing its Upper House majority at an election due in the middle of next year which would raise new questions about its ability to remain in power. While the various opposition parties are far from united, they already have the capacity to unsettle Ishida’s government by threatening a vote of no confidence.

Opinion poll support for the minority government fell five percentage points to 46 per cent immediately after it was formed with 83 per cent of people saying the messy election outcome was appropriate.

• Richard Katz says at Substack that contrary to contemporary wisdom about inertia under a weak prime minister, greater competition amongst Japan’s political parties could stimulate more economic reform.

INDONESIA: more democracy satay

Indonesia’s return to the polls just months after one of the world’s biggest elections for a new president and legislature members, appears to have produced a somewhat mixed result for the newly inaugurated President Prabowo Subianto.

Candidates aligned with Prabowo’s sprawling multi-party Onward Indonesia Coalition have done well in many parts of the country. But in the most watched contest to be Jakarta governor – a stepping stone to the presidency - the opposition Indonesian Democracy Party of Struggle (PDI-P) appears to have won the 50 per cent of the vote needed to avoid a second-round vote.

The PDI-P, associated with the Sukarno family, is the main opposition force for Prabowo after its candidate Ganjar Pranowo lost the presidential election and former President Joko Widodo fell out with the party.  But its candidate Pramono Anung Wibowo, a former Cabinet secretary, appears to have beaten Ridwan Kamil, an architect, former Bandung mayor, former West Java governor and much touted future presidential candidate, who was backed by Prabowo. He is also a frequent visitor to Australia.

Indonesians were choosing  37 governors, 415 regents and 93 mayors in the largest single direct election of non-national politicians. Prabowo aligned candidates are set to win the governorships of the three biggest provinces apart from Jakarta, underlining his broader political clout.

See: INDONESIA BUSINESS below

RECENTERING ASEAN

Penny Wong and ASEAN secretary general Kao Kim Hourn (third right) at the ASEAN-Australia Centre launch.          Picture: Greg Earl

A First Nations art exhibition will tour Southeast Asia next year in one of the first initiatives from the new ASEAN-Australia Centre which was launched this week.

The creation of the Centre to replace the Australia-ASEAN Council (AAC) reflects the Albanese government’s focus on boosting ties with Southeast Asia and was announced at the Special ASEAN Summit in Melbourne in March. But it also reflects a gradual restructuring of the Department of Foreign Affairs and Trade network of country councils with notionally independent boards with better funded centres more aligned with government priorities.

Speaking at the launch, Foreign Minister Penny Wong placed the Centre in a timeline of relations with Southeast Asia which began with Australia becoming the first dialogue partner of the Association of Southeast Asian Nations (ASEAN) in 1974. She declared it was part of “working together to preserve the character of our region.”

The Centre has taken over some key priorities from the old AAC including an Emerging Leaders Program to build connections; the BRIDGE school partnerships program to connect teachers and students in Australia and Southeast Asia; and a womens’ entrepreneur exchange. A new grants application process opened last week. The indigenous art tour will be curated by the National Museum of Australia.

Establishing the Centre to boost Australian public interest in Southeast Asia and vice versa, the government has continued to use the nomenclature of ASEAN, the regional political institution, when some observers argue Southeast Asia is a more relatable entity.

But on a visit to Canberra for the opening, ASEAN secretary general Kao Kim Hourn, a former Cambodian government official, welcomed the new institution as part of a growing network of ASEAN centres in various countries. “These centres will be very instrumental in expanding engagement,” he said. Australian officials felt they had no choice but to go with this trend.

Delivering an address at the Australian National University, Kao lauded Australia as one of the few dialogue partners with formal engagement across multiple ASEAN security bodies, noted the rising demand in his region for Australian agricultural products, welcomed the high quality of the trade agreement with ASEAN countries, and Australian support on broad healthcare matters.

BANKING ON THE PACIFIC

Australia’s creeping economic integration of the South Pacific is set to take a significant step forward with the Albanese government underwriting the ANZ Bank to keep branches open in nine countries.

Treasurer Jim Chalmers used a speech to the Australian Institute of International Affairs annual conference on the integration of economic and foreign policy to flag the ANZ deal as an exemplar of the integration. “The deal we’re working on is another big part of our efforts to keep communities and economies connected, and finance flowing in our neighbourhood,” he said arguing that economic policy and foreign policy was now such a team effort in the Albanese government, to the point that “they’re almost indistinguishable”.

The still unannounced ANZ agreement will mean the country’s seventh largest listed company will be joining the 13th largest in Telstra (for the Digicel Pacific mobile phone purchase) doing well-compensated national service in the gradual economic merging of the Pacific nations with Australia. It raises a question of whether this will eventually go all the way to extending Australia’s deposit guarantee into a region facing various money laundering and prudential challenges.

In July, Australia and the US committed to solving the crisis of Western banks withdrawing from the Pacific, which is seen as posing a national security risk if China moves in to provide financial services in the region.

In 2019, 10 Pacific nations – including Fiji and Papua New Guinea – signed an economic co-operation agreement with China to support Chinese banks providing innovative financial products in Pacific Island countries. In 2018, the Bank of China established a representative office in Port Moresby, which was closed in 2020. However, the Bank reopened the office in June last year.

The ANZ Bank arrangement comes as the Lowy Institute’s latest Pacific Aid Map shows a rebound in Chinese development aid and projects in the Pacific after a downturn associated with the Covid pandemic and a broader downturn in financial flows from many other parts of the world.

PHILIPPINES DEFENCE

Australia and the Philippines will expand their security partnerships in the Indo-Pacific region amid growing tensions in the South China Sea.

In the first official meeting between the defence ministries of the two countries, Defence Minister Richard Marles and National Defence Secretary Gilberto Teodoro agreed to bolster a 1995 defence agreement between the countries, which will see a memorandum of understanding updated in 2025. Australia will also send a defence engineering assessment team to the Philippines in the first quarter of next year to look at ways in which Australia can support the growing defence infrastructure in the Philippines.

Marles said: “For a long time, we have had very close people-to-people links, and our two countries have, in that sense, been close together. But what we have really seen grow over the last two years is the strategic dimension of our relationship, based on our shared strategic alignment and our shared values.”

Teodoro said: “We intend on the defence side to make sure that our institutional arrangements are enduring and are strong, because we want to lay the foundation of principled cooperation between the two of our countries.” There would be a more concrete exchange of bilateral and multilateral activities that would strengthen the partnership, breed familiarity and interoperability between the countries’ forces and authorities.

The two countries have already stepped-up joint exercises with four maritime cooperation activities in the past year.

RECRUITING PNG

Australia’s plans to recruit Papua New Guineans to fill gaps in the Australian Defence Force have hit a hurdle with PNG reluctant to allow its people to take Australian citizenship to join up.

PNG Foreign Minister Justin Tkatchenko told The Australian the country was keen for its people to participate in the Pacific recruitment plan to fix the ADF’s workforce shortage, but wanted to ensure that they ­returned home after their service. “We would definitely look at all options,” Mr Tkatchenko said but warned that “sovereignty comes into play” and the citizenship issue would have to be worked through.

Several models have been put forward to deal with the issue including recruiting Pacific Islanders directly into the military, or the formation of a Pacific battalion to operate in the region along the lines of British Gurkha units.

Ross Thompson, a former British army officer who is now chief executive of Australian recruitment firm PeopleIN, has urged the government to use the British Gurkha model and suggests there could be 1000 recruits annually from PNG. Selection centres would be established across the country and recruits would need to meet the same English language, education and physical fitness requirements as Australian personnel. They would join for four years before returning home with skills and qualifications.

PeopleIN is the largest recruiter of Pacific Islanders under the Pacific Australia Labour Mobility scheme, bringing in some 6000 workers to Australia to work in aged care and agriculture.

INDONESIA BUSINESS SPECIAL

Going for growth: Australian officials are embracing new Indonesian President Prabowo Subianto’s bullish economic growth commitments as the latest carrot to boost Australian investment in the country.

Assistant investment minister Tim Ayres, Ambassador Penny Williams, and Business Champion Jennifer Westacott each talked up Indonesia’s possible stepped-up growth outlook of eight per cent year as they addressed the Australia Indonesia Business Council annual conference in Sydney.

In the latest in an emerging suite of documents following up Invested: Australia’s Southeast Asia Economic Strategy to 2040, Westacott describes Indonesia’s growth trajectory as “compelling” and dramatically different to the 1990s. Invested: Indonesia to 2040 follows the Albanese government’s recent stocktake on what it has done since the report headed by investment banker Nicholas Moore was released last year.

Westacott, the former Business Council of Australia chief executive and current Western Sydney University (WSU) chancellor, says that since taking on the Indonesia Business champion job she has been impressed by the opportunities in Indonesia and the ways government doors are open to joint investment in both countries.

Williams told the conference the entry to Indonesia by Deakin University and WSU had been relatively quick following in the footsteps of Monash University in a demonstration of how new Australian businesses could smooth the way for others. “Business needed to spread the word of what is happening in Indonesia now,” she said. Williams said the new president’s priorities were clear including on the need to achieve more engagement with Australia and he would be wanting to review progress after 100 days.

Indonesian ambassador to Australia Siswo Pramono urged Australian businesses to look at the Prabowo priorities and the opportunity sectors in the Invested report to find the sweet spot for seeking new opportunities.

But the embrace of the bullish Prabowo growth outlook, which is questioned by some economists, was striking through the conference with Westacott declaring the growth projection would make Indonesia a $10 trillion economy compared with $3 trillion for Australia. “I say to companies, where will your growth come from if it doesn’t come from here,” she said.

Invested hits a century: The Deal Teams established as part of the Albanese government’s new push into Southeast Asian business have identified more than 100 potential investment prospects for Australian companies.

The teams based in Jakarta, Singapore, and Ho Chi Minh City now have 32 staff looking at potential investments sourced from the market across the region in the first outcomes from one of the key recommendations of the Invested report. About 20 of these potential investments are now undergoing further assessments before being put to Australian companies and investment funds with some interest in the region.

Discussing the push for more investment in Indonesia, senior trade and investment commissioner Stephen Skulley played down the prospects of swift action by Australian super funds noting how Canadian pension funds and Macquarie Bank had spent about ten years familiarising themselves with the country before doing big deals. While super funds had the money for “big ticket items” they needed to start slow and small to find the right partner and gain awareness of the country, he said.

Speaking more broadly to other companies, he said they should have an open mind and be curious about Indonesia but be aware that their “Australian business model would probably not work in Indonesia.”

Danny Latham, of Igneo Infrastructure Partners, said that while Australian super funds were looking outside Australia for investments, they wanted to follow someone else’s success in Indonesia rather than be the first to test the environment with a large investment.

Lunch box boom: While healthcare has long been seen as a new business frontier for Australia in Indonesia, the conference discussions underlined how it has risen in priority with President Prabowo Subianto’s focus on providing free school lunches and reducing his citizen’s spending on foreign health care.

The planned school lunch and pregnant mothers initiative is being viewed as requiring more milk, if fully implemented, than the Australian dairy industry can supply. So, the conference saw more discussion about how Australian institutions can slot into the broader health agenda, as well as provide supplies and expertise for the food program.

Westacott said Indonesia had recently taken dramatic steps to open up its health care system to foreign ownership, expatriate doctors, and imported medicines compared with its previous insular approach. “It wants to strop people going to Singapore and Malaysia and that’s a real opportunity for centres of excellence,” she said of the Australian model where large teaching hospitals were linked up with universities.

AIBC Healthcare Group chair Jeff Parker said the reappointment of former healthcare minister Budi Sadikan to the job in the new government was an unusual development which underlined a sense of continuity which would accelerate reform. He said Indonesia had realistic but still ambitious healthcare reform plans and was open to foreign participation. This was driven by the idea that improving healthcare capability was critical to driving economic development.

Paul Bartlett, director of the Katalis program linked to implementing the bilateral trade agreement, emphasised how Indonesia had now established two healthcare special economic zones focussed on medical tourism and healthcare education which would provide a new more liberal environment for foreign investors to healthcare business projects.

Out of respect for the office of President of the United States, and following the election of President Trump, Ambassador Rudd has now removed these past commentaries from his personal website and social media channels.
  - Statement by Australian Ambassador to Washington Kevin Rudd (November 7)

Mr Rudd is going to have some problems, Donald Trump doesn’t forget these kind of comments.
  - Former Trump White House press secretary Sean Spicer speaking on Sky News (November 13)

I am confident that Kevin has been hyperactive on our behalf as he sees it in Washington. So, I would be surprised if there is any pressure from the Americans to change our ambassador.
  - Former prime minister Tony Abbott (November 13)

The difficulty the PM is in at the moment is if he sacks Kevin Rudd, then what does he do with Penny Wong. And if he sacks Penny Wong, what does he do, given he’s made his own disparaging comments about president-elect Trump as well?
  - Opposition leader Peter Dutton (November 14)

The team here at the embassy and the government of Australia are ready to work closely with the new Trump administration to continue to realise the benefits of what is a very strong economic and security partnership.
  - Kevin Rudd statement (November 20)

TRUMPED

Source: Resolve Political Monitor/SMH

Picture: Commonwealth Observer Group

VANUATU VOTES (AGAIN)

Vanuatu’s reputation for growing political instability will face a new test in the next month or so with the country going to an early election after a loss of confidence in Prime Minister Charlot Salwai.

The country’s president Nikenike Vurobaravu dissolved Parliament amid a no confidence motion in the prime minister and a boycott of Parliament by the opposition. It comes just two years since the last dissolution of parliament, only a year since one was narrowly avoided, and four changes of leadership in four years.

An election must now be held between December 18 and January amid signs of public discontent about the chaotic political situation. Earlier in the year voters backed changes to the Constitution to end the revolving door of leadership in the country’s first referendum which was aimed at strengthening party discipline.

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