Illustration by Rocco Fazzari.

TRUMP PROOFING

It says something about an imminent federal election or perhaps just Donald Trump’s ability to “flood the zone” with noise, but this week’s Albanese government Budget was largely an Asia free zone.

Treasurer Jim Chalmers batted away rhetorical geopolitical storm clouds without so much as mentioning the US President. But there were no big new regional themes like the Southeast Asian Investment Finance Facility (2024), reshaping of aid (2023), or a Pacific step-up (2022).

While White House disruption flows sotto voce through the Budget, such is the concern about upsetting the US President, it is up front in this edition. There’s uncertainty about Taiwan (see NEIGHBOURHOOD WATCH), there’s putative prime minister Peter Dutton’s first stop Washington plan (see ASIAN NATION), and mystery about a Trump meeting with Chinese President Xi Jinping (see ON THE HORIZON).

Despite all this uncertainty, Taiwan has still emerged as Asia’s happiest country. (See DATAWATCH).

Greg Earl
Briefing MONTHLY editor

NEIGHBOURHOOD WATCH

TAIWAN: under pressure

The Trump Administration appears to be subtly circumscribing its commitment to defend Taiwan against Chinese aggression potentially narrowing the definition of the US defence perimeter.

The Senate confirmation hearing of Elbridge Colby to be Trump Administration’s undersecretary of defence for policy, saw him controversially suggest that selling nuclear submarines to Australia could leave the US vulnerable because it wouldn’t have vessels in the right place at the right time.

But he also demanded that Taiwan should triple its defence spending to perhaps 10 per cent of gross domestic product and the US needed to encourage that which can be interpreted as a hawkish approach to China in line with the views held when he was an official in the first Trump Administration.

On the other hand, in an apparent softening of his position, he declared that while Taiwan was very important to the US “it’s not an existential interest” and that the US should bomb its semi-conductor factories in a conflict with China.

In contrast, former President Joe Biden, on several occasions, made clear that the US would defend Taiwan militarily if China were to attempt to seize it by force.

This has led to a swirling debate about whether the man Trump has called a “highly respected advocate for our 'America First' foreign and defence policy” is trying to prioritise defence policy to prepare for war with China or really maintaining more traditional policy of co-existing with China.

• At Nikkei Asian Review, Ken Moriyasu says the US defensive perimeter may be shrinking from Taiwan to Japan.

PHILIPPINES: beyond Duterte Harry

The arrest of former Philippines president Rodrigo Duterte by the International Criminal Court (ICC) has left behind a tangled question: has the court achieved a rare victory at the expense of intensifying political division in one of Asia’s oldest democracies?

The International Criminal Court has a limited record of being able to enforce its investigation efforts and mainly relies on some form of regime change to be able to do so. And that has been the case in the Philippines.

The ICC did credible work determining that the death toll from Duterte’s war on drugs (which earned him the epithet “Duterte Harry”) was much higher than the then government acknowledged.

But when incumbent President Ferdinand Marcos replaced Duterte in 2022 he did not favour allowing the ICC to prosecute his predecessor, especially since the Philippines had withdrawn from the court under Duterte. The Marcos family itself had experienced extra-territorial investigations after it was forced from power in 1986.

But now with Marcos Jr’s relationship with the Duterte family in tatters after the impeachment of Duterte’s daughter Sara as vice-president, Marcos sees obvious benefits in hand passing his domestic dispute with the rival clan to an international agency.

The legislative elections in May are now likely to see Marcos – the son of a dictator – presenting himself as upholding international human rights and justice, while the Duterte supporters say Marcos has caved into foreign pressure to undermine his domestic political opponents.

• Andrea Chloe Wong, says at The Interpreter that the ICC needs national government assistance which inevitably sees it embroiled in domestic politics.

UNSPLIT: Bangladesh and Pakistan

Fifty years on … Pakistan’s Shehbaz Sharif and Bangladesh’s Muhammad Yunus  Picture: AP

More than half a century after their violent split, Bangladesh and Pakistan have been quietly rebuilding ties in recent months with big implications for the sub-region’s putative great power India.

The sudden departure of long-ruling Shiekh Hasina from Bangladesh after popular protests last year has re-opened the way for a return to the warner relationship that was first tried in early 2000s. The two countries have begun trading directly for the first time, businesses have established a joint economic cooperation council, direct flights have reopened, military contact has been restored, and visa restrictions have eased.

The rapprochement began last year when renowned microfinance economist Mohammad Yunus, who advises the new interim Bangladesh government, met Pakistan Prime Minister Shehbaz Sharif at the United Nations in New York.

The Islamic state of Pakistan was divided into East and West Pakistan after Indian independence from Britain in 1947. The relationship broke down when the dominant West Pakistan sought to impose the Urdu language on Bengali-speaking East Pakistan leading to Bangladesh fighting a war for independence in 1971.

The now exiled Hasina’s father led that independence movement and she has maintained a pro-India tilt in foreign policy under her Awami League government’s over the years. She is now believed to be living in India from where she opposes the interim new government.

The new unity between the once divided populous components of Pakistan poses a challenge to India’s dominant role in south Asia both in regional bodies and in terms of religious politics given India’s large minority Muslim population.

• At The Straits Times, Ashraf Khan says India will be concerned that both Bangladesh and Pakistan have good ties with China.

ASIAN NATION

DUELLING BUDGETS

Source: Development Intelligence Lab

For an event which may never have happened, the Albanese government nevertheless had the difficult task of addressing two very different audiences in its early Budget this week: voters in the imminent election and the Trump Administration’s tariff threats.

So, the Budget lacks the Asian engagement and statecraft themes flowing through past Labor Budgets which revamped the development aid program, established the Southeast Asia Investment Finance Facility (SEAIFF), and have underwritten major investments in the Pacific.

Development aid: Spending increases 2.7 per cent to $5.097 billion and, although that is a small inflation adjusted decline, it certainly stands out against the recent massive aid cuts in both the US and Britain. The Budget papers claim Australia is already responding to those cuts by “reprioritising our development investments to bolster support to our region”.  But the actual numbers only show a less than one percentage point share increase in aid to the Asian region which is in line with recent years.

Pacific banking: The Budget does provides some details of the Albanese government’s effort to support failing Pacific banking services. The ANZ Bank has secured a ten-year indemnity against certain losses from agreeing to keep its regional banking network open as part of the government’s whole of nation statecraft approach.

India: India stands out as the only recipient of new regional initiatives in the Budget in a contrast to past years with several country initiatives. There is $20 million over four years for an Indian trade and investment accelerator fund and an extension the Maitri exchange program.

Buy Australian: A $20 million one-year advertising program to promote Australian products in response to the Trump tariff threats may be seen as somewhat at odds with government rhetoric about boosting two-way trade with, for example, ASEAN countries.

Outlook: Without referring to Donald Trump, the Budget says a 25 per cent US penalty tariff would only have a mild 0.2 per cent negative impact on GDP by 2030 but the indirect impact of a global tariff war would be four times as bad. The Budget forecasts India’s economy will grow 6.75 per cent this year, Japan will grow 1.25 per cent, broader East Asia will grow four per cent, and China is likely to hit its five per cent target.

MORE (ASIAN) EYES

The Budget’s one new foray into regional relations is the extra $45 million funding over four years for intelligence agencies in response to the Independent Intelligence Review which was completed last year.

While the Review focuses on changes in the global intelligence scene, its points about regional cooperation may take on new relevance given the questions surrounding the functioning of the Five Eyes (Australia, US, Canada, Britain and New Zealand) intelligence sharing group due to the Trump Administration’s actions since the Review was completed.

The Review says regional intelligence relations will continue to grow in importance, including directly with Pacific and Asian countries. And high-quality analysis on geopolitical trends in the Indo-Pacific is, more than ever before, an essential asset for governments grappling with difficult policy decisions. It notably warns that “these (regional) partnerships cannot be one-way – expectations on Australian intelligence agencies to do their share will be high.”

The Review’s call for more contestability over intelligence assessments and more regional cooperation align to some extent with the parallel review of government third party strategic funding which raised questions about an excessive share of funding going to US-focussed thinktanks.

FIRST STOP USA

Opposition leader Peter Dutton Dutton is set to overturn more than a generation of Australian prime ministerial tradition if he comes to office at the next election by not making his first bilateral overseas visit to Indonesia.

While he described the Indonesian relationship as “sacrosanct” in his first major speech on foreign policy, he said the US would be his first visit priority given the unsettled bilateral relationship under President Donald Trump.  “I think there are a number of competing priorities, but my sense would be that at this time in our national interests, the United States would be a very early first visit,” he told the Lowy Institute in questions after his speech.

Notably Dutton elevated China, the Pacific, the USA and defence as his core regional priorities, refraining from outlining a broader framework for Asian engagement at a time of rising geopolitical uncertainty. Curiously, after describing Indonesia as “sacrosanct”, he then elevated the United Arab Emirates as an “underdone” relationship alongside Japan.

He declared he was interested in visiting China early on, but then trod a delicate path between talking up the “remarkable Chinese diaspora” in Australia and the need for a more forthright response to the “Chinese Communist Party’s military aggression against our men and women in uniform.”

Many past prime ministers have embraced various versions of a three-legged approach to the world building around the US alliance, Asian engagement, and commitment to multilateral institution-led globalisation. India, Southeast Asia and global institutions – apart from free trade – were notable omissions from the speech which emphasised tactical foreign policy leadership and values-based diplomacy.  

AIDING ASEAN

Source: Development Intelligence Lab

A survey of Southeast Asian development aid experts has raised questions about Australia’s focus on trade and infrastructure while reinforcing the influence of education when policy towards foreign students is in a state of flux.

Climate change, shifting demography and inequality, and geopolitical tensions were identified as the three biggest disruptions facing the region in the survey of more than 360 experts by the Development Intelligence Lab.

In response the experts identified Australia as having a comparative advantage as a development partner in education, governance, climate adaptation, and agriculture support. Education was identified as a top three sector for cooperation in each of the nine countries surveyed with a particular demand for support for in-country educations systems and access to Australia’s tertiary education system.

The strong support for Australia as a governance partner from the largely non-government respondents in the survey raises some questions about how much Australian aid can step up in this space without running into diplomatic tensions with some regional governments.

While Australia provides significant education and government aid, the experts were relatively unconvinced that Australia has comparative advantage in infrastructure and trace support which has become a bigger part of the aid budget in recent years to both support trade deals and rival Chinese funding of infrastructure.  “Experts were not convinced that a significant portion of Australia’s ODA should be allocated to trade support, given the perception that Australia’s

Humanitarian assistance also received some questioning with some respondents suggesting some countries could now cope with small scale crises and Australia would be better focused on prevention measures rather than short term emergency assistance.

The survey also reveals some scepticism of Australia’s efforts to be more embedded in regional diplomatic architecture questioning whether it can play a meaningful role in offsetting US-China rivalry in this architecture. Instead, it suggests Australia should position itself as a “people partner” which that “connects across communities, universities, businesses, cultural ties and organisations, not just partner governments.”

STUDENTIFICATION 101

A six-year study of international students in Australia, who largely come from Asia, has rejected assertions they are contributing to a broader rental crisis but warned that “international studentification” is changing host countries.

The University of South Australia study says overall international student enrolment numbers do not statistically significantly predict the rental costs for residents in major cities and those students were vulnerable to rental market shifts like other residents.

It says the ‘scapegoating international students for the rental crisis deflects attention from addressing their accommodation needs and tackling the root causes of the crisis and the structural issues in the housing market.” The study collected data from 2017 to 2024 at local and national level in what it says is the first of its kind in Australia, although the Property Council of Australia produced similar findings last year in response to the capping of student visas due to the broader rental crisis.

But putting the Australian debate about international students and housing into a broader international context it says Australia is experiencing a new global phenomenon of “international studentification” which will see the number of internationally mobile students grow from 5.4 million in 2017 to about nine million in 2030.  “These students do not just study and live in their host societies; rather, they influence the socioeconomic and cultural landscape of local communities – a phenomenon that we term ‘international studentification,’” it says.

For example, it points out how international students have been a key influence in the shift of the Melbourne CBD away from commercial office buildings towards small-sized, no-parking units tailored to those students, mimicking a trend seen in some other countries.

But it says this international studentification has so far only been seen in specific urban localities with a high concentration of international students, rather than in the broader housing market, “yet, politicians in traditional international student destinations in the West abuse this partial evidence to advance their political agendas.”

DEALS AND DOLLARS

JAPAN FIRES UP (AGAIN)

Despite the new global debate about the reliability of the Trump Administration, Japanese energy importers have chosen to revive their pre-existing concerns about the reliability of Australia as a gas supplier.

The country’s biggest LNG buyer JERA used a Perth conference to warn it could look to other supplier countries unless Australia made changes to industrial relations, the domestic gas safeguard mechanism, and approval delays.

“In contrast to Australia, in the US there are expectations of abundant future new supply, cheaper prices, lower cost of production and labour, and faster project approvals for LNG projects,” JERA executive Hitoshi Nishizawa declared just as western allies like Australia and Japan are focusing on bigger picture cooperation to manage Trump Administration challenges.

He reminded local exporters that there were alternative suppliers around the globe and this might impact the competitive environment when large Japanese contracts drawn up in 2010 with Australian exporters expired in 2030. “The clock is ticking, and inaction could potentially cost Australia thousands of jobs, billions of dollars in lost revenue and weaken regional trade partnerships,” he said.

Since 2021 Japanese diplomats and energy executives have been criticising Australia gas development and retention policies in an unusually public way despite a broader rubric of increased security and economic coopetition between the two countries. A further loss of confidence amid the current geopolitical uncertainty would be a setback for Australia due to the way its energy resources often give it a diplomatic clout in the region when it may otherwise have less influence.

MINING TIMOR

Australian mining companies appear to be doing better than Chinese companies in winning the rights to mining exploration rights in Timor-Leste despite the long-standing tensions with Australian governments over boundaries and onshore development of natural gas.

Dili began awarding mining leases in 2023, and The Australian Financial Review reports four of the five successful foreign explorers are Australian – Estrella Resources, Beacon Minerals, Tivan and the privately held Iron Fortune. Singapore’s Nova Energy and Resources, a Chinese-backed group, also holds a further exploration licence.

Timor-Leste is said to hold deposits of copper, gold, zinc and manganese, as well as rare earths and other critical minerals, yet the country has a limited history of exploration and mining. The push to expand the nascent mining sector comes as its $28 billion sovereign wealth fund – based on gas royalties – is expected to run out in the next decade.

The country has awarded 43 of 49 concession areas, with the remainder expected to be granted towards the end of this year.

CHINESE REBOUND

Picture: Tourism Queensland

Just as Chinese naval vessels were making their plans for their controversial circumnavigation of Australia last month, their compatriots were already flooding into the country as tourists.

For the first time since the pandemic Chinese tourists overtook New Zealanders in January to regain their stature as Australia’s biggest source of overseas visitors. Bureau of Statistics data shows 114,670 people arrived from China compared with 96,250 from across the Tasman.

Referring to how Chinese tourists spend almost twice as much as New Zealanders at about $5081 per visitor trip, Tourism Australia managing director Phillipa Harrison told The Australian the “lucrative” Chinese visitor market in January was good news for the industry. And in another twist on Australia geopolitical balancing act, US tourists rank third but much lower than Chinese visitors at 72,090.

AUSTRADE SHAKEUP

The Albanese government has returned to a more traditional experienced bureaucrat to run the Australian Trade and Investment Commission (Austrade) and simultaneously embarked on yet another review of export assistance grants.

Amid a spate of pre-election diplomatic appointments, Trade Minister Don Farrell has appointed Paul Grimes as Austrade chief executive after the last Coalition governments sought to change the organisation with the appointments of outsiders Xavier Simonet (formerly Katmandu chief executive) and Stephanie Fahey (formerly an academic and consultant).

Grimes by contrast is a state and federal public servant who ran the NSW Treasury and the Departments of Agriculture as well as Sustainability, Environment, Population and Communities at the federal level.

Austrade has had a chequered leadership and strategic direction since being corporatised and notionally broken out of the Department of Foreign Affairs in the 1980s. It was initially mostly headed by former businesspeople but then brought back more under ministerial control and senior public servants.

Meanwhile Farrell has appointed a former senior diplomat Tim Yeend to review the Export Market Development Grants (EMDG) program while declaring that the Labor government has doubled the size of the average grant to $53,000 in the recent funding round.

The Albanese government cut the Austrade and EMDG scheme budget in 2023 despite talking up the need for greater trade diversification.  It is also coming under criticism from business from failing to deliver on a simplified trade system.  

KOREA TO THE DEFENCE

Six months after it appeared to walk away from buying defence manufacturer Austal, South Korean company Hanwha has sought to buy up to ten per cent of the company in a stock market raid amid the global rise in the share prices of military manufacturers.

Hanwha made its first attempt to buy Austal in 2023. Since then, it has made three more approaches and conducted preliminary approval reviews in the Australia and the US where Austal has shipbuilding capacity. It has reportedly been offered minority stakes but has declined them.

A takeover would be politically sensitive because Austal is a major contractor to the Australian and US navies. But in the new climate of uncertainty about Australia’s relationship with the US, a tie-up with a major Korean defence company could give Australia an important new defence industry link closer to home in Asia.

DIPLOMATICALLY SPEAKING

We have been very clear that we do not regard this [tariffs] as the act of a friend. Last time around there were exemptions, not just for Australia, there were dozens of exemptions. What’s occurred this time around is the Trump Administration, for ideological reasons, have … said there will be no exemptions.
   - Prime Minister Anthony Albanese (March 14)

We’ve called out those comments [on taking over Canada]. They’re disrespectful, they’re not helpful, and they ... will have to stop before we sit down and have a conversation about our broader partnership with the United States.
   - Canadian Prime Minister Mark Carney (March 17)

This was a long time coming. There appears to be some surprise that he [Trump] is actually doing what he said he would do. I’m not surprised. Maybe I took him more at face value. I’m not being entirely facetious, a multipolar world used to be our talking point. It’s now become the American talking point.
   - Indian external affairs minister S. Jaishankar (March 14)

DATAWATCH

HAPPY PLACES

The World Happiness Report has revealed Asia is as varied by this measure as it is by wealth, religion or democracy. Scandinavian countries top the survey, produced by the Oxford University Wellbeing Research Centre and the Gallup World Poll.

The index is life evaluation averaged over three years and measured out of 10. The trend is the change since 2012. For comparison, Australia is ranked 11 measuring in at 7/10 and trending down by 0.4.

Here’s the Asian list …

ON THE HORIZON

BIRTHDAY BOYS?

The appearance of a Republican Senator at a gathering of global business leaders in Beijing this month only seemed to underline two crucial points about the Trump Administration’s approach to China.

There has been remarkably little public contact between the world’s two major powers since Trump came to power, but the US leader still seems intent on a meeting with his fellow strongman before any new Cold War takes hold.

Trump and Xi spoke by phone days before Trump’s inauguration in January, but high-level communication between the two countries has been limited ever since. China’s senior foreign policy official Wang Yi and US Secretary of State Marco Rubio spoke in late January, and Vice Premier He Lifeng talked to Treasury Secretary Scott Bessent late in February.

So, the meeting between Chinese Premier Li Qiang and Republican Senator Steve Daines on March 23 appeared to be a significant step forward with Daines saying afterwards: “This was the first step to an important next step, which will be a meeting between President Xi and President Trump.  When that occurs and where it occurs is to be determined.”

The Wall Street Journal reported on March 10 that the two leaders were considering a “birthday summit” in June due to the their coincidental birth month. Xi was born on June 15, 1953, seven years after Trump, who was born on June 14, 1946.

While China has not commented on the issue, Trump has fuelled the speculation more than once most recently by commenting that Washington would need to be cleaned up for a summit in the “not too distant future.”

Meanwhile The New York Times has reported that China sent academics to the US in February to navigate new connections to the Trump White House because of concern their old contacts in the Washington bureaucracy were not getting their messages to Trump.

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