Lowy Institute
  • Six new documentaries  in PNG aiming to inspire young women in the country. 
  •  The 2014 Millennium Development Goals Report was released last week. Good news that targets relating to poverty have been met, with poverty rates halved between 1990 and 2010. But bad news on the child mortality and maternal mortality targets. See Robin Davies' commentary on the new report. 
  • The US and China  meet this week to chair a special Joint Session on Climate Change
  • The mega-cities of the future will be in Africa and Asia.
  • Seven billions: visualising the world as seven regions, each home to one billion people. 
  • India now gives more foreign aid ($1.3 billion) than it receives ($665 million).  (HT@petemartin7)
  • Africa's manufacturing islands and anti-Americanism in the Middle East: Chris Blattman links to a bunch of development-related academic papers.
  • With little fanfare, the US recently made some important changes to its policy on landmines.
  • 'Dysfunction': Medicins Sans Frontiers reviews three recent crises, and marks the UN's humanitarian response poorly.

Bringing together the best Interpreter articles you were too busy to read this week.

Two big regional stories this week: Jokowi's probable win of the Indonesian presidential elections and Japanese Prime Minister Shinzo Abe's visit to Australia.

Throughout the Indonesian election campaign, Aaron Connelly and Catriona Croft-Cusworth have both provided exceptional analysis.

Catriona looked at the effectiveness of grass roots campaigning by Jokowi and his team:

Where Jokowi's campaign has found success, it has been at the level of the grassroots. Volunteers have carried the presidential ticket with self-initiated activities in communities, public spaces and online.

Because Jokowi's supporters are spread among so many small groups, it comes as a surprise to see their numbers when they gather in one place. Prior to Saturday night's debate, a public concert supporting Jokowi was held in Jakarta's Gelora Bung Karno, a stadium complex named after the first president, Sukarno. Headlined by Slank, one of Indonesia's most popular rock bands and the producers of a campaign song for Jokowi, the concert filled the stadium to capacity with supporters holding up two fingers to indicate their preference for Jokowi, candidate number two on the ballot. Other artists in the line-up reportedly performed for free in support of Jokowi, while online news reported that concert-goers volunteered to clean up rubbish after the show so that Jokowi would not be blamed for making a mess.

A couple of days before the election Aaron Connelly reported on Jokowi's late rebound in support and the importance of the final presidential debate:

In the final segment, in which one ticket was able to ask the other a question, Kalla noted matter of factly that Prabowo had spoken about thieves the day before. Gesturing toward himself, Kalla said, 'We and the parties that support us are not thieves.' Then, clearly relishing the chance to strike, he ran through a list of the other side's iniquities. 'My question is, because we (on our side) don't have oil thieves, don't have meat thieves, don't have a rice mafia, we don't have a hajj mafia, we don't have forest thieves, who is it that you are referring to?'

Prabowo, struggling to regain his narrative and his cool, admitted there might be thieves in his own party. His running mate, Hatta, stood up to calmly and cynically suggest that if there problems with corruption, then the police and the Corruption Eradication Commission (KPK) could take care of it. Kalla, seeing he had landed a blow, shot back with no small amount of scorn that all of these problems were already under consideration or on trial in KPK. Jokowi suggested Prabowo had not yet answered the question and invited him to do so again.

And on the morning after, Aaron outlined Prabowo's options now that it seemed like he'd lost he election:

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Prabowo has every right to await the official count by the KPU and to challenge the result in the Constitutional Court. We should remember that the chair of Jokowi's party, former President Megawati Sukarnoputri, did just that in 2009 when her opponent's margin of victory was a much higher 34%. I cannot forsee any scenario in which Prabowo would not exhaust every legal avenue available to challenge the result. He has come too far and invested too much time and money to not do so. Assuming he takes this as far as he can, the KPU and Constitutional Court would not be able to declare Jokowi the winner of the election until late August.

In a speech to supporters on Wednesday night, Prabowo told them to 'have patience, follow the law, and try to be polite.' But Jokowi supporters expressed grave concern that Prabowo might use his muscle to disrupt or taint the vote counting. Prabowo has cultivated ties with underworld figures as well as nationalist and Islamist thugs. He can also call on considerable reserves of cash — he disclosed $140 million in assets to the election commission earlier this month — and neither the KPU nor the Constitutional Court have avoided Indonesia's unfortunate history of graft. In just the past year, the former chief justice of the Constitutional Court was caught selling rulings in electoral cases. The KPU's computer system is also thought to be vulnerable to tampering. These are serious concerns in Indonesia's young democracy.

On Prime Minister Abe's visit to Australia, I added a quick comment immediately after the Japanese leader addressed the Australian Parliament:

Note the three-way link Abe draws between Australia, the US and Japan, which could yet prove consequential. Because as Buruma concludes, Washington's security guarantee to Tokyo is becoming more 'fraught with danger' as Japan's relationship with China erodes, with the Senkaku/Diaoyu dispute being the flashpoint. Why? Because 'it risks dragging the world's largest military power into petty regional conflicts'.

Now more than ever, the risk is that allies of the world's largest military power will get dragged along too.

The next day, Malcolm Cook countered:

Friendships, special relationships and skilful diplomacy are built upon the recognition of convergence of interests and beliefs. This is different to a commonality of interests and beliefs, and such a convergence does not have to imply required future action. I would hazard that the burgeoning of the China-Australia relationship, despite the huge differences between the two states, is testament to this distinction.

If one accepts that Australian officials and politicians can do their job and realise this difference, it is hard to see how the steps taken by Japan and Australia to foster closer security ties is putting Australia or the Australia-China relationship at any greater risk. Forgoing such opportunities with Japan for doubts that deserve to be dispelled would be an opportunity lost and would raise questions in Japan about how good a strategic partner Australia really is.

Sticking with Asia, here's Griffith University's Andrew O'Neil on the limitations of the realist paradigm in understanding the current geo-political climate:

The region is characterised by great-power rivalry between the US and China, to be sure, but there is little evidence non-great-powers feel under pressure to 'choose sides'. And there are few indications this will change in the future. Indeed, small and middle powers are demonstrating a degree of agency in shaping geopolitics that undermines the validity of the realist model for predicting how states in Asia will behave.

Indonesia, Thailand, and Malaysia have resisted bandwagoning with the new rising power in Asia, but nor have they joined the US, Japan, and Australia to balance against China. Far from being pressured into choosing camps, all three have been highly adept at exploiting benefits from close relations with Beijing and Washington.

And Julian Snelder wrote on the recent political protests in Hong Kong:

'We hope young people can raise their understanding of the rule of law, and make themselves the vanguard of preserving Hong Kong's prosperity and stability', thundered Li Yunchao, China's powerful vice president.

China is alarmed by the mobilisation of the Hong Kong public in recent weeks, including a large rally for democracy in 1 July. Beijing's earlier publication of a White Paper had goaded the local democratic Occupy Central movement and surely boosted turnout in its informal online referendum last week: 88% of the 787,767 respondents demanded direct voting in the 2017 chief executive election, citing 'international standards' of democracy.

Visibly irate, Beijing has denounced the referendum as 'illegal', 'ridiculous' and a 'farce…of mincing ludicrousness'. Hardline voices mutter darkly about 'the PLA coming out of their barracks'. A sophisticated hacking campaign took place while banks and accounting firms have strained to distance themselves from the rabble rousers. Hong Kong has even been warned about losing its RMB currency trading business. The city thus faces a barrage of intimidation,which may backfire on Beijing.

We had Vaughan Winterbottom return to The Interpreter this week. He looked at tightening restrictions on freedom of expression in China:

On Tuesday, official news agency Xinhua revealed new guidelines issued by the country's media regulator that prohibit journalists from reporting or blogging on state secrets, commercial secrets, 'or information which has not yet been made public.' It was not immediately clear what the latter phrase meant, though 'revealing state secrets' is acatch-all crime in China that has been used to bring troublemakers to trial before.

The guidelines are the latest move by the Government under President Xi Jinping to tighten restrictions on journalistic freedom, both in traditional media and online. In June the media regulator announced new rules forbidding journalists from publishing reports critical of the Government without employer approval. The rules also ban journalists from setting up their own websites and conducting interviews or writing reports outside their assigned field of coverage.

 Shashank Joshi gave us a rundown of recent opening of debate on India's nuclear doctrine:

This debate has been catalysed by a variety of factors. These include Indian disquiet at Pakistan's development oftactical nuclear weapons, a widespread sense that India's nuclear deterrence has failed in the face of state-sponsored terrorism, concern that India's ability to project deterrence against China remains inadequate, and a general sense that India has been slow to translate its national power into usable capabilities.

Typically, only those at the fringe of this debate – the ultra-hawks – have proposed radical changes in India's nuclear policies, such as the resumption of testing or a shift to nuclear war-fighting doctrines. But a growing number of mainstream Indian voices – including former officials and military officers – are expressing dissatisfaction with India's nuclear doctrine, the first and only public version of which is now over a decade old. See, for example, the former civil servant PR Chari writing for the Carnegie Endowment in June, the April manifesto of the Bharatiya Janata Party (BJP) before it came to power this year, and articles such as those in The Hindu last week.

But it is fascinating to see an official who until recently was at the heart of Indian nuclear policies, in both military and civilian institutions, make such explicit criticisms of a doctrine with whose classified details he would be intimately familiar.

And on the Middle East, Roger Shanahan expertly examined the 'caliphate' declared by the Islamic State of Iraq and Syria (ISIS) in the Iraq-Syria border region:

ISIS has certainly gained kudos and headlines through its military success but its dominance in parts of Iraq is aided by political gridlock in Baghdad and Iraqi military ineffectiveness. Neither of these will last forever and Baghdadi's forces will at some stage be engaged in decisive fighting in Iraq, at which point his tactical alliance with the tribes will come under enormous pressure. He needs to maintain military momentum, and he has been attempting to do this in eastern Syria. How long he can maintain his cross-border empire remains to be seen, but it will in all likelihood remain an ephemeral construct.

Baghdadi's caliphate claim has shown how diffuse, splintered and broadly-based the regional Islamist threat has become and how easily groups can be swayed by martial success. Even though ISIS's success, and its caliphate, will not last forever, in the idealised worldview of radical islamists it will serve as a model of what can be done by committed and observant Muslims.

The Afghan Arabs under bin Laden had to shelter in non-Arab lands and were constantly under threat. Baghdadi by contrast has achieved what nobody among contemporary jihadists has before him: he has carved out a piece of the historical Arab world, defeated the 'kafir', done away with the Western-imposed borders and placed his territory under Islamic rule. Even if few people physically join his caliphate and it lasts only weeks or months, the damage may have been done.

Photo by Flickr user Ikhlasul Amal.


A few weeks ago I featured extended excerpts from a truly eye-opening essay by Swinburne University academic John Fitzgerald on Chinese Government activity among the Chinese diaspora in Australia, which include the orchestration of pro-Chinese demonstrations along the Olympic Torch relay route through Canberra in 2008 (photo above), and the Chinese state's attempts to buy up the Chinese-language community media here.

I'm a couple of days late to this, but I want to flag a blistering op-ed from China watcher Paul Monk which appeared in the Fairfax papers on Wednesday, also on the subject of Australia's Chinese-language media. 'The Chinese Communist Party’s propaganda bureau has been buying up radio stations and newspapers across the country and channelling the voice of Beijing into them from editorial offices in China', Monk writes:

What Beijing is doing is of a piece with its more general drive to extend its sway in the region in terms of both hard and soft power. But this particular initiative is blatant interference in Australia’s internal affairs of a kind that would never be tolerated on the receiving end by China and is, in fact, rendered impossible there by the Party’s tight monopoly of news media. It is a strategic move on Beijing’s part to create what can only be described as a fifth column inside our borders. It should be scouted out and the Party sent packing.

Read the whole thing. I assume the Government is receiving regular reports on this topic from ASIO. No wonder it is taking a tougher line on China.

Photo by Flickr user Michael Lieu.


The Chinese Government is frequently criticised for not being transparent about its aid program. As I mentioned in my quick summary yesterday, there's not a lot of specific data in the Chinese aid white paper. But we can make a few comparisons — on geographical spread, type of aid, and income level of recipient country.

China's aid system is complex, involving numerous government departments and actors. Sharing of information between the Ministry of Commerce (which manages grants and interest-free loans) and China Eximbank (which provides concessional loans) is not great.

There's some suggestion that the total aid figure is 'multiples higher than the government announces', but on my calculations the US$14.41 billion number for 2010-2012 cited in the White Paper is more or less accurate. Moreover, the statements in the White Paper that in recent years China's foreign assistance 'has kept growing' and that it will it 'continue to increase the input in foreign assistance' doesn't look like a Chinese Government that is trying to hide the true size of its program. We can't demand China publish more data and then turn around and dismiss it.

But back to the comparisons. The first white paper provided cumulative data up to 2009. It's not entirely clear, but this likely covers the period 1950-2009. The second white paper gives us data from 2010-2012. The charts below indicate the percentage of total aid for the given period.

Geographical distribution: the takeaway here is that more than 50% of China's total aid goes to Africa; Asia and Latin America have consequently fallen slightly. 

Distribution according to income level of recipient: in recent years China has highlighted its support for least developed countries (LDCs). The trend here indicates this rhetoric is matched with aid dollars.  Read More

Type of aid: the Chinese Government is phasing out interest-free loans. They were a feature in the 1980s and early 90s before Eximbank was formed and most of these tend to be converted into grants eventually anyway. This is reflected in the trend: Chinese aid is essentially now 50% concessional loans and 50% grants. 

Unfortunately, we can't directly compare the forms of aid across the two white papers, as the second has more categories than the first. But the main takeaway is that China's aid program has diversified away from a focus on economic infrastructure and industry to include more emphasis on social and public infrastructure, donations, and training.


Source: data from 2011 and 2014 white papers; Xinhua


Earlier this week the Lowy Institute hosted former Australian Prime Minister Malcolm Fraser to discuss his new book Dangerous Allies. Below is the full video of the event.

Yesterday evening Mr Fraser tweeted the video, adding that he was 'debating the established political class!', which brought a wry response from his interlocutor at the event, Lowy Institute Executive Director Michael Fullilove.

If you want to know more about Dangerous Allies, note also my interview with Mr Fraser in May.


Lowy Institute Paper

Debating Beyond the Boom

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John Edwards' Beyond the Boom is a welcome follow-up to his 2006 Quiet Boom, which I reviewed at the time in conjunction with Ian Macfarlane's Boyer Lectures.

I agree with the argument that economic reform should not be sold on the basis of a faux crisis or economic failure narrative. If proposed reforms are worth doing they are worth doing regardless of where we sit in relation to the business cycle or the budget outlook.

John notes that households saved the Howard Government's tax cuts and that household saving would have been lower in their absence. This is an important observation, because it demonstrates the private saving offset to changes in public saving. Possibly to spare his readers the jargon, John didn't mention this as an example of Ricardian equivalence, but it is clearly relevant here. I made much the same argument at the time.

It is perhaps worth noting that John was rather more sympathetic to tax cuts in Quiet Boom, where he says that:

It may well be worthwhile to reduce the top marginal income tax rate, or to encourage more workforce participation by older Australians or to increase the incentives to move from social security support to paid employment.

Those arguments remain valid, regardless of the state of the budget. While balancing the budget over time is important, this should not come at the cost of reducing incentives for labour market participation.

John also notes that during the financial crisis, the increase in private sector saving more than offset the decrease in public sector saving from the fiscal stimulus. He doesn't mention that this is at odds with the dominant narrative around the stimulus, which is that it worked because we 'went early, went large and went households.' If the stimulus worked, John's analysis implies that it was not through household consumption spending. I would like to have seen John spell out these implications in more detail (my take is here).

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John maintains we should limit the current account deficit to 3.3% of GDP to contain growth in external liabilities. This is close to the average since 1960 and so is certainly achievable based on historical experience. However, in Quiet Boom John shows how conditioning macro policy on a view about the appropriate size of the current account deficit got us into a lot of trouble. Tim Geithner's attempt to get the G20 to sign up to a 4% of GDP limit on current account imbalances was similarly mistaken in my view. We cannot know in advance the appropriate rates of saving and investment, from which it follows that the appropriate current account deficit is also unknown.

John maintains that the government has a revenue rather than a spending problem, but this is necessarily a joint problem. The normative issue is to define what government should be doing and raise revenue accordingly. In that sense, the expenditure side is analytically prior to the revenue side, regardless of what is driving changes in the budget balance over any given period. The test both revenue and expenditure measures need to pass is whether they improve incentives to work, save and invest. Higher average tax rates do not pass that test and would be at odds with the aims of the tax reform process and raising labour force participation. Balancing the budget is important, but should not come at the expense of microeconomic incentives. Balancing the budget and stabilising net debt as a share of GDP will be a somewhat hollow achievement if it comes at the expense of a smaller economy that yields less revenue for government in absolute terms.

John is spot on in arguing that Australia's economic future lies in integration with Asia through trade in services. I would add that there are even larger gains to be had through increased trade in capital and labour. Regional free trade agreements will be important in defining the parameters of our engagement and deserve close attention from policymakers. The G20 would do well to focus on the successful conclusion of regional and multilateral trade deals.

Alex Tabarrok says the Reserve Bank deserves a lot of credit, but I do not think we can attribute Australia's relative economic outperformance to the conduct of monetary policy. Australia adopted inflation targeting along with the rest of the world. Australia's senior central bankers largely trained in North America and think much like Ben Bernanke. It cannot be said Australia followed a different intellectual approach or that we know something foreign central bankers do not.

At the onset of the crisis, CPI inflation was running at an annual rate of 5%, nominal GDP at 11% and inflation expectations were coming unhinged. In the absence of a global downturn, the RBA would probably have needed to engineer a severe domestic slowdown to bring inflation back to target. In that sense, the downturn in the world economy did the RBA a favour. Monetary policy is neutral in the long-run, so I don't think we can give the central bank too much credit for a 23-year expansion.

Photo by Flickr user Mario Bollini.


This week's selection of news, commentary and analysis from and about the Pacific island region:

  • Brand new from the Australia-PNG network: PNG links.
  • Fluctuations in the flow of aid can have extremely disruptive effects on small economies such as Tuvalu.
  • In Cook Islands, a new report from the Statistics Office confirms the trend of depopulation. Economic reforms which reduced the size of the public service is one of the contributing factors. The impact and policy implications of depopulation have been a significant issue in the lead-up to national elections held this week.
  • Urban youth see little about politics in Solomon Islands that makes them want to get involved.
  • Kiribati, Tuvalu and Marshall Islands will meet with other small atoll nations to prepare a united stand on climate change.
  • The most recent edition of the ADB's Pacific Monitor focuses on the challenges of job creation in the region. The economic update was the basis of a keynote speech by Christopher Edmonds at the Pacific Update.
  • Check out this promo for the forthcoming 'Desert Islanders' in which Ben Bohane visits Pacific islanders serving in Afghanistan:


Today, the Chinese Government released its much-awaited second White Paper on Foreign Aid. It's been in the pipeline for a while, as I've noted a number of times, and follows the first white paper published in April 2011. 

So what does it say?

First, it is an overview of China's foreign assistance from 2010-2012, rather than a forward-looking strategy. But this is an improvement on the first paper, which was an overview of the entire aid program across its 60-year history.

How much?

Over the 2010-12 three-year period, the White Paper says China provided US$14.41 billion of aid in three forms:


121 countries, including 51 in Africa, 30 in Asia, 19 in Latin America & the Caribbean, 12 in Europe and 9 in Oceania.


There's an interesting new addition to the list of basic principles underpinning China's provision of assistance: 'keeping promise'. The others are more familiar, and rather repetitive: mutual respect, equality, mutual benefits, and win-win.

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The White Paper focuses on two key themes: 'helping improve people's livelihood' and 'promoting economic and social development'. It is interesting to see what is prioritised under these broad headings.

Under the first theme, the White Paper states that 'one of the important objectives of China's foreign assistance is to support developing countries to reduce poverty and improve the livelihood of their peoples' (Australian aid watchers will note there's no explicit mention of 'national interest').

Also under the first theme, China focuses on agricultural development, improving the level of education, improvement of medical and health services, building public welfare facilities, and humanitarian aid. While we still don't have any specific country data, there are some good examples and cumulative figures for each of these sectors. For example, between 2010-12 China completed agricultural demonstration centres in 17 countries, constructed 80 medical centres and undertook 29 well-drilling and water-supply projects.

The second priority, promoting economic and social development, is more interesting. The White Paper emphasises improving infrastructure, strengthening capacity building, promoting trade development, and strengthening environmental protection. There are some notable overlaps with the Australian Government's (and others') focus on 'economic diplomacy'. Examples include promoting exports to China through offering zero tariff treatment to least-developed countries.

Finally, the White Paper devotes significant attention to regional and international cooperation. We discover that in 2010-12 China contributed a total of US$285 million to multilateral organisations, including the UN, the World Bank, IMF and Global Fund to Fight AIDS, Tuberculosis and Malaria. As I mentioned in a post earlier this week, most of China's aid is distributed bilaterally. New Zealand will be pleased that its 'world-first' trilateral cooperation project with China in the Cook Islands got a mention (Australia's pilot cooperation with China in PNG didn't).

The future

The final paragraph offers a hint of where the aid program is heading.

China will continue to increase the input in foreign assistance, further optimize assistance structure, highlight key aspects, innovate assistance means, raise the efficiency of capital utilization, effectively help recipient countries improve their people's well-being and enhance their capability of independent development. China is willing to work with the international community to share opportunities, meet challenges, strive to realize the world's dream of lasting peace and common prosperity, and make greater contribution to the development of mankind.

In short, the White Paper is heavy on cumulative detail and light on country specifics, but it is a definite improvement on the broad overview of the first White Paper. The stated priorities offer an insight into how China conceptualises its aid program.


Earlier this week Hugh White wrote a column for the Fairfax papers about Shinzo Abe's visit to Australia, in which he argued that Prime Minister Abbott was embracing a closer relationship with Japan either without considering the larger strategic consequences or because he wanted to 'spur on' regional rivalries. Japan-China tensions are rising and the US and China are manoeuvring for regional supremacy, Hugh wrote, but:

There is no sign that Mr Abbott has considered any of these questions. One reason might be that he simply does not understand what’s happening in Asia today, and so he doesn’t really understand what Mr Abe is after. This might seem hard to believe, but Mr Abbott often speaks as if he simply does not accept that strategic tensions are growing. For example he told a Washington audience recently that America should not worry about China’s rise because it is not a strategic rival. I doubt Mr Abe would agree.

A second possibility is that Mr Abbott is just pretending not to understand. He does understand what is going on in Asia, and has decided that, as regional strategic rivalries escalate, Australia’s best move is to spur them on – not just by strengthening our alliance with America, but by becoming Japan’s ally against China.

Let's consider both these possibilities in turn.

The first is based on what strikes me as a misreading of Abbott's speech to the US Chamber of Commerce in Washington. Far from dismissing rivalry, Abbott acknowledges the possibility by saying 'it’s understandable that Americans should be wary of potential rivals.' To me, the tone of the speech is not one of denying or wishing away a rivalry, but of implicitly pleading with Washington and Beijing to please keep their rivalry in check, for the good of us all:

The relationship between America and China is worth all the effort that both countries are putting into it – because no relationship is more vital for the world’s future. I remain fundamentally optimistic because conflict is in no one’s best interest. We will all advance together or none of us will advance at all.

But as of this morning, we probably don't need to parse the PM's words to solve this mystery, because, in an interview with Fairfax, his foreign minister Julie Bishop has...

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...made the clearest public statement yet of how the increasingly militarised disputes on China’s periphery were prompting Australia to deepen and broaden military ties with the United States and other nations, most notably Japan. Those trends have been on display this week with Prime Minister Tony Abbott agreeing to a “strategic” defence relationship and new military technology sharing agreements with Japan’s Prime Minister Shinzo Abe, who leaves Australia on Wednesday.

“We know that the optimum is deeper engagement [with China],” said Ms Bishop. “But we’re also clear-eyed about what could go wrong. So you have to hope for the best but manage for the worst.”

Bishop also recently made some dark comparisons between Asia today pre-World War I Europe (compare this to her tone during the 2013 election campaign to get a sense of how dramatic this change is). Earlier this week I aired some reservations about the tightening of ties with Tokyo, yet Bishop's statements at least show that the Government is not in denial about the challenge China represents to the Asian strategic order.

So if the Government is not aligning blindly with Tokyo, then what of Hugh's second possibility? I'm thrown by Hugh's claim that Abbott may wish to 'spur on' the rivalry between Japan and China. What possible Australian interest could this serve? Surely the more straightforward interpretation is that the Abbott Government is practicing a form of offensive realism. It recognises the risk of conflict between Asia's great powers, and judges that the best way for Australia to help prevent or deter such a conflict is to signal that Japan is not alone. Hugh may think this will spur on a China-Japan rivalry, but the aim is surely to damp it down by showing resolve and thereby convincing China that it is losing.

Whether one agrees with that policy or not, at least it shows that the fog has lifted. Previously, open acknowledgement of the risks of China's rise was left to ex- political leaders such as Paul Keating, Bob Carr, and Malcolm Turnbull, while sitting governments preferred a more rose tinted view, captured in the Gillard Government's Asian Century White Paper and Bishop's early focus on economic diplomacy (as if Australia faced no greater problem than how much money it could make from the region).

The Abe visit and Bishop's interventions suggest things might be shifting inside Cabinet and that the Government feels the need to talk to Australians about it. And that means the question of how Australia should respond to China's rise can now move to centre-stage in the national debate about Australia's place in Asia.


The view from Jakarta

Across Indonesia, up to 190 million voters went to the polls yesteraday to choose their next president. In Jakarta the faces of the two candidates, Joko 'Jokowi' Widodo and Prabowo Subianto, had mostly disappeared from advertisements in public spaces under an enforced cooling off period, appearing again on sample ballot papers at the entrances of polling stations across the city. 

The main streets of the capital were uncharacteristically empty, while neighbourhood polling stations were bustling with people lining up to cast their vote. This year's election falls in the Muslim holy month of Ramadan, meaning that many voters in the Muslim-majority nation headed for the polling booth after their pre-dawn meal. By mid-morning, voters in Jakarta were lined up in the sun, patiently attended to by General Elections Commission (KPU) officials and volunteers, many of whom had had nothing to eat or drink since dawn.

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One neighbourhood station I visited in East Jakarta was a Prabowo stronghold. Flags bearing the crest of Gerindra, Prabowo's party, were still strung up in the alleyways, having survived the ban on political advertising for the two days prior to the election. Those with ink on their fingers, a sign of having voted, spoke quietly when asked about their choice. 'I chose someone,' one woman said ambiguously, while holding up one finger hidden behind a Rp 5000 note, indicating a vote for Prabowo, ballot number one. Others were more upfront about their choice. 'Number one,' a motorcycle taxi driver said proudly. 'He is the only one capable of leading this country, both here and overseas. Jokowi is only a mayor, he has no experience overseas.'

A block away, Jokowi was the neighbourhood choice. Several people had worn checkered shirts to the ballot box, a symbol of Jokowi's campaign, while others wore attributes of Indonesia's first president, Sukarno. Prabowo had tried to associate himself with Sukarno in his campaign, including by donning the traditional peci cap and giving fiery speeches from behind old-style microphones. But these voters in East Jakarta still associated Sukarno with Jokowi and his party, the Indonesian Democratic Party of Struggle (PDI-P), led by Sukarno's daughter, Megawati Sukarnoputri. 'Jokowi is honest,' they said. 'He comes from the people.' They held up two fingers to indicate their preference for Jokowi, ballot number two.

It may take up to two weeks to announce the official results of the election and name Indonesia's new president, though quick counts and exit poll results indicate a Jokowi victory. Concerns have been raised about potential conflict over the results, due to the close margin between the candidates. Without a clear majority for either side, results are likely to be fiercely contested. However, if voting day in Jakarta is anything to go by, Indonesia's democratic system is capable of handling the transition peacefully.


At the first day of the annual US-China Strategic and Economic Dialogue in Beijing yesterday, China's leaders spoke of the importance of frank discussion for solving disputes.  But a number of reports this week highlight the sorry state of frank discussion within the country itself.

Prominent Tibetan rights activist Tsering Woeser and her liberal-intellectual husband Wang Lixiong were placed under house arrest in Beijing on Tuesday. In a Facebook post, Woeser said the reason for their detention was likely a phone call inviting her to the US embassy to meet with US Secretary of State John Kerry during his visit to the capital.

Woeser and Wang are by no means extremists, nor do they advocate for Tibetan independence. Woeser has riled the Government by openly writing about the dark chapters of Tibet's history, such as the Cultural Revolution in Lhasa, and by documenting the suicide notes left by the region's self-immolators. Wang advocates reforming minority rights in the region to afford greater protection to Tibetan culture and language.

Also on Tuesday, official news agency Xinhua revealed new guidelines issued by the country's media regulator that prohibit journalists from reporting or blogging on state secrets, commercial secrets, 'or information which has not yet been made public.' It was not immediately clear what the latter phrase meant, though 'revealing state secrets' is a catch-all crime in China that has been used to bring troublemakers to trial before.

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The guidelines are the latest move by the Government under President Xi Jinping to tighten restrictions on journalistic freedom, both in traditional media and online. In June the media regulator announced new rules forbidding journalists from publishing reports critical of the Government without employer approval. The rules also ban journalists from setting up their own websites and conducting interviews or writing reports outside their assigned field of coverage.

Frank discussion within the Communist Party itself was also under fire this week. State media reported Yao Zengke, a deputy head of the anti-graft Supervision Ministry, as saying in an online chat with netizens that China should learn from the lessons of the Communist Party of the Soviet Union, which 'let its members publicly express views different to those of the organization.' Such members, Yao said, 'became megaphones for the spread of Western ideology.' A lack of Party ideological discipline is often cited by Party leaders and academics as one main reason for the dissolution of the Union.

Discouraging as this week's clampdowns are, they were not entirely unpredictable. Back in August 2013 an internal memo called on the Party to engage in a 'fierce struggle against seven political perils', which included the discussion of non-official history, constitutional democracy, universal values and 'the West's view of journalism.' All subsequent measures to restrict dissenting opinion make sad sense.

During his meetings with senior Chinese officials on Wednesday, John Kerry 'described his perception of a trend in China, with an increase in arrests and an increase in harassment of individuals who are expressing political views'. Kerry is right, of course. But all he's doing is pointing out official Chinese policy. 

Photo courtesy of the US State Department.


Jakarta Governor Joko Widodo, best known as Jokowi, has won the race to become the next president of Indonesia. His rival Prabowo Subianto has refused to concede, however, setting up a showdown over the results that could last until late August.

We know Jokowi won because a collection of established polling firms, respected for their accuracy, released what are known as 'quick counts' yesterday afternoon. Quick counts are not exit polls, but neither are they official results. Quick counts are conducted by sending observers out to a representative sample of polling places to witness the initial tabulation of votes cast at each polling station. Polls in Indonesia closed at 1pm yesterday, and poll workers at each station immediately set about counting each vote in broad daylight and full public view so that voters could check the results with their own eyes against the final tally. The quick counts are based on observation of those initial counts, and have historically been accurate to within 1% of the official result.

The five most established organisations fielding quick counts — the Centre for Strategic and International Studies, Saiful Mujani Research and Consulting, Indikator, Kompas, and Radio Republik Indonesia — showed a Jokowi margin of victory of between 3.8% and 5.9%. A handful of less established firms, some of which are affiliated with Prabowo supporters, put out polls showing a Prabowo victory at widely varying margins.

The General Election Commission (KPU) will now conduct several further counts at the district, provincial, and finally national level. Under the elections law, it is due to release its final tally on either 21 or 22 July. Later that week, challenges to the official result can be filed with the Constitutional Court, which will hear those challenges in August and rule on them between 22-24 August.

Prabowo has every right to await the official count by the KPU and to challenge the result in the Constitutional Court. We should remember that the chair of Jokowi's party, former President Megawati Sukarnoputri, did just that in 2009 when her opponent's margin of victory was a much higher 34%. I cannot forsee any scenario in which Prabowo would not exhaust every legal avenue available to challenge the result. He has come too far and invested too much time and money to not do so. Assuming he takes this as far as he can, the KPU and Constitutional Court would not be able to declare Jokowi the winner of the election until late August.

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In a speech to supporters on Wednesday night, Prabowo told them to 'have patience, follow the law, and try to be polite.' But Jokowi supporters expressed grave concern that Prabowo might use his muscle to disrupt or taint the vote counting. Prabowo has cultivated ties with underworld figures as well as nationalist and Islamist thugs. He can also call on considerable reserves of cash — he disclosed $140 million in assets to the election commission earlier this month — and neither the KPU nor the Constitutional Court have avoided Indonesia's unfortunate history of graft. In just the past year, the former chief justice of the Constitutional Court was caught selling rulings in electoral cases. The KPU's computer system is also thought to be vulnerable to tampering. These are serious concerns in Indonesia's young democracy.

Given Prabowo's mercurial reputation, we cannot rule out the possibility of political turmoil in the coming weeks. Yet even as Indonesians prepare to closely monitor vote tabulations and electoral challenges, many told me that there was a feeling in Jakarta last night that the country had turned a new page. Despite warnings from the authorities to stay home in order to avoid clashes, hundreds turned up to witness Jokowi declare victory at the Proclamation Monument just before sunset, and continued on to break the fast and celebrate into the evening in the city's iconic Hotel Indonesia traffic circle. Perhaps, as CSIS researcher Evan Laksmana suggested from Jakarta, the 'outpouring of public support and celebration of Jokowi' would discourage anyone from attempting to subvert the result.

Photo by REUTERS/Beawiharta.


By David Schaefer, an intern in the Lowy Institute's International Security Program.

The Lowy Institute International Security Program's work on Indo-Pacific security is supported by two grants from the John D and Catherine T MacArthur Foundation.


Economic convergence — the potential for poorer countries to catch up with the richer countries — may be the most important economic narrative of the post-World War II era. More than a billion people have shifted out of extreme poverty, largely by adopting technology and techniques already practised in the advanced economies. Convergence is not, however, an automatic process, like water finding its level. Not all poor countries will experience convergence, and even those that do will not necessarily catch up all the way. A new OECD report sets out this story in detail.

Some previously poor countries have made it all the way to equaling (or even exceeding) per-capita incomes in wealthier OECD countries. Singapore and Hong Kong have clearly done so, and South Korea and Taiwan have gone most of the way. But some of the great success stories among the emerging economies still have a long way to go; despite three decades of stunning growth, China is still well behind. 

The OECD report asks this question: if these countries continued to grow as they have over the past decade or so, which ones would reach the average per-capita income level of the OECD countries by 2050? The graph above gives the answer: those countries below the 45-degree line are closing in on the OECD countries fast enough to overhaul them by 2050; those above the 45 degree line (the majority) aren't growing fast enough to do this.

Of course this is just one aspect of the story.

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For a start, these countries may not go on growing at the same rate in the future. China can't sustainably return to its 10% rate, while others might do better than they have so far. In any case, what's the big deal about equaling the OECD? Quite a few countries are not far from the 45-degree line and will get a good distance towards closing the gap. They might well regard that as 'near enough'.

Yet there is a huge difference between catching up to where OECD countries already are and pushing out the frontiers to where no country has gone before. 

How fast the rich countries grow from now on will depend on the pace of technological advancement, innovation and a whole raft of other unknowns. Some economists argue that the rate of future growth for advanced countries will be substantially slower than before.

For emerging economies, however, the prospects are clearer, and perhaps easier. The technology that can take them to higher income already exists. They just have to copy it. It's a matter of learning the techniques, applying them, educating the labour force and, above all, putting in place the necessary infrastructure and institutions. No easy task, but what has been done before can be done again. This graph shows how much potential there is for increasing productivity by closing some of the gap with the US.

The OECD is concerned that productivity increases derived from shifting people out of low-productivity industries (agriculture, for example) to higher-productivity industries (manufacturing) will soon be used up. It will be necessary to learn how to do things better within each industry. This is harder. But anyone who has sat in a Jakarta traffic jam or battled with the city's slow internet (only 15% of Indonesians have internet) knows the potential for dramatic improvement in the way business is done. Moreover, those who have experienced the world-class standards of a Jakarta five-star hotel know that it can be done.

Perhaps the most original message the report delivers is how much room there still is for the emerging economies to become more globally integrated (which is good for everyone's productivity). By 2060 non-OECD countries will account for three-quarters of world trade.

The promise of convergence was not that every poor country would become rich. Rather, the message was that it was possible to close the gap dramatically. That seems obvious enough now, but that was not the conventional wisdom in the post-World War II decades. Gunnar Myrdal's Asian Drama: an Enquiry into the Poverty of Nations was representative, and deeply pessimistic. The OECD report carries traces of this old-fashioned gloom (look at the title of that first graph above). But it also acknowledges that the path to higher living standards is open for the taking.