Lowy Institute

Cambodia is once again at the heart of ASEAN problems in relation to the disputes associated with the South China Sea. Reports that it has not been possible for the ASEAN ministers meeting in Vientiane to find an agreed form of words about the issue should surely be no surprise, however regrettable this might be.

As Hun Sen deals with criticisms of his family's involvement in the kingdom's business affairs by Global Witness, with allegations of secret deals and probable corruption, and the furore that has followed the recent execution-style killing of one of the CPP government's most vocal critics, Kem Ley, the Cambodian leader has not taken a backward step from his pro-Chinese position on the South China Sea dispute.

Just as was the case in 2012, when Cambodia, as ASEAN chair, prevented ASEAN from issuing an agreed communique because of its support of China's position, Hun Sen has continued to support China's stated policy that it will only deal with disputed issues and claims on a bilateral basis.

This reiteration follows several recent statements by Hun Sen in which he castigates critics of his position, including unnamed fellow ASEAN members

Cambodia is deeply dependent on China for aid, as Hun Sen has repeatedly stated, including most recently when he excoriated European countries that suggested aid to Cambodia might be cut because of its human rights record. China has long been Cambodia's principal aid donor and has very recently announced the provision of a further $600 milllion in aid to the country. And once again Hun Sen maintains there are no strings attached.

How ASEAN deals with this continuing problem is a matter for speculation, but for the moment there is little to no chance that Hun Sen will change his position.

Photo courtesy of Flickr use iwishmynamewasmarsha

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By Harriet Smith, an intern with the Lowy Institute's Melanesia Program

  • After surviving a vote of no-confidence last week, PNG Prime Minister Peter O’Neill has reshuffled his cabinet. O'Neill has pledged stable government until next year's national election but opposition leader Don Polye wants another vote of no confidence.
  •  In this Interpreter post, the Lowy Insititute's Jonathan Pryke traces the arc of the O'Neill government, from its promising start to now.
  • Former PNG Attorney-General Kerenga Kua has called for an end to the political camp systems that played a central role in the vote of no-confidence, saying the practice is outmoded and reflects badly on the country’s democratic development.
  • The PNG Supreme Court has adjourned a case brought by  five refugees at the Australian-run detention centre. The case was based on a Supreme Court ruling in April that found the Manus facility was unlawful and unconstitutional. The five refugees want  to resettle in Australia.
  • Australia's minister for international development and the Pacific, Concetta Fierravanti-Wells, has announced a partnership with the Solomon Islands business community to strengthen the role of women in the economy. 
  • Speakers at the Pacific Update conference were optimistic about the  Fijian economy, noting economic resurgence reflected in the country's 2016-17 budget.
  • Fiji’s police commissioner opened the fourth in a series of workshops on gender-based violence (run by the Women’s Crisis Centre), saying it was essential police learn how to tackle this endemic issue.
  • A new Lowy Institute Analysis by Dr Anna Powles and Jose Sousa-Santos, 'Principled Engagement: Rebuilding Defence Ties with Fiji', argues Russia’s sale of arms to Fiji demonstrates how the security orthodoxy in the Pacific Islands region is changing. Unless Australia and New Zealand adapt to these changing strategic circumstances, the authors argue they will lose influence in the region to external players.
  • A recent documentary Haka and Guitars examines the role of Maori culture in the peace process on Bougainville.
  • A 12-year-old Samoan, Lupe Va’ai, has become a published author, recently travelling to London to launch her book The Voice of an Island, which examines the impact humans have on the environment.
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The recent DNC hack, which led to the leaking of emails purporting to show favouritism towards Hillary Clinton over Bernie Sanders, is another example of the arms race moving into cyberspace. It has also sparked a frenzied hunt for the perpetrator, with Russia the most logical candidate. Undermining Clinton’s bid for the White House — or so the story goes — will assist Donald Trump, who is more likely to be sympathetic to Russian interests.

There are a number of reasons why this story is significant, although the ability of states, groups and individuals to steal and leak sensitive electronic information isn’t one of them. Rather, it’s the implications or effects of those capabilities that matter. Cyber-security was recognised as a major threat long before Wikileaks. But the digital era means that the overall challenges faced by security professionals, industry and individual citizens are now indivisible, even if the types of risks might differ. In other words, what can be personally damaging can also be politically damaging, and damaging to national security as well.

A more immediate question, though, is what Putin stands to gain from a Trump presidency. Here we might identify a variety of answers. Some of them are quite reasonable. Others remain possible, but are more speculative.

The first has to do with Russia’s geopolitical and geo-economic interests. During the Cold War, both Ronald Reagan and Margaret Thatcher saw in Mikhail Gorbachev someone the West could do business with. Putin has a similar perspective on Trump. The Republican presidential nominee is not Putin's ally by any means, but he is a populist who has risen at a time when Russia needs to break out of its (largely self-imposed) isolation. Moreover, Trump regularly pays Putin personal compliments, and has stated that NATO might not get involved in any potential conflict with Russia over the Baltics.

Trump’s anti-immigration line, his muscular stance on ISIS, and his penchant for ‘simple’ solutions mean Russian audiences find him infinitely easier to relate to than Clinton or Obama. And while much of the Western media focus has been on Trump’s ability to stir up xenophobia, the Trump trade agenda is actually far to the left of the Democrats. A protectionist Trump presidency would seek to reverse the course of global trade liberalisation that has been the centrepiece of US foreign economic policy for decades. And his determination to seek a new deal for US allies, based on the view that if nations want US protection then they should pay for it, would result in hard choices across the global network of American security partners.

In other words, Trump would suit Russian strategic priorities very nicely. He would wind back open markets, which Moscow (and Beijing, for that matter) see as powerful instruments of Western hegemony. He would renegotiate US alliances, weakening them at a time when many analysts argue they need to be strengthened. And he would push a neo-isolationist agenda that would hasten a multipolar global order rather than delay it.

The second theory that links Trump to Putin has to do with his business interests.

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Since he was declared bankrupt, Trump has found it difficult to raise capital, which means that he has been forced to rely heavily on Russian financing. Much of the Trump SoHo development in Manhattan, for instance, was reportedly funded from Russia and Kazakhstan, but Trump’s refusal to release his tax records make establishing a direct link difficult. Carter Page, who is Trump’s main foreign policy advisor, has longstanding career ties to Gazprom. And Trump’s campaign director was previously in charge of communications for Viktor Yanukovych, the pro-Russian Ukrainian President ousted in 2014.

All this is intriguing but, as with many allegations about the conduct of Russian elites, there is no ‘smoking gun’ that tiesTrump directly to the Kremlin. A lack of evidence is also why one cannot take the next step, and claim that Trump’s connections to Russia are so extensive that he is actually a Muscovian (not Manchurian) candidate.

But the fact that such a possibility is even being raised proves how effective it can be to encourage a view that nobody is safe from Russian information operations. This brings us neatly back to cybersecurity and information warfare, which is undeniably a force multiplier in the contemporary security environment.

Russia has invested a great deal of money and thought into exploring how to exploit the blurring of the lines between war and peace. The ‘Gerasimov Doctrine’, penned by Russia’s Chief of General Staff in 2013, set out what Russians have come to see as the precepts for what we have come to call ‘hybrid’ or ‘non-linear’ warfare. One of its key observations is that war cannot be separated neatly into military and non-military domains. As a result, responses to a problem must utilise the full spectrum of a country’s capabilities, through an adaptive approach that relies as much on control of information as raw might.

Igor Panarin, one of Russia’s most influential strategic thinkers, has taken this further to claim that the manipulation and fabrication of information is a vital asset which is cheap, universal, has unlimited range, and can easily cross state borders. This provides the opportunity to engage in social manoevering and lobbying, and even extortion and blackmail. Information, therefore, can be used to do what militaries traditionally did: to perform disruption, deterrence and denial functions. And like the digital equivalent of a drone, it can be used against people in groups, or even singly.

In a sense, information attacks are a darker version of modern smart sanctions, which are a ‘legitimate’ way to target individuals, because they have similar goals: to put pressure on people to change their behaviour. They can also be joined up with other tactics to cause much broader ripple effects, working off the assumption that publics — especially those in the West — are brittle. A state utilising that approach could release compromising information about a person (or even the sniff of it), to cause a scandal that ends a career or splinters a family. It could tacitly aid far-right movements and deepen existing fissures in the EU. It could turn off the power in Ukraine to make people angry — with some of that anger inevitably directed at the government. And it could raise doubt in the integrity of democratic processes in the world’s most powerful liberal state, and even potentially influence the outcome of an election.

The West is understandably reluctant to openly engage in similar behaviour. One of the main constraints of deliberately manipulating information is that it is deceitful and dishonest. It is something that nations never admit to doing, but express outrage about when it is done to them. But perhaps the reverse is also true, in that at least being coy about one’s own capabilities can help prevent a sense of weakness, and limit the fear generated by a public stance that is purely defensive and reactive.

In other words, when it comes to manipulating information, the West can do it too. And an advantage of targeting authoritarian nations is that not much manipulation is really needed. Perhaps it is time to start thinking about making such efforts a little more overt. 

Photo by Adam Berry/Getty Images

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The release of the United Nations’ mid-year report on civilians casualties (CIVCAS) in Afghanistan came two days after ‘the deadliest single incident recorded by the UN in Afghanistan since 2001’. Eighty civilians were killed and as many as 290 injured in a suicide attack on peaceful protesters in Afghanistan’s capital Kabul on 23 July. 

For the first time the UN report, which documents the relentless toll of the conflict on civilians (63,934 CIVCAS — 22,941 deaths and 40,993 — since January 2009) dedicated a section to ISIL Afghanistan/Daesh, which claimed responsibility for the Kabul attack. The UN attributed 122 CIVCAS to Daesh in the first half of 2016 (compared to 13 the year prior). That figure has now increased fourfold. It's clear the group is increasingly a major player in Afghanistan's protracted conflict.

Daesh never set up shop directly in Afghanistan, but, rather, ‘picked’ up groups that broke away from the Taliban after its founder and longstanding leader Mullah Omar was officially confirmed dead. Some of these groups view the Taliban as increasingly under the influence of Pakistan, others prefer to franchise the Daesh brand. There are also reports that many of those fighting for Daesh are not Afghan, but from the Federally Administered Tribal Areas of Pakistan. All this makes it hard to pinpoint the territorial spread of Daesh outside of its stronghold in Afghanistan’s eastern province of Nangarhar, though there are reports it is also operational in Kunar, Logar and Wardak, with activities in Zabul, Northern Afghanistan and, obviously, Kabul.

The fact that the Hazara minority accounts for nearly all those killed and injured in the Kabul attack has prompted some observers to warn of the dangers of a sectarian conflict. In my view, however, we should be careful about fanning the fire of sectarian conflict — unless we wish to advance the political agenda of Daesh. This is not to say there is no element of ethnic targeting. The Hazara are both an ethnic and religious minority and they are indeed Shia and not Sunni Muslim which puts them firmly in Daesh's sights. In the days since the Kabul bombing, a Daesh commnader claimed it was retaliation for the support offered by some members of the Hazara community to the Assad regime in Syria. In addition to this specific attack, the Hazara have been disproportionately affected by seemingly random abductions and killings over the past months. All this said, few things in Afghanistan are simple or clear cut. As the UN report documents, some 51% of all CIVCAS occur in Afghanistan’s Pashtun belt (South, Southeast and Eastern Afghanistan), with 28% in Southern Afghanistan alone, the Taliban’s heartland. Civilian suffering is spread across all ethnicities and creeds.

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It is also true that the Hazara have long been a repressed minority. They were persecuted in the past under the Taliban and many Hazara feel their region has been neglected economically, with relatively few aid dollars finding their way there. After all, Saturday’s demonstration was to express discontent with the Afghan government’s decision to reroute the Turkmenistan-Uzbekistan-Tajikistan-Afghanistan-Pakistan (TUTAP) electricity project from Bamiyan to the Salang routes, with the Hazara region losing out on associated jobs and benefits. Tensions over this project have been simmering all year. Protesters repeatedly interrupted Afghan President Ashraf Ghani’s speech in London on 13 May, following up with a demonstration three days later. Many feared then that something could go wrong at a mass protest with ethnic dimensions.That event passed without incident, making Saturday's attack a shocking contrast.

The Hazara have gained a great deal of political power and integration over the last decade. They are well represented in the current government, including high-ranking positions. President Ghani (a Pashtun) quickly condemned the attack in Kabul and declared a national day of mourning while vowing revenge. These actions reflect a conflict between a heterogeneous Afghan government and an insurgent group that happens to be majority Sunni. Furthermore, the insurgents the government are fighting are increasingly heterogeneous as well. Daesh and the Taliban do not always see eye to eye. There were reports they declared jihad on each other early on, and have since fought for territorial control, especially in Nangarahr. In addition, some Taliban commanders that had joined Daesh were recently reported to have defected back citing ‘ideological rigidity and ultra-violent action’. The Taliban was also quick to deny responsibilities for Saturday’s devastating attack. 

Thus, while sectarian targeting played a role in the Kabul bombing, others factors were also at play. It was an opportunity to create maximum effect (in the form of human suffering) with minimum resources and to prove Daesh is active in Kabul and hence needs to be taken seriously. Which of these three considerations was the most important for Daesh is hard to say. What matters is the attack had its intended effect: it delivered international attention and the group is now considered to be a serious threat in Afghanistan.

In light of the above, in a country where the conflict — and allegiances — have always been rather fluid, with opportunism and pragmatism frequently prevailing over firm convictions, and where every ethnic group has been victim and perpetrator at some point in time, one should be careful before attributing too much solely to sectarian conflict. It is very valid to cry out against an attack on a civilian demonstration, and the targeting of minorities, but as the Afghan government has proven, such an event can equally become an opportunity to demonstrate solidarity between the different ethnic groups, rather than emphasise difference. The Afghan government responded maturely by condemning the attack, and so did many Afghans regardless of ethnicity and creed. Similarly, the beheading of ethnic Hazara by Daesh in November last year caused public uproar and led to a demonstration where Hazara were joined by others in the public condemnation. Speaking of sectarian conflict ultimately gives Daesh what it seeks by indirectly empowering the group and its agenda.

Photo by Haroon Sabawoon/Anadolu Agency/Getty Images

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Last week, Prime Minister Malcolm Turnbull announced that Julie Bishop will remain as Australia’s foreign minister and that Frances Adamson, an experienced diplomat, will start a five-year stint as the secretary of the Department of Foreign Affairs and Trade (DFAT).

Boeng kak community activists call for the release of workers of Cambodian human rights NGO ADHOC (Photo: Getty Images)

Adamson takes over the department as the world faces tumultuous times. Extremist attacks, long regular occurrences in Kabul and Bagdad, are becoming frequent in Europe too. The European Union is losing a key member, putting European unity to the test. Far-right politicians are gaining ground with populist xenophobic policies. Tens of millions of people are fleeing war, discrimination, oppression and violence.

In such troubled times, many are quick to turn their focus away from human rights protections. But in difficult times, it is even more important that Australia recommits to prioritising human rights in its foreign policy.

Why? Not just because 'it is the right thing to do,' but because Australia’s long term economic and security interests are best served in a neighborhood that respects rights and the rule of law.

Here are five areas that Foreign Minister Bishop and Secretary Adamson should consider to improve human rights in Australia’s foreign policy.

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1. Annual reporting on human rights

First, DFAT should issue an annual public report on human rights concerns in specific countries. Countries such as Sweden, the UK, and US already do this. Such reports demonstrate to the governments concerned that Australia is closely monitoring human rights developments, and set a logical and consistent agenda of issues for diplomats and visiting delegations to raise. Public reports are good for transparency and serve to inform the Australian public about human rights concerns abroad. Annual reporting would help produce a more consistent, coherent approach to human rights around the world, train young diplomats about the importance of human rights issues, and send a strong signal to embassies about the value of human rights in diplomacy.

2. Working to end the death penalty in Asia

Second, DFAT should develop a detailed strategy to end the use of the death penalty in Asia. This is in line with recommendations from the parliamentary Joint Standing Committee on Foreign Affairs, Defence and Trade, which called on DFAT to coordinate 'a whole-of-government strategy for the abolition of the death penalty which has as its focus, countries of the Indo-Pacific and the United States of America.' A public report, measuring progress would be a valuable contribution, especially at a time when the death penalty is having a resurgence in the Asia region.

3. Choose our friends carefully

Third, DFAT should introduce a stronger system for vetting foreign officials and security forces of governments receiving Australian security assistance. Those implicated in serious abuses should be denied visits or training in Australia. Foreign relations necessitates exchanges with unsavory individuals, but Australia should be careful not to send the wrong message by rolling out the red carpet and appearing indifferent to the abuses of foreign officials. This year alone, visits by Ethiopian and Cambodian delegations to Australia have included officials with troubling rights records. When meeting officials from countries with poor human rights records, the Australian government should raise their concerns both publicly and privately.

4. Making existing dialogues more effective

Fourth, DFAT should make its regular regional human rights dialogues with China, Laos, and Vietnam more effective by increasing transparency, civil society participation, and setting clear benchmarks for improvements on rights. The impact of these dialogues has already been the subject of a parliamentary inquiry. The current ‘closed door’ discussions could have real benefit if civil society groups in-country and victims of abuses were able to contribute to the discussions and know what was discussed. Visiting Australian delegations should request to visit political prisoners, speak to families of such prisoners, and following the dialogue, issue a detailed public statement outlining issues of concern and what commitments have been agreed to.

5. Sign up to Safe Schools

Fifth, Australia should sign the global Safe Schools Declaration, which urges militaries and armed groups to avoid using schools in the course of military operations and to protect students, teachers and schools from attack. Some 54 countries have joined the declaration to date. Australia has not. As a country that values education for all and prioritises education as part of its development aid to other nations, Australia should commit to signing this declaration.

Will other countries in the region even listen to Australia on human rights, given Australia’s own questionable rights record?

There is no doubt that Australia’s credibility as a human rights leader has been seriously damaged by its treatment of refugees and asylum seekers, especially those who are offshore. More than three years since the Australian government reintroduced this policy, at least 2000 people have been stuck in legal limbo in Manus, Papua New Guinea and on Nauru—hundreds on Nauru still live in moldy tents. More than 800 on Manus remain in a detention centre despite a court ruling that their detention is illegal.

Instead of forcibly moving people offshore, Australia should do its fair share to respect the institution of asylum; while cleaning up its act with respect to asylum seekers arriving by boat. DFAT should work with its Asia-Pacific neighbors for a regional solution that protects the rights of migrants, asylum seekers and refugees: so that people can find safety in transit countries, and are able to earn a living, their children able to attend school, and live free from detention while awaiting resettlement to third countries, including Australia. And offshore processing has to be dismantled once and for all.

In the lead-up to the election, the Turnbull campaign team claimed 'the Turnbull Coalition Government has a strong record of respecting human rights worldwide. This reflects our underlying values and our commitment to promoting and protecting human rights internationally.' Let’s put that commitment to the test.

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US presidential race 2016

On 14 June the Washington Post reported a security breach of the Democratic National Committee's computer network. Citing committee officials and security experts, reporter Ellen Nakashima wrote Russian government hackers were responsible, specifically two groups known as Cozy Bear and Fancy Bear. It was a sophisticated attack, Nakashima concluded:

The depth of the penetration reflects the skill and determination of the United States’ top cyber-adversary as Russia goes after strategic targets, from the White House and State Department to political campaign organizations.

Nakashima quoted Shawn Henry, president of CrowdStrike, the cyber firm called in to handle the DNC breach and a former head of the FBI’s cyber division. He said it was extremely difficult for a civilian organisation to protect itself from 'a skilled and determined state such as Russia'.

A day after this report appeared, CrowdStrike co-founder Dmitri Alperovitch said in a blog post that the firm remained convinced the breach was the work of Cozy Bear and Fancy Bear, even after a  blog post to a WordPress site, authored by an individual using the moniker Guccifer 2.0, claimed credit. Alpervovich said of Cozy Bear and Fancy Bear:

We’ve had lots of experience with both of these actors attempting to target our customers in the past and know them well. In fact, our team considers them some of the best adversaries out of all the numerous nation-state, criminal and hacktivist/terrorist groups we encounter on a daily basis. Their tradecraft is superb, operational security second to none and the extensive usage of ‘living-off-the-land’ techniques enables them to easily bypass many security solutions they encounter.

Then, late last week, came the release by WikiLeaks  of thousands of emails from the DNC that were guaranteed to stir up already riled Bernie Sanders fans gathered in Philadelphia for the Democratic National Convention. Who was responsible this time?

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This comprehensive account at the Vice Media Motherboard blog suggested the forensic evidence linking the DNC network breach to Russian operations was 'very strong', noting that two other cybersecurity companies had confirmed CrowdStrike’s findings.

Motherboard also made contact with Guccifer 2.0 and concluded that the team at work behind the persona is indeed the WikiLeaks conduit and the link back to Russian operators is real. Writer and cyber security expert Thomas Rid finished the post thus:

It is time for the United States (and the United Kingdom) to pull their weight: by publishing more evidence, by signalling political consequences for the perpetrators, by treating Wikileaks as a legitimate counter-intelligence target, and by providing not only physical but also improved digital security to candidates and campaigns in the future.

Many commentators took the link from the hackers to the Putin government as a given. Here's Fred Kaplan writing in Slate:

It’s nothing new that the Russian government has hacked into the Democratic National Committee’s email. What is new—and alarming—is that it seems to have leaked the files in an attempt to influence an American presidential election...

No doubt the Russians have also hacked the Republican National Committee’s emails, which almost certainly contain critical missives about Donald Trump that would embarrass the GOP and its candidate today. But no one has leaked those memos to WikiLeaks.

Others are not so certain it was the Russians. Another cybersleuth, Jeffrey Carr, painstakingly combed through the analysis and concluded CrowdStrike's identification was based on some 'seemingly crasy assumptions'.

Attribution is hard enough without cybersecurity companies picking the evidence they need to support the conclusion that they want with threat actor models that are completely devoid of common sense. We can do better.

On the Techdirt blog, Mike Masnick had this to say:

Of course, who did the hack and got the info is absolutely a news story. But it's an entirely separate one from whether or not the leaked emails contain anything useful or newsworthy. And yet, because this is the peak of political silly season, some are freaking out and claiming that anyone reporting on these emails "has been played" by Putin and Russia. Leaving aside the fact that people like to claim that Russia's behind all sorts of politicians that some don't like, that should be entirely unrelated to whether or not the story is worth covering.

Certainly Bernie Sanders fans weren't phased at all by the Russian connection. As far as they were concerned, the story was the emails, not who handed them over to Wikileaks. They felt vindicated, and really, really angry. Just as they had suspected, the party's national committee had actively plotted against their man. Already convinced they had been robbed after months of feeling the Bern, they were in no mood to look the other way.

It's too early to say what note this Convention will end on, and how it will reverberate over the next few months. But it's fair to say it was a horrible start. And you can't blame Putin for that.   

Photo by Joe Raedle/Getty Images

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Another G20 meeting has come and gone. At the conclusion of their two-day gathering in Chengdu, finance ministers and central bank governors sent a signal that they remain firmly focused on monitoring emerging economic events. Once again, though, the G20 can be accused of kicking the can down the road and disappointing the many who have called for governments to be more active in addressing economic vulnerabilities and risks.

Ministers and governors talked about a range of emerging economic, political and financial risks. The Wall Street Journal's Mark Magnier and Ian Talley listed these as Brexit, Turkey's attempted coup, terror attacks, global growth downgrades, a potential Italian banking crisis, Chinese currency policy and commodity price uncertainty.


Notwithstanding these risks, headline G20 rhetoric on macroeconomic policy has hardly moved in the past six months, and was a reiteration of pledges to use all of fiscal, monetary and structural policy tools, and that monetary policy can't do the heavy lifting alone.

The signal we are meant to take away is that Brexit and other recent risks are not global problems the world needs to worry about, and that the global financial system has proven robust. Instead of knee-jerk policy responses, then, what is needed is a calm, steady, hand to finish the job on implementing agreed reforms.

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As a result, the communique focused on the familiar mix of jargon and indicated some promising technical progress in areas such as tax, financial regulation, structural reform and capital flows.

In understanding the G20's stance, the advice provided by key international organisations is telling. In one corner, the IMF wants countries to embrace a comprehensive, positive, proactive agenda. Ahead of the meeting the IMF repeated its calls for more political leadership. IMF managing director Christine Lagarde called for broad-based policy efforts to lift global growth, reduce uncertainty around Brexit, implement effective macroeconomic support, address debt overhangs, lift growth and make that growth more inclusive, and strengthen multilateral action, including on trade.

At the same time, Financial Stability Board  chair Mark Carney pointed out that the global economy and financial system has now weathered two spikes in uncertainty and risk aversion so far this year. In both cases, the global financial system continues to function and the financial system dampened, rather than amplified, the shock.

Moreover, the direct economic consequences appear largely confined to the UK and EU, and the FSB's assessment is backed up by both the Bank of England and the European Central Bank deciding not to adjust interest rates or amended their non-standard monetary policy settings in response to Brexit. Partly the decision has been based on more mild direct economic consequences than predicted.

The Chengdu communiqué leans closer to the FSB's confident handling of past events than the IMF's calls for more ambition and urgency against future ones. It seems that finance ministers and central bank governors are hoping for the 'muddle through' path and putting their faith in the financial and economic systems proving equally resilient to future shocks.

Time will tell how effectively the world can indeed muddle through. There is immense technical expertise available to inform the G20's decisions, and their read on the global economy and future risks may ultimately justify the lack of urgency expressed in Chengdu. As Martin Wolf noted at the start of the year, there remains lots of ruin in the economy; what matters is not whether the economy is well-managed but whether a calamity will be avoided.

But it is a dangerous game. As long as growth remains low, unemployment high, and there is a lack of sense that inequality is being addressed, risks will continue to mount and populations will remain dissatisfied.

And by the time the next crisis comes, the job of crisis responders may prove far harder than in 2009. Finance ministers and central bank governors are leaving the door wide open for anti-globalisation sentiment to keep proliferating. It adds to doubts over how constrained 'all the tools available' are in a world of disaffected voters, heightened sovereign debt levels and already-accommodative monetary policy settings.

In the words of Centre for International Governance Innovation distinguished fellow Tom Bernes, the idea that Brexit isn't such a bad gamble sounds very much like the sort of logic that you would expect to hear from a guy falling from a 70-story building as he passes the 50th floor, seemingly oblivious to his fate. As we learnt from the financial crisis, economists don't necessarily notice the breeze blowing around them.

Photo: Getty Images/Pool

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First-time director Natalie Portman also stars in this adaptation of Israeli novelist Amos Oz's memoir. According to IMDB, the film is 'A story about the childhood of Oz in Jerusalem and his youth in the Kibbutz during the British Mandate and the first days of the state of Israel. The plot describes the relationship between young Oz to his mother and his first steps as a writer.'

A Tale of Love and Darkness is about to be released in the US (I just discovered it via the US site SlashFilm), though it seems to have debuted in Australia late last year.

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Over the weekend Bill Shorten, leader of the opposition, announced a fairly major reshuffle of the Labor shadow ministry. Tanya Plibersek has left foreign affairs for the domestic battleground that is education; Senator Penny Wong (formerly of the trade and investment shadow ministry) will take her place.

Having such an effective retail politician as Plibersek in a shadow ministry far removed from the concerns of general public resulted in a sort of zero-sum game between Plibersek's domestic and foreign policy priorities (see, for example, this election-era Plibersek profile with absolutely zero discussion of the foreign policy differences between Labor and the Coalition).

As Kevin Rudd's climate change minister, Wong developed the emissions trading scheme that never was (in 2009, nine months before the Copenhagen UN conference, Wong addressed the Lowy Institute on Australia's contribution to international action climate change), and then as Labor's finance attack dog and Labor senate leader, became famous for her grillings in Senate Estimates. But what do we know about her foreign policy?

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Wong leans more towards the Plibersek approach on the South China Sea than the Stephen Conroy approach. Her position on the the US alliance is slightly more opaque (is she a Rudd-style realist or a Gillard-style sentimentalist?).

In the run-up to the this year's federal election, Wong was a vocal defender of foreign investment in agriculture. In an address to the Global Food Forum earlier this year, she argued that:

There is no credible evidence that Australia faces a food security crisis due to foreign investment in agriculture. What we do face is a shortage of the domestic capital we need to expand our agricultural sector so it can take advantage of future opportunities – opportunities that will deliver economic benefits both to our farmers and to the wider Australian community.

Her tone was sharply different to both Shorten's (who said he was 'uneasy' about 'putting everything up on the market to sell everything') and the general Australian public, 87% of whom oppose the Australian government allowing foreign companies to buy Australian farmland (a number some Coalition parliamentarians are leaning on to justify their position).

In reference to the Trans-Pacific Partnership, Wong has said the TPP 'has the potential to increase Australian market access for our goods and services exports which, in turn, will benefit the local economy and create jobs', but is suspect of investor-state dispute settlement (ISDS) clauses in free trade agreements:

I don't see in a nation like Australia what the public policy or economic benefit is to having a private arbitration system that operates both separately to, and in some instances above, domestic law...having said that I think the reality is — and Labor has said if we were in government we would not include them … — the reality is that they are already part of a great many agreements...certainly, were we to be elected I think one of the things you would need to do, apart from thinking about future agreements, is to do what we could to add Australia's voice to reform of ISDS.

In her first speech in the Senate in 2002, Wong accused then-Prime Minister John Howard of divisive rhetoric on asylum seekers ('Of course we decide who comes to our country…so why say it?'). In 2012, Wong argued for a Labor bill which would allow for the reopening of the detention centre on Nauru and the implementation of the 'Malaysia Solution', an ultimately- doomed effort to seal a refugee-asylum seeker swap deal with Malaysia:

What we collectively face as a nation and as a parliament is an enormously complex policy challenge, an enormously complex policy problem, which is not cured by sound bites or three-word grabs, a policy problem the world is grappling with and that involves millions of people seeking a better life in a different country. I do not stand in this chamber saying that I believe this bill is necessarily the complete answer, but I do know this: it is the only answer before us.

After opposing boat turn-backs as official policy for a number of years, Shorten moved to include them in Labor's asylum seeker policy at the 2015 Labor national conference. Through a proxy, Wong (along with Plibersek and number of other prominent Labor Left members) voted for an amendment excluding turn-backs, which ultimately failed.

As a South Australian politician, Wong is unsurprisingly supportive of local Navy ship construction. Wong cites pressure from Labor (along with the South Australian community) as the primary reason for the Coalition deciding to construct 12 new submarines locally (instead of purchased 'off-the -shelf' internationally), but the newly emerged Nick Xenophon Team no doubt deserves some credit as well.

On the more insubstantial side of politics, Wong's most famous interaction with the Department of Foreign Affairs to date is undoubtedly her late 2015 interrogation of then-DFAT Secretary Peter Varghese over Foreign Minister Julie Bishop's use of emoji. Wong asked Varghese to explain what Bishop meant when, in an interview with BuzzFeed, Bishop described Vladimir Putin with a 'red face emoji'.

The line of questioning appears to have had no real effect on Bishop (she later contended that Putin would 'be delighted' with the 'red face emoji' description), but as a publicity stunt the exchange was so absurd it made it into the New York Times, a rare achievement for Australian Senate committees.

Earlier this year, Wong was again grilling Varghese in estimates, but this time on the purchasing of three beanbags at a cost of $590 each for InnovationXchange, a DFAT initiative started under Bishop's tenure. Varghese argued that the three beanbags were actually cheaper than a three-seater couch. This response was evidently inadequate; during the election, Labor announced that if elected it would abolish InnovationXchange, referring to the $140 million program as 'focused on purchasing bean bags'.

Photo: Getty Images/Lisa Maree Williams

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Many political pundits see widening income disparities as the key factor in the Brexit vote and associate these with a single cause — globalisation. There is no doubting that income distribution within individual countries has become more unequal in recent decades, but is globalisation the main culprit?

Thomas Piketty’s heavy-weight tome Capital in the Twenty-first Century had astonishing success because it rode the zeitgeist: everyone could see that those at the top of the pile were minting it — and flaunting it.  Piketty just gave chapter and verse to confirm this. But Piketty didn’t lay the blame on globalisation: his main cause was the patrimonial society, and if anything, globalisation should expose the fat cats to more competition.

The latest offering in the ongoing income-disparity debate is from the always-thoughtful McKinsey Global Institute: ‘Poorer than their parents? A new perspective on income inequality’. Whereas Piketty focused on the very top of the income pyramid, McKinsey looks at what has happened to the whole spectrum, income-group by income-group. In the six advanced countries studied in detail, two-thirds of income-groups had no increase in income during the decade 2005-2014. This is not quite the same as saying that individuals had no increase, because some people shifted between income-groups. But the message is clear: stagnant incomes were not confined to the poorest segment of society: middle-income groups also did badly.

The punch line is that this is the new normal. Gone are the days when just about everyone would be better off than their parents, with the promise of similar advances for their children. In the previous decade, almost all groups became better off.

The social implications are obvious. Social cohesion is much easier if people feel that things are getting better and, whatever life’s struggles, their children will be better off. This promise is now in question. This, surely, is a big part of the explanation for the Brexit discontent: anti-immigration was just the human manifestation. But what role did globalisation play?

This stagnation in low/middle incomes is, in itself, not a new story, but McKinsey disaggregates the generality to explain what happened, perhaps identifying the part played by globalisation.

First thing to note: there are big differences between countries. This is crucial: the dismal general picture may not be so inevitable if some countries have done much better than others. Almost everyone in Italy was in the ‘no better off’ group, while in Sweden only around 20% were in this category.

So why did some countries do better than others?

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The first clue is in the 2008 global financial crisis and its aftermath. All the countries studied had a recession and a slow recovery, but some handled this better than others. Italian GDP is now 8% lower than before the crisis. No surprise, then, that almost no-one in Italy is better off. Sweden instituted active policies to keep employment from falling after the crisis and avoided fiscal austerity and its GDP rose 15% over the decade, so there was a bigger GDP pie to go around.

Thus the first requirement in avoiding the bleak future foreseen by McKinsey is to dodge a recession and, if you have one, implement active policies to speed the recovery. Nothing very new here, but this provides half the explanation without mention of the current bête noir of ‘globalisation’.

Feeble GDP recovery, however, was not the only factor. Keeping with the comparison of Italy and Sweden, both had serious adverse demographic changes (fewer people of working age). Again, it’s hard to blame globalisation for this. But it’s also harder to correct through macro-policy, so the gloomy prognosis stands for countries with substantial population ageing and no political support for immigration. Sweden’s preparedness to accept refugee immigration will help it here.

In just about all countries the distributional problems were made more serious by structural changes which began much earlier. Wage-earners share of GDP has fallen by around 10 percentage points over the past 25 years. In the US, the fall in the wage share is about the same as the OECD average, but has been much sharper since around 2000.  In addition, prime-age men dropped out of the labour force.

Globalisation must explain some of this. China has become ‘manufacturer to the world’, displacing conventional manufacturing in advanced economies, and the well-paid, secure jobs it involved. McKinsey notes that between 1980 and 2010, competition for low- and medium-skill jobs became global, with 85 million workers in emerging economies joining the labour force in export-related activities. Global competition undercut labour’s bargaining position and diminished the opportunity for industry ‘rent seeking’ in protected industries, which had often benefited unionised labour. Union membership fell just about everywhere.

But globalisation was not the only factor in the diminished wage share. The International Labour Office cites ‘financialisation’ as being at least as important — ‘sharp-pencil’ managerial pressures for greater productivity which weakened labour’s bargaining position. Globalisation might have put extra pressure on management for efficiency gains, but much of this pressure originated elsewhere, particularly from stronger shareholder pressure and economy-wide deregulation.

Earlier analysis had explained the falling wage share largely in terms of technological progress (smarter ways of doing things, with more sophisticated tools: robots replaced humans). The ILO gives this lower importance although the anecdotal evidence is compelling. Germany has retained a big manufacturing sector, but employment in manufacturing has fallen nearly as much as elsewhere. In any case, labour-shedding technological advance would have occurred even without globalisation.

The nature of production changed, with more low-income services, typically creating low-paid part-time jobs. So too investment changed, with Google and Facebook requiring little in the way of big factories with blue-clad workers bent over their machines. Whatever ill effect these seismic changes had on the demand for unskilled labour, it’s hard to blame globalisation.

In short, globalisation was not by any means the only factor, although it played an important role. The standard response is that more must be done to help those left behind. The McKinsey report fills in some important detail here. It may not be too surprising to learn that  tax/transfer policies helped overall income distribution in Sweden during this slow-growth period (so that almost no-one was worse off), but such policies did just as much in the US (e.g. through extension of unemployment benefit eligibility). Before taxes and transfers, 80% of the income-groups had no increase in income, but after tax and transfers, this fell to 20%. Thus redistributive measures have been important in softening the greater income disparity, even in free-market America.

So what are the lessons?

First, don’t have a financial crisis. The optimistic interpretation of this period is that the crisis was the result of clearly identifiable mistakes (inadequate prudential supervision of finance which allowed an asset bubble to form in fragile and overextended financial sectors in the main advanced economies). Competent policy would avoid repeating these mistakes.

Second, use active counter-cyclical polices when necessary. The crisis-affected economies had a pathetically weak recovery, exacerbated in 2010 in Europe by the secondary crisis in the peripheral countries, whose debt problems reflected policy failure.

Third, GDP growth is needed if aspirations are to be met. Abandoning the huge benefits that globalisation has brought would be throwing out the baby with the bathwater. It’s hardly surprising that everyone understands that post-Brexit, the UK will still be a great outward-looking trading nation, because there is no sensible alternative. No-one is suggesting putting the Yorkshire journeymen back behind their hand-looms. But if the Trans Pacific Partnership is any indication, globalisation is under pressure in America.

There are lessons, too, about the best ways to soften the impact of globalisation (and technology). Tax/transfers are clearly part of the story, but there are limits to how far this can be pushed without distorting incentives. Mendicants don’t generally enjoy their status.  Better to find employment for those left behind, even subsidising this through negative income-tax. Industry policy may be making a comeback (see speeches by the new UK PM),   but governments have a bad record at picking winners, and the incentives need to be general rather than project-specific (the dead-end nature of our submarine project provides an example of what to avoid). Education is the key to offering life-enhancing progress up the ladder.

When there is enough perspective to evaluate Brexit objectively, it will be judged to have been a failure of politics to play its core role in reconciling different views — a triumph of emotion over rationality. And the nefarious side of globalisation will be seen as a minor blemish. Good policy can still deliver the social glue of equitable outcomes.

Photo courtesy of Flickr user Philipp Lücke

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Mohammed — not his real name — is a Syrian opposed to Syrian President Bashar Assad. In 2013, he fled to Turkey with his young family. A little over a week ago, he among the first out in Istanbul streets, waving the Turkish flag in support of President Recep Erdogan in the wake of the failed  coup.

Mohammed sent me a video of his young son, draped in the red crescent of the Turkish flag, among the tens of thousands who responded to Erdogan's call for mass mobilisation by his supporters against the short-lived coup.

Since then, Erdogan’s efforts to cleanse the country of what he has described as 'cancerous institutions' of the conspirators, including mass arrests of up to 50,000, have made the West nervous.

Do we look the other way as Erdogan talks about re-introducing the death penalty, as thousands of military men disappear, only to be seen half-naked and cuffed in state released photographs in a basketball court? As upwards of 1600 educators are sacked, academics are banned from leaving the country, and journalists are rounded up?

Fears of the President’s increasingly autocratic and dictatorial ways, his persecution of journalists, and reported mass human rights violations against the Kurds are uncomfortable truths about a NATO ally. Turkey is, after all, home to the largest air base from which the US is launching its air offensive against ISIS in the north of Iraq and Syria. It is also critical to Europe’s response to the refugee crisis; a recently agreed deal with Europe to try to stem the flow of Syrian refugees to Europe by offering incentives for them to stay in Turkey has been credited with lowering the migrant death toll on the Aegean sea. 

Erdogan would also appear to be an unlikely hero for the largely Sunni Syrian opponents to Assad, who only five years ago rallied against the same kind of undemocratic leadership.

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When I suggest this to Mohammed, his answer is straightforward and persuasive.

'We are scared. That’s all there is to it'.

The truth is, for all its problems, Turkey has been a safe haven for Syrians. Of the six million Syrian refugees now outside their country, some 2.7 million have made Turkey home. Turkey has given them limited work visas, opened Arabic schools, and recently raised the possibility of  citizenship.

If the coup had succeeded, Syrians fear they would have become the chief target of military secularists, and once again, they would have found themselves unwelcome. These are not idle fears; when Erdogan floated the idea of Syrian citizenship, 'I don’t want Syrians in my country', trended on Twitter. The Istanbul airport attack last month was largely seen as a result of Turkey’s position on Syria. Many even believe his pro-Islamic position and Anti-Assad stance were what spurred the putschists in the first place.

'We all remember Egypt', said another Syrian, Tarek, who lives in Istanbul, referring to the 2013 military counter-revolution which spurred a massive backlash against Syrians who had taken refuge in that country.

'If there was a secular coup here — where would we go?'

But another Syrian I spoke to was concerned the West’s response to Erdogan’s crackdown could also spell trouble.  Should the EU decide to discipline Erdogan by taking the EU visa deal off the table, Turkey may be inclined to send more Syrians their way.

'I worry we are going to see a lot of Syrians take the boats again and the deaths will start again', this refugee told me.

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Are the Blue Dog Democrats to blame for US inaction on the Trans-Pacific Partnership trade agreement?

Well, at least partially. 

With the World Trade Organization stalling, regional agreements like the TPP are the next best option for making international trade easier and cheaper. And with trade growth slowing they are more important than ever. When the negotiations were launched in Melbourne six years ago it seemed reasonable that a handful of moderate Congressional Democrats would eventually join a Republican majority to pass the TPP, as they’d done with other US trade deals. 

But the one thing Democrats and Republicans currently seem to be able to agree on is their mutual distaste for the TPP, which means getting the deal through Congress will be tough. That has the rest of the TPP countries in limbo because negotiators from the 12 countries had effectively agreed that the agreement could not come into force without US participation. 

How did it come to this?

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Democratic political opposition to trade deals isn’t new, particularly during presidential elections. Democrats have traditionally courted the support of labour unions like the AFL-CIO and have long argued that free trade hurts the American working class by sending jobs overseas.

But the White House and Congressional Republicans have always been able to count on a small but important minority of Congressional Democrats to help free trade agreements (FTAs) across the line. This Democratic contingent was led by the Blue Dogs (moderate Democrats who supported federal fiscal restraint and were hawkish on national security). They also supported free trade as a tool to spur on US economic growth and private sector growth job creation. In 1993 when Bill Clinton was trying to secure Congressional ratification of the North American Free Trade Agreement (NAFTA), the Blue Dogs helped to lead the charge. A whopping 40% of House Democrats ultimately supported NAFTA. 

But election losses and retirements have diminished the Blue Dogs — there are now only 14 members of the coalition left — weakening Democratic backing for trade agreements. Indeed, compared to NAFTA, only 15% of House Democrats voted for Trade Promotion Authority last year, the legislation which simplifies the US process for agreeing to trade deals. 

Meanwhile, the changed American political landscape which has put the Blue Dogs under pressure has also thrown into doubt the GOP’s status as the undeniable party of free trade. Some Republican senators have come out against the TPP because they worry it doesn’t go far enough to help big American business. Others agree with the sentiment that trade deals hurt American jobs. These are the same Republicans who now see the working-class white men who soured on free trade after the Global Financial Crisis as their key constituency. 

The result is a gloomy outlook for the TPP getting through Congress. But there’s at least a glimmer of hope.

Like China bashing, anti-trade rhetoric is typical during US presidential campaigns. During his 2008 presidential campaign, Barack Obama criticised NAFTA and US free trade agreements with South Korea, Colombia, and Central America, only to champion them once in office. 

If the TPP isn’t passed under Obama, it’s possible the next president could execute a similar pivot. That’s because while US anti-trade groups have been organised and vocal, polling by the Pew Research Centre last year showed that 68% of Americans agreed that boosting trade and business ties between the US and other countries is a good thing for their country.

What’s more, Pew polling of registered American voters in March of this year shows that Democratic voters are now actually far more supportive of free trade agreements than Republicans (56% to 38%), breaking the previous Democrat anti-trade mould. And Clinton supporters have the most positive view of FTAs, giving her the easier path to push the TPP through, despite her endorsement by major US trade unions: 58% of her supporters say FTAs have been a good thing for the US, compared to only 27% of Donald Trump supporters. 

But voters have mixed views on the impact of FTAs on their personal lives. Fewer than one in five Americans think that free trade agreements create jobs and higher wages, and 36% say that FTAs have hurt their financial situation. Key to US ratification of the TPP will be addressing head-on the sense that trade has been good for business, but that the benefits have not been felt by all.

Without the Blue Dogs around to help, this will be a tough (but not impossible) task. 

Photo: Flickr/US Capitol Building

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Money stolen from the troubled Malaysian state fund 1MDB was laundered in jaw-dropping ways: multi-million dollar real estate in Manhattan, Beverly Hills and London; art worth US$130 million; and funding for Hollywood movie The Wolf of Wall Street, among others

The US Department of Justice (DOJ) is trying to seize US$1 billion in assets traced to 1MDB, its largest ever such endeavour.

Malaysia’s Prime Minister Najib Razak is the chief of 1MDB’s advisory board as well as the country’s finance minister, and the scandal surrounding the fund hangs heavily upon him.

As the allegations pile up, Najib has defied gravity, even strengthening his position domestically by removing opponents at key state institutions like the Attorney General’s Office and the Central Bank, and clamping down on critics in the media.

Najib has persistently denied any wrongdoing, stating he did not take any money for personal gain. He has refused to resign, claiming the allegations are a political plot by adversaries.

Many are now wondering: will the unfolding US investigation bring him down?

It is a natural enough question, given how the 1MDB scandal is impacting on Southeast Asia’s third-biggest economy. Any political instability could also stymie joint efforts by the Muslim country and US and Australia to fight terrorism, which analysts fear will be reinvigorated in the region by returning extremists from ISIS-controlled territory.

But those hoping for a swift end to Najib’s rule are likely to be disappointed for three main reasons: the PM's substantial political support; a lack of united opposition; and, finally, some powerful foreign allies.

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1. Political support at home

Firstly, Najib commands solid support from his political party, United Malays National Organisation (UMNO), and has flushed out all dissenters.

UMNO’s Supreme Council, the most important party organ, threw its support behind the party leader soon after the DOJ announcement, warning others 'not (to) make any conclusion because no one can be said to be guilty until proven in the court'.

Last month it sacked prominent party members critical of Najib, including former deputy Prime Minister Muhyiddin Yassin and MP Mukhriz Mahathir, eldest son of Malaysia’s longest serving prime minister Mahathir Mohamad

'This move (by the DOJ) will not dent his position because he is strong domestically and his party members fall in line. They are beholden to him,' said one source in the government’s inner circle who declined to be named.

2. No united opposition

Najib's political foes are weakened and the opposition parties fragmented.

An early supporter of Mr Najib, Dr Mahathir now leads the charge to bring him down. But the 91-year-old, who once wielded considerable political leverage as Malaysia’s longest serving prime minister, now sees his influence waning. The latest indication of this came in May, when Dr Mahathir called for voters in elections in east Malaysia to punish Najib. Instead, the ruling coalition won a bigger-than-expected margin. 

'It also reflects the reality that many rural voters — who make up the majority of the population in some states — do not relate to 1MDB; they have no idea what it is and why it matters because all they see is that the ruling coalition has provided them with the basics,' said a Kuala Lumpur management consultant, also speaking on condition of anonymity.

Meanwhile, the opposition coalition is in disarray after leader Anwar Ibrahim was jailed last February for the second time in his career on a sodomy charge many believe was politically motivated. His once-powerful opposition alliance fell apart after rejecting the plans of the conservative Pan-Malaysian Islamic Party to enforce Islamic law in the state it rules.

Another alliance member, Democratic Action Party, is in full damage-control mode after the arrest of its secretary-general Lim Guan Eng on allegations of corruption. 

3. Foreign friends

Finally, Najib still has the support of foreign allies, like Saudi Arabia.

The Malaysian attorney-general claimed that funds deposited into the PM’s bank accounts were a 'personal donation' from the Saudi royal family. 

US-Malaysia relations initially blossomed under Najib as he forged a closer friendship with his American counterpart, President Barack Obama, who became his golf buddy. The US needs regional support to combat extremism and mitigate the rise of an ever more aggressive China. It sees Malaysia as a crucial partner on both fronts and Mr Najib’s ouster could undermine what has been a constructive and important relationship.

Malaysia is trying to play the US off against China, which has become an important friend to Najib since this scandal broke. China provided a lifeline to 1MDB when China's state-owned energy company invested in 1MDB’s energy assets worth US$2.3 billion soon after the Chinese Premier promised to help Malaysia overcome its economic woes. 

So, even as his image takes a further hit, Mr Najib’s position looks solid for now.

The 63-year-old son of Malaysia’s second prime minister is renowned for this survival skills.

He pulled through a scandal as defence minister, when two former members of his security detail were jailed for killing a Mongolian model in 2006 and blowing up her body, all amid allegations of dark dealings.

Now his resilience is on display once again. So far Najib has outmanouvered his domestic foes. If the US DOJ were to charge him with a criminal offence, it may finally be enough to bring him down.

But, with much to lose and few credible challengers at home, Najib seems set to hold on.

Photo by Mohd Samsul Mohd Said/Getty Images

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As an analyst of regional security, I spend much time absorbed with the usual suspects; nuclear proliferation, arms modernisation, territorial tensions, plus a panoply of non-state challenges from terrorism, cyber and other domains. While the divisions between state and non-state security concerns are more blurred than they used to be, our assumptions about great-power flashpoints are more or less constant. North Korea, Taiwan, the South and East China Seas exercise a steady hold on our attention. Are there potential triggers to regional conflict entirely out of this analytical comfort zone?

At last week's public event to celebrate the 50th anniversary of the ANU's Strategic and Defence Studies Centre (SDSC), the audience was asked to suggest 'black swan' events with the potential to tip the balance between peace and war in Asia in 2020.

Here's my black swan for what it's worth:

In 2019, a Southeast Asian country (I'm not being deliberately coy, there is more than one candidate) experiences a sharp economic and political crisis, following a deterioration in global conditions. The country has a sizeable, long-established ethnic Chinese minority. From 2017, it received a new wave of skilled permanent residents as managers and entrepreneurs from the People's Republic of China (PRC). This was part of a wider relocation of labour-intensive production out of China, attracted by tax-breaks and other inducements offered by a number of Southeast Asian countries competing for Chinese investment and one-belt one-road initiatives.

Many of the new arrivals are wealthy, conspicuous consumers making them easy targets for resentment in a downturn — just as Japanese citizens were across Southeast Asia in the mid-1970s. The difference in 2019 is that opportunist politicians openly play the race card in ways that had been taboo previously.

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Violent attacks on ethnic Chinese communities spread to PRC expatriate communities, clustered around export processing centres along the coast. Chinese-Singaporean and Taiwanese nationals are also attacked. As police and military units are deployed disproportionately to the capital, law and order quickly breaks down in a number of regional cities.

Commercial flights out of the country are snapped up, and as violence escalates, it becomes clear that an organised evacuation of PRC nationals is necessary. Western embassies are preoccupied evacuating their citizens.

Saturation media coverage in China, reporting lurid details of racial attacks on PRC citizens, feeds a social media clamour for China's authorities to intervene and ensure their citizens' safety. Widespread calls are made to extend China's protection to ethnic Chinese 'compatriots'.

After intense diplomatic pressure, the Southeast Asian country accedes to China's request to facilitate a non-combatant evacuation operation (NEO). In addition to chartered flights from the capital to China, the order is given to dispatch a PLA Navy amphibious group from the South Sea Fleet to carry out an evacuation by sea. The PLA has conducted NEOs in the past, in the Middle East. But never on this scale. A battalion-sized force protection element consisting of Chinese marines and special forces is embarked. Military transport and refueling aircraft are sent ahead to China's installations in the Spratly islands, where PLA combat aircraft already seasonally deploy.

On arrival, Chinese military personnel, with uneasy assistance from local security personnel, establish a defensive perimeter around the port to facilitate the evacuation of Chinese expatriate workers and their families. However, as law and order degenerates elsewhere, local forces are withdrawn, leaving the Chinese contingent to handle security largely unaided. Groups of local ethnic Chinese begin arriving, appealing for protection. As the perimeter is extended, Chinese forces are involved in small-scale clashes to restore law and order. The local mood sours further. Although many evacuees are quickly taken to the main naval force offshore, the distinction between PRC citizens, their dependents and non-Chinese citizens quickly becomes blurred.

As the PLA commander in charge of the operation appeals for reinforcements in order to hold his perimeter against an increasingly hostile population, the Southeast Asian government accuses China of violating its sovereignty, issuing a 48-hour ultimatum to complete its evacuation, return non-PRC citizens and withdraw its forces. Mass demonstrations flood the capital protesting against China's 'invasion'. Nationwide violence intensifies. China's government issues a corresponding warning, demanding that Chinese people's safety be guaranteed and their property respected. Internet outages are reported at key government installations. Chinese combat aircraft begin flying sorties offshore, as a wider mobilisation of forces is detected.

This stab at a black swan is not a prediction of the future. Clearly such a turn of events would not occur within an international vacuum. But nor is it unthinkable. Unlike conventional state-on-state flashpoint scenarios, there would be no 'playbook', or mechanisms to prevent crisis escalation. Moreover, emotions on both sides would be heavily engaged. A non-combat, humanitarian intervention in such circumstances could quickly become charged with strategic overtones.

Fortunately, there has been no major outbreak of violence against any of Southeast Asia's ethnic Chinese populations since the late 1990s. Some have been effectively assimilated. Yet if tensions over the South China Sea continue, the geopolitical risks overhanging the Chinese diaspora are likely to intensify, especially if Beijing pursues a destabilising 'co-ethnic' foreign policy based on appeals to culture and kinship. Equally, Southeast Asian elites must be increasingly alert to the strategic implications of populist politicians resorting to the race card.

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Papua New Guinea’s Peter O’Neill survived last Friday’s vote of no confidence, the first since his turbulent term as prime minister began in 2011. With Parliament to now adjourn until August, O’Neill looks set to remain prime minister until next year’s June election. This would make him only the second prime minister in PNG’s history to serve a full term in office.

A casual observer of Papua New Guinea will note that with 85 members of Parliament voting in support of O’Neill, more than three quarters of the total, he holds a majority that would be the envy of most modern democracies. However, the numbers hide the much more fractured reality of PNG politics. High profile defections, including three former prime ministers, combined with bloody student boycotts and ongoing worker strikes, show the gloss has clearly come off the PM, once heralded as the voice of an emerging generation.

How did it come to this? How did a man who controversially wrested power from founding father Michael Somare in 2011 and then went on to win the largest majority in PNG’s history, marginalising the opposition to only four seats (less than 4% of parliament), find himself in the fight of his political life just three years later?

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For me, it all boils down to two interconnected issues: economic management and corruption.

The state of the economy

When O’Neill came to power, PNG was entering the construction phase of its largest ever natural resource project, a US$19 billion LNG project that was expected to transform the nation's economy. Anticipating a dramatic surge in government revenues once the project came on line, the government made bold expenditure commitments including free education, free healthcare, a massive decentralisation program, and commitments to hosting major events including APEC 2018 in Port Moresby. The promises of PNG’s newfound wealth from the project also emboldened the prime minister to make a dubious deal to acquire a stake in PNG’s largest company. O'Neill thought he could have it all, and had commodity prices remained at historic highs he may well have been proved right. But that’s not the story of PNG’s fourth resource boom.

In previous posts on the Interpreter I have detailed what happened next but, in short, the dramatic fall in commodity prices combined with record deficit spending left the government in an untenable fiscal situation with an overvalued exchange rate putting the private sector under significant strain. Revenue collapsed by 10% in 2015, instead of increasing by 10% as expected, leaving the government scrambling to slash the budget while protecting major expenditure items, resulting in a major shift in expenditure allocations that slashed the budget for essential services.

It is easy to see how all of this could have broken better for the O’Neill government, and the PNG economy was certainly hit by the global downturn at the worst possible time. But the government has not done itself many favours in the way it has responded to its sudden and dramatic reversal of fortune. This has not gone unnoticed.

Corruption

Corruption is often synonymous with development, particularly in natural resource dependent countries like Papua New Guinea that have a strongly entrenched system of cultural patronage. In this context it should not be surprising that corruption is rife in PNG; the nation currently ranks 139th in a list of 163 in the Corruption Perceptions Index. Corruption predated O’Neill’s tenure in PNG and he made bold claims about how his government would stamp it out by establishing and empowering an independent corruption taskforce. The ABC’s recent account of the tragic shooting by police of students boycotting classes recounts how far O’Neill’s stance on corruption has changed as the spotlight was directed towards him.

It’s impossible to say whether corruption has become worse under O’Neill’s leadership, but his active role in the subversion of the independent and police corruption task forces and abuse of the court system has created a perception of impunity in the country’s highest office. Corruption has become the rallying call for broader dissatisfaction at the state of PNG, which goes far beyond the actions of the prime minister.

We’ll never know how different the state of PNG would have been under a Somare (or any other) government emboldened by the natural resource boom. Changing the country’s leader now will also not change the country’s fortunes or necessarily improve adherence to the rule of law. As Bal Kama concluded last week, the important question is not who will be prime minister, but rather who is fit for the office.

Would all of this have been different if services were still flowing and the economy was the darling of Asia, it was expected to be? That is one of the greatest ‘what ifs’ of O’Neill’s first elected term in power.

Where to from here

There is clearly a deep dissatisfaction with how Prime Minister O’Neill has responded to the allegations against him to date, and the energy with which he has disputed these claims has no doubt distracted him from the task of managing PNG’s weakened economic position. But who could have done better? Even after this vote the opposition is still a marginal force in parliament, and no alternative leader has emerged with a platform for change.

Legislation prohibits no confidence votes in the 12 months leading up to an election, so the people and the opposition will no doubt be turning their attention to voting in change at next year’s election. A dissatisfied civil society and disenfranchised student body will help embolden the opposition and perhaps see some new voices emerge in the campaigning to come. But sitting MPs have substantial financial advantages to remaining in power. Money politics will certainly be put to the test, and it will make for an interesting election campaign. Unfortunately, it will also no doubt distract from governing the country. June 2017 looks very far away.

Photo: Mark Schiefelbein / Pool / Getty Images

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