Lowy Institute
Digital Disruption

After a decade of swimming against the tide, the Australian Government is slowly engaging in the world of digital diplomacy.

The term 'DFAT the Dinosaur' no longer applies, a label slapped onto our foreign affairs department in 2010 after a series of public refusals to incorporate the internet into its engagements with the world. This strategy, or lack thereof, was a bizarre own goal.

Rather alarmingly, the Government's extended inertia in this area exposed a lack of understanding of the evolving ways in which states, organisations and individuals use information and communication technology (ICT) tools to engage, coordinate and influence one another in an increasingly crowded environment of international actors.

Today, digital diplomacy is a foreign policy essential. We live in a world where state and non-state entities all compete for influence and power in the same online space. That space now hosts more than 3 billion people, most of whom only access the internet through their mobile phone. When used properly, digital diplomacy is a persuasive and timely supplement to traditional diplomacy that can help a country advance its foreign policy goals, extend international reach, and influence people who will never set foot in any of the world's embassies.

The good news is that DFAT's online reach has grown significantly over the past two years.

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Most major embassies now have a Facebook account and a growing number of ambassadors have an active Twitter presence. Some social media accounts are doing better than others (Ireland needs a little help; Pakistan and Indonesia do not). A number of embassies have piloted small exercises. For example, Australia's High Commission in PNG attempted live topical Q&A sessions. Hashtags like #NewColomboPlan and #innovationXchange are used by the generic @dfat Twitter account to promote initiatives and link stakeholders. Recently, a blog was launched authored by Australia's Ambassador in Germany (in German). Leveraging off the success of 'The Embassy' TV show, online forums were hosted on the Smartraveller Facebook page (there is also a Smartraveller mobile app). DFAT's new consular strategy briefly mentions an intention to improve and expand social media use. 

Social media is a valuable tool the Government should continue to use and expand on to enhance its international footprint. But digital diplomacy is far more than diplomats and embassies communicating via social media. 

The Brits define digital diplomacy as 'solving foreign policy problems using the Internet'. The Americans have coined the term '21st Century Statecraft,' of which their well-resourced decade old e-diplomacy team forms but one part. No matter which definition you subscribe to, a social media presence is only a part of an evolving picture. Ben Scott, Innovation Advisor to former Secretary of State Hillary Clinton, outlines three components of digital diplomacy:

  1. Public diplomacy, including the use of online platforms.
  2. Building expertise in technology policy and understanding the way the internet impacts international developments such as political movements (ie. Hong Kong's Umbrella movement).
  3. Impact on development policy and how ICT can be used more effectively to promote economic growth around the world.

With these definitions in mind, a comparison of Australia's efforts with those of our counterparts proves rather humiliating and should serve as a rude awakening for the Australian Government.

The US leads from the front, as it should given the resources at its disposal. Fergus Hanson's analysis of the US State Department's digital diplomacy remains unrivalled, and State's DipNote blog provides regular updates on new initiatives, including how the US uses open data and collaborative mapping to enhance diplomacy. The US, along with a number of other countries, is also building online networks to counter the digital momentum of ISIS. 

The UK isn't far behind, having published a digital strategy in 2012 after widespread consultation, which led to the launch of a new Digital Transformation Unit within the Foreign Office (case studies of successes can be found here). Its empowered staff – through social media and blogging – actually play a part in the public policy discourse, unlike our own. 

France decided in 2008 that its soft power relied on digital technologies, while Polish and Japanese foreign affairs departments employ an extensive collection of social media networks, quadruple the size of our own. Germany turned to ICT platforms to crowd-source opinion and new ideas from the public that fed into its 2014 foreign policy review. India continues to invest heavily in building up its online reach despite resource constraints. Israel has matched its aggressive traditional diplomacy with one of the most active digital diplomacy units in the world, which has worked hard to influence the outcomes of US-Iran nuclear talks. 

Following former Canadian Foreign Minister Baird's speech to Silicon Valley last year, his department's online presence has exploded. Canada is now experimenting with how to best advance its interests online, including by funding university projects that use ICT to circumvent Iranian Government censorship. Sweden's digital diplomacy flourished under former Foreign Minister Carl Bildt, a long-time master of Twitter, who can now be found helping Canada. Small countries are also making significant progress: Romania hosts regular forums to discuss how to enhance its efforts and Kosovo has a (apparently lauded) digital diplomacy strategy.

So what of Australia? DFAT's social media accounts efficiently push out and amplify information, the majority of which is already publicly available via other channels. But these accounts are almost entirely devoid of policy detail and you'll be hard pressed to find the views or positions of the Australian Government beyond a re-tweeted media release.

Instead, the accounts are dominated by Ambassador photo-ops, visa information, trade facts and cute snippets about Australia (koalas, beaches, sport etc). Photos of officials shaking hands are uploaded, an article on why to study/holiday in Australia is posted, a link to an aid announcement is shared and the odd Ambassador tweets their schedule. Engagement with others is generally limited to tweets praising the 'good' and 'useful' meetings they've just had.

There is value in this. But because DFAT communicates only this, its social media accounts are performing more of a marketing function rather than a diplomacy function. But most importantly, communicating is not the same as influencing. This is where Australia's attempts at digital diplomacy come completely unstuck.

Along with many readers of this site, I've sat through dozens of events where Australian officials have delivered muscular public speeches advocating the Government's views on any number of contemporary issues, be it relations with China, resetting our relationship with PNG or the peace process in the Philippines. But while these official views are public, they are not reflected or advocated for online. Why does the Government suppress its own policy positions online while other countries leverage the internet to project their viewpoints and jockey for influence. It is perplexing, and even stranger given Australia has a foreign minister who so easily conveys her personality online and who has such a personal approach to her use of the internet.

It's time the Australian Government invested in digital diplomacy capabilities that extend far beyond regurgitating traditional media. There are risks, as there are when any organisation uses the internet. But the biggest risk of all is not engaging in this space, because the world will soon be home to four, five, then six billion internet users. Until digital diplomacy is taken seriously as a tool of foreign policy, the Australian Government is not equipped to reach them.

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This week we've had the IMF and World Bank spring meetings.

Economic heavy-hitters from around the world descend on DC to attend committee meetings, seminars, briefings, and other policy-maker fun. Also, the IMF's World Economic Outlook is released. Chapter 4 in the most recent edition looks at something I've written about a couple of times: low investment growth.

This chapter concludes, using some novel statistical techniques, that the disappointing performance of investment is just what we would expect given the disappointing performance of the global economy. In other words, it is not investment holding back the economy, it's the economy holding back investment. There are exceptions; in some European economies, uncertainty and credit constraints are weighing on investment. But for the most part, the report concludes, investment is not unusually weak, given the state of advanced economies.

Why are advanced economies weak? Part of the reason is covered in Chapter 3. Potential growth is lower than it used to be. Potential growth is the growth the economy can achieve under 'normal' conditions. It's influenced by productivity growth and labour force growth. So it's not special factors holding back investment. The mood of business isn't overly or unnecessarily pessimistic. It's something more fundamental.

Photo courtesy of Flickr user International Monetary Fund.

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Digital Disruption

The ability of individuals and organisations to access and respond to information instantaneously, via any number of information and communication technologies (ICT), is flipping the switch on international relations. Non-state actors – from businesses to civil society and even terrorist groups – have adapted more quickly to a wired world and are transforming our understanding of global power and influence. State actors are scrambling to catch up, with some doing much better than others. 

Approaches to diplomacy, intelligence, aid and defence policy are changing as countries try to adapt to this 'digital disruption'. The benefits and burdens it brings will prove one of the great challenges of 21st century foreign policy.

Digital Disruption is a special Interpreter series starting this week, in which we will publish posts from a range of Australian and international experts analysing the ground-breaking ways the internet and advancements in ICT are impacting on Australia's place in the world and on international affairs more broadly. From ideas on how to combat ISIS in the cyberworld to a review of diplomats' use of the internet to the growing influence of Chinese-owned search engines, Digital Disruption promises to be an exciting series that we hope will spark an ongoing conversation. 

The series supplements the Digital Asia links produced every Friday on The Interpreter by Danielle Cave, and complements the Lowy Institute's existing library of research papers, including Digital Islands: How the Pacific's ICT Revolution is Transforming the Region and Revolution@State: The Spread of e-Diplomacy.

If you would like to submit an idea for a post, or have any feedback on the series, please email sdunstan@lowyinstitute.org.

Photo courtesy of Flickr user Trey Ratcliff.

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It is generally not a good sign when a virus becomes prominent in the public consciousness. The Ebola epidemic was one of the enduring and tragic stories of 2014, with terrible humanitarian and economic consequences. It also revealed a darker side to the speed and interconnectivity of today's globalised world.

The world has dug deep to provide much needed finances, medicines and personnel, and there are hopes that the outbreak will end in 2015 if everything goes to plan. In time, attention can shift to long-term recovery in affected countries.

Whether the world will heed the lessons from Ebola remains less clear. Hannah Wurf and I explore this issue in the latest Lowy Institute G20 Monitor

Most objective assessments would agree the outbreak was poorly handled and the international community should have done more, and more quickly. It appears that the World Health Organization (WHO) was simply overwhelmed by Ebola. At the peak of the crisis, Director-General Margaret Chan declared that the WHO is a technical agency and that health care remains the responsibility of national governments.

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Health policy does remain, for the most part, a domestic policy area managed within national borders. Even for internationally-transmitted infectious diseases, there is a focus on actions at the national level, with each country expected to detect, assess, report and respond to public health risks of international importance. But the capacity of health systems around the world vary considerably. It appears that the entire African continent was ill-prepared to manage emerging health threats just before Ebola struck. 

What is needed is a technical body that monitors vulnerabilities, identifies gaps, informs policymakers and coordinates responses. The WHO, with its current funding, structure and staff, does not seem able to provide the necessary oversight. Yet there is no other organisation that can match the reach or representativeness of the WHO. As Bill Gates points out, the problem isn't that the system didn't work well enough, it is that we hardly have a system at all.

The problem is truly global, and solutions need to be developed at a multilateral level. It is sure to be high on the agenda at the UN World Health Assembly in May. However, the risk is that while these discussions advance technical solutions, without high-level political leadership they will not be able to address the deficiencies in the health architecture that Ebola has exposed. Until that political leadership comes, the world will continue to hope the next fast-spreading health crisis will prove controllable. 

This kind of situation appears tailor-made for G20 attention, given the forum's membership and its focus on the international 'rules of the game'. A G20 focus on global health governance would also build on the political support given to the international crisis response by G20 Finance Ministers in Cairns and Istanbul, and on the commitments included in G20 leaders' Brisbane communique and statement on Ebola

Wurf and I focus on three areas that would define an appropriate, clear and well-targeted global health governance agenda:

  1. Politically reinforce the WHO as the central organisation for health crises, strengthen its mandate for cross-border infectious diseases and secure its funding structure.
  2. Improve health-risk surveillance and ensure that decision-makers are informed of evolving health risks that could derail economic activity.
  3. As Larry Summers advocates, incentives need to be structured for the development of vaccines, diagnostic tests, and medicines that primarily benefit the poor.

Together, these initiatives would be an important step forward in the global management of future health crises, and recognition that the challenges that developing countries face pose global risks. The tragedy of Ebola is top-of-mind and it would be a shame to waste that momentum.

Photo courtesy of Flickr user DFID.

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In a new Lowy Institute Analysis launched today, Monash University academic Andrew Zammit argues that Australians fighting in Iraq and Syria pose a serious national security threat for Australia. He examines the options for responding to that threat, including through non-coercive means. The Australian Government has described the foreign fighter threat as its 'number-one national security priority' and raised the National Terrorism Public Alert from medium to high in September 2014.

Australian foreign fighters: Risks and Responses argues that non-coercive elements have played a role in Australia’s counter-terrorism approach for several years, but past measures are not suited to the current environment:

Returned foreign fighters have been involved in many of the most serious jihadist plots in the West, including in Australia. Returnees from Syria have already engaged in terrorist plots in Europe, and the large number of Australians involved with groups such as IS and Jabhat al-Nusra raises well-founded fears of an increased threat at home.

Zammit concludes that Australia can learn much from European countries, which have extensive experience applying non-coercive measures to radicalised individuals, including foreign fighters. However, he warns that any Australian approach must be carefully calibrated for the local context.

Download and read the full paper on the Lowy Institute website.

Photo by REUTERS/Stringer.

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When the seven leaders of Britain's bigger parties met for their only televised debate of the campaign for the 7 May general election, foreign affairs barely received a mention, other than the usual back and forth about the EU and the munificence of the foreign aid budget at a time of economic austerity.

Vladimir Putin was ignored, even though national security officials fear that one of the gravest threats to the UK right now comes from Russian spy planes testing British airspace, which they fear could result in a calamitous mid-air collision with a passenger jet. Iraq went unmentioned, despite the flow of British young men and women heading to the Middle East to fight alongside ISIS, and the participation of RAF bombers in the US-led coalition.

When foreign affairs and Britain's place in the world have been discussed it has tended to be in the context of domestic politics, and the haggling that might follow an election unlikely to produce a clear winner. The future of Britain's nuclear deterrent has become enmeshed in the discussion of whether the Labour Party would be forced into an informal alliance with the Scottish National Party, which wants to scrap the Trident nuclear submarine fleet. David Cameron's promise of a referendum on Europe was intended to blunt the challenge on the right from the UK Independence Party, which is demanding a complete withdrawal from the EU. The European question is primarily a discussion about immigration.

What made the silence on foreign affairs all the more noticeable was that it came just days after The Economist, the parish pump of the international commentariat, published a stinging piece on Britain's shrunken role in the world entitled 'Little Britain.' 'For a country that has long been respected for the skills of its diplomats, the professionalism and dash of its armed forces,' The Economist noted disapprovingly, 'the global outlook of its political leaders and its ability to punch above its weight, the decline has been unmistakable.'

The critique also included a rebuke from Senator John McCain who stated that cuts in the defence budget — which is expected to drop below the 2% of GDP mark expected of NATO members — 'diminishes Britain's ability to influence events'.

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Britons watch their prime ministers attend commemorative events for the two world wars, and see them at summits like the G7, and tend to assume that the country's traditional lead role in global affairs is assured. But there's been a noticeable slippage. German Chancellor Angela Merkel is viewed by the Obama Administration as the dominant European leader. The French, rather than the British, have become the most interventionist European power, deploying troops in the Central African Republic and Mali. When it came to negotiating the Ukraine ceasefire between Moscow and Kiev, it was Merkel and Francois Hollande who brokered the deal rather than David Cameron, a notable absentee. As its failed campaign to block the appointment of Jean-Claude Juncker to the presidency of the European Commission demonstrated, Britain is often isolated in Europe.

Moreover, Britain remains an Atlantic power in an ever more Pacific world. The Cameron Government has sought to remedy this by improving relations with China and beefing up its diplomatic footprint in the region. As part of its Asian pivot, it has elevated the importance of the Commonwealth and the diplomatic relationship with Australia, making the AUKMIN talks an annual affair.

However, courting China in a purposefully trade-driven foreign policy has irked the US. After Britain signed up to the Asian Infrastructure Investment Bank, a senior Administration official bemoaned the UK's 'constant accommodation' of Beijing. That unusually barbed comment would have reverberated in Whitehall, because it implied that the much-vaunted special relationship is no longer quite so special. It speaks again of a shrunken international standing.

If Ed Miliband becomes prime minister, it is hard to imagine him pursuing a more interventionist foreign policy. In August 2013 he opposed David Cameron's attempt to gain parliamentary approval for military action in Syria, consigning the vote to defeat in the House of Commons. He has also distanced himself from the military adventurism of the Blair years. Besides, his focus and background is in domestic affairs.

The fractured state of British politics, with its coalitions and deal-making, may also militate against boldness in foreign affairs. Prime ministers have to look beyond their own backbenches for parliamentary support, and coalitions tend to be more unwilling.

That may well be in line with the cautious mood of the British electorate. Commemorative events for the two world wars still produce a massive public response, as evidenced by the enormous popularity of the haunting poppy installation at the Tower of London to mark the centenary of the Great War. But after Afghanistan and Iraq, there's no appetite for new conflicts. National self-esteem is buoyed by past glories, and British politicians are preoccupied with problems closer to home.

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The Indo-Pacific is a strategic system encompassing the Indian and Pacific oceans, reflecting the expanding interests and reach of China and India as well as the enduring role of the US. The Lowy Institute's International Security program presents a weekly selection of links illuminating the changing security picture in this increasingly connected super-region.

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Vice-President Jejomar Binay. (Flickr/ISS.)

Elections are rarely decided by foreign policy issues, but election results can decide foreign policy issues.

The 2016 Philippines presidential election looks like it could lead to a sharp change in Manila's approach to its maritime boundary disputes with China in the West Philippine Sea. The US, Indonesia and Vietnam are taking firmer and more active positions on the South China Sea disputes involving China in the face of Beijing's aggressive reclamation activities targeting Philippine claims. President Aquino has won international support for the Philippines' firm stance.

But his most likely successor could significantly soften Philippine policy towards China on this issue.

Vice-President Jejomar Binay, despite being the focus of a Senate Blue Ribbon Committee investigating alleged corruption, is the clear front-runner for the 2016 elections. In the latest Pulse Asia poll on 2016 presidential candidates, Binay garnered 29% support, a clear 15% ahead of Senator Grace Poe in second at 14% and a full 25% ahead of Manuel 'Mar' Roxas (Aquino's presumed favoured candidate), at 4%.

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Binay has no foreign policy experience, having risen to national prominence as long-time Mayor of Makati, the wealthiest city in Metro Manila and the country. In one of his first extended interviews addressing foreign policy issues, Binay focused on the prospects for joint Philippines-Chinese development of natural resources in the West Philippine Sea, and downplayed the case filed by the Aquino Administration to the International Tribunal on the Law of the Sea regarding the Philippines' maritime boundary disputes with China. The ruling on this landmark case is expected to be delivered in mid-2016, potentially at the same time Binay takes over as president.

If Binay wins and follows through on these views, it would be a return to the policy preferred by Aquino's predecessor, President Macapagal-Arroyo. Macapagal-Arroyo's joint development plans with China were widely viewed as unconstitutional. In the face of this furore, in 2009, the Macapagal-Arroyo Administration did not renew the 2004 joint seismic study agreement signed in China covering the disputed waters. When Aquino took office in 2010, he and Foreign Secretary Albert del Rosario quickly adopted a much firmer stance.

The foreshadowing of a second reversal of Philippines policy on its maritime boundary dispute with China in two presidential terms shows how divided the Philippine political elite and their financial backers are on this issue and its place in Philippines-China relations. A second reversal in two presidential terms would rightfully reinforce views within ASEAN, and in Washington and Tokyo, about the unreliability of the flip-flopping Philippines, and would throw into doubt the wisdom of aligning their South China Sea approaches with the policy prevailing in Manila at any given moment.

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Kevin Andrews was appointed Defence Minister with question marks over whether he was even interested in the portfolio. So as I watched his interview on the ABC's 7:30 program last night on the deployment of additional Australian troops to Iraq, I was impressed by how well he seemed to be across his brief. He spoke with authority on the sectarian make-up of various provinces, and on the role of Australia's forces. If anything, he seemed a little too eager to display his command of the topic. And then this happened:

It didn't take the Fairfax websites long to make this 'gaffe' their top story. It is still reverberating around the media today. And it has gone global.

It was a dreadful moment for Andrews which I'm sure he wishes he had handled better. It may well haunt him, because once a media narrative is established about a minister, it is hard to shake.

But let's be clear: it says nothing about Andrews' competence as a minister. He may very well have known the name of Abu Bakr al-Baghdadi and just forgotten in the moment. Or he may not have known at all. Either way, what of it? Andrews probably doesn't know what LHD stands for, either, or what an MH-60R is, yet his Government is spending hundreds of millions of dollars on these two weapons platforms. Andrews is paid to get the big decisions right, not to memorise details.

As David Wroe commented, we've just had a defence minister who loved nothing better than to toss off military acronyms and weapons-systems designations. But was it important for David Johnston to know that stuff? Did he need to know what an MH-60R was in order to actually do his job, or did he need to know it so that he could appear to be in command of his job? 

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The two things are not unrelated, of course. It's a minister's job to convincingly advocate for the Government's policies in public, so I suppose Andrews failed in that regard. But it's unfair of Wroe to draw broader conclusions, particularly after he admits that it could just have been a mental blank, and 'we've all been there'.

Or maybe it wasn't a gaffe at all. Maybe the fact that Andrews could not recall al-Baghdadi's name indicates that Andrews has his priorities straight. Andrews is paid to make the truly big decisions about the nation's defence, and having the name of the ISIS leader at the forefront of your mind just doesn't serve an obvious purpose in that regard. For someone like Andrews, it is completely rational, reasonable and efficient to offload that bit of data to an adviser or to a briefing note, rather than memorise it. The only context in which it would be useful for him to have that information at immediate command is in a media interview; in every other part of Andrews' job, it makes no sense for him to know it off the top of his head.

We should think about where this insistence on the instant command of detail takes us. Which other names and details should Kevin Andrews commit to memory? Would that be the best use of his time? And how many of Andrews' ministerial colleagues wasted hours this morning memorising trivia about their portfolios rather than actually doing their job?

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Over the past month, The Interpreter has hosted a debate on Australian defence strategy initiated by Alan Dupont's Lowy analysis paper, Full-Spectrum Defence.

The discussion so far has only glanced tangentially off the most brutal of the realities affecting defence strategy: the perpetually frustrating issue of money and the imperative for which it is always a proxy, the identification of priorities.

Hugh White raised the issue in his response to Alan's initial post, in the context that finance is central to any serious discussion on strategic policy. Alan's rejoinder mainly posited the place of theoretical rigour but did identify the crux of the relationship between finance and defence policy: 'the efficacy of the process for allocating resources.' In this context, Allan's focus is on decisions concerning the development of ADF force structure.

It is obvious that funding forces choice into public policy, although it seems that policy makers often try to ignore this reality. This certainly is the lesson from most of the defence white papers tabled since 1976. They failed to accommodate the impact of looming developments in Australia's economic and fiscal circumstances and their programs were, surprisingly quickly, disabled by the Commonwealth's inability to appropriate budgets of the size envisaged in formulating the white paper.

This process, repeated over a few decades, leads not merely to a degree of inconvenience but a challenge to the basis of defence policy. Inevitably, financial objectives had to become part of policy, as in the 2000 white paper's commitment to a 3% real increase in the defence budget. A quick scan of the figures in a paper I did at the time gives some indication of the destructive potential of unchecked financial pressures on Australia's defence capacity.

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The 2000 white paper was implemented in the best possible environment, a period of persistent fiscal consolidation driven by expanding revenues. This is in contrast to the present fiscal situation, although it remains government policy to increase expenditure on defence to reach the level of 2% of GDP. However, a continuing constraint on revenue and a search for expenditure reduction remains the backdrop for all Commonwealth policy areas.

So, there seems little question that rigorous prioritisation will continue to be central in developing whatever ADF force structure should be indicated by policy. My difficulty with Alan's concepts is that it is hard to see how they assist in this process.

I'd like to hear a lot more about the force structure priorities that Alan sees as arising from the space and cyber domains as operational environments. His expectations seem quite ambitious but consequent changes to ADF force structure are not so clear.

The Australian Signals Directorate is already the Commonwealth's lead agency for cyber security, so it is easy to imagine (these things are, by their nature, not openly discussed) Defence leveraging these capabilities to develop a capacity for offensive cyber operations. The ADF could be expected to require additional equipment and new operating procedures which might be neither cheap nor simple. Yet, were Australian offensive cyber to become a strategic capability, it would more likely require organisational change – the creation of an Australian NSA, or some such – than adjustment to ADF force structure.

Similarly, what changes to force structure would Alan identify as allowing Australia to 'shape and if possible control' the space environment, and how might this be sustained in the absence of an Australian space industry?

Australia could enhance security against the proliferation of ballistic missiles by upgrading the RAN's new Air Warfare Destroyers to use the SM-3 missile system. But to protect Australian targets the AWDs would have to intercept ballistic missiles during the launch phase, meaning that the vessels would need to be stationed close to the coastline of the launching state. This would be (especially in the case of North Korea or Iran) a long way from the protection of other ADF forces and would only be feasible if the destroyer was operating in cooperation with a much larger coalition force. In such circumstances, the destroyer's deployment would have little to do with a specific attack on Australia and much more with arrangements for regional security. So in this case ADF capacity would reflect alliance relationships rather than changes to force structure.

I draw much the same conclusions from Alan's discussion of the emerging nature of warfare and Australia's history of distant operational deployments. The nature and extent of Australia's overseas deployments has often been influenced as much by international or local politics as by the military situation. I can see little to indicate that future distant deployments will not continue to be as highly contextualised.

Similarly, evaluating the nature of emerging conflict can help planners identify emerging challenges but not much to nominate the priority that should be allocated to force structure elements. As Hugh White observes, combat is unlikely to occur on Australian territory, so it will be the judgement of Australian governments that continues to determine the scope and size of the ADF's exposure to emerging conflicts and overseas deployments.

Such contextualised episodes provide few indicators of priority within defence strategy. That is why there remains a vigourous debate over whether the capabilities of the new Canberra-class helicopter landing docks meet, are greatly in excess of, or provide the basis for future ADF force deployment requirements.

Ironically, I would not be surprised to see Alan's analysis used to encourage a default position of 'more of the same', rather than to support significant change in ADF force structure.

Photo courtesy of Australian Defence Image Library.

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Indonesian and Australian journalists were at the Lowy Institute on Monday, once again trying to explain why the press in each country plays such a minor and often perverse role in helping mutual understanding.

The causes are many, but one that deserves more thought is the way China hogs the headlines in Australia. This pushes out other Asian reporting. Once the editor has a couple of China stories, that's Asia covered for the day. Particularly in the financial press, China gets saturation coverage and Indonesia almost nothing.

Some might think this is as it should be, since China is so large and important to Australia. Indeed, China dominates our exports and affects global commodity prices in a way that sets it apart from the rest of Asia. And there is plenty of scope for hand-wringing over security issues.

But there is so little insightful hard news about China that most of these stories repeat what we already know. How many hundred stories have talked about the slowing of the Chinese economy, when all they amount to is that it has slowed from 7.5% to 7.1%, which means nothing given the unreliability of Chinese data? And none of this reporting has any real implication for the reader. Sure, the Chinese economy is important in a general way, but its importance is not changing from day to day. It's hard to get excited over China's inward-looking and secretive politics. Remember those endless articles on the formulaic changes to the Politburo Standing Committee, when the journalists didn't even know in advance when its meetings would be held, let alone what it all meant?

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Indonesia, on the other hand, has a new and amazing story every day, just waiting to be told. Its politics is open, packed full of gossip and fascinating goings-on. And it is possible to find out what is happening. Journalists can travel freely almost anywhere and report without Big Brother threating their visa if they don't stick to the party line.

As for security issues, our future in Asia might well involve vital issues between our two countries, perhaps bringing us closer together or perhaps tearing us apart. We're much more likely to be sorting this out without help from our Great and Powerful Friends, so it will be much more important for the Australian public to have a good understanding of the issues.

This is not, of course, the only explanation for the dearth of Indonesia reporting, and for the unhelpful fixations of the stories that are reported. By all means, let's go on hearing the same old content-free reporting on China, but let's also have a bit more on Indonesia's fascinating story.

Photo by Flickr user Shreyans Bhansali.

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By Sally Andrews, an intern in the Lowy Institute's Melanesia program.

  • Barrick Gold will compensate 137 PNG women after allegations of rife sexual violence from guards and police at Porgera mine. 
  • PNG’s opposition reopens the debate on extending autonomy for regional governments. 
  • Fears grow in Vanuatu over dire water shortages in the aftermath of Cyclone Pam.
  • Australian volunteer Zoe Marshall was based on Vanuatu’s Pentecost island when Cyclone Pam hit. Here she recounts the story of that night.  
  • Denise Fisher discusses the ramifications of the French election results for New Caledonia.
  • Fiji has signed an historic MOU with China that will help improve the Fijian health sector.
  • The Governor of Port Moresby granted 1.1 million kina in order to establish a new sexual violence centre.
  • Mark Evenhuis commented on the growing cynicism in PNG towards Australian aid and asylum seeker programs.
  • The League Bilong Life program is being rolled out throughout PNG, capitalising on the country’s love of NRL to help achieve education outcomes in primary schools:

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The Australian Treasury has been busy. On top of its usual output, the last 18 months have included the Financial System Inquiry, hosting the G20, the 2015 Intergenerational Report and the tax white paper. All this while eliminating one-third of its workforce!

But today I'd like to focus on the tax white paper, and an underlying assumption Treasury uses to justify some of its agenda.

When modelling and discussing the effects of taxes, Treasury frequently makes the assumption of perfect international capital mobility. This assumption means there is only one worldwide after-tax (risk-adjusted) rate of return on capital. If there were anywhere that offered a better deal, perfect capital mobility would imply that capital would flow into that area, until the return differential was arbitraged away. Similarly, if anywhere offered a worse deal, capital would flow out until, again, returns were equalised. 

Often, this assumption is just for analytic convenience. It is easier to solve models with this assumption, and it generally is of no great consequence.

However, there are times where this assumption is critical.

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For example, it is crucial in justifying Treasury's discussion of abolishing dividend imputation. You see, under the assumption of perfect capital mobility, capital flows into Australia determine the amount of investment in the country. Foreigners do not benefit from dividend imputation, but they do have to pay the company tax rate, which considerably reduces the amount they invest. Thus we get the proposition that Australia could increase investment by eliminating dividend imputation and using the proceeds to lower the company tax rate.

The proposition of perfect capital mobility, or at least very mobile capital, has also been important in other work the Treasury has done on company tax. For example, the assumption drove the result that two-thirds of the benefit of a company tax cut went to wage earners. Also, in work released last week, perfect capital mobility was one reason company tax was assessed to be one of the most inefficient taxes we levy.

But how realistic is perfect capital mobility?

In 1980 Marty Feldstein and Charles Horioka published a famous and influential paper that claimed capital was quite immobile. They based this claim on a very tight correlation between a country's saving and its investment. That may sound esoteric, but it is not. As I said before, if capital is freely mobile across country borders, it will seek the highest yielding opportunities. There is no reason for it to be invested in places with the highest savings. The most plausible explanation for the correlation was that savings tended to be invested in the home country, or in other words, there was a high degree of home country bias in investment.

Now, their paper was written 35 years ago, so things may have changed. To consider this possibility, I have plotted Australia's saving and investment as a percent of GDP below. The tight correlation is still there. If we split the sample up between pre- and post-1980, the correlation stays almost exactly the same (correlation of 0.783 pre-1980, 0.786 post-1980).

And by the metric that Feldstein and Horioka used to assess capital mobility (the coefficient of a regression on investment on saving) the influence of domestic saving on investment has actually increased slightly (from 0.75 to 0.79).

So I am wary of interpreting Treasury's modelling that seems to crucially hinge on a high degree of capital mobility.

Photo courtesy of Flickr user Stefan Jürgensen.

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Now that the dust has settled on last month's civil unrest in Burma, it is worth pausing to reflect on the protests and official responses to see if any important factors have escaped public attention. I am prompted to do so because the conventional narrative does not completely match what I heard in Rangoon at the time.

To briefly summarise recent events, in January protesters began marching from major provincial cities to Rangoon demanding changes to the National Education Law, which was passed by parliament last September. Protests were also held in other parts of the country. Among the protesters' demands were a greater devolution of power to universities, the freedom to form student unions and mother-tongue language instruction in ethnic minority areas.

On 5 March, up to 150 protesters outside Rangoon City Hall were forcibly dispersed by the Myanmar Police Force (MPF). The police were assisted by civilian 'auxiliaries' wearing armbands proclaiming them to be 'on duty'. Several protesters were reported injured and eight were arrested. The following day about 200 protesters at Letpadan, 140km north of Rangoon, attempted to overcome a police blockade and resume their march on the city. Five people were arrested.

On 10 March, after negotiations with the authorities, the protesters at Letpadan were given permission to continue their journey to Rangoon under certain conditions. Some protesters refused to accept the agreed terms, however, and began dismantling police barricades. This sparked violent action by MPF security battalions, which were assisted by local Bago Region members of the MPF. Officials later said 127 people had been detained.

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These events have been portrayed by most journalists and activists in stark, dualistic terms as clashes between peaceful, idealistic students and brutal, hard-line police, reminiscent of the bloody confrontations under the former military regime. On this basis, calls have been made for the EU to suspend its MPF training program and for all other international contacts with Naypyidaw to be reviewed.

Clearly, the authorities at both the regional and national levels could have handled the protests much better, and the MPF's brutal behaviour at Letpadan was inexcusable. The strong responses from foreign governments and human rights groups to the two incidents were understandable and justified.

Speaking to well-informed observers in Rangoon at the time, however, I was given a more nuanced account of events. Among the points made to me were the following:

  • The protesters have invariably been labelled 'students'. This not only implies a direct and justifiable interest in educational reform, but also a status and respectability deriving from student participation in Burma's past pro-independence and pro-democracy struggles. Not all the protesters, however, were in fact students. Also, as the Government has claimed, some probably had wider political goals in mind, including regime change.
  • Most people I spoke to last month believed that, prior to the incidents in Rangoon and Letpadan, Naypyidaw had made a number of unexpected concessions to the protesters. Some of their demands had already been incorporated into the education law. Others (such as the allocation of 20% of the annual budget to education) were seen as unrealistic by a parliamentary committee that included members of the opposition parties.
  • The MPF units at Letpadan initially adopted a cautious and conciliatory approach. For example, at one stage female police officers were deployed in an apparent attempt to present a friendly official face and to reduce the likelihood of violence. It was only after five days of negotiations, when some protesters tired of what they saw as police obstructionism and openly began to challenge the police blockade, that the security battalions were sent in.

None of my interlocutors in Burma last month tried to excuse the MPF's violent tactics. Clearly, excessive force was used at Letpadan in what was described by one onlooker as 'a complete breakdown of police discipline'. Yet, as was also pointed out to me, on 10 March some officers, probably from the Bago Region MPF, attempted to curb the behaviour of the security battalions and even tried to protect protesters and bystanders.

Those actions highlight an aspect of the disturbances that has not been addressed in the news media, namely that the uncompromising attitude of the security battalions was not representative of the entire MPF. Indeed, one senior police officer told me that many in the force were shocked and disappointed by events. They regretted what had occurred and recognised the damage the Letpadan incident in particular could do to the MPF's reform program and its attempts to regain public confidence.

Another issue which seems to have divided the MPF last month was the recruitment of civilian 'auxiliaries' to 'assist' the police in Rangoon. These untrained, poorly led and ill-disciplined 'vigilantes', usually made up of local unemployed youths, publicly undercut the authority of the MPF. Who actually directs such groups during an incident is unclear, but for the police they make the management of civil unrest more problematic.

Another point of discussion last month was the extent to which the harsh response to the protests was instigated by the authorities in Rangoon, Bago or Naypyidaw. The security battalions are a national asset, but it does not necessarily follow that the notoriously hard-line Home Affairs Minister ordered that violent tactics be used. The recruitment of the civilian 'auxiliaries', for example, was by Rangoon ward officials, on orders from the Region's Chief Minister.

It is also noteworthy that the security battalions deployed in Rangoon and Letpadan do not appear to have received any training in crowd management from the EU. The violent tactics employed by them are therefore hardly an indictment of the international training program. In any case, the EU has to date only undertaken to train 4000 police, a small proportion of the estimated 12,500 in Police Security Command. Also, as it has no operational control over these forces, the EU cannot be held responsible for any of its actions.

Despite this, the security battalions' behaviour has prompted calls from activist groups and others for a cancellation of the EU training program. It has also cast a shadow over the efforts of others, notably the UN Office of Drugs and Crime, to help reform Burma's police force. How the MPF can be encouraged to raise its standards when the very elements dedicated to helping it reach those goals are withdrawn is not clear. If anything, recent developments argue for even closer engagement by the international community.

When incidents of this sort occur in Burma, it is often difficult to work out precisely what happened and when. Even harder to discern is the thinking behind some of the decisions taken, on both sides. As is so often the case, the picture is more complicated than it first appears, and any responses need to be considered with this in mind.

Photo by REUTERS/Soe Zeya Tun.

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Don't read too much into China's rejection of Taiwan's application to join the AIIB.

Like more than 40 others, Taiwan had applied to be a founding member of the Beiing-led Asian Infrastructure Investment Bank. China yesterday rejected this but says discussions are ongoing about Taiwan's membership of the Bank under 'an appropriate name', meaning 'Taipei, China' or 'Chinese Taipei', not 'the Republic of China' or 'Taiwan'. The question of Taiwan's name is always fraught in relation to its participation in international organisations and events. In the Asian Development Bank, Taiwan is referred to as 'Taipei, China', despite its ongoing protestations. And it is 'Chinese Taipei' in APEC and the Olympics, for example.

Some commentators say this decision to reject Taiwan's membership of AIIB does not bode well for China's intentions for the Bank. There are concerns that China will run the bank based on its own political interests rather than as a professional financial institution, as China has claimed.

This is a valid concern, though with many countries now involved in the AIIB, China's ability to dominate the governance and decision-making procedures is greatly reduced. In fact, the popularity of the AIIB may turn out to be a burden for China in terms of any geopolitical ambitions it had for the bank. It is easier to exert influence over Cambodia and Laos than over the UK, Australia and South Korea.

The decision raises a larger question of how Taiwan will fit into the evolving regional architecture. Taiwan is currently excluded from key initiatives now being negotiated, such as the TPP, AIIB, and the ASEAN-led Regional Comprehensive Economic Partnership (RCEP). This will likely have long-term implications for economic integration in the region. Taiwan is a significant economy and would like to benefit from the emerging trade agreements and infrastructure financing. In this regard, it is promising for Taiwan that it can be involved in the 'Belt & Road' initiative being heavily promoted by the Chinese Government at the moment.

The full list of AIIB founding members will be released by China tomorrow. Let's hope a compromise can be found for Taiwan to join as a regular member down the track.

Photo by Flickr user Jennifer.

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