Lowy Institute

A first look at the 2016-17 budget for foreign affairs, aid and defence yields few surprises. For an unsurprising budget, this is a long post, but it’s worth looking deeper at how each of the agencies fared, particularly after the comparatively controversial efforts of the last two Coalition budgets.

Source: Lowy Institute Global Diplomacy Index

Foreign affairs and aid

One of the surprises is a pleasant one for those of us who’ve long argued for a larger diplomatic presence for Australia, with a $42 million budget measure to expand Australia’s overseas diplomatic network by adding a new post in China, presumably in the vast and booming inland. The location is yet to be announced.

This builds on last year’s foreign affairs budget which, if you are partial to surprises, was the big one. It heralded an unprecedented investment of $100 million to increase Australia’s overseas representation, adding five new posts in Doha (Qatar), Macassar (Indonesia), Ulaanbaataar (Mongolia), Phuket (Thailand) and Buka (Bougainville). The Buka post idea has now formally been abandoned, scotched by an awkward communications problem between the Australian and PNG governments. 

In its place is a new post in Lae, as well as the post in China announced yesterday. This makes a total of six new posts for Australia’s still-underdone overseas network, bringing our total to 115 posts. The planned additions will lift our position in the global rankings and OECD nations’ diplomatic networks from 27th to 26th; ahead of the Czech Republic but behind Belgium (117 posts) and Portugal (123 posts).

Overall, the appropriation for DFAT is $1.4 billion this year, up $53 million (4%) on last year’s budget. This doesn’t include the aid budget, which is an administered expense and not included in the department’s operating costs. The bitter pills in the foreign affairs and aid budgets came earlier in the term of this Coalition government: in late 2013 there was a 10% reduction in staffing over the foreign affairs and aid portfolio with the ‘integration’ of AusAID into DFAT, and last year a 20% cut ($1 billion) to the aid budget.
 
This year's $200 million cut to aid is small by comparison, and it was also expected. As Devpolicy’s Stephen Howes put it today, ‘we’ve got used to aid cuts’; and besides, the average Australian isn’t that fussed: in our polling on the aid cuts last year, 53% were in favour of last year’s $1 billion budget cuts, with only 35% opposed. When it comes to easy budget savings, it appears the aid budget is now low-hanging fruit.

Among the other measures in the foreign affairs budget are:

  • $9.2 million over four years for the government’s people-smuggling prevention program.
  • $2.4 million to bring forward the opening of two new ‘landing pads’ in Singapore and Berlin under the government’s Innovation Strategy, adding to the existing pads in San Francisco, Tel Aviv and Shanghai.
  • $46 million to meet the increased costs of producing passports, which will be more than offset by an additional $173 million in revenue for the government over four years raised by upping the cost of a passport by $20 ($10 for children and seniors).
  • $48 million in revenue from increasing notarial service fees (though sadly this also goes to consolidated revenue, not to the departmental budget).

 One of the persistent problems for the foreign affairs and trade portfolio is the relentless demand for efficiencies. Read More

These are always styled by government as ‘business as usual’, with periodic reviews conducted across the whole of the public sector to identify potential cost savings. This year, the ‘efficiencies’ generated by DFAT’s last Functional and Efficiency Review amount to the single biggest budget item for the portfolio, with savings of $74.5 million over five years. These will come from a variety of areas including:‘streamlining business processes’; ‘changing overseas posting arrangements’; and ‘removing consular assistance for dual nationals and permanent residents in the countries of which they are citizens’. This last one was bound to cause consternation, even though it was foreshadowed in the Foreign Minister’s review of consular assistance leading up to its recent Consular Strategy. It is also the practice of like-minded countries such as the UK and New Zealand.

Adding to this efficiency drive is the ongoing public sector ‘efficiency dividend’. This is a government-wide initiative, introduced back in 1987, to reduce the annual costs of departmental operations by a fixed percentage. Some agencies (but not DFAT) are exempt. The dividend has ranged from 1% to a high of 4% in 2012, and now sits at 2.5%. For a department the size of DFAT, with an operating budget of around $2 billion, this means $50 million in savings must be found each year. The 2015-16 budget promised to reduce it to a more manageable 1% in 2017-18; this budget overrides that, maintaining the 2.5% for the next two years, winding it down to 1.5% in 2019-20.

This is all very well for government departments and agencies which have enjoyed ‘historically strong public expenditure growth’ over the last 10-15 years. However, as we’ve argued in the past, DFAT was not one of them. Its share of total government expenditure actually fell from its ‘high’ of 0.43% in 2000-2001 to an historic low of 0.28% just before the AusAID integration. Over the same period, its budget in real terms was almost stagnant. The public sector as a whole grew by 57% between 1998 and 2013, while DFAT grew by only 7%. It did not experience the boom the public sector enjoyed, but it is expected to wear the continuing punishment. The 2010 Incoming Government Brief prepared for the Gillard government by DFAT noted that:

...limited gains are achievable after more than a decade of having to offset the eroding effects of the 1.25 per cent cumulative efficiency dividend... Having exhausted opportunities for reprioritisation and efficiency gains, meeting the challenge of a more complex diplomatic world will require additional funding, with a particular focus on growing the overseas network.

Six years later, that additional funding is materialising, albeit painfully slowly. But if the opportunities for further efficiencies were exhausted in 2010, they must surely be almost non-existent by now.

Defence

Defence is of course a different story.

Defence gets $32.3 billion this year and $142 billion over the next four years, in line with the Coalition’s 2013 commitment to reach 2% of GDP by 2020-21 . This is up just 3% up on last year’s budget, but a very substantial 22% increase on the pre-Coalition 2013-14 budget.

This year, Defence operations gets over $616 million for additional operations funding (around half of DFAT’s entire operations budget), and a similar amount over the forward estimates. This funds the continuation of our existing operations in the Middle East, with Operations Accordion, Highroad, Manitou, Okra and Resolute all getting additional money.

It’s full steam ahead on Australia’s naval shipbuilding strategy, with $90 billion over the term of the White Paper invested in the 12 future submarines, offshore patrol vessels and future frigates projects.

Our friends over at ASPI have dissected the Defence budget story, and called it a ‘no surprises budget’. 

In sum: no surprises in a good way for the Defence budget, no surprises for the aid budget which has endured its share of jarring shocks under the Coalition, and a small surprise for the overseas network in an otherwise unexceptional budget.

Onwards.

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Later this month, President Obama will attend the 42nd G7 Summit in Ise, Japan, about half-way between Tokyo and Hiroshima. Following John Kerry's visit to Hiroshima in early April, the first ever by a sitting US Secretary of State, many speculate that Obama will do the same and could in fact apologise for the atomic bomb drop of August 1945. Kerry apparently found his Hiroshima visit harrowing, and it fits with Obama's less blustery approach to US foreign policy that he would consider an expression of remorse, perhaps akin to his address to the Muslim world in Cairo in 2009.

But if the politics of that speech were contested, this would be worst, as almost no one wants it.

US Conservatives

It is a populist article of faith in the US that the bomb-drop was necessary; I do not remember this even being controversial in any textbook I read until my senior year of college. Veterans groups and public opinion were powerful enough to shut down a major exhibit on the 50th anniversary of the bomb drop in 1995, and no serious public figure I can think of talks about this. Hiroshima is even less controversial than Dresden.

So it is not hard at all to imagine the huge backlash Obama would face at home from Republicans, neoconservatives, talk radio, Fox News, veterans groups and so on. That this is an election year only worsens the calculus. Donald Trump has fractured the Republican party, but if there is one thing all Republicans agree on, it is that Obama is 'weak.' A favorite conservative critique is that Obama apologises for the US, and a Hiroshima apology would be easily spun as another stop on Obama's 'apology tour.' Were Obama to do this, it would be an election season gift to the struggling GOP, and Hillary Clinton would find herself answering questions on this for weeks. Honestly, this alone is probably enough to derail any Obama effort.

China and the Koreas

Similarly, it takes little imagination to see how badly this would provoke China and the two Koreas. Memories of the Pacific War run deep, and resistance to Japan in that conflict are central legitimising narratives in all three countries. The communist parties of both China and North Korea were tested in the crucible of that war, and the nationalist credibility both earned from having fought the Japanese justified their post-war take-overs. Even today, both continue to use Japan as a villain for nationalist and state-building purposes, with their constant insistence that Japan must remain disarmed and that any military build-up on its part is a precursor to renewed Japanese imperialism. The standard World War II narrative suits these two just fine; indeed, it is still quite alive for both of them today.

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An apology to Japan by the major contributor to its defeat would throw the moral economy of North Korean and Chinese post-colonial anti-Japanism into doubt. Not only would it suggest that anti-Japanese forces in the war did awful things too, a US apology would explicitly recognise how far Japan has come from the Axis imperialist of the 1940s to today's liberal, human rights respecting, global governance cooperating democracy. China and North Korea are none of those things of course. It suits neither Pyongyang nor Beijing to see Japan rehabilitated; ghosts of the 1940s are preferred as politically useful strawmen.

Worse, the anti-Japanese struggle narratives of the North Korean and Chinese communist parties are highly exaggerated. Kim Il Sung and Mao Zedong did far less to defeat the Japanese in their countries than, respectively, Chiang Kai Shek and the Red Army of the Soviet Union. Mao and Kim were quite content to free-ride on these forces, which of course can never be admitted. So any major re-examination of the war's end, which such an apology would provoke, is unwanted.

Given that South Korea is a democracy, one might have expected a different course. But there too, Japan-as-villain is deeply politically inscribed. The issue of who collaborated with Japan during the colonial period is hugely divisive and continues to roil the country 70 years later, as does the fate of the comfort women. South Korean analysts too tend to see Japanese re-armament as a pre-cursor to imperialism, and there is deep resistance to seeing Japan as rehabilitated or deserving of apologies for wartime events. That Japan cannot quite seem to admit to itself that it started a truly awful conflict only hardens the resistance to apologies to the erstwhile colonialist and imperialist.

Japanese conservatives (yes, really)

One might imagine the nationalist community in Japan to most seek such an apology, but as Jake Adelstein notes, there is little interest there too. A US apology would have domestic ramifications Americans are likely unaware of, but for the Japanese conservatives trying to make Japan a more 'normal' partner of the US, the apology would only help the domestic left's effort to hold onto Japan's unique pacifist, semi-isolationist foreign policy.

Specifically, an Obama apology would revive discussion about the conflict from which the Japanese pacifist position draws its political and moral strength. Japanese conservatives want to look forward to tension with China or North Korea to justify a more robust military, not back to a time when the Japanese military rampaged around the region. And an apology by the war's victor only strengthens pacifist arguments on the futility of the use of force: even in WWII, the 'good war,' the good guys acted badly, suggesting that the use of state violence always leads to immorality. 

This, curiously enough, aligns with America's long-time interest that Japan carry a greater burden in the alliance and generally do more, leading to the bizarre outcome that an American president doing this to show America's maturity would be acting against US interests.

Reconciliation vs zero-sum politics

Obama's impulse to apologise is morally laudable. As a student of Martin Luther King and Nelson Mandela, he sees that reconciliation and trust-building are achieved in part through the mutual recognition of error and inappropriate violence. Obama, unlike so many Americans, seems willing to recognise that even the US has done some pretty awful stuff (if he wants an even greater challenge, consider how the US should reckon with the fate of Native Americans). There is in fact a pretty good case that the bomb drop was unnecessary.

But humility is rare in international politics, intellectually dominated as it is by nationalism, grievance-pandering, prestige-seeking, and demands for recognition. While US and Japanese elites may embrace this post-modern, post-national ethos, that does not apply in modernist, nationalist East Asia where an apology will be read as just another turn in enduring regional competition.

Photo courtesy of Flickr user The White House.

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US presidential race 2016

Those wondering how Donald Trump became the presumptive  Republican party presidential nominee should have a look at this video, and listen to the short comment below. In a case of remarkably fortunate timing,  the Lowy Institute, publisher of The Interpreter, today hosted a lunchtime lecture from renowned US journalist, author and one time presidential speech writer James Fallows. Fallows, speaking just a few hours after Trump rival Ted Cruz  bowed out of the race, told the capacity crowd he was honoured to be delivering the first speech of the Trump political era. In his lecture  Fallows explained why he thinks Trump will be the end of the GOP, why Trump has emerged triumphant from the once-crowded field vying for the GOP nomination, and why Trump is very, very unlikely to win the election. (You can listen to the full lecture here.)

On the second point, Fallows said it was a strange confluence of events that has allowed Trump to pull ahead and one of these was the fact the primary race had become 'indistinguishable from an American reality TV show' and 'a lot like pro-wrestling which is full of phony, histrionic, tough-guy performances'. Fallows urged the audience to look the wrestling video, recorded back in 2007 in one of Trump's many past lives as a pro-wrestling promoter. Fallows said the video was both 'primal and Lord of the Flies like';  a good description for the Republican nomination race of 2016.

In this quick comment, Fallows elaborates on his views on Donald Trump's campaign success to date and what is says about the US.

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By Alastair Davis, an Intern in the Lowy Institute's Melanesia Program.

  • Following the unanimous ruling by the Papua New Guinean Supreme Court that the detention of people at the processing facility on Manus Island is illegal, the question of responsibility for the 850 asylum seekers and refugees is under negotiation. The time frame for these negotiations is unclear, as the Australian Federal Budget has allocated AUS$55.4 million in funding for Manus Island and Nauru according to Sky News.
  • The Economist ran a useful explainer on the regional processing issue last week.
  • Lisa-Marie Tepu argues that the PNG Supreme Court decision provides an opportunity to reform the legal framework for the treatment of asylum seekers and to reassert the primacy of the Papua New Guinean constitution. A copy of the Supreme Court's decision can be found below.
  • Also, Lowy Institute Non-Resident Fellow Sean Dorney discusses the enduring strength of the Papua New Guinean constitution in extraordinary times.
  • The uncertainty around Papua New Guinea's police anti-corruption unit continues, with the Supreme Court ordering the Police Commissioner to reopen the unit as the closure is affecting criminal cases before the courts.
  • The 2012 election victory of Don Polye, leader of the opposition in Papua New Guinea, has been stayed by the National Court. Polye has since stepped down as opposition leader.
  • The much anticipated Leaders' Summit of the Melanesian Spearhead Group has been postponed, leaving the issues of leadership of the Secretariat and potential Indonesian and West Papuan memberships unresolved.
  • The nature of the Pacific Islands Forum could change significantly with the drive for full membership for New Caledonia and French Polynesia gaining support from New Zealand. The two French territories would be the first non-independent entities to attain full membership.
  • Vanuatu Infrastructure Minister Jotham Napat is to travel to China to negotiate further Chinese assistance in road construction.
  • Allan Bird writes for The Interpreter on why many Papua New Guineans are occupied with issues other than Manus Island.

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It's an Oliver Stone film, so it's no surprise to see a trailer that reflects the paranoid-conspiratorial strain in Stone's political views.

Stone has ideological enemies who made much of the director's historical over-reach in JFK (1991). The problem for those critics now is that Stone's wild theories about an unaccountable national-security establishment which secretly runs the country (and can even assassinate a sitting president) look slightly less fanciful in the age of XKeyscore.

Stone is a fringe figure these days, but JFK was a major success in part because it tapped into Americans' sense that the system was rigged (The X-Files was big in the early '90s too). In the age of Trump and Sanders, it is hard to argue that that feeling has diminished. Maybe Snowden is a film for the times.

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The PNG Supreme court ruling last week that the detention of asylum seekers at the Manus Island was illegal did not come as a surprise. The PNG judiciary has always been fiercely independent and it proved so once again.

It is also not unusual in PNG for governments to do the wrong thing and only correct their actions when ordered to by the Supreme Court. And sometimes not even then; the illegal ousting of the Prime Minister in 2011 has still not been rectified even after several Supreme Court decisions on the matter.

However the detention of asylum seekers (or illegal immigrants depending on which side of the fence you sit), has hardly galvanised sentiment in the PNG public except among politicians and lawyers and those on Manus.

In fact, most Papua New Guineans could not care less about the whole issue.

In my hometown of Wewak, the entire population is focused on simply getting on with life in these hard economic times. Next door in Madang, they are just recovering from an ethnic clash which shut the place down. Similar stories can be found all around the country.

This is what happens when you are ranked 158 out of 170 odd countries in the United Nations Human Development Index (Australia is ranked 2). We are very much inward looking and worried about our own problems.

Politically, PNG will always stand ready assist Australia in whatever way it can, this is the Melanesian way. We stepped in to help Solomon Islands, Vanuatu, and Fiji, and we will continue to step in as required. At home though, most folks are worried about medicines in the clinics and teachers in the classroom and hoping there may be a job opening down the road.

The court decision will not affect the politics of PNG. We will continue to vote for the people who promise to bring home the most freebies. Our politics is not determined by doctrine or conviction but by very basic human needs.

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As harsh as this sounds, it is the hard truth. Perhaps this is the reason why the majority of the so-called asylum seekers on Manus island refuse to be settled in PNG. They have probably figured out this is a much more difficult place to put down roots than the countries they left behind.

I suspect that if PNG were further up the human development ladder, if it was a place bounding with opportunities, then asylum seekers would choose to stop here and not keep going to get to Australia.

That prospect might warrant more significant investment on the part of Australia's leaders if they want a more effective — and legal — buffer between Australia and boat people.

Photo courtesy of Flickr user: Tanaka Juuyouh

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Budgets are always pretty boring. Any controversial issues have been leaked (and spun) beforehand. Last night's was no exception. But it does provide an opportunity for a stock-take on longer-term debates about how the economy is travelling.

In a world which has been 'too slow for too long', the Australian performance has been pretty good, especially considering the collapse of commodity prices since 2011 (the graph below shows just how big this terms-of-trade shock has been). On the usual aggregate GDP measure, Australia has grown 22% over the eight years since 2007, just before the crisis. This compares with 10% for the USA, 7% for the UK and 12% for Canada, a rather similar economy. This looks even better against the dismal performance of Europe, where France is up just 3%, Germany up 7% and Italy down (yes, down!) 8%. Among the mature economies, New Zealand is closest, with 16% expansion. (all data from IMF WEO April 2016 database).

If we look at per capita GDP, Australia is less of a stand-out, with an increase of 7% over these eight years. On this measure the out-performance narrows: even Japan is up a couple of percent. But Australia still has twice the growth of the US.

RBA Chartpack

It's too early for a definitive assessment of how the transition from the resources boom is going, but so far the cautious optimists like John Edwards are ahead. There is now a wider acceptance that the impact of the resources boom was exaggerated. Half the increase in resource investment was spent on imports rather than in the domestic economy; the calculation of the terms-of-trade impact on income left a lot of room for different interpretation; and so much of the resources sector is foreign-owned that the big swings (both up and down) are felt more by foreign investors than by locals. Coal miner Peabody is now in Chapter 11 insolvency and Xstrata-owner Glencore is restructuring its balance sheet, but these are wholly foreign-owned.

None of the predicted disasters has come to pass. The banks were said to be vulnerable because of their dependence on foreign funding but this was given a real-life ultimate stress-test in 2008 and they came through untroubled. Anyone predicting a repeat of the freezing of the New York money markets hasn't noticed what prudential supervisors have been doing since then. Another popular alarmist prediction was a house-price bust (with the knock-on effect this might have on the banks' mortgage-heavy balance sheets). Again, so far so good: asset-prices seem to be levelling out and even if they drop back, the biggest exposures are with well-placed borrowers. Unless there is a big rise in unemployment, all this seem a case of scare-mongering — or commentators without enough real issues to talk about.

Moody's has put the government on notice that it must do more to get the budget into surplus. It's a puzzle why anyone would take any notice of the credit-rating agencies after their pre-crisis performance in handing out AAA securitization ratings on demand. Certainly the markets didn't take any notice of past down-grading of Japan and the US. But Australian politicians have made a rod for their own backs here, by using the threat of downgrading as an impetus for budget stringency.

In the global context, this pressure for a quick return to budget surplus has been the driver of austerity in the crisis-affected countries. This macro-economic mistake is perhaps the main explanation for 'too slow for too long'. The crisis expanded deficits, more because of the economic downturn rather than the need to support failing banks. Winding these deficits back greatly weakened the recovery: even with a conservative estimate of the fiscal multiplier, each percent reduction in the deficit-to-GDP ratio takes a percent off the growth rate. Look at this graph to see the contraction applied by austerity in 2011-13 and weep.

Source: IMF WEO April 2015 Figure 1.7

Australia had the same debate, with successive governments vying with their opposition in promising faster return to surplus. This was, in fact, unnecessary here. With no recession or bank failures to cause a huge deficit blow-out, moderate government debt levels and time-bound fiscal stimulus, there was no pressing need to return quickly to surplus. Fortunately, the austerity needed to achieve a surplus was never applied. The promised surplus has progressively receded into the future. We were saved by prevarication.

Long-planned resources projects (including LNG) have kept the level of investment from dropping precipitately, and housing investment has helped fill the gap. Total investment has fallen from 28% of GDP in 2007 to 26% in 2015, still strong by international comparison. Unemployment is fairly low, thanks to wages restraint. The slowing has been softened by exchange rates and interest rates. The real (inflation-adjusted) exchange rate is more than 20% lower than its peak in 2012 (the largest fall among mature economies). Interest rates are low in historic terms, but the RBA has not had to resort to the desperation-driven near-zero (and even negative) rates prevailing overseas. Ross Garnaut's advocacy for still-lower rates to get the exchange rate down further seems misplaced in an inflation-targeting regime which has served Australia well.

Of course further structural transition is still needed. While productivity is notoriously hard (maybe impossible) to measure, there is not much doubt that Australia is mimicking the global weakness. At some stage, the budget has to be brought back to surplus.

The valid criticism of past policies is not that they have been seriously wrong, but that the political process has not only failed to take desirable options: it has also blocked them off in the future. The government ignored the main lesson of the successful reforms of the 1980s: when your political opposition advocates good policy, you should seize it as your own. In the current context, trimming back the excesses of negative gearing is an example. Labor's total hash of a resources super-tax in 2010 has put that option off the agenda for as long as memory lasts. Combined with a sovereign wealth fund, this would have been a powerful automatic counter-cyclical instrument for Australian's chronic problem of commodity cycles. The current government botched sensible climate-change policies just as decisively. A carbon-tax was labeled as a 'big new tax' and scuttled forever, ignoring the opportunity it provided to lower other taxes which distort, rather than offset a distortion, as a carbon tax would have done.

Economic reform requires patient gathering of support through rational argument and sensible compromise, not the now-standard point-scoring negative politics. Parties pander to their constituencies. The modest cut in company tax this budget responds to vested interests, ignoring the fact that Australia's imputation policy fully offsets company tax for domestic shareholders. Foreign multinationals are the target of a potentially budget-fixing 'Google' tax, with the actual collection being a problem conveniently in the future. South Australia's political blackmail on ship-building succeeds brilliantly, as industry policy disappears down a dead-end.

Economists, for their part, should be ready to offer compromise second-best solutions, rather than incomprehensible optimality (as was Treasury's proposed resources super-tax).

The key issues for the economy's future are not to be found in last night's door-stop of budget documents. Far-sighted initiatives (such as an infrastructure fund, financed outside the budget) were left for another day. Tinkering has prevailed over structural reform. The strategy which will in due course return the budget to surplus remains uncertain.

On the resources debate, John Edwards' measured assessment of the not-too-disastrous impact of the resources boom is proving correct, but Ross Garnaut's somber message of lost opportunities resounds. With all the advantages of resource endowment and proximity to the globe's fastest-growing region, we should do better than just muddling through. The overall assessment is: 'Lazy: could try harder'.

Photo by Stefan Postles/Getty Images

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We face 'extraordinary' times, 'very sensitive' times, international headwinds and fragility. But the overarching message we are meant to take away from this year's Budget with is a positive one.

In his 2016-17 Budget speech, delivered tonight, Australian Treasurer Scott Morrison stated that the Turnbull Government understands the economic challenges Australia faces. And indeed there is a comprehensive range of measures and policy announcements intended to assure us that the government is responding to our challenges and successfully navigating the transition away from the mining boom.

Unfortunately, the Treasurer's words have been undermined somewhat by his extremely light treatment of the global challenges and risks that are materially important to the Budget figures.

The avoidance of international context is particularly worrying on the back of the Treasurer's decisions not to attend the IMF, World Bank and G20 meetings in Lima last October and in Washington last month, as well as other recent international gatherings.

The scant international content in the Treasurer's remarks is particularly striking in light of the 0.25% interest rate cut announced this morning by Reserve Bank of Australia Governor Glenn Stevens. In justifying the interest rate decision, the key factors cited by the Reserve Bank Board were primarily global in nature. Weighing on the Board was a confluence of downgrades in global economic forecasts, uncertainty about the economic outlook, difficult conditions in emerging-market economies, and the divergence in monetary policy settings.

The Treasurer cited precisely none of these factors in his speech.

He had much to work with. Digging into the details of the Budget papers suggests a prudent, middle-of-the-road set of estimates about the global economy, awareness of the risks, and broad alignment with the international economic discourse and the Reserve Bank Board decision.

The US, Japan and Euro area are expected to grow at modest rates or remain subdued out to 2018 the forecast years. As for our emerging-market trading partners, the ongoing Chinese transition means moderating growth and ongoing risk to the global economy, India's title as fastest growing major country in the world will continue to present opportunities, and other East Asian countries are expected to grow slowly relative to history.

The overall picture is one of moderating global growth, reflecting unresolved crisis legacies, low productivity growth and unfavourable demographics.

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Table 1: International GDP growth forecasts

Given the Budget papers’ claim that risks to growth are broadening and are evident in both advanced and emerging economies, it is also worth paying attention to the uncertainty around the estimates. For interested wonks, Budget Paper 1, Statement 7 details forecasting performance and scenario analysis and is worth a read. It is technical but rich in detail about the uncertainty of numbers.

I’ve produced, with a couple of tweaks, an Aussie version of the ‘most depressing chart in the world’, an honour bequeathed to a chart from the 2016 Economic Report of the US President which explains the succession of World Real GDP growth forecast downgrades by the IMF.

Australian Major Trading Partner GDP forecast, 2010-2018 

Source: Various Australian Budgets and Mid-Year Economic and Fiscal Outlooks (MYEFOs)

The graph explains how well, or rather how poorly, Australia has forecast the performance of our major trading partners – those of particular importance to domestic economic activity – in recent Budgets. We have gotten into a routine of projecting a rosy recovery, which has failed to materialize by the time forecasts become actual, known figures. 

It is an observation entirely consistent with the experience of other forecasters, such as the IMF, and is unsurprising given the tendency for Australian forecasts of the international economy to benchmark our international projection, for very understandable reasons, against credible global and national forecasts. But it means we inherit their mistakes, and this has meant downgrades so far this decade.

What continued downgrades in the international economy means is a very real thing for the Budget. It is a material contributor to the ‘parameter and other variations’ (changes in Australian economic conditions not associated with policy) that are collectively responsible for around $13.5 billion in net tax receipts downgrades since MYEFO out to 2018-19, a smaller downgrade than in recent budgetary documents. In comparison, though, the net impact of policy decisions on the budget bottom line across the same four years (which admittedly covers a range of actions that impact on the budget bottom line) is just $1.2 billion.

In all, this is very much the Budget of a salesperson, one that allows Morrison to distance himself firmly from his predecessor and the highly optimistic tone on the global economy that was a hallmark of last year’s Budget.

A side effect, though, is that when it comes to the big picture, the impression is that Australia’s Treasurer is completely focused on a fraction of the change that drives our nation’s bottom line.  The action by the Reserve Bank, and what it implies about the trajectory of the Australian economy, is therefore likely to steal some of the headlines away from this unusually early Budget.

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Australia is sending one of its submarines, the HMAS Rankin, to Japan this week for joint training and to promote the bilateral relationship, following news last week that the Japanese company Mitsubishi Heavy Manufacturing lost its bid to build Australia's 12 new submarines. Some commentators in Australia have criticised how the government treated Japan during the bidding process, but what’s the view in Japan?

The Japanese media has taken an active interest in the submarine saga, particularly now that the bidding process has concluded. Japan had enacted reforms to allow for the export of military hardware, and building Australia's submarines would have been the first big project under these reforms. Furthermore, building submarines collaboratively was emphasised in the context of closer strategic Australia-Japan cooperation and Australia-Japan-US cooperation.

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Japan expected that its bid was going to be successful. One Yomiuri Shimbun commentator likened the government’s surprise at the outcome to a fall from heaven to hell. Writing in The Australian, Greg Sheridan's recent article based on interviews with Japanese politicians and foreign affairs commentators, paints a stark picture of how Japan now sees Australia as a strategic partner, particularly in the context of Australia's relationship with China. 

While elements of that view are expressed in Japanese media, by and large Australia's acceptance of the French company DCNS' bid is viewed independently from the broader Australia-Japan strategic relationship. However, it should be noted that the Japanese media tended to focus on why Japan lost the bid, rather than the resulting implications. 

Lack of enthusiasm and experience

One of the most prevalent views in the Japanese media is that Mitsubishi Heavy Industries lacked experience and did not commit to building the submarines in Australia until it was too late. Whereas the French and German bidders actively lobbied the defence and political community in Australia, the Japanese bid was promoted by the Japanese ambassador to Australia. Reluctance by some in the Japanese Defense establishment to export sensitive military technology was a reason given for Japan's apparent lack of enthusiasm. 

Domestic politics 

A majority of articles surveyed identify domestic politics as being a factor in the Japanese bid’s rejection. Some reference is made to former Australian Prime Minister Tony Abbott's decision in early 2015 to introduce the 'competitive evaluation process’ but there is arguably greater emphasis on the impact from changing prime ministers from Abbott to Malcolm Turnbull in late 2015. 

The China factor 

Roughly half of the articles surveyed questioned China’s influence on the bid outcome. [fold] For instance, the Yomiuri Shimbun stated that 'if Australia had paid undue regard to China and rejected that Japanese bid, that cannot be overlooked'. The Nikkei Shimbun stated that the view that Australia did not want to irritate China will spread in the Japanese government. An article published in Newsweek highlighted the short period of time between Turnbull’s trip to China and the submarine announcement, as well as his familial and business ties in China. 

Implications for the Australia-Japan Strategic Relationship

While there is little commentary on the broader implications for the bilateral strategic relationship, a few articles do consider the issue. 

The Sankei News warns that a split in Australia-Japan and Australia-Japan-US cooperation could spur on China’s militarization of the South China Sea. The author considers that joint maritime patrols in the South China Sea are worth considering if it both Australia and Japan want to deepen security ties, and advocates that Japanese Prime Minister Shinzo Abe should maintain and strengthen the bilateral relationship with Australia, as to avoid the perception that Australia-Japan and by extension Australia-Japan-US cooperation is faltering.

The Yomiuri Shimbun notes that 'Abbott recognised the importance of Australia-Japan-US cooperation. The Turnbull administration must explain what kind of role it will play in the stability of the Asia Pacific region'. 

What the future holds

While the media expressed shock and disappointment at the result, there was no overt criticism of Australia’s handling of the bidding process. Although Turnbull’s policies towards Japan and China were viewed in Japan as being largely consistent with Abbott, who was regarded as very pro-Japanese, the Japanese media will likely see this decision as a point of departure and this view will be reflected in future commentary.

Photo courtesy of Getty Images/JTB Photo

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It is timely to consider the legal implications of last week's ruling by the  Supreme Court of Papua New Guinea which held the detention of asylum seekers at Manus Island Processing Centre (MIPC) breached their constitutional rights to personal liberty and freedom.

The Supreme Court also found that the purported Constitutional Amendment to legalise the detention of asylum seekers was invalid and of no force and effect, and ordered that:

both the Australian and PNG governments take all steps necessary to cease and prevent the continued unconstitutional and illegal detention of the asylum seekers or transferees constitutional and human rights.

So what are the legal implications of this ruling?

1. Compliance with Supreme Court order

The Australian government may argue that it is not a party to the proceeding, and therefore should not be subject to the court orders made. This situation can be remedied by an application to join the Australian government as a party to this proceeding. If such an application is made and granted, specific orders may be sought outlining what steps need to be taken by the Australian government to end the ongoing illegal detention of the asylum seekers.

Although no timeframe was set by the Supreme Court for these orders to be complied with, the PNG Government has already started to take the steps necessary to end the illegal detention. Last week PNG Prime Minister Peter O’Neill said the centre would be closed and released a statement that said his government would immediately ask the Australian government to make alternative arrangements for the asylum seekers. While the Australian Government has suggested the PNG Court decision is not binding on Australia, it has also indicated would provide assistance to resolve the situation. 

Given the serious nature of the matter, and taking into account the initial procedural delay by the State in settling the agreed and disputed facts, any  delay in resolving the illegality may attract the wrath of the Supreme Court.

2. Reinforced that constitutional amendments should not be made on a whim 

One of the first things PNG law students learn is that the PNG Constitution is the mama law (mother of all laws), because it is the foundation upon which all other laws are built. It should not be amended on a whim.

In contrast, however, the majority of Papua New Guineans fail to appreciate the importance of this document. Therefore, when proposed constitutional laws are rushed through parliament without proper debate or public consultation, it is only the knowledgeable few who take issue and try to rally the masses to protest and question the proposed amendments.

How then do we keep our government accountable, when so many do not understand enough about their constitutional rights and the parliamentary process?

At present, it is our judiciary which has continued to act independently, and kept the other arms of government accountable. This decision serves as an important reminder that the judiciary will continue to uphold the PNG Constitution, and will not bow to external pressure to legitimise rushed, illegal arrangements made by parliament. 

Drawing from a healthy body of PNG case law on constitutional amendments, the Supreme Court was able to summarise the criteria that needs to be met for a law that purports to regulate or restrict a qualified right under the Constitution to be valid.

In this case, the 2014 Constitutional Amendment failed to meet the full criteria set out under s.38 of the constitution. The amendment failed to specify the purpose of the amendment and the rights it purported to restrict, and failed to state that the restriction was 'reasonably justifiable in a democratic society having a proper respect for the rights and dignity of mankind', as the constitution requires.

It is now imperative that the knowledgeable few, which may include civil society, legal professionals, and political experts, create avenues to communicate the importance of this decision to every Papua New Guinean and advocate that they also have a major role to play in keeping their government accountable. 

3. Opportunity for legal reform in PNG 

It seems obvious from the Supreme Court’s judgment that PNG has insufficient legal framework in place to address the treatment of refugees seeking asylum. Read More

  Having identified these deficiencies in domestic legislation, and depending on PNG’s political relationship with the Australian government, two scenarios could follow:

i.  Short term: The PNG Government could quickly draft up new laws, and remedy the flaws highlighted in the decision that rendered the asylum seeker arrangement unconstitutional.

ii. Long term: The PNG Government may take the view that this is an opportunity to consult all stakeholders, and develop a considered policy to address how refugees seeking asylum are treated during detention and processing in the future, and then draft and enact the appropriate legislation to give effect to the rights and freedoms guaranteed under international conventions and the PNG Constitution.

The PNG judiciary and legal profession have gone through some challenging times in the past few years, so this well-considered landmark decision was a welcome event. We should all stand and applaud the ruling of the Supreme Court and its fearless defense of our constitution and the human rights enshrined in it.  Let us hope that our nearest neighbors will respect PNG’s sovereignty and abide by the decision handed down by the highest court in our land.  

Photo: Recep Sakar/Anadolu Agency/Getty Images

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When he rejected the bid by Chinese company, Dakang for an 80% share of S Kidman and Co, Australian Treasurer Scott Morrison offered three reasons why it wasn’t in the national interest.

Each of these three sits uncomfortably with previous deals that have cleared the approvals process. 

This makes the Treasurer vulnerable to criticism that it is not threats to the national interest he is responding to but, rather, populist pressures around investment from China.

The Treasurer's first objection is that Kidman’s portfolio is big. Even with the property at Anna Creek carved out, there are still 11 cattle stations up for sale that cover 77,000 square kilometres. 

Yet in 2009 London-based private equity group, Terra Firma had no trouble taking a 90% stake in Consolidated Pastoral Company (CPC), another Australian business with sprawling cattle station holdings. CPC’s portfolio includes 20 properties, covers 57,000 square kilometres and has more than double the herd carrying capacity of Kidman. And several decades ago, UK company, Vesteys held cattle stations covering an area of Australia more than twice that now for sale by Kidman.

The second reason the Treasurer gave for rejecting the proposed acquisition is that the 11 properties were being offered as a single aggregated asset and this made it difficult for an Australian investor to make a competitive bid.

To be sure, Dakang’s $371 million offer is a big wad of cash. But it is less than the $425 million that Terra Firm paid when it received regulatory approval to acquire CPC’s portfolio. And just two weeks ago The Australian Financial Review reported that Queensland Investment Corporation (QIC) was in due diligence on a likely $400 million dollar deal for the North Australian Pastoral Company, which has cattle stations spread across Queensland and the Northern Territory.

With local billionaires such as Gina Rinehart and Twiggy Forrest also getting into the cattle game, it seems awkward to suggest that Australian suitors lack the funds to compete. 

Indeed, Treasurer Morrison conceded an independent review of the Kidman bid process led by Professor Graeme Samuel had confirmed local bidders had been given an opportunity to make an offer. He added that the review found there 'remains significant domestic interest in Kidman'. No doubt there is. But unlike QIC and the North Australian Pastoral Company, local investors didn’t show the same level of interest in Kidman that Dakang did.

The final reason given for not allowing the deal to go ahead was that it could undermine public support for foreign investment in Australian agriculture more generally.

Here it might seem the Treasurer has a point. Read More

The 2014 Lowy Institute Poll found 60% of Australians are against the government allowing foreign companies to invest in agriculture.

But let’s also be clear about what exactly the Australian public objects to.

In 2015, research by the Australia-China Relations Institute and the Centre for the Study of Choice at UTS found that what most concerns the Australian public when foreign companies invest in Australia’s agricultural sector is the share of foreign ownership that will result, not the dollar value of the deal or the country the money is coming from.

So it’s true that many Australians would not be happy to see Dakang’s bid for Kidman go ahead because it would result in 80% foreign ownership.  But they also wouldn’t be happy with CPC being 90% foreign- owned either, or with any number of other Australian agricultural assets that are entirely foreign-owned.

So why single out Dakang’s bid, if not for political opportunism?

In the end, it will be up to foreign investors to manage the political risk that now seems unavoidable when investing in Australian agriculture. One way they could do this is by partnering with a local investor and restricting themselves to a minority stake.

For some the commercial calculus of a minority holding might still work. But no doubt others will seek to mitigate the risk by simply investing elsewhere. With Australia producing less beef output than it potentially could, countries that compete with us in international markets — such as Brazil, India and the US — will be delighted. 

Photo by Lisa Maree Williams/Getty Photos

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US presidential race 2016

With the outcome of this week's primary in Indiana generally expected to be a key indicator in the GOP nomination (The Hill suggests a win for Donald Trump would  put him on 'a glide path'), perhaps it's time for a bit light of relief.

Here some jokes about the election from White House Correspondents Association Dinner that took place on Saturday night, featuring President Barack Obama and comedian Larry Wilmore:

The ractcheting up of the vitriol between Obama and Trump has been one of the more diverting aspects of the long primary season. Here's a compilation of some of the high points (and plenty of low ones), including a grab from last year's correspondents dinner. 

And finally, an oldie but a goodie. Saturday Night Live's take on Trump interviewing Hillary Clinton:

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By Brittany Betteridge, an intern in the Lowy Institute's East Asia Program.

In February, President Joko Widodo visited Silicon Valley to meet with US technology power players including Google, Facebook, Twitter and the start-up technology investment firm Plug and Play. It was his bid to show that Indonesia is serious about expanding its digital economy and promoting technological entrepreneurship.

Indonesia has an enviable social media presence with the 4th largest Facebook community in the world and the 5th highest number of Twitter users; the challenge lies in how to harness the digital economy for Indonesia's own economic benefit. Jokowi's Administration has taken steps in the right direction by partnering with financial authorities to support small and medium technological enterprises and launching a 4G/LTE telecommunications network.

However, the Administration's proposed new legislation towards foreign e-commerce companies in Indonesia is detrimental to the realisation of a fully liberalised digital economy.

Streaming services like Netflix and Spotify, without a legal presence in Indonesia, have frustrated officials both through their hosted content as well as their capture of advertising revenue streams. As they pay no taxes in Indonesia, Jakarta is unable to gain revenue from the estimated US$800 million value of digital advertising.

Indonesian Minister for Communications and Information Rudiantara has recently proposed a new law requiring foreign companies to have a legal entity in Indonesia or joint-venture partnership with an Indonesian company. The newly proposed law would allow Indonesia to collect tax from these providers.

Read More

However, tech entrepreneurs have criticised the proposal as not having been developed in consultation with digital stakeholders and as causing regulatory confusion. Large tech companies such as Twitter and Facebook, which have had representative offices in Indonesia for several years, could be exposed to higher taxation under the draft, especially if back taxes are pursued, as suggested by Finance Minister Bambang Brodjonegoro in April.

Indonesia needs to revise the current draft to allow it to collect more tax revenue without creating disincentives to new tech investment, or damaging investor sentiments by changing the rules of the game on companies that have already established legal entities in Indonesia.

Jokowi's Administration also plans to create a national payment gateway that facilitates rapid e-commerce payments that Indonesian banks can profit from, as opposed to profit being accrued to foreign banks. The payment gateway would also increase consumer data for e-commerce companies who will be able to track public spending data to better target Indonesian consumers. While the initiative targets an important goal of improving interoperability between different financial institutions and making it easier for Indonesians to make integrated e-commerce transfers, there are questions over how the nationalised system would impact foreign companies.

Under Rudiantara's new business entity regulations, it would  be mandatory for national and foreign companies to use the national payment gateway. But established companies, such as Visa and MasterCard, are likely to provide a more efficient and secure service for this goal than a nationalised payment gateway. The enforced usage of this scheme by foreign companies will be another regulatory barrier to pursuing business in Indonesia. This initiative seems at odds with the Jokowi Administration's broader narrative for the liberalisation of the Indonesian economy, and for an Indonesia moving away from a commodities-based economy to one with robust service infrastructure that is attractive to foreign investment.

For Jokowi, supporting innovation in the context of Indonesia's internet censorship regime might also prove a challenge. Indonesia's controversial 2008 Information Law prohibits use of technology that offends religious or community values, and provides for the enforcement at the national level. Foreign start-ups looking to invest in Indonesia can run afoul of these regulations over the content they host or features of their applications.

Recently, Netflix was blocked by state-owned Telkomsel for objectionable content and its failure to have a business permit to operate in Indonesia. Messenger apps such as LINE were also challenged under the legislation in February, with the service forced to remove all emoji stickers depicting LGBT lifestyles. Having to adapt to regional censorship requirements is not unique to Indonesia, but the new business entity regulations will also make it easier for the Indonesian Government to enforce adherence to censorship regulations. Specific content deemed objectionable can be more easily taken down, as opposed to blocking the entire service.

As Jokowi paves the way for a digital revolution, Indonesia still has a ways to go. A strong digital economy needs a technologically skilled workforce to fill these emerging industries. Investments in technology need to be coupled with strong investments in higher education and research/training. Bureaucracy needs to be streamlined to promote business competition in an environment of government-owned infrastructure and to encourage entrepreneurs to build new products and applications.

Large tech firms must negotiate Indonesia's current digital censorship regulations and uncertain business incorporation entity rules, which are barriers to these companies entering and expanding in Indonesia. The time is right for Jokowi to streamline bureaucracy for technological start-ups and increase investment in digital entrepreneurs and higher research/education to ensure young Indonesians are ICT job ready.

Indonesia is moving from 'main internet' (playing internet) to incorporating it as a fundamental to its plans for economic growth.

Photo courtesy if Flickr user Global Panorama.

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German Chancellor Angela Merkel is paying a high political price for spearheading a European Union deal with Turkey aimed at stemming the flow of refugees from the Middle East to Germany and northern Europe.

The deal, which is based on Ankara taking back refugees arriving in Greece from Turkey, has sparked widespread criticism across Europe with the agreement seen as providing Turkey’s autocratic president Recep Tayyip Erdogan with leverage over the EU.

The result has been to send Ms Merkel’s poll numbers tumbling, while placing at risk her authority as Europe’s pre-eminent political leader amid increasing concerns the refugee deal could unravel.

The agreement with Ankara faces a crucial test this week when Brussels considers a key part of the accord, which calls for the EU to grant 78 million Turkish citizens visa-free travel in the EU from June.

'The issue of the visa waiver is vital for Turkey,' Turkish Prime Minister Ahmet Davutoglu said at a joint news conference earlier this month with Merkel and top European officials during a trip to Turkey aimed at easing tensions over the deal.

The number of migrants making the perilous journey across the Aegean Sea from Turkey to Greece has dropped sharply since March when Ankara and the EU signed the deal, which also involves reviving Ankara’s long-stalled EU accession talks and providing Turkey with €6 billion ($9 billion) in EU aid to arrange refuge for the 2.7 million migrants stranded in the nation.

But the plan for sending asylum seekers back to Turkey has not been fully implemented as a result of concerns expressed by groups including the UN and European humanitarian organisations about a range of issues, notably the treatment of non-Syrian refugees. Ankara does not apply the Geneva Convention on refugees in full. 

Resistance to the visa waiver is also running high in both Ms Merkel’s conservative, Christian Democrat-led bloc and several EU member states. Those opposed fear the move would pave the way for a new wave of Muslim migration into Western Europe, which is already battling its biggest refugee crisis since the Second World War.

Among the sceptics is Berlin’s number one ally, France, where French President Francois Hollande faces a tough reelection fight in the first half of next year.

But then it was tensions unleashed by the arrival last year in Germany of more than one million refugees fleeing wars in the Middle East and Africa that forced Ms Merkel to agree to Turkey’s requests —  to speed up its EU accession talks and obtain the visa waiver — so as to stanch the flow of asylum seekers.

Turkey’s political leadership might have distanced themselves from last week’s comments from the Turkish parliament speaker, Ismail Kahraman calling for the nation’s constitution to reflect its Islamic identity.

Still, for many in Western Europe, Mr Kahraman’s remarks have only added to worries about the sense of change underway in Turkey.

'The introduction of Islam as a state religion would result in further divisions in Turkey’s already highly polarised Turkish society and threaten social peace,' said Cem Ozdemir, co-chairman of the German political party Alliance '90/The Greens, who is of Turkish origins.

But even before Brussels decides whether to grant Turkey the visa waiver, German prosecutors could rule on whether a German comedian should face criminal charges as a result of a crude poem he read out on public TV about Mr Erdogan, which the Turkish leader claimed insulted him.

Read More

A decision by prosecutors that the comedian, Jan Boehmermann, has a case to answer, could pile on the pressure on Ms Merkel's after she agreed to allow prosecutors to consider the issue, sparking a bitter row in Germany about free speech and artistic freedom.

Mr Erdogan had demanded Mr Boehmermann face charges under an antiquated law, which prohibits insults against foreign leaders and which has been untouched since the 19th century when slights of honour could settled by drawing pistols at dawn. 

The Boehmermann case and the EU refugee deal have come just as Ankara’s human rights record and its crackdown on the media — along with reports of a black list of foreign journalists — have helped to fuel worries that Turkey is increasingly out of step with western European values. 

Ms Merkel herself has in the past been one of the prominent opponents of Turkey’s long-held quest for EU membership.

But her decision in the Boehmermann case has left her open to claims that she has allowed Mr Erdogan to export his clampdown on freedom of speech to Europe. 

Up until recently, Ms Merkel’s personal approval ratings have remained remarkably high despite the concerns about the refugee crisis and a sharp slump support for her conservative Christian Democrat-led political bloc in the wake of a deep split among her supporters about her handling of the migrant drama.  

If Ankara meets its side of the bargain, the EU has promised to recommend on Wednesday that EU states approve visa-free travel for Turks. A recent Politbarometer poll suggested 80% of Germans believed the chancellor had made too many concessions to Turkey in her negotiations with Ankara over the refugee crisis.

Most doubted that Ankara is a reliable partner, while 62% of those polled said they were deeply unhappy with the chancellor's decision to ask prosecutors to rule whether Mr Boehmermann had case to answer for.

Ms Merkel has already announced that the section of the criminal code which Mr Erdogan had taken his legal action would be removed by 2018.

But the sudden plunge in her support appears to have rattled the chancellor who has acknowledged she made mistakes in the handling of the Boehmermann case, a rare admission for a political leader.

Her description of Mr Boehmermann's satirical poem — which implied the Turkish leader enjoyed child pornography and had sex with animals, among other insults — as 'purposefully offensive' could have given the incorrect impression that freedom of opinion and of the press were no longer important to her, Ms Merkel said.

'With hindsight that was a mistake,' she said attempting to set the record straight ahead of a visit to a refugee camp in Turkey and a meeting with Turkish Premier Ahmet Davutoglu.

Human rights and values would always feature in diplomatic discussions, 'but human rights, rights to freedom, the rights of the press are indispensable assets,' Ms Merkel said.

'And that a situation can arise where it is thought that such things would be abandoned because we just made a deal with Turkey — that was flawed,' she said.

Photo: Dan Kitwood/Getty Images

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The Modi Government’s quest to ensure women’s safety in India has resulted in a ‘panic button’ policy. From 1 January next year, all mobile phones sold in India must be equipped with panic button technology. From 2018, all mobile phones must have GPS tracking.

Indian government ministers were quick to praise Modi’s announcement. Women and Child Development Minister Maneka Gandhi, described the built-in panic button as a ‘game changer’. Communications and Information Technology Minister Ravi Shankar Prasad said: ‘technology is solely meant to make human life better and what better than using it for the security of women?’.

Women's safety rose to the top of the policy agenda in India after the globally publicised gang rape of Jyoti Singh on 16 December 2012. When the news of Singh’s assault hit the media, protests swept across New Delhi and India, enduring beyond her death two weeks after the attack. In a nation frustrated by pervasive patriarchal norms,  protesters angrily demanded the government take action.

The case triggered a series of legislative changes. In 2013, stricter laws including the death penalty were passed through the Lok Sabha (Lower House) and Rajya Sabha (Upper House). Six ‘fast track’ courts were established in Delhi to deal with crimes against women. A women-only police hotline was introduced, as were women-only counters at police stations. Reporting of sexual harassment (or, ‘eve teasing’, the euphemism common in India), sexual assault, and rape increased. Between 2013 and 2014 alone, reporting increased as much as 15 per cent.

But while the institutional environment for reporting crime by women had improved,  India’s archaic and under-resourced courts mean progress through the judicial system is slow, often resulting in no conviction. It is no surprise then, that Modi is scrambling for new solutions to the problem of women’s safety in India.

In a country where mobile phone ownership is the second highest in the world, ordering a mandated panic button is one way to ‘protect’ women across the country. In the event of an assault, a woman will be able to trigger the panic function by keeping a finger pressed on the number '5' or '9' on a phone's keypad. This will alert the closest registered emergency contacts who can raise an alarm with authorities. Little more detail about the panic button is known.

There has been much praise for Modi for his #DigitalIndia panic button solution, especially by the Ministry of Women and Child Development, which began advocating for the button two years ago. But it is not without its critics. Read More



Firstly, women’s rights activists argue that it is a reactive policy and makes no substantial contribution to improving safety for women. This is against a backdrop of politicians and police who have previously argued that women should not loiter after dark, should ‘dress decently’, and take self-defense classes. Activists argue that the government needs to do more to proactively address cultural challenges.

Secondly, there is the criticism of women’s access to phone ownership. In several villages in Modi’s home state of Gujarat, mobile phone use is at the discretion of the Gram Panchayat (village council). In the village of Suraj, mobile phone ownership and usage are banned for girls. In other villages, single women and teenage girls are banned. One villager argued: ‘Young girls get misguided. It can break families and ruin relationships’. With 250,000 self-governing Gram Panchayats across India, many women and girls affected by such attitudes will have no access to panic buttons. 

Finally, there is criticism that government is using women’s safety as a proxy for surveillance. The GPS localisation function is presumably so that authorities might easily locate victims of assault. However, there is increasing concern over the intention of this mandated function. Given the ferocity of the net-neutrality debate following internet.org’s arrival in India, it would be a paradox that a mandatory GPS function is so easily adopted.

Modi’s ‘panic button’ policy does little to address the cause of crimes against women in India. The high-profile Delhi gang rape sparked significant legislative change and ignited an increased pressure on the Government to address women’s safety. The Modi Government is desperate to implement policies that illustrate its commitment to reducing crimes against women to its domestic and international observers. However, critics have noted that the panic button is reactive and shifts the blame to women, that mobile phone ownership is often at the discretion of men, and that the GPS function is a proxy for surveillance. 

Photo courtesy of Flickr user World Bank

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