Rowan Callick (Asia-Pacific editor)

As China battles to keep its grip on the steering wheel of Asia, the world’s engine of economic growth, a new power is rising rapidly in the region: India.

India, whose law-based, democratic institutions and pluralistic culture are national elements widely shared in the region, has not yet developed an Asian narrative to rival China’s impressive “silk road” suite.

But as China becomes mired in a deepening web of disagreement in the South China Sea, India is starting to emerge as a second potential Asian champion.

This has been underlined during the past week of extraordinary national self-examination and of celebration.

The week began with India’s 1.25 billion citizens receiving a warm letter, published on the front page of ever newspaper: “Friends, this is just the beginning. Our objective is to transform quality of life, infrastructure and services. Together we shall build the India of your dreams.”

It was signed off, “Always in your service, Narendra Modi.”

For Australia, the dream he conjures, is of a vast country becoming our “new China” with an insatiable hunger for our resources including iron ore and especially coal, and for our skills and capital.

The charismatic prime minister has been celebrating over the last few days, his first anniversary in office, widely dubbed India’s “Modiversary.”

Modi has begun to embody the vast nation’s hopes maybe even more than do his all-conquering Asian counterparts, Japan’s Shinzo Abe and China’s Xi Jinping – whose “Chinese dream” has tellingly become his own signature phrase.

Modi is affectionately being dubbed NaMo by India’s fast-expanding mass media – even though he has failed to give a single press conference at home since being elected, preferring to communicate directly through social media and through cleverly staged telegenic events, especially during his international visits.

Few had expected that he would be such an avid traveller, visiting 18 countries including all India’s neighbours and all the world’s major economies.

In most, he has been feted by members of India’s 25 million strong diaspora, as the first national leader to honour them – with his Bharatiya Janata Party (BJP) opening a special office dedicated to “non resident Indians.” Importantly, many retain their right to vote.

He has been portrayed in such visits not as a humble novice but as a proud equal of all he has encountered. He has taken with him around Asia, experts on yoga, underlining India’s “soft power” as the heartland of Buddhism – despite his party’s founding core as an agent of Hindu zeal – and of an enduring pan-Asian culture.

His visit to Australia, including a confident speech to parliament, was the first by an Indian prime minister in 30 years. It made a strong impact, magnified through the presence of Indians who have become the biggest group of skilled migrants, overtaking Chinese in the last two years, with Australia heading towards a million people of Indian background.

To entrench his new position on the global top table, it is essential that Modi ramps up the Indian economy so that it does not only hit the high spots – double-digit economic growth – occasionally, but sustainably.

Already, India has overhauled China as the fastest growing large economy in the world, heading for 7.5 per cent for 2015.

Modi inherited power – or seized it – from a Congress Party that had already moved in this direction, but more tentatively.

Now, his government is unequivocally chasing growth on the East Asia model.

He has changed the political conversation, says influential thinker Amitabh Mattoo, Delhi-based chief executive of the Australia India Institute, from one about government support to one about growth and jobs.

The pent-up hunger for personal as well as national progress has “seized the hour” to the extent that other narratives lack oxygen.

The aspirational Indian of all castes and religions is now pinning her or his hopes on Modi.

Australia and India are careering rapidly towards a free trade agreement by the end of 2015, pledged by the two prime ministers but appearing at first beyond reach.

Modi has kept his government extraordinarily busy issuing ambitious targets, always accompanied by deadlines. He has already begun hauling in his ministers and top bureaucrats to review progress.

Among them, is to “upskill” 500 million people by 2022 – because up to 65 per cent of the population works in agriculture, which contributes just 16 per cent of GDP.

As in the process now tailing away in China, hundreds of millions need to – and increasingly want to – come off the land to find more productive employment in India’s teeming cities.

Australia’s TAFE sector and its universities are being sought to play a key role in this transition.

India needs to attract more investment, and to upgrade its infrastructure to do so, ambitiously seeking to create 100 new “smart cities” of 1 million or so.

Australia’s financial institutions – all the major banks are already there – and infrastructure and logistics consultants and companies can play key roles.

Amitabh Kant is one of the new technocratic leaders who are seeking to realise Modi’s and India’s dreams in a hurry, battling the demographic demons that are seeing China’s population overtaken in the next few years – with 72 per cent of Indians now under 32. If they emerge as young adults without skills or jobs, they become a large looming threat.

Kant is the Secretary of the Department for Industrial Policy and Promotion, one of the new top bureaucrats with whom Modi works directly, and on whom he depends as much as on his variably competent ministerial team.

The Economist’s front cover headlines “India’s one-man band”, showing Modi playing a sitar but burdened with drums, tubas, and a kitchen sink.

His supporters say that while he appears to be in effect his own Foreign Minister and Finance Minister – personally playing the leading role in drafting his two budgets – he is a good listener to those he respects.

And he clearly respects Kant.

Kant told The Australian that his own KPIs include to drive manufacturing – which powered east Asia’s own rise – from 16 per cent of GDP to 25 per cent, helping absorb those marching off the land, where “agriculture needs a second green revolution,” another area where Australia has a role to play.

This industrialisation program is dubbed by Modi “Make In India,” with 25 promising sectors identified.

Already, the first car both designed and manufactured totally in India is coming off the production line – the Kwid, made by Renault-Nissan in Chennai.

India is already famous for its hi-tech skills, and it is rolling out a new nationwide process of providing biologically certified registration of its poorest 850 million people.

This, allied with the access of even India’s poor to smartphones – 950 million mobiles are already in circulation – will enable the government to target welfare directly to individuals rather than as at present through inefficient and economically disruptive subsidy schemes.

E-commerce will help drive new jobs, Kant said, leapfrogging earlier technologies – though also, more challengingly, 21st century industrialisation will employ fewer people, as robotics keeps advancing.

Already, Kant said, foreign direct investment has climbed 56 per cent this year, with new sectors being opened up to international corporations including railways, defence, construction and insurance.

He said: “We need to negotiate a trade deal with Australia,” and stressed the need for coal imports, without which “India will not grow at the record rate it requires, for the three decades it needs.”

Australia’s resource inputs are crucial, he said. And India’s own mining sector is being opened up – “from which Australian players will get huge benefit.”

Kant said: “We want world class mining. This is just one element among the many synergies between India and Australia.”

The gap between ambition and performance remains necessarily wide after just one year of a five-year administration.

But Trade and Investment Minister Andrew Robb has become a believer, investing sufficient faith in positive outcomes to be planning his fourth visit to India in seven months, later in June, to help keep the FTA on its fast track, despite India’s stretched negotiation resources.

A poll for the Times of India, with 35 million daily readers, gave Modi’s government a 66 per cent approval rating. Its own editors went a step further, awarding it 77.5 per cent in their own assessment – headlined “Modi govt gets Distinction in its first year.”

The editors’ highest figure was 9 per cent for “restoring leadership, governance and work culture,” and also for “burnishing India’s image globally.”

To become eligible for such acclaim, Modi has had to clear the decks. The editors also awarded him 9 per cent for “curbing corruption, cronyism and black money.”

He said in a speech celebrating his anniversary: “Hundreds of power circles in Delhi have been demolished.”

The lobbyists and brokers for patronage and promotion who have for decades swarmed around and within Delhi’s rabbit-warren-like public service ministries, have never had it so bad, his supporters boast.

The political opposition isn’t in great shape either.

Rajeen Gowda, head of research for the Congress party is a member of the Upper House whose powers and turnover of members are similar to Australia’s Senate though without the same capacity to block budget items.

He told The Australian: “The magnitude of the Modi victory caught us by surprise. It was a huge shock.”

But now the party is starting to fight back through the Upper House – where Modi is likely to gain control eventually, but not for a few years.

It is holding up the passage of two key pieces of legislation – a new law on land acquisition intended to free up the development process, especially for infrastructure, and the introduction of a GST to cut out residual trade barriers between states, provide them with more assured income and encourage them to compete.

Modi has pursued these bills “on the wrong foot,” Gowda said, operating in a presidential manner and failing to negotiate or to consider the need for Indians at all levels to grant their consent for disturbing change.

“He successfully sold a developmental dream – encouraging people to believe the glory days are already with us – but somewhere a price has to be paid along the way, and that penny is starting to drop.”

Besides the “dream” rhetoric – “over-promising like crazy,” he said, “Modi’s guys do a tremendous amount of trash-talking and mud-throwing. His Defence Minister recently said we have to fight terrorism with terror. Modi has got the whole country in a tizzy.”

Swapan Dasgusta, a ubiquitous commentator close to the prime minister, naturally views the Modiversary differently, as “a moment for people to reflect about whether we’re on the right road.”

Modi “hasn’t shied away from the difficult issues. But he’s not an ideologue, he’s not a Margaret Thatcher flinging copies of Hayeck at her Cabinet colleagues.

“He has felt his way forward. He believes business has in the past been treated with an unfair degree of distrust.”

But Modi takes pains to stay at a public distance from business leaders, even those such as Gautam Adani – with massive coal investment plans in Queensland – whom he has known well for decades. Both come from Gujarat, where Modi cut his political teeth as an action-man chief minister.

Dasgusta said that “India has a fractious, combative political culture,” but crucially Modi retains an inner calm. He doesn’t have much of a life outside his political career. He lives a semi-monastic life as a devout Hindu.

He has a circle of 200-250 people around the country to whom he turns for advice, and with whom he might talk late into the night, sometimes for six or seven hours, said Dasgusta.

But this is not India’s traditional elite. “He has never got on well with old money.”

Modi is however “generally a good listener,” he said, especially plugged in to India’s vast aspirational class and their dreams.
*Rowan Callick visited India as a guest of the Australian high commission.

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Rowan Callick (Asia-Pacific editor)

A typical middle class child in South Korea goes to school from 7.30am to 5.30pm, has a snack, then at least a couple of days a week travels to an after-school college, studies there from 6.30 to 10pm, then starts homework after returning to her or his home.

On Saturdays, they are likely to take piano and possibly art lessons, as well as some further academic tuition.

This arduous regimen applies to many primary school children as well as to most of those at high school.

The rest of the world, including Australia, is increasingly shamed by the test results of north Asian students into vowing to catch up with their stellar performance.

This is of course easier said than done.

And there’s a further question: what is the cost?

Rayoung Kang, aged 28, knows.

An English graduate, she now teaches maths and English at an after-school institution in Seoul.

“Parents are very nervous about their children not doing enough studies,” she says. “So they may send them to more than one extra institution, on top of school.

“It’s a crisis if a child really doesn’t want to study so intensely.”

Kang says she has hardly ever come across a child who only studies at school, even though most school days last 10 hours. Almost all, go to extra tuition classes.

Sometimes private tutors are hired to come into the home – “but usually this happens on the two ends,” she says – “either because the child is reluctant to study, or because they’re especially bright.”

Korea’s celebrity tutors chiefly operate in the home. Parents who hire the, want to minimise public exposure for their children. “It’s where privacy is a priority – for the parents also,” says Kang.

“Mostly, money doesn’t matter to these parents. The tutors they hire, tend to focus on maths and English. They guarantee good results, they come from prestigious universities. They have good communication skills with the students, and have a big reputation.”

A male friend of Kang’s teaches in a private school and also does some tutoring. “A parent offered him $A25,000 a month, only to teach her children, because she didn’t want him helping their potential competitors.

“He rejected the offer although of course the money was good – but maybe next year , he said, he might not have a regular job, and would no longer have such a reputation, since he’d be working for a single family.

“The reputation issue was the most important for him. I understand my friend’s decision, as well as the attitude of the parents, because it’s a very, very competitive world.”

The top tutors get plenty of exposure on cable TV and on the internet, she says, broadcasting their coaching sessions.

Classes delivered by internet might cost about $A120 a session, per child. “And mostly that’s cheaper than paying to go to an institution like mine,” says Kang, “which can cost from $A60 per chapter of a book up to $A600 a month.

“I prefer teaching face to face. Internet teaching is OK but there’s less feedback of course.

“Mostly, students in Korea don’t ask questions anyway.”

She says: “My students usually ask me any questions in the break-times, because of peer pressure which makes it hard for them to admit in sessions that they may not fully understand something.

“I have to watch their faces and read their expressions to assess their comprehension. If they don’t seem to have understood, I’ll repeat the problem or question again. That’s my teaching skill at work.”

Parents, she says, are usually highly concerned about controlling their children’s time, especially invigilating their internet use, and the amount of games they play.

The core focus of both parents and students is on tests.

“The ultimate goal of education is to go to university,” Kang says. “In high school, especially in maths and English classes, there’s no time to discuss any problems or questions the students may have because the syllabus is so full, and there’s big pressure on time efficiency, for both teachers and students. The curriculum is intensive.”

Unfortunately, she says, as students get older, the time available for discussion is reduced. “There’s no time for thinking creatively, or even for solving problems, in high school. They just have to memorise.

“They have to practise a lot, not think a lot. In maths especially, students have to follow the teacher’s instructions exactly. I try to provide some space in English for students to introduce some of their own ideas and skills – though the course still requires considerable vocabulary memorisation.”

She usually has about 30 students in a class. “Their parents are typically really nervous about their children’s future. They are eager for them to go to a prestigious university. Grades are more important than any other issue.

“The parents say their students should win the race, and will do so if they learn more before a subject even starts to be covered in class at high school.”

So the after-school college introduces them to the subjects they are to learn at school.

“In reality, says Kang, “often they just remember they have studied a subject, but don’t understand it 100 per cent.”

The system, she says, can create circular dilemmas, even for students who study a lot and parents who spend heavily on their education. The results are not always there.

“Between kinder and middle school,” she says, “some parents are prepared to think about creativity. They might take their children to a museum or to a foreign country, and allow them sufficient free time to communicate with each other.

“But as time goes by, especially in the last three years of high school, it gets hard to sustain that. They are focused on getting to university. Music, art, PE are part of high school curricula at first – but tend to fall away in the higher years.

“After entering university, the students often follow their own interests, and seek to express their creativity – which has been denied them in the previous few years. They start to follow their passions” – and some, naturally, just a little, freak out.

Only about 10 per cent of aspirant students can get to a university which is perceived as famous – “reaching the sky,” as the Korean phrase goes, gaining a place at Seoul or Korea or Yonsei Universities.

In the past, everything hinged on a single big test – but now school grades are also starting to be considered, as well as their own personal statements and interviews.

Inevitably, students’ parents pay for them to be tutored for such university interviews.

Kang admits: “The sheer volume of hours put in, can drive success. But I think many children simply don’t have enough time to sleep.

“At weekends parents tend to let them sleep in, and they are often so exhausted they will sleep all day. It’s all very stressful. We have a lot of tiger mothers and fathers.”

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Rowan Callick (Asia-Pacific editor)

We’re going through a purple patch for leaders in the big Asian countries.

A few years back, we had the least known leader for a century, the ultimate committee-man, in charge in China, a bright but exhausted economist, wearied by political infighting, as prime minister in India, and machine-politicians succeeding each other after brief terms in Japan.

Now those countries – the most powerful in the world except for the USA, though Russia and Germany might stake claims – are led by giants: Xi Jinping, Narendra Modi, and Shinzo Abe.

Each charismatic, purposeful, and dominant within his own country.

Can they work out a way not only to avoid bumping into each other dangerously, but to co-exist and even prosper together? The signs are cautiously promising, but the winds that blow across Asia can always change direction suddenly.

A few days ago we saw Abe stride across America, asking of it a vision for a re-energised role in Asia, the world’s largest and most important continent, in a manner which demanded a positive response of the type that the US polity appears no longer capable of providing.

The bathetic attempt by Barack Obama and his Secretary of State, the incomparably incompetent John Kerry, to attract a caucus of Arab leaders to the US to discuss the American embrace of Iran makes for a sorry comparison.

Today Modi arrives in Beijing for a three day visit, his first since becoming prime minister a year ago.

Security experts and economists on each side have been billing this encounter with all-powerful President Xi as the latest round in a growing geopolitical contest.

India under Modi has intensified connections with the US, built military cooperation with Vietnam – involved in a bitter maritime dispute with China – and enjoys a special relationship with Abe, as Japan Inc launches a new investment wave into Asia.

In advance of the visit, Chinese media have complained about Modi visiting the disputed border region of Arunachal Pradesh, and Hu Zhiyong of the Shanghai Academy of Social Sciences wrote in Global Times that “due to the Indian elites’ blind arrogance and confidence in their democracy, and the inferiority of its ordinary people” – an unhappy phrase – “very few Indians are able to treat Sino-Indian relations accurately, objectively and rationally.”

He also told the Indian government to “stop supporting the Dalai Lama,” who of course lives there. Modi recently obliged, cancelling a meeting scheduled between the Dalai Lama and Amit Shah, president of the Bharatiya Janata Party he leads.

The Indian side has expressed its own concerns about China’s extraordinary $50 billion investment in an economic corridor through Pakistan, giving it land access to the port of Gwadar – because the corridor includes disputed territory in Pakistani Kashmir.

Modi has moved swiftly to intensify relations with other countries that China has long courted, such as Iran, Afghanistan, Nepal, and now Sri Lanka, and Indian ocean nations Mauritius and the Seychelles.

But the benefits of cooperation can also be immense, given the deep continuing developmental needs of both countries – though with China still well in the lead.

Modi, for instance, signed up India as a founder of China’s Asian Infrastructure Investment Bank, while China has held out the prospect of a “strategic cooperative partnership.”

China is escorting India into APEC membership, and leading the construction of new transport links between the countries.

The prospects for improvement are obvious. Total trade between these most populous countries in the world, is only half that between China and Australia.

GavekalDragonomics analyst Tom Miller says this economic potential will only be fulfilled once security concerns no longer overshadow the relationship, and doubts that their “huge trust deficit” can be plugged.

But that’s where the vision and authority of these three considerable leaders comes in. Their challenge is to retain their domestic support not only in spite of international deals that bring the three countries closer, but through doing them.

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Rowan Callick (Asia-Pacific editor)

A local Chinese court has refused to implement a $3.9 million international arbitration award – endorsed by Australia’s High Court – in favour of a Melbourne based wholesaler against a Chinese supplier of faulty air conditioners.

Michael Kwong, the managing director of Castel, which employs 83 people, said this hole in the company’s liquidity has placed expansion plans – including taking on more staff – on hold since the stoush began in 2008.

The notoriety of the case – which was celebrated with the High Court’s verdict as a ground-breaking victory for Australian hopes to establish a global arbitration business here – is causing growing concern in the sector.

Mr Kwong said that he hoped that the free trade agreement with China that is now approaching its final stages of ratification, would help resolve the issue, with costs and interest now pushing the total payable past $6 million.

But Trade and Investment Minister Andrew Robb told The Australian: “I think it would be unfair to link problems that may arise under commercial contracts with free trade agreements.”

Mr Kwong said that his Hong Kong-based business partner was told in 2009 during a visit for discussions with Chinese supplier TCL at its base in Guangdong province: “You will never get your money, because we have taken care of things here in Zhongshan,” the company’s home city of 3 million people, whose local court has refused to implement the award.

The relevant judge in Zhuhai, where TCL is a powerful major employer, has described the issue as “very sensitive.”

Mr Kwong said that “unfortunately, TCL doesn’t have assets in Australia,” so he has no choice but to pursue enforcement in China. “I’ve had to fund everything out of my own pocket, since this issue began in 2008.”

He said that it would be wrong to generalise from this problem, “since we now do very good business with a very honourable Chinese company, Midea.”

Bryan Clark, the director of trade and international affairs at the Australian Chamber of Commerce and Industry, said that “despite the excitement about international trade, with glib remarks about getting legal advice often made as an adjunct, there’s also this dark side to it.

“We’ve certainly seen such cases before. And too often in such cases, legal advice has come from people more familiar with equipment leasing and estate planning. We would never say to someone not to do deals with Chinese companies – but to do so with your eyes open.”

The Chinese corporation, TCL, produces a wide range of electronic products, led by TVs, and signed an exclusive deal with Castel Electronics, a nationwide wholesaler, to sell its airconditioners within Australia.

Castel claimed later that TCL had breached the deal, which provided for recourse through international arbitration – as is typical of such contracts.

After a 10-day hearing, a panel of three arbitrators in Melbourne awarded Castel $3.2m compensation and $700,000 costs, for violation of exclusive distribution rights as well as frequent product failure.

TCL challenged this award through the Australian legal system, making the radical assertion that the entire Australian arbitration system is inconsistent with the national constitution – saying the judiciary alone has the power to determine such disagreements.

Doug Jones, the president of the Australian Centre for International Commercial Arbitration and head of major projects for Clayton Utz, said when the High Court rejected this challenge, that it had found that “arbitration is a consensual process by both parties, and that it is therefore perfectly valid for the Australian parliament to enact this UN modelled law, known as “the New York Convention”.

“This finding places Australia firmly in the camp of countries that practise international commercial arbitration, that are automatically enforced the world over.”

However, although China’s own Supreme Court had directed through Guangdong’s provincial legal system that the international arbitration award must be implemented, this “automatic” enforcement has remained elusive.

Albert Monichino, the president of the Chartered Institute of Arbitrators Australia, said that China has recently introduced a new rule to boost confidence in reliability of contracts, and to protect the country against negative economic and political consequences of failure, that “if local courts are not minded to enforce an arbitration verdict, then the case leapfrogs to the apex court” in Beijing.

Such enforcement, he said, “is not a merit review,” where the facts or legalities can be revisited. “Beijing understands that local courts should not be allowed to soil China’s international reputation” by holding up proceedings.

Investor-State Dispute Settlement mechanisms that Australia has in place with a growing number of countries, including with China through an investment treaty and in the forthcoming FTA, only safeguard investors against discrimination and expropriation, Mr Robb stressed – not traders.

Mr Robb said: “FTAs establish the trade commitments of the countries involved, they do not regulate private contractual arrangements between businesses. Our free trade agreements are about opening new doors for business; they certainly should not be seen as a substitute for businesses doing due diligence to the best of their ability.

“Nor do FTAs determine the conduct of domestic legal proceedings within foreign countries, or for that matter in Australia.”

Luke Nottage, Professor of Comparative and Transnational Business Law at Sydney University, said that the Castel-TCL case is “an example of how international arbitration law and practice in Australia still has a long way to go if we want to compete at all realistically with venues such as Hong Kong and Singapore.”

He said that while “courts in jurisdictions that have adopted the NY Convention generally understand” that their role is chiefly to implement verdicts, “problems can still arise if the courts are corrupt, inefficient, or unfamiliar with international arbitration law and practice.”

A TCL spokesman has said that “TCL supports the principle of international arbitration but the international arbitration clause has been determined by the Chinese courts to be invalid.

“The matter has been considered by the Supreme People’s Court of China and we understand it has been remitted to the Zhongshan Intermediate People’s Court for further consideration.  The matter is still before (that) court.”

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Rowan Callick (Asia-Pacific editor)

Right now, the questions uppermost in many Australia minds are clear.

They are, how can we make Indonesia’s political class know just how much we detest what they’ve done to Andrew Chan and Myuran Sukumaran?

And what more can we do to punish them, besides the somewhat esoteric diplomatic measure of withdrawing our ambassador, Paul Grigson – a move Indonesia has itself made twice in the last decade?

The relationship with Indonesia has been here before. Indeed, the Timor Sea that separates us might well be renamed the Dire Straits.

The highs and lows have been intensified both by our proximity which causes our failures and successes to be highlighted, and also by our mutual lack of understanding, of engagement between our peoples beyond brief holidays.

For this reason, urges Tim Lindsey, the director of the Centre for Indonesian Law, Islam and Society at Melbourne University, “I think it is vital that this not be simply an Australia-Indonesia issue.

“We need to join with other countries – including possibly the UN, whose secretary-general Ban Ki-moon has intervened twice on the issue – to make it multilateral.

“We lack leverage and will be too exposed on our own.”

In the dark hours of yesterday (Wed) morning, Indonesia executed four Nigerians, a Brazilian and an Indonesian as well as the two Australians – while a Filipina and a Frenchman were given temporary reprieves.

In January President Joko Widodo approved the execution of citizens of Brazil, Malawi, the Netherlands, Nigeria and Vietnam, all also convicted of drugs charges.

With Brazil and Holland also already withdrawing their ambassadors, if Widodo carries through his pledge to execute the scores more of foreigners on death row, Jakarta’s diplomatic corps could end up as a very thin residual group.

Indonesia is one of only a handful of countries that still today executes people for such offences. Capital punishment is otherwise carried out worldwide overwhelmingly for forms of murder.

Gathering international support to press Jakarta to halt what is turning into a wave of state-conducted massacres of drug traffickers, will provide a fresh test of the impressive calibre of already over-burdened Foreign Minister Julie Bishop.

But Australia’s success in its temporary role on the UN Security Council which expired at the start of this year will provide Canberra with a handy base for ratcheting up global opposition to the recalcitrance of beleaguered Jokowi and Indonesian parliamentarians on this issue.

Back home, the executions themselves only comprise the first round of public anguish.

More will come with the funerals of Chan and Sukumaran, likely to be occasions of extraordinary grief, which will intensify those demands of Australians for “action.”

Beyond shifting holidays from Bali – which many Australians scarcely regard as part of Indonesia – to newly democratic Fiji, there is not much that individuals can do, however, in part because the people-to-people links between the countries have remained remarkably thin for such close neighbours.

And Australians have already been flying to holiday in Bali in increasing numbers this year, despite Indonesia’s intention to execute Chan and Sukumaran.

In January and February, 156,424 Australians travelled to Bali, up 16.74 per cent on the same period in 2014. More Australians visited Bali than any other nationality – comprising about a quarter of the total – followed by Chinese tourists.

The Indonesian rupiah has been falling virtually in tandem with the Australian dollar, so that Australians do not suffer from a worsening exchange rate which is causing many other international destinations to become more costly.

Ross Taylor, president of the Perth-based Indonesia Institute, said – before the executions – that “the more ‘thinking’ Australians have worked out that Bali is 1,300km away from Jakarta, where these death sentence decisions are made.”

He foreshadowed that a new ban on alcohol sales might have a considerably greater impact on Australian tourism. However, the legislation – pushed through parliament by two Islamic parties a fortnight ago – applies principally to convenience stores, and exempts certain locations to protect tourism, including five-star hotels and the island of Bali.

Business measures are not likely to prove especially effective either in “punishing” those who approved the executions. Again given the size of the Indonesian market and its rapid economic growth in recent years, Australia is only modestly engaged there.

Our investments in Indonesia, for example, are half those in that other neighbour, Papua New Guinea.

That leaves many talkback radio callers and social media users suggesting we cut or shift, maybe to Nepal, our government aid to Indonesia – $605 million this financial year.

But where is that aid targeted?

Among other goals, to provide support to and help combat corruption in Indonesia’s law and justice sector – which the Bali Nine cases underline, remains in serious need of reform – to improve the way local governments deliver basic services such as education, water and sanitation, to help address the health needs of women and children, tackle HIV, malaria and emerging infectious diseases.

The problem with attacking such aid is that the impact tends to be felt by many thousands of ordinary folk, but not at all by those responsible for the issue at hand.

It would not touch Widodo himself, for whom the killing of foreigners is readily deployed within the domestic political framework as a demonstration of strength of character, of resolve that otherwise appears to have evaporated as his presidency has been subsumed within the resurrected political caravanserai of his patron Megawati Sukarnoputri, his least competent predecessor to date.

The lack of dignity surrounding the executions, and the lack of respect that led to requests from Australia’s Prime Minister and Foreign Minister going unanswered, have reinforced this perception of incompetence, even of goodwill.

In stark contrast, some Indonesian figures emerge from this appalling episode with enhanced dignity.

Chief among them is Todung Mulya Lubis, the Australian victims’ leading lawyer, who has dedicated his distinguished career to working towards an honest and fair legal system that reflects human rights.

He was director of Indonesia’s most famous dissident NGO, the Legal Aid Foundation, which under the Suharto regime led to his office being broken into, and to death threats. Even now, he needs a bodyguard in Jakarta.

On a visit to Australia last year, where Melbourne Law School appointed him an honorary professor, he said that still today, “many perceive the legal apparatus, including the judiciary, as having become an instrument of those who have the means to buy its support.”

Lubis, a strong and consistent campaigner against the death penalty in Indonesia, had been optimistic, as the Widodo presidency began, that he was a president who could finally put into place the aspiration of the 1945 constitution that Indonesia should be a nation based on negara hukum, the rule of law.

But immediately after the executions yesterday, the exhausted Lubis tweeted: “I failed. I lost. I am sorry.”

Lindsey, a long-term friend of Lubis, and chairman of the Australia Indonesia Institute, told The Australian that “these killings will taint President Widodo’s dealings with Australia for the rest of his current term.

“It will probably make it impossible now to develop the sort of relationship that Australia had with President Susilo Bambang Yudhoyono, which for all its ups and downs, was overall a real boon for Australia. “

He said: “There will always be tensions in the relationship between neighbouring countries that are so different, but a warm working relationship with the president allows them to be managed much more effectively.

“The absence of this key platform for cooperation, together with the fact that Widodo’s government is fragmented, weak and greatly influenced by inward-looking conservatives, suggests very difficult times ahead for the bilateral relationship.”

Malcolm Cook, senior fellow at Singapore’s Institute of Southeast Asian Studies, agreed, saying that the executions “should act as a reality check on the limits of Australia-Indonesia relations and Australian influence in Indonesia.

“They clearly reinforce the large cultural, ethical and policy differences between the two countries today. The executions also reinforce the counter-productive nature of diplomatic pressure on Indonesia over what it views as internal matters.”

Cook highlighted the almost-universal view among such experts, that the two SBY terms were the best for Australia-Indonesia relations. “So far, this judgement is standing the test of time.”

He said: “The Jokowi administration, as shown by the sinking of Vietnamese fishing boats, stronger language on its maritime boundary dispute with China in the South China Sea and these eight executions, is quite nationalistic.

“From its first days in office, the administration has been sensitive to what it perceives as foreigners and particularly foreign governments not treating Indonesia with the respect and dignity it feels Indonesia deserves.”

Michael Wesley, the director of the Coral Bell School of Asia Pacific Affairs at the Australian National University, expects that at the official level there will be a freezing of high level contacts but that the normal process of on-the-ground engagement will continue.

“The big unknown is nationalism on both sides,” he said. “There’s some pretty nasty stuff coming out on Twitter in Australia, and the chances of that starting to drive nationalism in Indonesia are pretty high.

“My worry is that the round of executions – not just the Australians – will have the effect of deepening the sense of isolation and nationalism among Jokowi and his foreign affairs team.

“We’ve already seen what a retail, low-horizoned politician he is. How he will react to an impassioned Indonesian nationalism is likely to be very different from SBY”.

The Lowy Institute’s Indonesia expert Aaron Connelly has a markedly different take, expressing concern that those seeking an explanation have “attributed a malevolence to Jokowi for which there is little evidence.”

He said that instead, “Jokowi is motivated by the zeal of a reformer, albeit one with a very different sense than most Australians of what constitutes reform.”

Andrew O’Neil, head of the School of Government and International Relations at Griffith University, said: “My take is that this episode will follow a pretty standard path in the bilateral relationship.

“The aggrieved party will take a demonstrable measure to register displeasure and to address public opinion – the withdrawal of the ambassador – but not do anything likely to do damage to the underlying relationship.

“I certainly think there’s an extra edge to this because of Tony Abbott’s and Julie Bishop’s relationships with the families, but my belief is that they have a clear sense of how this will play out in time.

“In a sense this is quite analogous to the spying controversy in 2013, when SBY recalled the ambassador in Canberra. It will be a bit turbulent for a while, but the Australian foreign policy elites have prepared for this eventuality for some time and will not let it get out of control.

“The challenging part will be managing a domestic backlash that may be harder to predict, particularly if the Opposition pushes the line that the Abbott government could have tried harder.”

So far, however, that hasn’t happened, and despite the inevitable social media trolls parading their grisly relish for capital punishment, the compassionate Australian core remains for now crushed and united by the events on Nusakambangan, Execution Island – and genuinely puzzled as to where our relationship with Indonesia goes from here.

The post EXECUTIONS CRUSH HOPES FOR INDONESIA-AUSTRALIA RELATIONS appeared first on ROWAN CALLICK.

Rowan Callick (Asia-Pacific editor)

Only one head of a foreign government flew to Melbourne for the state funeral of Malcolm Fraser last Friday.

That was Peter O’Neill, Prime Minister of Papua New Guinea.

Whatever that says about Fraser, more importantly it underlines the closeness between PNG and Australia – which often appears to be a one-way street, with Australians knowing less about PNG as each generation succeeds the next.

O’Neill himself has emerged as a remarkable figure in PNG’s usually battle-scarred political landscape, which makes Game of Thrones look tame.

He has suffered criticism for the peremptory manner of his government’s takeover of Ok Tedi mine, and for the failure to clear up the cloud of corruption that lurks over well-attested collusion between public service heads, lawyers and others to steal hundreds of millions of dollars of public funds.

But he has emerged as an almost irrepressible force in the nation, with a growing role in the Pacific islands region and as a link between the islands and Asia.

O’Neill told The Australian during his visit for the funeral that he had met Malcolm Fraser on several occasions.

Fraser, he said, had helped PNG attain independence under Gough Whitlam, and had supported the country through its early years – after becoming prime minister just two months after that event.

“That’s why I came, to pay our respects to him and his family. We really appreciated that bipartisan support in Australia.”

Fraser had described for archives how as Defence Minister, he prevented Prime Minister John Gorton from circumventing the usual process for calling out troops during the Mataungan uprising in East New Britain, PNG, in 1970.

Five months after Fraser ceased to be Defence Minister in 1971, and after he had succeeded in holding back troop deployment, the respected district commissioner there, Jack Emanuel, was killed by Mataungan supporters.

O’Neill said that sending in the army then, would have made the situation even worse, however. He said that Fraser was especially remembered for helping establish in PNG’s early years, “good funding arrangements directly supporting the budget.”

Even though Australian aid – $577 million this financial year – is much smaller today as a proportion of the whole PNG budget, O’Neill said, it remains significant, and ensures Australia retains a high presence in the country.

He said that despite criticisms that PNG was not ready for independence, the country had remained “a very robust democracy” through the ensuing decades, “withstanding many tests.”

The Manus asylum seeker processing centre had been established 14 years ago, and reopened in late 2013, because PNG saw that “our friends in Australia needed help, and that many lives – about 2,000 by then – were being lost at sea.”

He regretted that Australian media had “played up to this in a very aggressive manner, portraying PNG as an undesirable place to live.”

But now that the PNG government had taken control of the centre’s administration, he said, the situation there was calm, with growing numbers “quietly” agreeing to return to their home countries.

Refugees being settled within PNG were pleased with the scheme, and PNG communities had been welcoming, he said: “It’s obvious we are on the right track, and the sooner we resettle many of the asylum seekers, after processing, the better for everyone.”

He said that “we need to see the details” of Foreign Minister Julie Bishop’s new aid program that is designed to work closely with the private sector.

“But we have a very good understanding with the Australian government, and at our annual ministerial forum with Australia we review how these programs perform.

“Our own approach is to refocus priorities not only on social services led by education and health but also on building infrastructure, and that is starting to show good outcomes.

“We are getting the Australians to align their aid programs with our government’s priorities, to reduce duplication and maximise limited resources.”

He said that PNG was facing some of the same challenges as Australia, in managing the commodities downturn, with minerals and energy providing more than 80 per cent of the country’s export earnings.

O’Neill said that in framing the 2015 budget, revenue expectations – including from the country’s major new earner, liquefied natural gas – were not clearly articulated, “so we didn’t capture much of that in our funding projections for this year and next.”

This has proven helpful, as prices for some of PNG’s biggest exports have kept falling.

“We will play it by ear,” he said, “and may need to make adjustments at the next budget, but we are giving the 2015 budget a chance to perform. It’s early to talk about a supplementary budget.”

And, he said, the country is starting to receive some revenues from LNG sales that were not captured in the budget estimates, because production began earlier than planned.

“All in all, we are being conservative, knowing that global conditions are uncertain.”

The government is starting to sell shares in some of its state owned companies. But this does not amount to privatisation, O’Neill insists.

Instead, he said, “we are raising capital to expand these businesses’ operations for the benefit of our own citizens, and of their customers.”

First cab off this rank will be a minority stake in the national carrier, Air Niugini. “We are committed to expanding its fleet, especially to increase flights to and from Asia.”

“But we shall maintain PNG ownership of such assets, and the first option to buy shares will be provided to our citizens. If demand is not there, we shall then look to other options.

“The state will continue, however, to hold substantial shares – ensuring security and regulatory stability for the relevant industries. We are not doing this to raise revenue for government – we are doing so to expand services.

If the Air Niugini sale works well, he said, then the government’s monopoly electricity utility, PNG Power, will follow when it is ready for market.

But the PNG Power accounts “are in a mess,” he said, “and they need to be cleaned up first.”

The prime minister said that PNG’s model for this phase of its development is south-east Asia, and especially Singapore, “where successful corporations such as its airline have retained substantial state shareholdings.”

“This is a model we are trying to follow,” he said – “moving away from direct government control,” with professional business managements and “with substantial ownership through sovereign wealth funds and superannuation funds, but where mums and dads can also take a stake.”

O’Neill is thus making plans that will take his administration through to the next election, due in mid 2017, and beyond.

This marks a change from the more familiar political past, when at such a stage in most parliaments, prime ministers were forced to focus on shoring up their support against votes of no confidence – often backed by MPs from within the government’s own ranks.

But O’Neill is the most powerful politician PNG has produced since Michael Somare – who remains, astonishingly, in parliament, 40 years on – during the independence era.

Jan Kees van Donge, political science professor at the University of PNG, wrote recently on the Development Policy website at the Australian National University, that O’Neill “manages to deflect criticism of his person and performance by diverting the debate to development.

“He is a master at creating a discourse in which he considers governance issues as secondary to his great scheme to break the stagnation or lack of implementation in PNG’s administration.

“Besides that, he identifies with worthy issues that are above political controversy, such as fighting domestic violence or campaigning against the spread of tuberculosis.”

Van Donge concluded: “O’Neill is popular, and there is nothing to be gained by going against him.”

O’Neill himself told The Australian that his support in the parliament is close to 100 of the 111 members.

He ascribes this to their viewing the government’s performance, and noting that “people are happy about our focus on key programs, which are being delivered – such as free education, and free health care.”

He said: “Of course, there have been some teething problems, but that happens to any program. We have, though, been reaching the majority of people.”

This is producing a virtuous circle, he said, in which “good government performance is providing confidence to MPs and to their communities,” who are backing the government, providing it with stability from which it in turn is encouraging the politicians and their local leaders to work together.

O’Neill strongly disagreed with the criticism that MPs’ loyalty has primarily been obtained by a massive and growing proportion of government spending being disbursed through constituency committees they control.

That funding, he said, is being distributed “through structured government agencies, implementing government programs.”

This is beginning to address for the first time in 40 years, he said, the maintenance of infrastructure – of health centres, classrooms and run-down roads.

“People who had lost hope are starting to see light at the end of the tunnel, with development happening as they had expected.”

In his own constituency, for instance, the district committee had instituted a “zero-tolerance” approach to potholes, he said, so that they are now all fixed within 24 hours.

Corruption remains a big issue for PNG, where conspiracy theories multiply in an environment in which state theft appears common.

O’Neill said that legislation is ready for the May sitting of parliament, to introduce an Independent Commission Against Corruption.

“But some government agencies are being politically compromised,” he said. “In an environment in which votes of no confidence in the parliament can’t succeed, our critics turn to such agencies in seeking to destabilise us.”

He said that “each individual case will be brought before the courts” of senior officials or politicians who appear to have conspired to steal public funds.

He has been accused of issuing a letter authorising payments to prominent lawyer Paul Paraka. “The signature appears to be mine,” he said. “But the letter didn’t originate from my office, and they can’t find the original.”

Some police officers, he said, had taken this matter up personally. It is now before the courts.

Despite the constant airing of rumours through PNG’s lively and sometimes toxic social media, O’Neill said he trusted that “Papua New Guineans are very knowledgeable people, and will make their determination at the appropriate time.”

His opponents’ attempt to use social media to destabilise the government had backfired, he said, due to lack of evidence. “People get tired of it after a while.”

This September, during the 40th anniversary of independence, O’Neill will host the Pacific Islands Forum leaders summit – and then two years later, the more challenging APEC summit, which will see the American, Chinese and Russian leaders arrive in Port Moresby.

Typically, O’Neill is confident that PNG will meet the immense challenges that such events present: “People who come to Port Moresby at these times will have a pleasant surprise.

“They will see the country experiencing rapid economic growth, and delivering basic services to our people, with new infrastructure that is starting to work.

“I am looking forward to hosting these events, to showcase what the nation has achieved – and in the APEC case, introducing a note of informality that people will enjoy.”

The post HOW PM PETER O’NEILL DOMINATES PNG’S POLITICAL LANDSCAPE appeared first on ROWAN CALLICK.

Rowan Callick(Asia-Pacific editor)

The surprisingly rapid dominance of President Xi Jinping has not yet subdued China’s political factions, which had effectively called the political shots for two decades.

Cheng Li, the director of the John L. Thornton China Centre at the USA’s Brookings Institution, did most to expose to the world the factions that kept the country’s leadership balanced but tentative following the death of the last all-powerful communist party figure, Deng Xiaoping.

Now Li, who on Tuesday delivered the Lowy Institute – AMP China Lecture in Sydney, is turning his attention to the country’s elite politics – which he says is certainly now no less important, and no less vicious.

He told The Australian that in late 2012, on the eve of the five-yearly national party congress, “I divided politics in two camps” – the taizidang or princelings, and the tuanpai or Youth League followers, broadly led by successive party general secretaries Jiang Zemin and Hu Jintao respectively.

The Politburo Standing Committee (PBSC), China’s peak decision-making group, that emerged at that congress was no longer balanced, Li said. Of the seven members, six were from the Xi-Jiang princeling faction, and only Li Keqiang, who became Premier, from the tuanpai.

“Xi received tremendous support from the top leadership. What happened next was quite dramatic.”

Some of the most powerful figures in the Chinese firmament fell, or were dragged down by corruption investigations – including Bo Xilai, the principal princeling rival of Xi, Ling Jihua, Hu’s chief advisor and head of the party’s United Front Work Department, and Zhou Yongkang, who had recently been chief of China’s security structure, a member of the PBSC, whose family and friends ran the country’s strategic oil and gas industry.

The anti-corruption campaign has targeted both “tigers” – heavyweight figures – and less important cadres, “flies.” Li said that four of the tigers brought down, were formerly associated with the princeling faction, “so you can’t say the campaign is driven purely by factional politics.”

But the campaign has created gaps in the ranks that can be filled by the next generation from within the faction, Li said.

“Xi’s real challenge now, is the consolidation of power so that he has his own people within both civilian and military hierarchies. That’s still very slow to take place.”

He points out that while Xi’s allies control the Politburo and its standing committee very clearly, the central committee of the party, comprising 376 people, presents a different picture, with Hu Jintao’s tuanpai camp holding a majority.

“In that regard, Xi still has an uphill battle. His relationship with Jiang and Hu remains complicated.”

It’s too early to say how the dynamics of top-level politics in China will play out, Li said.

“Everyone in power is interested in maintaining the party’s rule, and recognise the importance of dealing with corruption,” he said.

But a debate is now being triggered about whether it might be becoming excessive, and whether and how it may have an endgame. “And no one wants it to undermine their own or their family’s or their proteges’ interests.”

Xi faces the challenge, he said, that those next in line for promotion to the top jobs tend to be allies of Jiang Zemin’s faction, rather than his own personal supporters, who are moving in to position – but at lower levels for now, because they are younger.

Xi is changing the governance structure already, though, Li said, evolving away from the collective leadership style of Jiang and Hu who were first among equals.

“Xi is clearly already the boss, like Deng and Mao.”

But he said it was too soon to assume this meant the longer term return to the Chinese system of “strong-man politics.”

He said that “some say his assumption of control of ‘leading groups’ that determine policy, is a sign of weakness rather than of strength. In Deng’s later years the only body he chaired with China’s Bridge Association.”

Such consolidation of power, Li said, meant that Xi would have to shoulder the blame as well as take the credit, as policies work their way through.

“Twenty years of collective leadership have established a framework of retirement ages and of other rules and norms that will be difficult to change. Xi still has to follow some of the rules of this game. He still can’t direct, for example, who goes to which positions in every case, as Mao or Deng could do.”

Even in the Mao and Deng eras, he said, there were factions which required a share of power, and today China is becoming more pluralistic, and regional representation is becoming more significant.

Li said he wondered if instead, Xi’s brilliance as a politician might be directed towards improving China’s collective leadership rather than replacing it – “using his political capital to contribute to institutionalisation rather than taking the strong-man route.”

He said; “Xi is a man of contradictions. Yes, he comes from a very prominent family, he grew up in Zhongnanhai” – the party’s HQ in Beijing – “but he’s also become quite dramatically a man of the people, extremely popular among the Chinese public.”

Li said that “monopolised power,” which some commentators are already pronouncing as the hallmark of the Xi epoch, “brings with it huge costs and dangers, false friends and enemies.”

He said that Xi may not fulfil that expectation, and may instead introduce surprises, for instance through legal reforms, as he “constantly searches for his agenda, for his legacy.”

China’s political structure is not sufficiently accommodating or flexible, he said – adding that he would not rule out Xi considering appropriate institutional development.

At present, he said, Xi and his supporters “have made a lot of enemies” through the anti-corruption campaign, and “it’s not difficult to imagine some forces trying to undermine them.

“That’s why their chief challenge is to consolidate and develop their legal, economic and political reforms – for which they are buying time by applying old methods, such as the corruption campaign, that deal with symptoms rather than causes.

“That makes sense. No country can change overnight, and to make changes you need first to consolidate your own power. People can debate whether or how Xi is implementing it, but few say he’s got the wrong agenda.

“China is thus at a very critical moment.”

The post MASTER ANALYST OF CHINA’S FACTIONS SAYS ELITE POLITICS REMAINS CRUCIAL DESPITE SUPREMACY OF XI appeared first on ROWAN CALLICK.

Rowan Callick (Asia-Pacific editor)

A true Asian giant has left the room.

Such figures do not only emerge from giant states.

In the last half century, the world’s most famous and respected figures have come from South Africa – Nelson Mandela, from Myanmar – Aung San Suu Kyi, and from Singapore, comprising a mere 1,000 square kilometres – Lee Kuan Yew.

Lee’s extraordinarily durable political career and his irrepressible personality encapsulate east Asia’s own rise, as does no other figure.

The Singapore that he did so much to position for prosperity, was ideally located, for a trading state, at the gateway of the Malacca Strait – as its modern founder Sir Stamford Raffles discerned two centuries ago.

But when he was growing up there, it was a relatively quiet British colonial backwater.

Lee’s own family slid from middle class comfort during the Great Depression of the 1920s, and during the Japanese occupation he worked as a clerk.

He worked for some time transcribing radio intercepts from Allied sources for the Japanese, but then as the tide turned he narrowly escaped being shot on a beach with a group of other Chinese men who were taken away in a truck – by asking a guard if he could collect some clothes from his home before joining the others.

His family sacrificed massively to ensure the children received the best possible education. That meant, in post war Singapore, England.

Lee graduated with a double first in law at Fitzwilliam College, Cambridge, and campaigned for friends in the Labour Party who won the ensuing election.

He returned to Singapore in 1949, determined to help his home city become self-dependent rather than relying on a Britain which had failed it so dramatically seven years earlier, when the Japanese forces raced down the Malay peninsula.

Lee would then have been viewed as a Leftist. The People’s Action Party he helped form was a broadly socialist party, with a strong alliance with trade unions. He was to lead the party for a further 38 years, and in many ways remained its leader until his death yesterday (Mon).

Step by step, the sure-footed Lee took the right decisions for the future of the tiny embryonic state.

It merged with Malaysia when that appeared the best way to leverage independence from the British.

Then, with reluctance and with genuine sadness five years later, he accepted the failure of this move – and looked for solutions to the pressing challenges that Singapore faced as an independent entity.

These included access to water, and a capacity to defend itself at a time when the Cold War was at its height, and the communist threat to east Asia was building, with China collapsing into the dangerous chaos of the Cultural Revolution.

Lee played a crucial role in the formation of the Association of South East Asian Nations in 1967, whose initial impetus comprised mutual protection against the rise of communism from within, and externally from the contagion of which the “domino theory” warned.

Singapore became a classic example of the Asian “guided democracy” in which the state played a strong hand in areas deemed important for defence and national identity, but in which capitalist endeavour was prized.

As the danger of communism eased, Lee himself began to guide Singapore towards a different ethos, one in which he was supported by his Malaysian counterpart Mahathir Mohamad, who was prime minister for 22 years until 2003.

Their personal relationship remained awkward at best, but together they propagated the concept of Asian Values as an alternative both to communism and to Western liberalism.

The prophet of Asian Values was the ancient Chinese philosopher Confucius. The leaders took from Confucius, their understanding of his approach to respect for elders, for authority, and for family.

In his introduction to the Analects of Confucius, the late Pierre Ryckmans, the great Australia-based Sinologist, writing as Simon Leys, referred scathingly to Lee’s efforts to propagate “the magic recipe – supposedly found in Confucius – for marrying authoritarian politics with capitalist prosperity”.

It was substantially through this connection, however, that Singapore provided a compelling development model for recent generations of Chinese leaders.

It is remarkable that a city-state of just 5.5 million can thus provide a template for a country the size of China. But much of what Lee and his compatriots have accomplished, is understandably highly attractive for China’s rulers.

Singapore has become extraordinarily prosperous. Its average annual gross domestic product of $A71,683 per person is about five times that of neighbouring Malaysia, from which it emerged.

It is a stable community where law and order largely holds sway, where corruption is constrained, where order and decency are fostered and largely upheld.

And – by no means least in Beijing’s thinking – it is a state where a single party has remained in power for about six decades, and which although starting to face genuine electoral opposition, retains the capacity to keep winning elections.

But Lee himself, while greatly admiring Deng Xiaoping in particular, was far from an acolyte of the Chinese communist party. He was, despite his continuing espousal of a certain Englishness, impeccably Chinese in a cultural sense but not in a mainland political sense.

Lee was a figure who generated extraordinary respect in Singapore, as throughout Asia and the wider world, without seeking to become loved. He preferred a Confucian role to that of Western style populism. He especially sought – and delivered – efficiency and productivity.

He did not encourage a personality cult. He was not sentimental or nostalgic. There are few if any statues of him extant.

But his family became – and remains – deeply immersed in all the power positions of the state, to an extent that the Lee clan, rather than the dynasty’s founder Lee Kuan Yew, might be seen as incorporating Singapore itself.

For instance his elder son, Lee Hsien Loong, has been prime minister for 11 years, while Hsien Loong’s wife, Ho Ching, is chief executive of the state-owned finance giant Temasek Holdings, one of the world’s largest sovereign wealth holdings, while another son, Lee Hsien Yang, is chairman of the Civil Aviation Authority.

Lee Kuan Yew said in a 2008 speech: “Many people say, ‘Why don’t we open up, then you have two big parties and one party always ready to take over?’

“I do not believe that for a single moment. We do not have the numbers to ensure that we’ll always have an A Team and an alternative A Team. I’ve tried it; it’s just not possible.”

His family members clearly comprise this A team. Alongside them are a cadre of highly educated, accomplished managers.

But as Lee Kuan Yew began to shed positions – though he remained in the Cabinet led by his son, until his death – the economic times began to shift, and Singapore began to seem for once behind the times.

It appeared to lack the innovative skills needed to adapt to rapid technological change.

The strictness of Singapore that had earned respect, began to look outmoded, and to act as a constraint on creativity.

Tee shirts appeared everywhere proclaiming: “Singapore is a fine country” – where everything was still fined, from spitting to chewing gum.

Questions began to be asked, including: does Singapore respect the rule of law, or is it ruled by law?

It has been the tough task of Lee’s son to oversee the transition from the straight-laced Confucian state to one which is more yielding, where greater acknowledgement is paid to artists, to inventors, even to those who may appear eccentric or politically questioning.

Singapore has succeeded in subtle reinventing itself to the extent that opposition politicians are no longer invariably harassed, often in the past through legal pursuit whose goal was to bankrupt them.

It has retained the loyalty of most of its smart Generations X and Y citizens, many of whom have become sufficiently well educated to take their portable skills elsewhere in the world.

Lee Kuan Yew himself demonstrated a durable capacity to adapt his thinking to the times. He did not permit himself to be tied down, by that earlier Asian Values construct, to fatalism about the West – especially after the salutary experience of the Asian financial crisis of 1997-1998.

When he was 89, he published an anthology of recent material that exemplified his continuing intelligence and incisiveness.

In it he asserted: “America’s creativity, resilience and innovative spirit will allow it to confront its core problems, overcome them, and regain competitiveness” – although he felt the “Asia pivot” pointed to policy problems.

He said: “If the US wants to substantially affect the strategic evolution of Asia, it cannot come and go.”’

He said that the very name China – Zhongguo, or Middle Kingdom – recalled a region in which it was dominant.

He asked: “Will an industrialised and strong China be as benign to Southeast Asia as the US has been since 1945? Singapore is not sure. Neither is Brunei, Indonesia, Malaysia, the Philippines, Thailand or Vietnam.”

He said they are “uneasy that China may want to resume the imperial status it had in earlier centuries, and have misgivings as being treated as vassal states.

“When we do something they do not like, they say you have made 1.3 billion people unhappy. So please know your place.”

He urged the Chinese to “avoid the mistakes made by Germany and Japan. Their competition for power, influence and resources led in the last century to two terrible wars. The Russian mistake was that they put so much into military expenditure and so little into civilian technology that their economy collapsed.

“I believe the Chinese leadership has learned that if you compete with America in armaments, you will lose. You will bankrupt yourself. So keep your head down, and smile for 40 or 50 years.”

He said: “If you believe there is going to be a revolution of some sort in China for democracy, you are wrong,” because the party believes it needs a monopoly on power for stability.

And he said of China’s powerful president Xi Jinping: “There is always a pleasant smile on his face, whether or not you have said something that annoyed him. He has iron in his soul.”

Lee famously warned much earlier that Australians risked becoming the “poor white trash of Asia.”

Since then, however, as Australia prospered, through and beyond the Asian financial crisis, Singapore has become a huge investor here, from Optus to Sydney’s landmark Queen Victoria Building to Tiger Airways.

Singapore was one of Australia’s first free trade partners. The countries are assiduous members of the Five Power Defence Arrangements that also incorporate New Zealand, Malaysia and Britain.

When Australia hosted the G20 summit last year, Singapore and NZ were the countries which it invited to join the table. The relationship is today remarkably close.

Partly for that reason, Lee’s warnings continue to reverberate whenever, as now, Australia faces important choices and transition.

Richard Nixon said that if had Lee lived in another time and another place, he might have “attained the world stature of a Churchill, a Disraeli, or a Gladstone.”

Nixon was wrong. That Lee lived in Singapore in the latter 20th century did not one iota constrain him from striding the world in a way which those British leaders would have admired.

The post LEE DIES – A TRUE ASIAN GIANT LEAVES THE ROOM appeared first on ROWAN CALLICK.

Rowan Callick(Asia-Pacific editor)

While China’s new Asian Infrastructure Investment Bank has rightly excited debate in Australia following this paper’s revelations about Prime Minister Tony Abbott’s positive change of mind, this bank is far from the culmination of China’s remarkable regional ambitions.

It is in fact just a sub-set of a very big picture indeed – one that makes US President Barack Obama’s fast-fading “Asia pivot” appear desultory.

Even though China’s most powerful leader since Mao Zedong, President Xi Jinping, has been explaining his vision for almost two years, its arcane “Silk Road” nomenclature has largely produced patronising dismissal as mere thought-bubbles from Western onlookers.

But the true extent of Xi’s extraordinary program is now coming into sharper focus.

And its realisation is already appearing inexorable – with the whole neighbourhood caught up.

Only Japan, and to a degree India, have the capacity to consider standing to one side as the swirling silk roads start to be realised.

Overcapitalised and choking on pollution, China is re-directing its formidable development machine, which has been so effective in raising living standards at home, into the rest of its region.

The China model, viewed as the top global template by the World Bank, has begun replacing former foreign aid driven concepts of development.

It is sending out its state owned corporations that control the key strategic heights of its own economy, as well as private firms, supported by massive funding as its foreign exchange holdings are brought home from their long-term passive investment in US Treasury bonds, and made available for regional investment.

The still-expanding concepts inter-linked through the “Silk Road” thread, include:

• The Chinese Dream – its details left open for popular imagining, but with reference to China’s Tang and Qing “golden eras” of regional expansion and control strongly implied
• The New Silk Road – reviving China’s glorious days of global trading across central Asia during the Tang dynasty 1400 years ago, now to link all its land neighbours and economic partners further afield, as far as western Europe
• The Maritime Silk Road – reviving the adventurous voyages of eunuch Admiral Zheng He with his vast trading fleets 600 years ago, to underline the importance to 21st century China, the factory of the world, of unhampered sea routes for inputs and products
• One Belt, One Road – respectively, China’s land and sea connections with markets, placing both “new silk roads” within the same concept
• Asian Infrastructure Investment Bank – a $A66 bn Chinese initiative to involve other lenders in providing ready capital for new infrastructure for developing countries in the region
• Silk Road Fund – a $A53 bn infrastructure-and-trade financing mechanism for development in the region, diverting some of China’s massive foreign exchange holdings
• New Development Bank, to be set up in Shanghai with $A132 bn from China and its BRICS partners Brazil, Russia, India and South Africa, to protect them against international financial volatility and to finance infrastructure
• The government has promised to provide further details of this Silk Road suite during the annual Boao Forum on Hainan island that starts in a week

Chinese leaders love to read history. And they are now starting to channel their understanding of Britain’s and Holland’s initial, fruitful deployments into Asia via economic entities – their East India Companies.

China doesn’t want formal colonies, into which these first profitable European forays eventually evolved.

But it does want to build the infrastructure that much of the rest of the region lacks.

This would accelerate Asian growth overall, and it would link the new, modern communications systems – freeways, high speed and freight rail lines, air routes and ports, and even Internet providers – in to China as the vast hub.

China thus becomes again today, as during the first Silk Road 15 centuries ago, the core of the world’s great value chains, their indispensable heart.

The program partly hinged off China’s desire to gain access to the largely undeveloped resources of remote Central Asia.

But it rapidly expanded to absorb the entire region, in a new Great Game that far eclipses predecessors.

The involvement of China’s neighbourhoods in production chains is a process that has been under way, in a less concerted manner, since China first began the “opening and reform” era under Deng Xiaoping 35 years ago and became the world’s factory.

But the process is about to receive a massive acceleration, one that will enable Beijing to feel it can start to retire the mantra of the ruling communist party about suffering “a century of foreign humiliation” from the Opium Wars until the People’s Republic was inaugurated.

The hour of foreign vindication is at hand instead.

The decade – or even, some are now whispering in Beijing, longer – of Xi’s leadership began with China testing its neighbours’ attitudes to sovereignty, with its forays in the East and South China Seas.

China has not fully resiled from that exercise. But it learned enough from the readiness of the region to resist and to seek greater involvement by the USA, in order to deploy now, far greater resources into its new, economically-driven Silk Road vision.

Nor is China pulling back from its involvement in global or multilateral bodies.

But it has tended to feel outnumbered and outgunned there – symbolised by the failure of the International Monetary Fund to reform itself sufficiently even to redistribute a modest 6 per cent of its shares between the countries led by China whose share of world GDP has soared since the system was established after World War II.

The US Congress has been the body holding up that latter reform since 2010, for which the Obama government must share some responsibility, for failing to manage effectively its relationship with the legislature.

But instead of labouring this point, China has decided to move on – and is now seizing its opportunity to fashion organisations that better reflect its own priorities, and possibly also those of the broader region.

This diplomatic impetus is coinciding with an economic and social impetus.

While the flow of people to China’s cities continues, it has slowed, and the country’s demography under the now-unwinding one-child system has seen the working population peak in 2012.

Demand for the development machine is consequently slowing at home.

And the government has been saying with increasing volume that the country has been over-building, and depending too much on manufactured exports – exacerbating the pollution that, together with corruption, have cast a pall over the popularity of the communist party.

And although growth remains brisk at about 7 per cent, it has inevitably moderated recently as the big-ticket items for a modern economy have started to be completed, and as restructuring gets under way towards a greater role for services and for consumption, and less for manufacturing and for inputs.

Former ambassador to China and director of several China-focused corporations Geoff Raby notes “a huge swing to services,” and that consumption now comprises more than half GDP.

The economy continues to generate significant savings, even as it is changing.

These have included the immense profits of state owned corporations, many operating in monopoly or oligopoly situations in strategic sectors such as finance, communications and utilities.

The leadership team under Xi – with Premier Li Keqiang commanding the nitty-gritty of economic management – is putting pressure on these companies to perform more efficiently, with less waste, and with less grandiose spending on their own managements and head offices.

But the savings liberated by the redirection of the economy are unlikely to end up substantially in the pockets of Chinese households.

For the new Silk Road drive is hugely demanding. To prove themselves, state owned and private Chinese companies must now find projects and partners in this vast Silk Road neighbourhood.

Making China’s money work better for the now declining work force, for those starting to retire – who are growing old before they grow rich, as the Chinese saying goes, but who won’t mind so much if they still grow rich – and for companies that have reached saturation point in the domestic market, is going to become ever more important.

That means, in big part, investing it in economies – ideally nearby – that need it, and have the potential to grow as fast as China did in its early reform years.

This may also involve the shift to these countries – such as Kazakhstan, the vast land in central Asia, or to Myanmar, or to Cambodia – of some of the more polluting types of heavy industry no longer acceptable in Chinese neighbourhoods, and of some labour-intensive factories being priced out by growing Chinese wages as the pool of workers declines.

China’s own internationally competitive manufacturing sector was crucially driven as it began to crank up, by capital, managers and technical experts from Taiwan and Hong Kong.

China will now increasingly play that role itself, in its developing neighbourhood.

If this new Silk Road vision is fully realised, it will revive the demand for commodities – many produced by Australia – that has slowly declined with China’s own need for new infrastructure and inputs.

This is the other side of the “fox hunt” coin. As China’s security agencies have begun pursuing corrupt officials across the globe, Chinese money has also come under surveillance.

And at the closing press conference of the National People’s Congress last Sunday, Premier Li was asked if he was concerned about Chinese property investment being blamed in Australia and elsewhere for pumping up home prices.

His answer underlined the implacable priority now placed on the “going out” of Chinese corporations and capital: “The Chinese government will encourage Chinese companies and Chinese nationals to go overseas.”

During his visit to Australia last November, Xi welcomed “Australia’s participation in the 21st century maritime Silk Road.”

He told fellow APEC leaders in Beijing how his new vision is of “a three-way combination of infrastructure, institutions and people-to-people exchanges, and progress in policy communications, infrastructure connectivity, trade links, capital flow and understanding among peoples” – integrating these countries into a network in which China is the common skein of silk.

This is a long-term process that has only just started to get under way, but it’s one about which Australians need to be alerted, to examine the fresh opportunities and challenges it presents, and to decide how swiftly and how deeply we participate.

The post XI JINPING’S BOLD VISION FOR A NEW ASIA SEIZES CENTRE STAGE appeared first on ROWAN CALLICK.

Rowan Callick (Asia-Pacific editor)

IF Tony Abbott were in the market for some discreet advice from the world’s most successful centre-right leader, he would be in luck today. He and John Key, as joint hosts of the Cricket World Cup, will be watching the clash of the favourites together in Auckland.
It won’t be Abbott’s only chance to swap notes with New Zealand’s Prime Minister. He will meet Key more often than any other international leader during this Anzac centenary year.
Compared with Abbott, Key doesn’t have to cope with a fractious Senate or bolshie states, and has only one-fifth the number of voters to keep happy. But he does face the challenges of a bizarre voting system designed to favour minority parties and an electorate that is left-inclined, having voted in Labour governments for two-thirds of the previous 25 years.
Key won government for his National Party-led coalition after two years as opposition leader, and has since won two more elections – last September with the biggest recorded pro-government swing.
In recent polling, his party gained more than five percentage points on that election performance. When asked if Key is a capable leader, 81 per cent of Kiwis polled said yes, compared with Abbott’s latest satisfaction rating in Newspoll of 25 per cent.
During last year’s election campaign, Key declared his country is ‘on the cusp of something very special”. In fact, he has so successfully seized the centre of NZ politics that Labour, in its frustration, has churned through five leaders since he became prime minister.
He leads as if driving a car that straddles the centre white line on a mountainous road. People keep trying to overtake from the right and the left, but he won’t budge.
Four years ago, Key even managed to raise the GST, from 12.5 per cent to 15 per cent, without significant political anguish. He compensated voters by cutting the personal and corporate tax rates.
New Zealand’s top personal rate, as a consequence, is now 33 per cent on income over $NZ70,000, while Australia’s is 45 per cent plus the Medicare levy.
The NZ company tax rate is 28 per cent, Australia’s is 30 per cent. The NZ dollar has steadily moved close to par with the Aussie, this week reaching a record 96.77c.
The NZ Reserve Bank has signalled it will hold its core rate at 3.5 per cent, while the Reserve Bank of Australia has been forced to cut to 2.25 per cent, with an indication that more falls may follow.
The World Economic Forum’s index of global competitiveness has Australia at 22, NZ at 17.
In 2014, NZ gained a record net total of migrants – 50,900. This was due in part to the staunching of the outflow to Australia, which peaked at 4300 in February 2001.
In October last year, more people arrived in NZ from Australia than travelled in the opposite direction, for the first time in any month since December 1993.
‘It’s a big milestone,” said Key, who was recently voted chairman of the International Democratic Union, the grouping of conservative political parties.
So, what’s he doing that’s so right?
He and Abbott can certainly agree on the big goals – including wrestling down oversized government sectors and boosting growth opportunities by internationalising the economy. They share some cultural values. Key, for instance, restored knights and dames in NZ before Abbott followed suit here.
But while Abbott has found it hard to shrug off even spurious claims about his student past, Key has been called Teflon John because criticisms don’t seem to stick, due to his personal style.
Key has been able to instigate debate about a new flag – he favours a silver fern on a black background – to be determined at a referendum, while ensuring this doesn’t trigger demand for a republic.
John Armstrong, chief political commentator at The New Zealand Herald, described the prime minister’s annual written statement to parliament this month as ‘boring and predictable. Which is just the way John Key likes to play things.” He ensures the government provides something for everyone, while remaining within tight limits on new spending.
‘One moment he is tacking to the left,” Armstrong, says ‘and extending free doctors’ visits to children under 13, increasing paid parental leave from 14 to 18 weeks” and vowing to end child poverty. He earlier voted for gay marriage, backing a private member’s bill.
‘The next moment Key is steering to the right and targeting gangs and gang lifestyles, making every publicly managed prison a -working prison’ where inmates work, train or study full time, potentially weakening environmental safeguards in the Resource Management Act, encouraging more petroleum and mineral exploration, selling state houses to nongovernment entities at discount prices, and opening the door to the development of more charter schools.” On the eve of the last election, he completed a series of contentious privatisations.
This is wide-ranging territory within which to roam, Armstrong says – sufficiently so ‘to stop incursions by other political parties on the Nationals’ right flank … while enabling Key to squeeze out Labour”.
Key is focused – he abstained from alcohol and maintained his habit of a daily 5.45am run through the seven-week election campaign last year – but he is also affable. He has natural charm and speaks as easily with ordinary New Zealanders – he was brought up by his widowed, migrant mother in public housing – as with global bankers. His leadership through the 2011 Christchurch earthquake was widely admired.
Key has made frequent visits to Australia, talking with state as well as federal Liberal leaders.
He is too diplomatic to proffer advice before it has been requested, but when asked, what he has told his conservative peers here has been clear:

•  He watches polling and focus group data and keeps a close eye on his political opponents, but scarcely mentions the opposition in public. He concentrates instead on what he, his party and government are doing or intend to do.
• He may aim high but he expects to achieve only 70 to 80 per cent of a program in any parliament. He is prepared to wait for a second go.
• He regularly refreshes his parliamentary party, advising members when it’s time to further other careers, ensuring as he does so that new intakes include high proportions of capable women.
• He talks every morning – ideally in person, otherwise by phone – with three or four key cabinet colleagues.
•  He holds brainstorming sessions with cabinet members before formal meetings – when ideas can be put up, shot down or modified before becoming policy documents.
• He seeks bipartisan support whenever feasible.
• He holds weekly press conferences, at which he usually answers every question.He uses every available platform to    explain his policies, from public meetings to talkback radio, television and social media.
• And it’s highly significant, as leading New Zealand political and economic analyst Colin James tells Inquirer, he works intimately with Finance Minister Bill English.

English is Key’s deputy and a former party leader. Key lauded him at the victory rally after the last election as ‘the best minister of finance in the developed world”.
James says English, a former farmer, ‘didn’t make the transition to leader”, and as a consequence is content to be the backroom genius connecting policy to implementation, moulding the public service to fit the government’s ambitions, creating ‘the developed world’s best balance sheet”. Without English, ‘the government would be adrift in policy terms”.Key, says James, is a leader who uniquely touches the NZ psyche and is greatly respected internationally. Key and English joke in public about their close relationship ‘because they have respect for each other’s very different capacities”, he adds. Before this team took office, English said they would take their cue from John Howard, moving forward step by step and taking New Zealanders with them. ‘Now it’s Australia that needs to learn from Key and English,” James says.

The post ABBOTT CAN LEARN FROM THE CENTRE-RIGHT MASTER: JOHN KEY appeared first on ROWAN CALLICK.