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Economics and Public Policy

Hong Kong’s pro-democracy campaign in for the long haul

If one was to believe the reporting on Hong Kong’s pro-democracy demonstrations, especially the reporting in Hong Kong, one could be mistaken for believing that it was all but over. Nothing, however, could be further from the truth.
There is no doubt that the numbers in Hong Kong Central have diminished, especially during the day, but they continue to bounce back at night, when ordinary Hong Kongers have finished their day’s work or study. So, too, at the Mongkok protest site in central Kowloon.
At both sites, traffic continues to be blocked and the barricades erected from street furniture over a week ago remain entirely intact. The few police roaming around appear to have no interest in taking down the barricades, even though the protesters are hundreds of metres away.
There was some hope that talks scheduled for Friday would make some headway towards resolving the protests. But no-one on either side believes there could be any meaningful movement on the protesters’ central demand to freely nominate and elect their chief executive in 2017.
Despite believing they were promised such an outcome in 2012, more recently the residents of Hong Kong were told they could vote only for a candidate that had been vetted by a pro-Beijing committee.
There is a view, too, that most Hong Kongers, as they call themselves, are sick of the disruption to their daily lives. Shopkeepers are reported to be complaining about loss of business.
Yet little business is disrupted and what is more evident is the goods that have been freely given by businesses all over Hong Kong to support the protesters. There have been donations of crates of water and other drinks, free food, tarpaulins and even tents and other forms of shelter, along with first aid supplies stockpiled at emergency care centres for those protesters who were tear-gassed or attacked by thugs believed to be paid for by interests close to the governor.
What is clear is that, rather than the pro-democracy protests just fading away, they have polarised Hong Kong society. There are very few Hong Kongers who now do not have a strong opinion on the issue.
Broadly speaking, the city’s business elites tend to be pro-status quo, with the working class. tending to be more divided. Hong Kong’s large and influential middle class, however, appears to be strongly pro-democratic. Unofficial but reliable surveys undertaken by a respectable institution (which cannot be named in what is a subtle climate of retribution) says that between 60 and 70 per cent of Hong Kong’s resident are in favour of having a freely nominated and elected chief executive.
Against these pro-democratic tendencies is not just Hong Kong’s business elite but, of course, the government of China. No matter the extent to which Hong Kongers like to think of themselves as a people and a place apart, they are Chinese and Hong Kong is a part of China.
The Chinese government believes it cannot afford to allow Hong Kong’s pro-democracy protest to be successful. Should it be so, it will show the rest of China that peaceful street protests can produce political change.
China may have moved on from the bad old days of the Tiananmen Square massacre, or it may not – that is yet to be seen. But the Chinese Communist Party has no intention of relinquishing its very considerable grip on the machinery of the state, and the considerable economic opportunities that come with such control.
Yet the regime in Beijing must tread carefully in Hong Kong, given it is China’s largest source of investment funds and, equally, China is now a major investor in Hong Kong.
Should Hong Kong become unstable and its economy dive, that would be financially disastrous for all involved. And in the end, with China having given up any pretence to being ‘communist’ and Hong Kong being one of the world’s most mercantile cities, money appears to be what is most important.
Yet Hong Kong’s students and others at the protest sites object to being locked in what they consider to be a gilded cage. Rather than damaging business, they believe greater representation and accountability will enhance business. And, more importantly, they increasingly see having a representative and accountable political leader as being a good in its own right.
There is a strong chance that Hong Kong’s public pro-democracy movement will wind down. But it is at least as likely that it will also revive. There is now a common expectation that pro-democracy protests will now come in waves, larger and more frequent as the city moves towards the 2017 elections.
A compromise is possible, saving political face for both sides. But such a compromise will be difficult to achieve.
The alternative is that, the closer the 2017 election comes, the higher the stakes will be for the people of Hong Kong. The stakes, too, will be increasingly – perhaps precariously - high for the government in Beijing.

The psychology of cash and credit

 

Although the concept of credit has been around for thousands of years (the Latin word, credere, means ‘to believe’), legend tells us that the first credit card appeared in 1949 when Frank McNamara, head of the Hamilton Credit Corporation, went out to eat with Alfred Bloomingdale. 

At the end of the meal they realised that no one in their group had any cash, so McNamara had to call his wife to bring cash to pay for the meal. It was then that he had the idea for a card that could be used at multiple merchants. 

Indonesian democracy may rest on election

When Indonesia's 180 million voters go to the polls tomorrow, they will be deciding whether Indonesia continues, more or less, with further developing its democratic experiment, or whether it turns away from a relatively open society that is necessary to allow democracy to flourish.

While the choice might appear to be obvious to anyone committed to democracy, to many Indonesians, the option of returning to a more authoritarian style of government still appeals.

Full article here:

http://www.abc.net.au/news/2014-07-08/kingsbury-indonesian-democracy-may...

Australia's foreign policy clumsiness is losing us the Asia-Pacific

After balking at its first diplomatic test over revelations of spying on Indonesia last year, there was still a reasonable expectation that the new government would quickly find its foreign policy feet. Julie Bishop as foreign minister was intended to present a firm but friendly policy face to the world, while Tony Abbott got on with domestic policy.

It appears now, however, that it’s actually Abbott who enjoys the world stage, while Bishop seems constrained in her ability to act. In a deeply enmeshed world, this arrangement is manifesting as a poor feel for (or a lack of understanding of) the nuances of foreign policy.

Australia is now explicitly viewed as a problem by an increasingly nationalist Indonesia, eyed with suspicion by an assertive China and with anger or tepid acceptance by formerly close regional friends.

Comments by Indonesia’s two presidential candidates, Joko Widodo and Prabowo Subianto, made ahead of this year's election, cast Australia as the problem in formerly close bilateral relations. Bishop’s failure to offer a quick apology over Australian spying on Indonesia was an "own goal". The apology eventually came, but it was too little and much too late.

This was exacerbated by Australia’s policy of unilaterally pushing asylum seekers back into Indonesia waters, transgressing Indonesian territorial sovereignty and, more recently, returning asylum seekers in Australian-supplied life boats. Bilateral cooperation put on ice last year will probably stay in the deep freeze until at least 2015.

Even further to the north, Australia’s downgrading of ties with long-standing friend, Thailand, was justified in response to the May military coup. But this led to an angry rebuke by junta leader, general Prayuth Chan-ocha, who will remain as Thailand's head of government for at least 18 months. Australia has, for the time-being, lost not just Indonesia but Thailand’s support in regional forums such as the strategic Asean regional forum, the east Asia summit and others.

More locally, Australia’s relationship with Papua New Guinea is under renewed pressure, following corruption investigator Sam Koin’s call for Australia to "take a greater interest" in allegations that embattled PNG Prime Minister, Peter O’Neill. Last year O’Neill criticised then-opposition leader Tony Abbott’s "completely untrue" claims over Australian aid to PNG being linked to an asylum seeker processing agreement.

''We are not going to put up with this kind of nonsense,'' he said. ''We are helping resolving an Australian issue.

There is little doubt that PNG is riddled with problems. As PNG’s largest aid provider, Australia has a right to be concerned over good governance. But this interest is increasingly unwelcome.

Earlier this year, Australia moved to normalise relations with Fiji, following the 2006 coup. Unfortunately for us, Fiji has long since dumped Australia as its dominant regional partner. We've been replaced by China’s, which offers "soft power" diplomacy, in the form of loans and investment. Fiji also recently welcomed Indonesian president Susilo Bambang Yudhoyono as a sign of strengthening relations with Indonesia, as it increases its own influence as a growing regional power.

China is playing a similarly more influential role with Australia’s other Pacific neighbors. The status of the Pacific as Australia's backyard has long since dissipated – Australia’s aid program has been contorted to fit changing domestic politics, our economy can't match growing regional powers and our strategic orientation remains transfixed by the distant spectre of militant Islamism.

Australia’s largest trading partner, China, has tolerated Australia’s diplomatic clumsiness. After Abbott identified Japan as Australia’s "best friend", he responded to China's partially concealed irritation by assiduously courting the growing regional power during his recent Asian trip. These negotiations were, in turn, conducted while Abbott walks the tightrope of a US alliance competing with Chinese trade.

Globally, the Australian government’s enthusiasm for supporting a return to Iraq before the US has defined its own policy position, its questionable approach to climate change and now its failed attempt to overturn the Tasmanian forest world heritage listing, has left Australia further diplomatically isolated.

Foreign policy primarily reflects domestic political concerns and there is little doubt that the Australian government would like to see a seamless link between the two. How likely is that dream? While the government struggles under the critical appraisal of a disenchanted electorate, the international stage looks more like a minefield – in part of its own making – that it seems only marginally equipped to avoid.

Foreign affairs: savage aid cuts will hurt the poorest in Asia

When a government cuts spending, its non-voting constituents are always going to fare worse than those who do vote. Whatever residual anger might come at the next federal elections, Australia’s aid recipients won’t be a part of that vote.
As compared to budget cuts of $7.6 billion over the next five years, or a little over $1.5 billion a year, the government’s trimming of just $107 million from the $5 billion aid budget in January looks positively generous. An earlier bipartisan commitment to lift Australian aid spending to 0.5% of gross national income, delayed until 2017-18, now appears entirely gone.
Australia has an international obligation under the United Nations Millennium Development Goals to spend 0.7% of its gross national income on foreign aid by 2020. That also appears to be no longer within the realms of foreseeable reality.
The Coalition's had a pre-election commitment to grow the aid budget in line with inflation. But, riffing off former prime minister John Howard’s "core" and "non-core" promises, that appears to have joined the substantial list of "non-significant" promises.
Yet Australia’s aid budget, and the uses to which it is put, is the better face of the "white tribe of Asia". Moreover, some regional governments only marginally concerned with cuts to Australian aid will measure this spending reprioritisation against Australia’s defence build-up. An 11% increase in the defence budget stands in stark contrast to the aid cuts, and sends a less benign signal to our neighbours.
Even Crikey’s sober readers, considering aid cuts set against wider cuts, might be saying, "So what?" Australia’s aid budget has been, overwhelmingly, aimed at the Asia-Pacific region. In this area, there are 757 million people in extreme poverty, usually defined as living on less that $1 a day.
Australia cannot fix this problem by itself, and regional governments do need to lift their respective games. But, to the extent that Australia has committed to assist, that promise has been broken to more than just ourselves.
With some regional governments being miffed, Australia will lose diplomatically from this budget. But the real losers from Australia’s aid parsimony will be those whose existence is just this side of total calamity and, for want of a few cents a day each, may now slip to the other side.

The new tri-polar world: why Russia can do whatever it likes

United States political leaders bluster, but Russia continues to be unmoved by their protestations over its annexation of Crimea and the massing of troops along Ukraine’s border. Long having believed itself the world’s only superpower, the US is now being delivered a lesson in real politik, if not humility.
Estonia, which has a large Russian population, has hit back against Russia, saying the West should freeze all Russian bank accounts … for what little that would appear to do. Estonia’s President Toomas Hendrik Ilves says that what is most threatening about Russia’s behaviour is that "the old rules don’t apply". Since Russia’s 2008 invasion of Georgia, he says, it has been clear that Putin would ignore guarantees of territorial sovereignty that conflicted with Russia’s sense of national interest.
Despite US President Barack Obama claiming that Russia’s seizure of Crimea is a sign of weakness rather than strength, US commentators, such as Stratfor’s George Friedman, believe the US is now headed towards direct confrontation with an increasingly assertive Russia. Assuming the US continues to believe that it is the world’s remaining superpower, and not one that has to negotiate, this may be correct.
There are now real concerns that, having established the precedent of "protecting" Russian speakers in former Soviet satellite states, it may move to annex further regions. Despite some commentary suggesting that Russia’s assertiveness is solely Putin’s doing, in fact it represents the wholesale reorientation of Russian politics towards a dominant conservative nationalist paradigm.
To illustrate, Deputy Speaker of Russia’s Duma, Vladimir Zhirinovsky, bluntly says that the south-east of Ukraine be re-incorporated into Russia. Yet Zhirinovsky is the head of the inappropriately named Liberal Democratic Party, rather than Putin’s United Russia Party.
Within Russia, there is strong support for asserting Russia’s "return to greatness". According to Irina Yarovaya, a prominent member of the Duma's security committee: "Any person whatsoever who criticises the policies of the Russian authorities in Crimea becomes thereby an enemy of the fatherland."
Criticism of Msocow’s policies or Putin himself is no longer tolerated. Leading Moscow academic Professor Andrei Zubov was recently sacked from the prestigious Moscow State Institute of International Relations for comparing Moscow's actions in Ukraine with Nazi Germany's annexation of Austria in 1938. In a parallel move, a number of critical websites have also been closed.
As if to illustrate the parallels between Russia’s former and current oligarchies, and the shift from one strong leader to another, Russia’s Orthodox Church Press has recently released its 2014 calendar featuring none other than the infamous Joseph Stalin. One analyst noted: "As Stalin would say 'this is not mere chance, Comrades'."
In large part, what appears to be missing from the West’s expressions of moral outrage over Russia’s perceived expansionism is that they are not presenting the world as it is, but rather as they would like it to be. The collapse of the Soviet Union was a moment of deep reflection for Russia, but the West’s triumphalism did not mean that Russia had disappeared. It many respects, it remains powerful, perhaps almost as much as it has earlier been.
Similarly, the rise of China as an economic and strategic power -- and the US' Asia "pivot" recognising that -- has added a third key player to the global balance of power. With the US economically and strategically weakened, perceptions of its pre-eminence and ability to shift global events are increasingly doubtful.
The Cold War era was characterised by two superpowers, and the post-Cold War era by just one. But, in the wake of the US’ ill-advised adventures in Afghanistan and Iraq, the world increasingly appears as tri-polar. No one now seriously questions that China is a global player and that Russia can act, more or less, with impunity in areas it claims to be in its sphere of influence, tends to confirm this fundamental global strategic shift.

A sclerotic Malaysian government stumbles in MH370 crisis

If times of crisis show the true mettle of a government, Malaysians must be wondering about their government’s response to missing Malaysian Airlines flight MH370.
After decades of working with a tightly controlled media and, overwhelmingly, getting a very easy run, the Malaysian government has been asked to answer hard questions by unbowed journalists.
The Malaysian government is used to passing over issues without question, much less challenge, by local media (online media, such as Malaysiakini, is the exception). But over the past several days the struggling Malaysian government has been looking increasingly inept. It would be a laughing stock, but that this is no laughing matter.
At one level, government spokespeople have contradicted each other, often within hours, about the status of the plane, what could have happened to it and what the likely scenarios are. At another, more basic level, they appear wholly unable to gather clear and hard information and to present it coherently.
The government was initially slow to report that the plane was missing at all. It then took days to announce that military radar had determined that the plane had doubled back on its course.
Transport Minister Hishammuddin Hussein (pictured), who has been the government’s public face on the issue, said that his handling of the MH370 issue was "above politics". Yet the government has "outed" opposition leader Anwar Ibrahim by saying that he is related (distantly, by marriage) to the pilot of the missing plane, Captain Zaharie Ahmad Shah. The implication is that there was some connection between the plane’s disappearance and the government’s trumped-up sodomy conviction against the opposition leader.
Yet when French journalist Carrie Nooten asked Hishammuddin if he was being protected for his incompetence as a result of being the cousin of the Prime Minister, Najib Razak, she received a barrage of criticism from the pro-government Star newspaper.
Hishammuddin has been criticised internationally for saying the police had gone to the home of the pilot of the missing plane, even though they did not go to the pilot’s home until several days after the acting minister made this statement. He also raised doubts about the plane’s communications systems being switched off, even though that information had been confirmed.
The Chinese government is also dismayed by the Malaysian government’s inability to provide timely information. China’s official Xinhua News Agency said the delay "smacks of either dereliction of duty or reluctance to share information".
When a foreign journalist on Monday asked about criticism over slow and confused information, Hishammuddin said it was baseless. "I have got a lot of feedback saying we’ve been very responsible in our actions," he said, then went on the attack: "It’s very irresponsible of you to say that."
The government is also refusing to share what information it has about the missing plane with the opposition. Opposition members were not invited to an update briefing on the investigation on Tuesday, yet government parliamentarians were invited. A government MP told the opposition they should not question the minister’s "prerogative" on the matter of invitations. He said opposition MPs had not been invited because they would release the information via social media.
In an information vacuum, and fuelled by the government’s ill-informed ramblings, rumour and speculation has taken the place of hard information.
The Malaysia media has recently reported everything from the plane having burst into flames mid-flight, crashed in the ocean, been hijacked by the crew or others, landed on a remote airstrip, flown in the shadow of another plane, and being seen over the Maldives. Even that doyen of accurate reporting, Rupert Murdoch, has been twittering into the void: 'World seems transfixed by 777 disappearance. Maybe no crash but stolen, effectively hidden, perhaps in northern Pakistan, like Bin Laden.'
The Malaysian government’s incompetence is now playing out as an election issue in a byelection in the town of Kajang in Selangor state on Malaysia’s central west coast. Ibrahim’s wife, Wan Azizah, is a PKR (People’s Justice Party) candidate in that election. Kajang is currently held by the PKR.
In its five decades in power, assisted by rigging electoral boundaries, the Malaysian government has rarely been held to account, much less scrutiny. It is not used to addressing questions directly or, sometimes, honestly. However in recent years its grip on power has weakened.
The MH370 crisis has shown how sclerotic the otherwise comfortable Malaysian government has become.

Crimea vote: Russia's big win, but what now for Ukraine?

Lining up with death and taxes, the outcome of the weekend’s vote in Crimea on whether or not to join Russia was certain before the event. Somewhat remarkably -- with about two-thirds of Crimea’s population being ethnic Russian and the other third being openly opposed to joining Russia -- the vote to join Russia was said to be running in excess of 90%.
While the outcome of the vote may have reflected reluctance by non-Russians to vote in a referendum that was a foregone conclusion, it also -- at least in part -- continued to confirm doubts about the veracity of the result. Foreign journalists had been largely cleared from Crimea before the vote and no independent ballot monitors were allowed.
The referendum was marked by the extremity of the pro-Russia propaganda. Billboards told Crimean citizens that the choice was between Crimean voting for becoming Russian or becoming Nazi. This was in reference to about 10% of Ukraine’s parliament comprising far-right or neo-Nazi party representatives.
The referendum question, too, was whether Crimeans wished to join Russia immediately, or if they wished to be independent, leaving open the option of joining Ukraine at a later date. That Crimea is currently a part of Ukraine was not identified in the referendum.
But backed by Russian troops on the ground and Russian naval ships blockading the strategic port at Sevastapol, the question of nuance over language was only one of a litany of critical problems facing the technically unconstitutional referendum.
The real question now is whether Russia acts to incorporate Ukarine, as passed by its own Parliament two weeks ago. The alternative is that Russia’s President Valdimir Putin could use the vote in favour of unity with Russia to further pressure Ukraine into "voluntarily" turning away from the European Union and returning to the Russian economic camp.
With an estimated 60,000 Russian troops on Ukraine’s borders too, and considerable dissent and pro-Russian sympathy in eastern Ukraine, the government in Kiev will be disinclined to try to wrestle back control of Crimea by military means. At best, this would spark a civil war, which would leave Ukraine divided. At worst it would lead to a Russian invasion, which Ukraine would not be able to stop.
Meanwhile, the Ukrainian government's friends in the West remain conflicted on what action to take over Russia's heavy-handedness in Crimea. Germany in particular is taking a softer line on proposed economic sanctions than other EU countries.
Economic sanctions are likely. This then plays into the hands of the Kremlin’s hard-liners, who have long been in favour of a split with the West. Instead, they are seeking to strengthen ties with an increasingly powerful China. Some even want a deliberately confrontational relationship with the West, by way of reasserting Russia’s status as a power worthy of the world’s attention.
United States Secretary of State John Kerry says he still hopes for a compromise arrangement with President Putin, in a bid to resolve the Ukraine crisis. The difficulty with this is, increasingly, there is no mood in Moscow for a deal. In any case, as Russians will tell you, in Russian there is no equivalent for the English word "compromise".
In linguistic theory there is, broadly, a view that the language that is available defines one’s ability to conceptualise -- if the word does not exist then neither does the corresponding idea. If this leaves what English speakers might regard as a gap in how Russians thereby understand the world, they might take even less comfort from the further fact that, in Russian, there are seven different words for "enemy".

Jokowi now cleared to run to the finish line as Indonesia's next president

In the race for the Indonesian presidential elections in July, Joko ‘Jokowi' Widodo has just been nominated as PDI-P's presidential candidate. This follows a decision by former president, Megawati Sukarnoputri, to shelve her own plans for an unlikely comeback to support the long-standing front-runner.
The 52 year old Jokowi is streets ahead of the nearest contender, former Kopassus chief and ex-Sunarto son-in-law Prabowo Subianto. Opinion polls show Jokowi consistently running at between double and triple Prabowo’s potential vote, with more than a third of the electorate favouring Jokowi in the first presidential round. Translated into a second round vote, Jokowi should, on current numbers, win the presidency in a landslide.
Having said that, Indonesia’s presidential elections are not a foregone conclusion. Indeed, nothing is a foregone conclusion in politics. But Jokowi would now have to make a serious error not to have a fairly easy run to the finish line.
Such challenges that the preferred presidential candidate now face will come after the elections, not before. The challenges that Jokowi will face will be principally around economic policy - he doesn't have any, yet Indonesia desperately needs to start charting a clear course if its economy is to reach anything like its potential.
Related to this, there remains a big question as to how Jokowi will handle Indonesia's economic rise, assuming it happens as predicted, and its parallel rise as a strategic power. The choices he will face are whether to continue to be inwardly focused and not assert Indonesia's increasingly important role in the region, or to look outwards and make Indonesia a more active international player.
On balance, one would say he will likely remain a conservative, or a minimalist, on foreign policy. Indonesia’s economy, on the other hand, could certainly benefit from clear economic direction, but Jokowi can be expected to be fairly hands off, with his default position tending towards nationalist or protectionist policies.
Beyond that, at this stage of the political game, there is not a great deal the others can do to 'steal' Jokowi's limelight. In Javanese culture, power accrues through perceived lack of action, or discreet action, rather than through overt action.
The more Jokowi’s main rivals, Prabowo and Golkar’s Aburizal Bakri, act, the more they will be seen as 'kasar' or coarse and over-reaching. Jokowi only need be himself to continue his good run of luck and the sense of charisma that appears to build based in his populist but not assertive appearances.
Jokowi is often portrayed as a ‘man of the people’, and he can claim to be closer to the ‘wong cilik’ (little people) than most of the political elite. Indeed, so much invested in Jokowi’s populism that he is seen to represent a clean break with the corruption and money politics that has dominated Indonesia in its post-Suharto period.
Yet in Indonesia, it is all but impossible to be successful in business, as Jokowi was in his home town of Surakarta, without at least flirting with corruption. That he has been a successful politician, first in his home town and then as Governor of Jakarta, perhaps speaks more to his engagement outside the main players in Indonesia’s oligarchy, rather than his complete removal from the world of patronage and favors.
The only possible problem that Jokowi would now face in his run to the presidential finish line will be if there is a critical issue between now and the election that Jokowi is unable to respond to adequately, and if his facade consequently crumbles, His charisma might then quickly crumble.
This close to the elections, though, it would have to be a dramatic issue and an equally dramatic collapse to have any real impact. All Jokowi need do is react little and he would be sufficiently politically preserved to use his electoral buffer to get across the line.
If one was to lay a bet, one would have to say that the odds are now very much stacked in favor of Jokowi becoming Indonesia’s next president. The next big question will be, once in office, how he will wield the still considerable authority the office holds, and whether he can stitch together a legislative majority to help ensure that whatever program he does try to implement will have some success of being passed into law.
Achieving office, in Indonesia, is one thing. Being able to do something with it to address the country's sense of drift is, however, quite another.

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