Publication in Economics, Politics and Public Policy in East Asia and the Pacific

Obama in Asia

Author: Tommy Koh, NUS

What did President Obama’s 10 day visit to Asia, covering India, Indonesia, South Korea and Japan and attendance at the G20 Summit in Seoul and the APEC Summit in Yokohama achieve?

First, he has erased all the uncertainties in India on whether he would continue the strategic partnership that Bush 43 and PM Manmohan Singh had launched.  His eloquent speech to the Lok Sabha, including endorsing India’s quest for a permanent seat in the UN Security Council was sweet music to Indian ears. Read more…

How the US and China can build a Noah’s Ark together

Author: Yuhan Zhang, Carnegie Endowment

Climate change has become the most difficult collective action problem our world has ever faced. It cannot be resolved by a single country taking unilateral action. Together, the US and China are responsible for more than 40 per cent of greenhouse gas (GHG) emissions. Their emissions have had dire impacts on the global climate. As the world’s two largest emitters, the US and China should take robust action.

First, policymakers and interest groups in both countries must completely abandon the non-cooperation strategy. Read more…

Australia and Japan: Emerging partnerships in the shadow of China

Author: Joel Rathus, Adelaide University

Japan’s Foreign Minister Maehara Seiji was in Canberra last week on his first formal visit to Australia. Although only on the ground for 24 hours, Maehara reached two significant understandings with Australia. The first is a commitment from Foreign Minister Rudd on security of supply of so-called ‘rare earth’ metals. The second is an agreement with Trade Minister Emerson to re-vitalise the Free Trade Agreement negotiations which have been struggling for years. Yet Japan’s renewed interest in economic partnerships with Australia reflects more than simply shared values and mature relations. Rather, they are a part of Japan’s diversification strategy targeting China.

That Japan is pursuing Australia as a part of a diversification strategy is most easily seen in the agreement regarding rare earth metals. Read more…

China’s atavistic economic policy strategies

Author: Peter Drysdale, ANU

China’s economy is still on a high growth roll. In the third quarter of this year, the economy grew at 9.6 per cent compared with the same quarter the year before. This represented a modest slowdown compared with the 10.3 per cent growth recorded in the previous quarter. According to some estimations, the seasonally adjusted growth rate in the third quarter did not fall but actually increased quite sharply over the last six months. Whatever the case, China still appears the bull element in the world economy and its strong growth is especially good news for the economies of East Asia, including Australia, where it has buoyed external demand throughout the region.

But there are now worrying signs of overheating in the Chinese economy not only in real estate but also reflected in the upward pressure on the prices basic goods and services. Read more…

China’s inflation control strategy back to the future

Author: Yiping Huang, Peking University and ANU

On 21 November, Sunday, China’s State Council issued a new policy document (the Sixteen Articles)  aimed at stabilising prices. It is encouraging the policy authorities are starting to take price increases seriously.

But reading the document is like entering a time machine, and being transported right back to the 1980s. If the policy document were issued in the 1980s, then there would probably have been one article specifically capping the prices by the government. Read more…

North Korean blackmail

Author: Andrei Lankov, Kookmin University and ANU

Last week, Siegfried Hecker, a former director of the Los Alamos National Laboratory was invited to visit the North Korean nuclear research center in Yongbyon. He was shown a uranium enrichment plant whose sophistication and likely output is well in excess of what most experts suspected about the North Korean uranium program. Then on Tuesday, North Korean artillery shelled a South Korean island, inflicting heavy damage.

The world is likely to say that the North Koreans are again acting ‘irrationally.’ But this is not the case — they are a very rational regime, actually the world’s most Machiavellian. Read more…

Territorial disputes in East Asia: Proxies for China-US strategic competition?

Author: Aileen S.P. Baviera, University of the Philippines

Recent tiffs between China and Japan, China and Vietnam and China and the US concerning the status of disputed islands and waters in the South and the East China seas possess a significance quite distinct from disagreements of the past. More specifically, previous contests amongst coastal states for sovereignty, fisheries, energy resources and maritime navigational rights continue to exist, but they are now being overshadowed by the rivalry among major powers in pursuit of the broader goal of establishing, and expanding, strategic influence.

Fueling such tensions are China’s growing military presence and rising influence in the Asia Pacific, and a concern in Washington that Beijing may become a credible peer competitor sooner than originally thought. Read more…

Time to cure Australia’s FTA disease

Author: Malcolm Bosworth, ANU Enterprise

Over the past decade, Australia has jettisoned its successful reform approach of unilateral liberalisation supported by multilateralism. Both sides of politics have instead embraced so-called ’free’ trade agreements (FTAs), motivated mainly by political considerations. The economic cost to Australia, and globally, of FTAs is high. They discriminate among trading partners, provide a veil for protection of inefficient industries, make trade regimes more complex and burdensome on business, and reduce transparency. They also detract from unilateral non-discriminatory liberalisation. Australia has made few major unilateral trade reforms in the past decade (e.g. failure to fix our protectionist quarantine system as typified by the current apple dispute with New Zealand) and it is no coincidence that we have fallen well behind average OECD productivity growth.

Trade Minister Craig Emerson recently indicated he would take a more orthodox economic position in pushing for free trade. Read more…

The Fijian economy: Time to build confidence

Author: Biman Chand Prasad, University of the South Pacific

Battered by coups, sluggish growth and in recent years the global increase in food, fuel and commodity prices, Fiji’s economy is struggling to regain its feet.  The December 2006 coup led by Commodore Frank Bainimarama was the fourth in the last two decades. Bainimarama, in ousting the Laisenia Qarase-led Government promised to tackle corruption, put an end to racially discriminatory policies and reform the race-based electoral system.

The Prime Minister promised a general election under a new Constitution in 2014. However, the history of previous coups in Fiji and the economic recovery plans implemented by successive governments provide little optimism for a swift economic recovery. Read more…

North Korea provokes again

Author: Evan Feigenbaum, CFR

Incidents between North and South Korea in the West Sea are not uncommon. The two countries dispute claims and rights around the Northern Limit Line — a sea border, drawn up by the United Nations Command in 1953, that Pyongyang often violates and does not recognise. But the North Korean artillery attack on Yeonpyeong island on Tuesday is serious indeed. Ahead of the attack, North Korea complained strenuously through North-South military channels about South Korean naval exercises in the vicinity. So this attack, in the wake of those complaints, suggests North Korean premeditation. The incident is also serious because past events have essentially involved incidents at sea, not the targeting of population centres or land.

Why did North Korea do it?

The North Korean system is very opaque. But it’s worth noting at least three possible rationales extrapolated from past North Korean behavior: Read more…

India’s controlled appetite for foreign capital

Author: Renu Kohli, New Delhi

Any doubts about India’s dependency on cheap dollars to fund its strong growth were dispelled by the welcome accorded to QE2, the second round of quantitative easing by the US. A large payments deficit and significant capital controls sets India apart from other nations that have to mop up the mess of hot money that follows. India naturally welcomes QE2, therefore, and endorsed the continuation of market-determined exchange rates at the recent Group of Twenty (G20) summit. After all, both of these measures are necessary to keep the party going. But as India hops on the capital flows merry-go-round to drive growth, let the speed and spin not blind us to some incipient distortions in the economy. 

There is little doubt about India’s growing ability to absorb significant foreign capital; up to US$70-75 billion is no problem, according to senior policymakers. Read more…

Is a currency war unavoidable?

Author: Yiping Huang, Peking University and ANU

One of the policy issues at the top of the agenda at the recently concluded G20 summit was global rebalancing.  Achieving strong, balanced and sustained growth was identified by the G20 leaders as a key policy objective.

While G20 officials agreed to allow greater roles for market forces in exchange rate formulation, they also emphasised the need for structural reforms in order to resolve global imbalances. Read more…

Koreas conflict to mark US-Japan relationship

Author: Tobias Harris, MIT

The exchange of fire between the North and South Korean militaries that left two ROK Marines dead and at least a dozen wounded, following closely on the heels of revelations regarding a new North Korean uranium reprocessing facility, strengthens hopes that the US and Japan might be able look past Futenma and strengthen their security relationship. The relationship has, of course, had a bit more wind in its sails since the standoff between Japan and China over the maritime collision near the Senkakus.

Can we really draw a straight line from regional instability to closer security cooperation between the US and Japan? Arguably this logic has worked in the past, with North Korean provocations from 1994 onward stirring Japanese policymakers to bolster Japan’s capabilities and launch new bilateral initiatives with the US, ballistic missile defense being perhaps the most notable example. Read more…

Obama visit to India: East Asia’s emerging security multilateralism

Author: Sourabh Gupta, Samuels International

On November 5, President Barack Obama became the first US president in more than three decades to pay a state visit to India during his first term in office. The visit, though modest in content, followed in his predecessor George W. Bush’s vein of extricating India from the ‘technology denial regime’ that Washington itself had instituted in bits and pieces following New Delhi’s nuclear test of 1974. Further, in a gesture that thrilled his hosts, President Obama endorsed India’s candidature to a permanent seat in a future expanded Security Council, during an address to the Indian Parliament. The American side, curiously though, provided no such direct assurance in the Joint Statement. Rather, the Indian side borrows the president’s phraseology to Parliament – look forward to a reformed UN Security Council that includes India as a permanent member – and thereafter proceeds to express gratitude for it as affirmation of India’s candidature!

Insofar as the East Asian region is concerned, both countries expressed their commitment to an ‘open, balanced and inclusive’ order, and to the stability of, and access to, vital public commons therein – air, sea, space, and cyberspace. Read more…

Burma’s democratic noises in a quiet neighbourhood

Author: Thitinan Pongsudhirak, Chulalongkorn University

In one short week over two long decades, Burma (officially known as Myanmar) has returned to a window of potential political transition not seen since its last elections in 1990 were hijacked by the military. This time, the orchestrated polls on 7 November have overwhelmingly sent military-backed representatives of the Union Solidarity and Development Party to parliament.

On polling day, renewed fighting between the Burmese army and the ethnic minority groups flared up along the Thai-Burmese border. Read more…