Published daily by the Lowy Institute

Economic diplomacy brief: Dastyari undone, Indonesian innovation, British trade and more

Economic diplomacy brief: Dastyari undone, Indonesian innovation, British trade and more

Managing China’s money

Ambitious Labor Senator Sam Dastyari may have lived by and then died by the mainstream media with his apparent cash for comment supporting China’s role in the South China Sea in conflict with Labor’s official party line. But for a smart politician who consciously attached himself to China’s rising soft power, he seems to have misunderstood a key element: the explosion of Chinese media reporting in and out of Australia. Vote harvesting politicians quietly make promises to splinter ethnic groups all the time. But Dastyari seemed to think he could deviate from the party line and not be noticed amid all the election campaign noise until Primrose Riordan revealed the Chinese media reports. There are still some uncertainties about exactly what Dastyari said standing alongside political donor Huang Xiangmo on June 17, but there is no doubting the influence of the online Chinese news outlet Sydney Today which reported him. Its website has five million views a month.

Belt tightening

China’s massive pan-Asian infrastructure building initiative comes with so much nomenclature that it won’t win any branding awards. But the One Belt One Road (aka New Silk Road, Asian Infrastructure Investment Bank, Belt and Road Initiative and 21st Century Maritime Silk Road) may now be building trenches as much as bridges. That is underlined by the briefing to new Members of Parliament by the Parliamentary Library which warns that China has broader uses for the increased influence it hopes to get from the infrastructure initiative. After canvassing the evolution of the OBOR, the briefing suggests to new MPs that 'Australia needs to adopt a more economically and strategically prudent attitude in determining how the Australia-China economic relationship is to further develop'. Peter Cai reports from India on similar reservations. This is a far cry from the enthusiasm that has greeted the OBOR in many business quarters mostly notably the Australia China OBOR Initiative headed by Orica and BHP director Malcolm Broomhead. As with the AIIB debate, the region needs to direct the funds on offer via OBOR into productive, growth enhancing investment rather than run from them. But the author of the parliamentary library OBOR briefing, Geoff Wade, is not an analyst who can be ignored. He has now played a key role in revealing the weaknesses in the Port of Darwin sale and calling for more transparency about Chinese investment. [fold]

Innovation nations?

Efforts to boost science and innovation collaboration between Australia and Indonesia are going into overdrive in a sign of the how the two countries are looking for growth beyond resource exports. The three-year-old Monash University-based Australia Indonesia Centre held its third joint research summit in Surabaya in August with streams on areas including energy, health, infrastructure and innovation. A few days later the third 1.5 track Australia-Indonesia Dialogue was held in Yogyakarta. Read a full wrap on the Dialogue discussions here and warmer diplomatic signals towards Australia from Indonesia here. There was a substantial science and design community participation and discussion about whether more business and research cooperation could curb protectionist moves in both countries. Later in September the Australian National University’s annual Indonesia Update shifts its attention to the implications of digital disruption in a country where social media has blossomed but ecommerce is now taking off. In November the Australian Academy of Science will pull these themes together with an Australia Indonesia science symposium with an emphasis on knowledge sharing between researchers. Technicians from the two countries have record of successful collaboration in obviously practical areas from forestry to forensics, but this is a bigger project aimed at making up for relatively low levels of innovation in both countries as they look for new sources of growth. Indonesia gave this project some real momentum in February when President Joko Widodo launched a science fund providing the country’s first serious financial infrastructure for R&D.

Back to the sixties

Trade deals were scarcely mentioned in the 2013 election campaign which brought the current Coalition government to power in Canberra. But they now sometimes seem to have been elevated to the government’s proudest achievement, although this says more about other policy snafus than the inherent virtues of freer trade. Cutting deals with South Korea, Japan and China was a signature political achievement under former trade minister Andrew Robb, notwithstanding the Productivity Commission’s well founded quibbles with preferential deals. But Prime Minister Malcolm Turnbull’s bid to snatch a British deal with the remains of the Brexit carnage while in China for the Group of 20 summit is spreading the Robb fairy dust a bit thin. Britain has a long way to go in arranging its departure from the European Union before it can rekindle is old trade ties Down Under. James Chessell comprehensively deconstructs the spin about a British deal here. And then there are the continuing surprisingly blunt warnings from Japan and the US to the new British government that they still don’t want a full Brexit. The new reality is that pursuing trade deals won’t have the gravitas it once had unless the government can produce a new Robb-like advocate of foreign investment after the recent Chinese FDI rejections. It’s worth recalling that Britain’s rejection of Commonwealth preferential trade ties to Australia in the 1960s in favour of the EU was the watershed that made Australia realise its economic future lay in its geographic region. That still hasn’t changed despite China’s constant fiddling with food and pharmaceutical import rules.



Banks don’t just fly the flag in international economic engagement they also fund the real action. So it is telling to see the Commonwealth Bank of Australia closing its sole India branch in Mumbai, following the footsteps of Westpac in exiting much of the South Pacific and the ANZ shrinking its balance sheet in Asia. The CBA still has a highly visible business in Indonesia with more than 80 branches. But some of these banks were early recruits to Foreign Minister Julie Bishop’s commercial diplomacy initiatives.

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