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Weekend catch-up: Yemen, AIIB, China's regionalism, Great Moderation and more

Weekend catch-up: Yemen, AIIB, China's regionalism, Great Moderation and more
Published 4 Apr 2015   Follow @BrendanTN_

Bringing together the best Interpreter articles you were too busy to read this week.

Late last week, a coalition led by Saudi Arabia began a bombing campaign in Yemen in support of now deposed President Hadi, in what some are saying could turn into 'a wider regional struggle involving Iran.' Sarah Phillips wrote on how the campaign is really a result of the internal dynamics in Yemen:

Despite the international tone to recent events, Yemen's predicament is very much a product of domestic political tensions and failures, the threads of which have been woven through the country's rivalries, palace intrigues, and humanitarian calamities for over a decade. Each of Yemen's contenders to power have sought political advantage by attaching their cause to wider regional preoccupations, whether sectarian rivalry, the war on terrorism, the rise of Iran, or a fear of the Muslim Brotherhood.

Saudi Arabia's Yemen intervention is part of the broader regional trend of narrowly-based regimes shoring up their domestic legitimacy through external posturing – the Iran-Iraq war (1980-88), the Saudi invasion of Bahrain (2011), Iran's support of Hezbollah and Hamas, regional support for/against the Muslim Brotherhood in Egypt and, of course, more recently the civil war Syria and Iraq. The list goes on.

Rodger Shanahan took aim at the 'coalition' Saudi Arabia has put together, and some of the irony behind its members' support for the operation:

Washington has said that it is providing unspecified support to the Saudi-led coalition, which sounds fair enough given Riyadh has, until now at least, enjoyed a special relationship with the US. But once we have a look at the rest of the Saudi-led coalition, some concerns start to appear.

To begin with, the Sudanese government is listed as one of the contributors to the coalition, even though its leader remains indicted by the International Criminal Court on charges of genocide. The thought of someone indicted for genocide helping to restore someone else's 'legitimate government' while being assisted by the US is richly ironic, even by the Middle East's high standards.

The AIIB was the other major topic this week, with Susan Harris-Rimmer writing on Australia's decision to join: [fold]

Heaven knows, it is not that existing multilateral development banks have been so perfect in their interventions in our region all these decades. They have improved because they were forced to change by civil society actors. And the governance of those banks has not represented the reality of shifting power for about a decade. The US and Japan have only themselves to blame for that.

China should take the safeguards concerns on board, improve them where possible. In the AIIB, China's global governance reputation will be on the line, and at the same moment China assumes the G20 presidency with the world watching.

Philippa Brant also wrote on the new bank and China's plans for regional economic integration:

In a clear case of the US shooting itself in the foot, the AIIB now looks like it is becoming a global institution. With the UK joining up, others did not want to be left out. Russia, Australia, Denmark, Brazil and the Netherlands are the latest to signal intentions to join. In addition to jumping on the bandwagon, there has been recognition that commercial and development cooperation interests will be affected by the AIIB and so it is better to be involved to try and influence the bank's investment decisions from the beginning. 

But in signing onto the AIIB, countries have implicitly agreed to support China's regional vision. The challenge will be to make sure that infrastructure investments really are 'win-win'.

Mike Callaghan argued that the best board structure for the AIIB should be non-resident and high-level:

Best-practice governance arrangements for the AIIB should involve articulating the roles and objectives of the AIIB, preparing clear operating principles and guidelines to achieve these objectives, outlining the roles and responsibilities of management and staff, and having robust review and accountability mechanisms. 

Such an approach is more in line with a high-level, non-resident board. Capitals will need to take a close interest in the activities of the bank, but with modern technology this no longer requires a full-time resident board.

Is the Great Moderation over? Leon Berkelmans doesn't think so:

… Some think the shock that hit the global economy in 2008 was as big as the shock that caused the Great Depression, but improved policy – through monetary easing and other liquidity provision to the banks – staved off 20% unemployment in the US. If this interpretation is correct, it provides another reason – improved policy – for why volatility will be lower than it had been in the past.

From Washington, Charlotte Kennedy wrote on Afghan President Ashraf Ghani's recent trip to the US:

For Afghanistan, there have been some good indicators of progress. The mere fact that the country did not descend into civil war and Ashraf Ghani and his former political opponent Abdullah Abdullah were able to form a unity government is testament not just to US diplomacy but also to the resilience of the country today. But Afghanistan remains extremely fragile and even the basics have been difficult for the new administration to secure. In trying to address corruption, Ghani has fired more people than he has replaced, leaving many top government posts and governorships vacant. All of this continues to cost Afghanistan's leadership precious time and energy, delaying reforms.

The Indian Ocean will soon become nuclear, said David Brewster:

There have been increasing detections of Chinese SSNs in the Indian Ocean in recent years, including the deployment of a Chinese SSN to the western Indian Ocean between last December and February, nominally as part of its anti-piracy deployment. According to Indian sources, these deployments are part of hydrographic 'profiling' of the region and will likely increase in frequency. But Beijing has less reason to deploy its SSBNs in the Indian Ocean; instead, they will likely be primarily deployed in the western Pacific, targeted at the US. This could create its own risks: the detection of an unusual transit of a Chinese SSBN into the Indian Ocean or an Indian SSBN into the Pacific could be seen as an escalation at times of tension.

How big is the shadow banking sector in China, and what is its effect on China's economy, asked Stephen Grenville:

The shadow banking sector is harder to delineate than the core banking system because its precise size is confused by fuzzy definitions, double counting of some institutions and under-reporting of others. Based on Chinese central bank data, the Fung Institute puts shadow banking assets a little over 50% of GDP, or less than one-third the size of bank credit. McKinsey estimates that the sector is a bit larger.

This is much smaller than the American shadow banking sector, and the Chinese institutions are much less complex.

Have we forgotten about the connection between Gallipoli and the Armenian Genocide? Nikki Marczak thinks so:

The Armenian Genocide does not feature strongly in our nation's history, yet Australia was well aware of the atrocities at the time, and among the eyewitnesses were some of our own ANZAC soldiers. Australian prisoners of war were held captive in Armenian churches and homes; servicemen not only saw the mass graves and deportations but even occasionally assisted Armenian civilians, as in the case of Arthur James Mills,  who wrote of having carried a four year-old girl to safety on his camel. The Armenian Genocide is, despite its invisibility in the contemporary Australian consciousness, closely linked to the story of Gallipoli.

Lastly, Meg Gurry wrote a revealing piece on Malcolm Fraser's work in building relations with India:

First, he wanted to inject substance into a relationship where he felt, correctly, the political impetus had been lacking. But his thinking was more imaginative than this suggests. He saw Australia and India as 'committed to moderation...not at the extreme end of any spectrum'. He felt that, even as aligned and non-aligned countries, they had little significant difference between them, and hence could work well together to resolve world tension. It was an arresting view, and his observations on non-alignment were unusual for a conservative Australian leader.

Photo courtesy of Flickr user RA.AZ.

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