New topic: you requested views on why Indonesia has reacted so strongly to claims about Australian and US spying, especially out of the Australian embassy and Bali consulate-general.  While the reaction is of course domestically driven as with Germany, the particular factor in Indonesia's case is the knee-jerk sense of victimhood from exploitation by wealthier, stronger outsiders seen subconsciously or consciously as neo-colonialist invaders. The Germans may admit that spying is something they also do; for Indonesians, it can only be something that others do to them. The story is in fact getting some play in the Indonesian press, meaning that there's no political mileage in a soft response (especially for a foreign minister who may hope to be reappointed by the next administration — but that's pure speculation).

* This error was introduced in the editing process. Jakowi's title is 'governor', although he is often referred to as 'mayor' in the foreign media.

** This error appeared when the post was originally published but was corrected by the author within minutes of publication.

Prabowo is the son of Sumitro Djojohadikusumo, the intellectual father of Indonesian economics. Sumitro started out a traditional socialist but his interventionist leanings were tempered by the reality of Indonesia's limited administrative and governance capacity when he was trade minister under Soeharto. If he were still alive he might inject some of this reality into his son's economics. He would certainly endorse the tilt at the presidency: the story goes that he once said Indonesia should be run by his family, using his brains, Prabowo's guns and Hashim's (Prabowo's brother) money.

Of the other contestants, former president (and Sukarno's daughter) Megawati Sukarnoputri is a proven loser in the presidential stakes. Prominent businessman and bank-roller of the Golkar party, Aburizal Bakrie, seems to be demonstrating that money alone is not enough to win. He can't shake off the reputational damage from the Sidoardjo mud disaster. 

Still, Jokowi has a few hurdles to clear.

He has no political party of his own and would probably have to rely on nomination by Megawati's Indonesian Democratic Party – Struggle (PDI-P), so in order to clear the way she might decide not to run. Amazingly, his appeal seems to carry weight well beyond Jakarta, but will that last when the other candidates get their well-funded publicity machines going? And if Jokowi appears like a shooting star in the night sky, so could an as-yet-unidentified candidate, although time is running out fast.

Looking ahead, it's hard to judge what sort of president Jokowi would make.

He has said almost nothing in public about his vision for Indonesia, either at home or abroad. Indeed, his current (and very convenient) stance seems to be 'shucks, I'm just the mayor of Jakarta'. Further, one of his main challenges would be to get legislation through parliament without much control over his presumptive party, which in any case won't have a majority. The weight of popularity would doubtless help, provided the enthusiasm survives the challenges of running a country as difficult and diverse as Indonesia. But the Indonesian parliament has proved just as quarrelsome as the US Congress and, in recent years, has often made life very difficult for the Indonesian administration. Even President Susilo Bambang Yudhoyono, whose party won an outright parliamentary majority 2009 who was elected with an absolute majority in 2009, has never found it easy to get legislation through parliament.

Indonesia has had an extraordinary range of presidents, from the flamboyant Sukarno to the blind cleric Abdurrahman Wahid. It matters a lot who gets the job, both for Indonesia and the whole of the Southeast Asian region. Australians ought to be taking more interest in this, and our media ought to be doing more to help us understand what is unfolding next door.

Photo by Flickr user j'star photo.

It is unclear what the Government’s reaction was to such demands, but one can be certain that for the army, which has lost some 5000 men fighting the TTP, this would be a bridge too far. Last year in Peshawar, I met the general in command of troops in the tribal areas, and he didn’t look like someone ready to cut deals with the terrorists. General Kayani, the Chief of Army Staff, has repeatedly said that the Taliban would have to first put down its arms. However, Kayani's tenure ends in three weeks, so it will be up to his successor to deal with that thorny issue.

The death of Hakimullah Mehsud doesn’t necessarily mean the talks are off, though they will undoubtedly be put on hold until the TTP picks a new leader. But regardless of who becomes the new leader, it is difficult to see what the parties will be negotiating.

The TTP is a motley association of terrorist groups divided by personalities, tribal affiliation and differences over tactics and targets. It wants to impose Sharia law throughout the country and end Pakistan's alliance with the US. It is difficult to see even Taliban-friendly Prime Minister Nawaz Sharif agreeing to such an endgame. In any case, the Pakistani army won't allow it, regardless of who replaces General Kayani.

What's more, negotiating with the Taliban is a fraught affair, with few guarantees that any deal will stick or bring peace. The governments of General Musharraf and President Asif Ali Zardari cut several deals with the Taliban and each one failed because the TTP reneged.

The broken deal which had the worst repercussions was the one in the Swat Valley in 2009. Instead of putting down its weapons as it was meant to, the Taliban kept advancing towards Islamabad. It took 35,000 troops to dislodge the terrorists, with most fleeing into the tribal areas or across the border into Afghanistan after destroying much of the infrastructure in the Swat Valley, an area once frequented by Western tourists.

Any deal with the TTP which leads to a reduced Pakistan army footprint in the tribal areas would provide the Afghan Taliban and Haqqani Network with even more operational space to launch attacks against Western troops leaving Afghanistan. This would be bad news for everyone, including for Australia as we prepare to exit. Washington would certainly protest such an outcome. However, the Obama Administration will have to tread carefully, as it needs Pakistani cooperation in order to repatriate hundreds of thousands of containers of military and other materiel back to the US. Alternative routes are much longer and more expensive.

The drone issue is highly sensitive in Pakistan. It is the single most important issue fueling Pakistan's already rampant anti-Americanism, and the Pakistani Government ignores it at its peril. And while privately not too many people in the Pakistani Government will miss Hakimullah, Prime Minister Sharif will still need to be seen to be doing something about his killing. Cricketer-turned-politician Imran Khan, whose party runs the government of the province of Khyber Pakhtunkhwa bordering the tribal areas, is demanding an immediate halt to the NATO convoys.

Meanwhile, the Pakistani Government has decided to review the whole US-Pakistan relationship. Last time it had such a review in the wake of the death of 24 Pakistani soldiers in a NATO strike on the Afghan-Pakistan border in early 2012, Pakistan stopped truck convoys from rolling through Pakistan for seven months until it got an apology of sorts from then Secretary of State Clinton. And although Islamabad relies on American economic largesse to assist it through its difficult times, unless Washington promises something substantial on the drone front, a similar outcome is not out of the question.

Photo courtesy of REUTERS/Aamir Qureshi.

But for the coming decades, China will be better served to pivot to a development model that is closer to that of the US or Europe — integrating a continent, linking deeper with markets through Central Asia and to Europe. On top of it, the increasing scarcity of inputs to propel the current model, as we have discussed, is already forcing China to 'rebalance' whether it wants to or not.

Of course, many people ask: 'can they do it?' In other words, not a blueprint problem but an execution problem. This gets into issues of political will and the leadership's capacity to move a very large ship of state to embrace change. Invariably, vested interests stand in the way, as many have noted.

Without diminishing the strength and complexity of dealing with vested interests —and they are certainly formidable — it is also true that vested interests are vested until they are not. Structural reforms of this magnitude always necessitate a rearrangement of interests, doesn't matter whether it's China or the US. In our view, it's hard to see specifically why maneuvering against today's vested interests is any more insurmountable than what the Chinese have done: pivoting from revolutionary zeal to pecuniary zeal within 2-3 years after the Cultural Revolution ended, kicking the PLA out of the economy, getting the banks to behave more like commercial entities, etc.

So all of this makes the upcoming plenum on 9 November a very interesting signpost for basically the next 10 years. And we suspect many of the reforms unveiled at the meeting will fall into addressing the challenges of scarcity, not just in the economy but also on the sociopolitical side.

But at the same time, expectations of change should be grounded in the reality that change won't happen tomorrow or the next year. That will probably disappoint many, but it's much more important to wait and get a better sense of how these changes will be executed. We obviously don't have a crystal ball and are perfectly willing to revisit our views when 2022 rolls around.

WA: The pervasiveness of state power in a country like China can give the impression that the government can do anything if there is only a will to make it happen. The reality, though, is that the Chinese government is subject to the constraints of their country's relatively meager endowment of natural resources. Not everyone gets to be Australia!

As they have so many times in the past, China's leaders may play their hand far more adeptly that we give them credit for. But we should keep in mind that they are playing a fairly unfavourable hand. Sweeping economic reforms may make growth more consumer-focused and less susceptible to a sudden downturn, but we are skeptical that reforms can make China's economy less dependent on energy and other raw material inputs, at least in the short term. After all, so much of what China's newly middle-class consumers want — homes, cars, electronics — is very resource-intensive to produce.

If it can't be got one way, perhaps it will be got another. With the prospect of much greater political and public scrutiny on SIGINT – its ambit, targets and methods – what will be the effect on another realm of spying, the use of human intelligence, or spies as traditionally understood?

One possibility is that governments which curtail their electronic efforts might begin to reinvest heavily in the human side of things, the old-fashioned world of running agents to gather forbidden information and insight through time-honoured if not exactly honourable methods of interacting in certain ways with other people. In other words, what is bad for the NSA may be good for the CIA.

This of course brings its own political and moral dilemmas. Human intelligence or HUMINT has its own fallibilities, including those that depend on the less-than-pure motives of people who give or sell classified information to foreigners. The sorry tale-telling of Iraqi defector Curveball is a reminder of HUMINT’s unique capacity for inaccuracy and distortion (and there’s a German connection in that story too).

Of course, HUMINT can occasionally deliver intelligence gems, such as a timely insight into the intentions of leaders or terrorists. But typically this comes with commensurate risk to diplomatic relations or even to a source’s life.

In any case, there is one kind of spy agency that is sure to find itself even busier due to all this rage against the SIGINT machine. Presumably, pressure is going to increase for domestic security organisations like the FBI and ASIO (a corporate member of the Lowy Institute) to identify and stop the next Snowden (and the next Manning while they are at it).

Regardless of whether a few countries now reconsider the extent of their own electronic eavesdropping abroad, it is absurd to imagine that the intelligence game can be wished away from relations between states.

Photo courtesy of Wikipedia.

Australia’s Oceans Policy, released in 1998 and theoretically still on the table, was all about a whole-of-government and whole-of-nation approach to managing national maritime interests. Fundamentally it was about promoting national maritime awareness. Australia’s Oceans Policy established an integrated approach to managing national maritime interests. It has much to say in support of maritime strategic thinking, noting, for example:

Oceans define Australia’s geography and are critical to our security, with our dependence on maritime trade and the maintenance of freedom of movement for all commercial shipping. Oceans link us with our trading partners, provide resources and wealth and offer a defence against possible aggression.

It also makes the significant strategic point that Australia might assume a leadership role in helping to manage the oceans around Australia:

Australia should provide leadership regionally and internationally in the management of our oceans, recognising the possibility that national activities may have effects on the marine jurisdictions of neighbouring countries.

This includes ensuring good order in these oceans. The policy also stresses the positive role that maritime issues should play in our regional relations:

Oceans affairs are rightly a central part of our broader political and strategic relations in the regions in which our neighbours have extensive maritime interests, including exclusive economic zones. They also have an urgent need to build their capacity to manage these areas.

The goals of Australia’s Oceans Policy remain valid although the policy itself is now only about preserving and protecting the marine environment and conserving its living resources. Its first goal ‘to exercise and protect Australia’s rights and jurisdiction over offshore areas, including offshore resources’ establishes the fundamental importance of protecting Australia’s sovereignty and sovereign rights at sea. Its goal ‘to promote public awareness and understanding’ of the oceans relates to promoting national maritime strategic thinking.

Anthony Bergin and I revisited oceans policy and Australia’s strategic, economic, political and environmental interests in the oceans in our Sea Change: Advancing Australia’s Ocean Interests report in 2009 for the Australian Strategic Policy Institute. The report includes a chapter on 'The Oceans and Maritime Security' where we point out that ‘for Australia, almost everything to do with the oceans has a strategic dimension'.

We made several suggestions relevant to the promotion of national maritime strategic thinking. To reflect a true whole-of-government approach, we recommended the establishment of an Office of Oceans and Maritime Affairs in the Department of Prime Minister and Cabinet. This would properly reflect the importance of the oceans to Australia, including our security, and the need for strong inter-agency coordination. This central policy coordination of oceans affairs occurs in other countries, including in France, Japan and South Korea.

A basic problem is that there are no votes in the issue and only small, specific maritime interests in certain electorates around the country (eg. naval shipbuilding in South Australia and fishing in areas along the east coast).

To get more political focus on maritime issues, a Federal Parliamentary Maritime Group might be established similar to the UK’s Associate Parliamentary Maritime Group. This is an all-party group of both houses of parliament and British members of the European Parliament, along with representatives of companies and professional organisations involved in maritime issues. It provides a forum for the exchange of views between parliament and those engaged in pursuing the nation's maritime interests. A similar group in Australia would help promote national maritime strategic thinking.

The Chief of Navy, Vice Admiral Ray Griggs, is ‘on the ball’ in his opening contribution to the Sea Power Centre’s recent collection of papers when he says that a maritime school of strategic thought is required that is rooted in the geostrategic reality of our national situation and based on a clear appreciation of our geographic, economic and diplomatic situation. Revisiting the concept of national oceans policy would help get this ball rolling.

Photo by Flickr user alexkess.

First, the problem in 1997 was misunderstood by the outsiders who tried to help. At the time, a central role was given to ‘crony capitalism’: Soeharto in Indonesia and the chaebols in Korea.

Now, fifteen years later, the central macro-economic issue can be seen as the sudden reversal of foreign capital, triggered by concerns about over-heating economies, overvalued exchange rates and excessive foreign borrowing, all of which were symptoms of the pre-crisis period of hugely excessive capital inflows. This was a liquidity problem which required the sort of treatment given to the European peripheral countries in 2010. Balance of payments support was needed, foreign debt had to be reduced through rescheduling and banks had to be kept going, not closed.

Policy was also confused by the doctrinal belief that free markets would deliver the right answers. In the middle of the 1997 crisis, the Fund was trying to amend its Articles to give free capital movements the same compulsory status as free trade.

Those involved in 1997 don’t seem to feel at all sheepish about the mistakes made. Many of them are still around (some were at a recent Peterson Institute conference which compared the two crises), and many were involved in both crisis periods. The nearest the IMF has come to a mea culpa is a 2012 speech by David Lipton (now IMF First Deputy Managing Director, but then one of the US Treasury bovver boys standing over the IMF), where he said that it all worked out for the best, as the result was stronger financial sectors able to withstand the 2008 shock.

Larry Summers, one of the ‘Committee to Save the World' (no, this wasn’t derisory or ironic) has shown more introspection. In 2010, deeply involved in Obama’s response to the 2008 crisis, he said:

There have been moments, certainly, when I understood better some of the reactions of officials in crisis countries now than one was able to from the outside at the time. It is easier to be for more radical solutions when one lives thousands of miles away than when it is one’s own country.

It seems that policy-makers have to learn for themselves. No-one in advanced countries thought that the Asian crisis had any lessons for them, even though the pre-crisis circumstances in the European peripheral countries had the same excessive capital inflow, with the same loss of international competitiveness.

When the 2008 crisis unfolded, policy-makers responded with ad hoc common sense rather than by drawing specific lessons from the Asian experience. The IMF has come to understand that foreign capital flows present big macro challenges for emerging countries, and that free-floating exchange rates can fluctuate widely. But this belated recognition came much more recently.

The 1997 crisis countries learned some lessons (which helped them weather 2008), without always finding satisfactory answers. They have taken out expensive self-insurance through big foreign reserves, exacerbating international imbalances in the process. Unhappy with the IMF, they created the Chiang Mai Initiative but have not been able to make it operational (it remained unused in 2008).

Even now, if we ask ‘have the problems been fixed?’, the answer is clearly ‘no’. We don’t know where or when the next financial crisis will occur, but we can be sure that there will be more.

Photo by Flickr user craigdietrich.

In our most popular post for the week, Andrew Selth looked the risks associated with Aung San Suu Kyi's political strategy in Burma:

It is curious that Aung San Suu Kyi seems to be counting on Thein Sein’s government being more responsive to external pressure than the former military regime. Even if the president and those around him were susceptible to such measures, the armed forces leadership is unlikely to be so, and its support is crucial not only for the continuation of the reform process but also for any amendment of the constitution.

Bear in mind too that since 2011 foreign governments and international organisations have embraced Thein Sein and publicly praised his reform program. Naturally, they have reserved the right to discuss contentious issues like the 2008 constitution. However, the same governments have been anxious not to do or say anything which might interrupt the momentum of the reform process, or reduce their newly acquired influence in Naypyidaw.

In any case, Aung San Suu Kyi has less influence on world affairs than in the past. The Burmese Government is not the only one that has changed. New administrations elsewhere are less in thrall to her iconic status, and more sensitive to accusations of interfering in Burma’s internal affairs. Aung San Suu Kyi herself has been criticised for failing to speak out in support of oppressed communities in Burma such as the Muslim Rohingya and the Kachin.

Lowy Institute Nonresident Fellow Milton Osborne gave us two pieces on Southeast Asia. The first looked at an imminent International Court of Justice (ICJ) ruling on the  long-running dispute between Thailand and Cambodia over the 11th century Hindu temple, Preah Vihear:

 According to the Thai ambassador to The Hague, there are four possible rulings the ICJ could hand down: it could decide not to interpret the 1962 judgment; it could rule in favour of Cambodia; it could say that Thailand’s territorial claim is correct; or it could hand down a ruling clarifying aspects of the 1962 judgment.

The Cambodian and Thai governments have reached a modus vivendi for the present, agreeing to cooperate to prevent the ruling causing difficulties between them, and there are signs that the issue no longer stirs the same kind of ultra-nationalist feeling that has occurred in the past.

One such sign is the fact that the temple is now, at least in the Thai English-language press, routinely referred to by its Cambodian name, Preah Vihear, rather than the Thai usage of Phra Khao Viharn. Two prominent Thai scholars, Charnvit Kasetsiri and Pavin Chachavalpongpun, have joined with a Cambodian author, Pou Sothirak, in a recently published book calling for a peaceful settlement of disputes over territory (Preah Vihear: A Guide to the Thai-Cambodian Conflict and Its Solutions; I should note that both Charnvit and Pou are long-standing acquaintances of mine). It is probably fair to say that this moderate tone is shared  by a large number of Thais and Cambodians of all political persuasions.

Yet despite this change in tone, it is clear that the Thai Government is concerned that the ICJ ruling could lead to serious anti-Cambodian protests that would feed into more general unrest at a time when domestic political divisions have clearly not moderated.

 Milton's second post continued his coverage of dam developments on the Mekong River:

Visiting Cambodia, Laos and Thailand over the past three weeks leaves me in no doubt that issues associated with the Mekong continue to be a subject of sharp controversy, both as a result of the Lao Government’s decision to build a dam at Don Sahongand the Cambodian Government’s decision to go ahead with the Lower Se San 2 dam on the biggest tributary flowing into the Mekong in that country.

As Laos appears set to proceed with its dam at Don Sahong, it has come under criticism from both Cambodia and Vietnam for its failure to follow proper processes through the Mekong River Commission, a replay of how it behaved in relation to the dam at Xayaburi, now under construction. The former environment minister in the Cambodian Government, Mak Moreth, has been sharply critical of Lao behaviour and this criticism has been echoed from Vietnam.

Rodger Shanahan was at his analytical best on the prospects of Syria's Bashar Assad remaining in power:

Tehran has made a strategic decision that, at the moment, Assad represents its best hope for continued influence. Backing Assad also sends a strong message to other Iranian allies (actual or putative) that Iran sticks by its friends. In addition, the longer there is hope of progress in its nuclear negotiations with the P5+1, the less Tehran feels inclined to cede any ground on Assad, likely on the basis that the nuclear issue is the main game and who rules Syria is a secondary issue.

For his part, Assad is pushing one line in particular which he believes is his trump card: that he is the only thing standing in the way of the radical Islamists in the opposition. In the rather perverse way the Syrian conflict has unfolded, the stronger the Islamists become, the better it is for Assad.

Finally, we had a thoughtful two-part essay from ANU's Jerry Nockles on the definition of terrorism. From part one:

Any discussion of a definition of terrorism relies on two key assumptions. Firstly, that terrorism is sufficiently different in nature to warrant unique treatment under law (that is to say, that terrorism is not an ordinary criminal act but rather a political-military act necessitating special laws and more severe penalties). The second, and interrelated, assumption is that the existing legal framework pertaining to the conduct of warfare and politically-motivated violence does not sufficiently incorporate the types of attacks by transnational groups which have proliferated since the 1970s. Both of these assumptions are contested and can form the basis for further discussion. However, for the purposes of this argument, I will assume both as given.

Definitions of terrorism exist across a wide range of jurisdictions. Some, like the United States Code, adopt a general approach, defining terrorism as ‘premeditated, politically motivated violence perpetrated against non-combatant targets by subnational groups or clandestine agents.’

And from part two:

By limiting the definition to civilians, we immediately exclude incidents such as the 1982 Hyde Park and Regent's Park bombings in London, the 1983 Marine Barracks bombing in Beirut, and the 1996 Khobar Towers bombing in Dharan (pictured), all of which targeted non-combatant military personnel (though civilians were killed and wounded in each incident).

This is a confronting issue. Let me make it very clear: excluding these outrageous crimes from the definition of terrorism in no way legitimises or justifies them. As Margaret Thatcher said in response to the Hyde and Regent’s Park bombings: ‘These callous and cowardly crimes have been committed by evil, brutal men who know nothing of democracy. We shall not rest until they are brought to justice.’

But we are trying to produce a definition and legal framework that targets a specific use of political violence, not produce a catch phrase that adequately expresses our horror at despicable crimes or hostile acts. The targeting of non-combatants is an act that has progressively fallen outside the norms of warfare and is consequently and explicitly prohibited in international law.  We can regard it as a hostile act, an act deserving of a strong and immediate response, but not an act of terror.

Photo by Flickr user Spree2010.

The PLA Navy has made a point of holding the exercise in the western Pacific, apparently somewhere south of Honshu, as part of a deliberate demonstration of its ability to 'dismember' the so-called 'first island chain' (which includes Japan and Taiwan). The account further declares:

...the location of the exercise is one of the most sensitive sea areas with the most potential conflicts. The PLAN must be prepared for any unexpected combat operation in such an area.

And just so there’s no doubt in Japanese, Taiwanese or American minds, the account goes on to celebrate 'the three major fleets’ passing simultaneously through the Bashi Channel, the Osumi Strait and the Miyako Strait'. The first of these skirts Taiwan, and the others – although legitimate international sealanes — cut between Japanese islands.

Of course China has the right to train its navy in international waters and can point to any number of US exercises in the western Pacific over the years. Moreover, China will no doubt claim a defensive element to its increasingly ambitious naval exercises, arguing that this is all about countering a prospective blockade strategy by the US and its allies.

But amid all the recent confrontational rhetoric in Tokyo and Beijing, the PLA Navy wargames and their provocative packaging suggest that cooling things down is not China’s highest priority.

The Lowy Institute’s research on maritime security tensions in Indo-Pacific Asia is supported by a grant from the John T and Catherine D MacArthur Foundation.

Photo by REUTERS/Tyrone Siu.

Opposition defence spokesman Phil Goff has noted that the Chinese ships visiting New Zealand declare themselves nuclear free and questions why the US could not do the same. Washington will fall back on its policy of neither-confirm-nor-deny. It is not likely to change in the immediate future.

The joint statement also 'noted the importance of continued dialogue on the shared challenge of cyber-security.' Given that cyber security and intelligence cooperation go hand in hand, this shows that Washington and Wellington will continue to cooperate in the intelligence sphere. Coleman dismissed concerns that the NSA had been listening in on the Key Government. It must be one of very few governments in the world currently willing to make such a public declaration of trust.

A note of caution, however. New Zealand’s expected 2014 elections could see a Labour-Greens government come to power. The bases of both parties carry some anti-American sentiment. The NSA revelations this week caused Green Party co-leader Dr Russell Norman – a likely cabinet minister in any future left wing government – to call for New Zealand’s withdrawal from the Five Eyes intelligence network. Washington will need to show some diplomatic nous to keep the new momentum and closeness of the relationship going, as part of its wider rebalance, if power changes hands in Wellington next year.

Photo courtesy of the US Defense Department.