Indonesia is among the world’s largest greenhouse gas emitters, and it has committed to cut its carbon footprint.

Can Indonesia achieve its goals, what is its role in the region, and how could developed countries assist?  Indonesia’s government has stood by its emissions target announced at a 2009 G20 summit. Just last week the President stated that he would ‘dedicate the last three years of [his] term as President to deliver enduring results that will sustain and enhance the environment and forests of Indonesia’. But, as always with such ambitious announcements, many observers are doubting how much will actually come of it.

The target is for a 26 per cent reduction relative to business-as-usual at 2020  undertaken by Indonesia unilaterally, and up to 41 per cent with international assistance. This is a substantial undertaking when taken at face value, even in comparison with other major countries. But what it actually means will depend on the definition of the business-as-usual baseline. An earlier government document submitted to the UN assumes fast growth in emissions under a business-as-usual scenario. If chosen as the official baseline, this would make the target less ambitious and affect its international credibility.

The overwhelming share of reductions over the next decade is likely to come from the land sector.  This emphasis is reflected in a list of emissions reductions programs to be initiated and financed by the Indonesian government, announced last month.

But if large-scale and sustained carbon savings are to be made, this must go hand-in-hand with a more holistic approach to land-based industries. Greater emphasis would need to be placed on local environmental factors like watershed protection, local economic development that is socially inclusive, and promoting models of land use that are productive over the long run — not just profitable in the short term. ‘Green growth’ thinking along these lines is evident in some provinces, districts and central government ministries. There is even a new national motto which demands development be ‘pro-growth, pro-poor, pro-jobs and pro-environment’.

But this is set against the strong influence of industry and parts of the government and bureaucracy that have a strong vested interest in the status quo. This difficult political economy is, of course, not unique to Indonesia; it has played out in the US and Australia in recent years, with very different results. What counts on the ground though is economic opportunity and enforcement of laws and regulations. Protecting forests and peatlands, for example, will require substantial financial incentives for businesses and local governments. Reforms to the tax system, along with intergovernmental fiscal transfers tied to environmental outcomes and properly enforced regulatory measures, could achieve this — especially if they are coupled with alternative strategies to promote local economic development.

The longer-term challenge is in Indonesia’s energy system. Industrial energy use, electricity use in public buildings and homes, and transport are all growing rapidly as the country moves up the development ladder. The solution involves a shift from coal to gas, expansion of renewable energy like geothermal power, better energy efficiency and better transport systems. But making the shift requires policy reform that is difficult both technically and politically. Power sector reform has been on the agenda for decades and energy subsidies have, to date, only partially been removed. Copious amounts of additional investment will also be needed: what role can developed countries in the region play in helping Indonesia achieve its goals?

Aid can be important, and plenty of donors are (or want to become) active on climate change in Indonesia. The most promising area for aid is targeted capacity building, helping Indonesia reap the opportunities that arise in policy reform and in access to international funding. Trialling implementation options is also important, for example testing payment schemes for better land management. This carries risks, but could have large returns where successful models are identified. Large scale concessional finance, for example through the World Bank, has a role in facilitating clean energy investments. But the big game down the track could be carbon markets. A number of developed countries will be looking to invest in emissions reductions in developing countries, as part of their own climate change commitments. In most advanced countries, emissions reductions at home — beyond a certain point — will come at a higher cost than cutting emissions in developing countries. Australian annual payments for overseas emissions reductions could be as high as AU$3 billion dollars at 2020, according to government modelling. While the actual amount of market flows could be lower, this figure is in the ballpark of what Australia might commit through its Copenhagen climate financing commitment.

Large flows could also become available from Japan, South Korea, California and elsewhere. It will be natural for these and other countries to turn to Indonesia as a key ‘supplier’ of emissions reductions. But more preparatory work needs to be done in Indonesia before this can happen. Trading emissions reductions across borders requires reliable monitoring, confidence in institutional frameworks, as well as sound policies and consistent implementation. After all, investors will want confidence that they are in fact supporting change. And to the extent that Indonesia is successful in addressing climate change, it gives the country a natural leadership position on the issue in Southeast Asia.

Dr Frank Jotzo is Director at the Centre for Climate Economics and Policy, Crawford School of Economics and Government, the Australian National University.

This is an abridged version of a paper presented at the 2011 Indonesia Update Conference, the Australian National University.

1. An important international climate change funding proposal from China
2. Changing the international climate for global climate change negotiations
3. US: Waxman-Markey Bill changes the landscape of international climate change negotiations

One of the notable recommendations of the Australian government’s Independent Review of Aid Effectiveness released in July was that Australia’s aid to China should be phased out.

The report and the Australian government’s response did not specify the time period likely to be involved, but the report made it clear that as China’s economic development continues, and its own aid program grows, Australia should focus its aid elsewhere. On the face of it, this might seem logical and help increase the palatability of Australia’s aid program to Australia’s public. But it needs to be remembered that Australia’s aid to China has a clear focus on enhancing the broader bilateral relationship (including enhancing cooperation between respective aid programs, thereby enhancing the effectiveness of each), and that China still faces deep development challenges in a number of areas which Australia can help address.

While the size and nature of China’s aid program has traditionally been shrouded in secrecy, the first White Paper on China’s aid program, released earlier this year, states that from 2004–09 China’s aid program increased by roughly 30 per cent each year. The White Paper also notes that China’s aid focuses on agriculture, economic infrastructure, public facilities, education, health care and, increasingly, climate change. Notably, the final section of the White Paper focuses on China’s ‘International Cooperation in Foreign Aid’, concluding that ‘China still has a long way to go in providing foreign aid’.

The Lowy Institute has been particularly critical about China’s burgeoning aid program in the Pacific, including on the capacity of Pacific island nations to absorb so much aid, and their capacity to sustain infrastructure built with Chinese aid. The level of Chinese aid as a proportion of GDP and the related ability of Pacific countries to service their loans has also been questioned. In 2009, China’s loans to Tonga were equivalent to 32 per cent of GDP, while in Samoa and the Cook Islands the figure was 16 per cent. Similar, if more intense, debate has emerged about China’s aid program in Africa.

All of this represents an opportunity for Australia. Given that China’s aid program shows no signs of slowing down, that Australia’s aid program is set to double by 2015 (to become the fifth-largest source of government expenditure), and there is overlap in the geographic scope of Australia and China’s respective aid programs, it makes sense that Australia should seek to enhance cooperation and dialogue.

To an extent, this is already being done. Two objectives in the China–Australia Country Program Strategy 2006–2010 had a broader remit than tackling poverty in China per se. Objective 3 focuses on enhancing bilateral institutional linkages, and Objective 4 focuses on working collaboratively to strengthen the region. A variety of Australian departmental and agency stakeholders are involved in achieving these objectives, with a clear focus on ‘building stronger relationships with stakeholder ministries and associated agencies, bringing increased trust and access’.

Such cooperation has a vital role to play in enhancing the effectiveness of Australia’s and China’s aid programs, not only in terms of what can be learnt through the exchanges but also in terms of reducing duplication and increasing complementarities — which, after all, are fundamental to delivering effective aid. It is also important that such cooperation occurs at the in-country program level as well, thereby reducing duplication and increasing program linkages.

Engaging China in regional development dialogues and structures is one way of enhancing cooperation. For instance, China is still not a member of the Cairns Compact, which was agreed to in 2009 by Pacific leaders as a means of enhancing development cooperation and effectiveness. Signing the Cairns Compact would be valuable for enhancing cooperation with China, and would also have an important symbolic impact: such a landmark cooperation deal would dispel some of the negative perceptions surrounding China’s aid program. In Africa, engaging China in discussions around cohesive, long-term strategies for economic growth will enhance the effectiveness of the aid programs of both countries.

It would also be wrong to dismiss China’s ongoing domestic development challenges. China’s economic growth is one of the great poverty-reduction stories of the past few decades, yet great disparities still exist and Australian expertise still has a role to play in tackling some of the more ingrained challenges. Environmental degradation, for instance, is a widespread consequence of economic development, and ongoing assistance from Australia in tackling these problems, and building China’s own capacity, is in everybody’s interests.

Sam Byfield is a Global Advocacy Advisor at Vision 2020 Australia, and was a delegate at the inaugural Australia–China Youth Dialogue in 2010.

1. Is China a military threat to Australia? The Babbage fallacies
2. China’s rise and the importance of Australia-China youth dialogue
3. China: Not about to attack Australia

The regulatory challenges faced in Asia have a magnetic effect on a group of less visible actors — foreign aid donors.

Multilateral institutions including the UN and its agencies, the World Bank and regional development banks, as well as key bilateral donors such as the US, Australia and the Netherlands spend in excess of US$2.6 billion per year on legal and regulatory reforms worldwide. Even greater sums are spent on security sector reform and military-funded rule of law in fragile and conflict-affected states.

Within Asia, what we broadly term ‘promoting the rule of law’ embraces environmental governance in China; judicial reform in Vietnam; court buildings and computers in Mongolia; independent regulators for Indonesia and anti-corruption initiatives across the region — all supported through donor loans, grants in aid, budget supplementation and technical assistance.

This is a good news story if donors and their stakeholders remain confident that rule of law works as advertised: to reduce poverty, open markets, boost economic growth and provide for more legitimate and more effective domestic governance institutions. Some of this is visible, but it is less clear that it flows as a consequence of donor assistance. For a host of reasons the intended impact of donor interventions tend to be blunted.

‘Rule of law’, like earlier forms of donor assistance, developmentally uses some less than effective regulatory techniques. One is standardization. Donors tend to promote a set of institutions and attributes that aggregate to ‘rule of law’. A core example is the ‘independent’ judiciary — an ideal in the west, and an ambitious reform in places with no tradition of separation of powers and no economic or ideological incentives for powerful elites to cede authority to the courts. No surprise, then, many donor years on, Vietnam’s courts are not independent, technically competent or efficient. Another tendency is to ignore historical perspectives. We take late 20^th century forms of law such as self-regulating bar associations, state-funded legal aid and ‘access to justice’, and comprehensive human rights norms and project these onto states that — by definition — have not developed these institutions. What took decades to evolve in the west is presented as a 3-year project in a development setting. So it is no coincidence that Indonesia’s under-resourced shari’a judges do a much better job of delivering justice at the local level than a Supreme Court which is saturated in donor funding but has not — and has not needed to — embrace a 21^st century client-oriented mindset.

Against this background, key players are now seriously re-evaluating the investment in global legal and regulatory reform. Bilateral donors are increasingly subject to regulatory pressures: their programming is driven by shifting political priorities; their budgets and procurement are more subject to technocratic accountability; and their failures are reported more aggressively by the media in both donor and host countries.

Multilateral donors such as the World Bank recognize those pressures but also have an institutional stake in advancing their role. The World Bank’s 2011 World Development Report calls for greater attention to justice reform in fragile and conflict-affected states. In parallel, the Bank’s Directions in Justice Reform policy paper, currently in development, is likely to advocate for an expansion of its support for justice reform worldwide, with greater differentiation of middle-income, plural legal regime, fragile or conflict affected and authorization states.

The problem is that these are ambitious agendas that follow 20 years of post-Berlin Wall investment in promotion of the rule of law that has yielded mixed results. And the Bank’s clients seem underwhelmed: ‘[W] widespread acknowledgement of the need for justice reform does not, however, necessarily correspond with immediate demand form client countries for World Bank justice reform operations.’ In other words, the Bank views justice reform as crucial for the achievement of its plans in areas such as forestry, land, and private sector disputes within functioning markets, but client states and their agencies do not share the enthusiasm.

There are three reasons why donors are likely to encounter pushback in Asia.

Regulatory diversity: The template approaches of donors have not been particularly successful, on anyone’s terms, in a region characterized by regulatory diversity.  The Bank codes countries in a binary style (middle-income OR plural legal regime OR fragile or conflict-affected OR authorization). Reality is more complex: China fits all categories. So celebrated models within the Bank such as ‘bottom up’ legal reform featuring legal aid workers who challenge local power structures in places like Sierra Leone are likely to be much less successful in Cambodia or rural Vietnam.

Counting the wrong chickens: Rule of law promotion — like other fields of development — is now subject to more intense quantitative evaluation. Donor and host governments use national audit systems to track expenditures and ‘impact’ from rule of law promotion. Third party tools such as the World Bank’s Doing Business indicators of regulatory reform and the World Justice Project’s Rule of Law Index™ are very much in vogue as indicators and benchmarks for national for rule of law results. Donors’ own project evaluations focus on the specific outcomes (or ‘deliverables’) for a short project timeline: ’5 legal clinics in 5 provinces’, or ’1500 subsidized cases over 3 years’ — arbitrary numerical targets that key to the available budget, but tell us very little about the quality of law — or regulation — or justice in the context of that particular host system. Paradoxically the metrics approach weakens sustainability, another key development mantra. Projects proceed as far as the cash trail, unless the target community and its government really value the reform goal. Signaling that what matters is a country’s rule of law ‘score’ or the number of computers delivered and police trained, rather than the quality of justice experienced by citizens is a short-cut to swift expenditures but seldom transforms institutions and the people who constitute them.

Affluence: From Beijing to Ubud to Ulaan Bator, Asia is becoming increasingly wealthy. That wealth is unevenly spread, the state is often predatory and local elites often benefit disproportionately. One effect of economic growth is reduced political traction for donor interventions — particularly in the governance and regulatory reform arena.  What we see across China, Mongolia, Vietnam, and to some extent in Indonesia is tolerance for donor money, but a robust attitude toward either steering project interventions or subverting the donor policies to domestic priorities. Thus China is unlikely to prioritize legal aid for its own poor in civil disputes — donors favor legal ‘empowerment’, while Chinese political elites want to keep many kinds of disputes out of the courts. The key issue here is that China is both itself a donor and a recipient of rule of law promotion funding and has both capacity and means to capture, steer and reshape donor interventions.

What should donors do in response? One approach would be to de-emphasize attention to formal legal institutions in Asia and look instead at the regulatory dyamics of individual systems at natonal and local levels. Regulatory reform in industrialized and post-industrial states relies on co-regulation by state and non-state actors and mobilizing self regulation by understanding of what motivates regulatoryy actors. Donors  would get better results in Asia from investing in a nuanced understanding of how indigenous regulation works — at all levels. So yjay requires less copying and pasting of competition legislation and more interdisciplinary understanding of the social, economic and political drivers for regulatory actors on the ground.

We could also correct the technocratic emphasis on form over substance. Body counts of judges are largely irrelevant indicators of legal ‘development’. Better measures would be rigourous, multi-method studies of how judges see their role, how their knowledge changes over time, and the personal costs and systemic constraints of, say, delivering accurate, appealable decisions.

A further dimension would be to take seriously the prospect that China may emerge as an intellectual force in the promotion of rule of law. It already stands as an alternative development model and there is no reason why Chinese adaptations of donor rule of law interventions cannot become suggestive models of practice elsewhere, regardless of whether they fit current donor orthodoxy. The indications seem to be that the donor era of ‘Do as I say, not as I do’ might be drawing to a close.

Veronica Taylor is Professor and Director-Designate of the School of Regulation, Justice and Diplomacy at the Australian National University.

This piece was originally published in the most recent edition of the East Asia Forum Quarterly, Asia’s Regulatory Awakening.

1. Politics, ‘guanxi’ and the rule of law
2. Gridlocked: the uneven road to rule-of-law reform in Mongolia
3. Rethinking nuclear power in Asia after Fukushima

Since 1995 the US has ‘provided North Korea with over US$1.2 billion in assistance’ — about 60 per cent for food aid and about 40 per cent for energy assistance to North Korea.

The provision of this aid has raised difficult political, moral and policy dilemmas.

Mark Manyin and Mary Beth Nikitin recently released an updated and insightful Congressional Research Service report on ‘Foreign Assistance to North Korea’. They trace the evolution of US aid to North Korea from the early 1990s until the present — including bilateral aid and multilateral aid conducted through the Korean Peninsula Energy Development Organisation (KEDO), the Six-Party Talks and the UN’s World Food Programme (WFP) — highlighting the dilemmas US policymakers face in formulating and implementing US aid policy toward North Korea, the stop-start nature of the aid flow, and outlining future policy options.

One argument in the United States is that Pyongyang has resisted reforms that would help it to better provide access to food for its population. This includes ‘economic reforms that would help pay for food imports or increase domestic production, as well as the political reforms that would allow for a more equitable distribution of food’.

A second is that access to monitor food aid distribution has been problematic. Multiple sources have alleged that ‘a sizeable amount of the food assistance going to North Korea is routinely diverted for resale in private markets or other uses’. The North Korean government often ‘restricts the ability of donors to monitor shipments of aid’, and the negotiation of monitoring access has been a recurrent struggle between the US government and the UN WFP on the one hand and the North Korean government on the other.

A third is that assistance of any kind is fungible. ‘Funds that the [North Korean] government otherwise would have spent on food can be spent on other items, such as the military’.

These dilemmas are compounded by the fact that North Korea receives aid from many sources, particularly unconditional aid from China and South Korea (at least it did under the sunshine policy of Kim Dae-jung and Roh Moo-hyun before Lee Myung-bak assumed power in Seoul).

The tradeoff with these dilemmas is that ‘it is likely that food aid has helped feed millions of North Koreans, possibly staving off a repeat of the famine conditions that existed in North Korea in the mid-late 1990s’. Some argue also that ‘a well designed food aid program can facilitate the expansion of markets, which over time will erode the Kim regime’s hold over the country’.

In attempting to work through these dilemmas, domestic US political squabbles and disagreements between the US and North Korean governments have resulted in aid being delivered in ebbs and flows. ‘The provision of aid to North Korea has given [the US] Congress a vehicle to influence … policy toward the DPRK’. At times, disagreements among US Congress people, and between Congress and the President, have hampered a coordinated approach. The positions of US Congress on food aid to North Korea range from those who advocate food aid ‘on humanitarian grounds … regardless of the actions of the North Korean regime’, to those who call for ‘food assistance to be conditioned upon North Korean cooperation on monitoring and access’, to those who outright oppose the provision of any food aid barring significant political changes in Pyongyang. Typically, this has resulted in Congress using its power to impose conditions and reporting requirements on funds authorized for aid to North Korea.

While ‘officially US policy de-links food and humanitarian aid from strategic interests’ it is ‘documented that the Clinton administration used food aid to secure North Korean participation and increased cooperation in security-related negotiations’. The Bush administration officially linked food aid to North Korea to three criteria: ‘the need in North Korea, competing needs on US food assistance, and ‘verifiable progress’ in North Korea allowing the humanitarian community improved access and monitoring’. Some experts have argued that food aid flows between 2001-2005 suggest a US desire to use aid to ‘influence talks over North Korea’s nuclear program’. But the resumption of food aid in 2008 suggested a ‘tighter link to issues of access and monitoring of food shipments’. Obama Administration policy has continued to use the same three criteria as those the Bush Administration applied.

In the wake of North Korean appeals for food aid earlier this year, US Special Envoy for Human Rights in North Korea, Ambassador Robert King led a delegation in late May to determine North Korean food needs, though any official US decision is yet to be made. Hence the pertinence of this timely analysis of the policy options available to the Obama administration.

Manyin and Nikitin outline five policy options for future US food aid to North Korea.

The first option is to ‘establish explicit diplomatic linkages by conditioning food aid on progress in security-related talks, such as … the North’s nuclear programs’. In the past this approach has produced some short-term successes, but overall it has not ‘induced significant changes in North Korea’s long-term behavior on security issues’. Additionally this approach risks undermining efforts to monitor food aid distribution.

The second is to ‘set explicit humanitarian linkages by conditioning future food aid on improvements in access and monitoring’. The impact of food aid diversion abuses can also be mitigated to some extent by delivering food aid through directly to ‘North Korea’s historically poorer and politically marginalised northern provinces’.

A third is the option of pressuring China on its food aid to North Korea either publicly or privately, something missing from both the Bush and Obama administrations’ discussion list with China. But China is unlikely to entirely cut off its aid flow given its interest ‘in preserving North Korean stability’. A more practical fallback position would be to encourage China to keep ‘food assistance only at a subsistence level needed to maintain stability in North Korea’.

A fourth option is deciding ‘whether and how to harmonise policy with Seoul’. Lee Myung-bak has taken a tougher approach to North Korea than his two predecessors, and this was only reinforced by the Cheonan sinking and the shelling of Yeonpyeong Island. Ambassador King, has said that, ‘South Korea would prefer that the United States not provide food aid to North Korea’. Critics of food aid policy contend that the US ‘should not provide food … because it might create a rift with South Korea’. Proponents argue that ‘US-South Korea cooperation on North Korea is sufficiently strong to sustain different approaches’.

Finally, if aid is resumed, the US must consider what mix to use of NGO and WFP channels for delivering food aid. In 2008 the Bush administration increased the use of NGO channels up to 20 per cent of total US food aid to North Korea. NGOs have had greater access and monitoring success dealing ‘principally with local North Korean officials, who often have more incentive to be more cooperative than the central government’. The WFP on the other hand has the institutional capacity to operate nationally and target millions more, assuming it can get access.

Ben Ascione is a Masters candidate in international relations at the Graduate School of Asia Pacific Studies, Waseda University, a research assistant at the Japan Center for International Exchange, and an associate editor of EAF.

1. Obama’s North Korea policy and the June 15 South-North Joint Declaration
2. A more effective US policy on North Korea
3. A bad plan for the unmentionable in North Korea

Videos showing Australian cattle being subjected to inhumane treatment in Indonesian abattoirs have prompted calls for an immediate ban on live cattle exports to Indonesia.

But is banning Australia’s only option?

As Indonesia’s per capita income increases there has been increased domestic demand for imported livestock, including from Australia, thanks to its quality, relatively affordable price and availability at the supermarket.

The Indonesian government is hoping to achieve beef self-sufficiency by 2014. To this end, it has launched various programs to assist small farmers and imposed a tariff (which is currently low at 5 per cent and heading to zero under some Free Trade Agreements such as the ASEAN-Australia-New Zealand FTA in 2020) and some non-tariff barriers. This self-sufficiency program may explain why Australia sends live animals to Indonesia instead of beef. The Indonesian government has set the maximum weight of imported live cattle at 350 kilograms to ensure Indonesia receives cattle that will have value added in Indonesia. This has led to the development of the feedlotting business in Indonesia, which receives supplies of feedlot cattle from Australia. The Australian government, through the Australian Centre for International Agricultural Research (ACIAR), has funded several programs to review the effectiveness of the Indonesian government’s programs and investigate the supply chain in the beef market. A complete ban on live cattle exports may lead to these Australian investments in research and development in Indonesia losing all value.

If banning exports is not preferable, working with the Indonesian government to ensure animal welfare might be. Many suggest the ban of Halal slaughtering. But it is not Halal requirements that result in the inhumane treatment of animals. Halal defines what is lawful according to Islamic law including acceptable food, slaughtering procedures, and how Muslims get the money they use to purchase food. Most abattoirs in Indonesia meet Halal requirements. They must apply for the Halal certificate from The Indonesian Ulema Council (Majelis Ulama Indonesia or MUI) and obtain a Veterinary Control Number (Nomor Kontrol Veteriner) from Government Livestock services (Dinas Peternakan) under the Ministry of Agriculture (MoA).

What has been debated is whether stunning must be performed before cutting. This is practised in most Halal abattoirs in Australia and complies with the Australian standard. As stated by Mohamed El-Mouelhy, the chairman of Halal Certification Authority Australia, stunning is completely acceptable under Halal; it is done in Australia and throughout Europe, and Indonesia willingly accepts Halal meat products from overseas abattoirs known to use stun guns. In Indonesia, the MUI allows slaughterhouses to stun the animals before cutting as well as cutting without stunning. To avoid similar cases in the future, perhaps the MUI should regulate to ensure that stunning must be conducted before cutting. Alternatively, if stunning is not conducted before the cutting, there has to be a clear guideline to ensure that the animals die right away.

This episode clearly demonstrates the failure of the Indonesian livestock services system, in particular the monitoring and supervision roles of the MUI and MoA. More regular and stringent monitoring and inspection practices need to be implemented. The lack of monitoring of Halal practises in Indonesia has been a concern of Muslim Indonesians for a long time. Muslim Indonesians are equally as upset as Australians over the issue. Most Muslim Indonesians feel that the inhumane treatment of animals is not in keeping with the spirit of Islam generally, or Halal. They feel their basic need to access Halal food cannot be satisfied by the government.

Australian support for Indonesia to deal with this issue is of critical importance and would be greatly appreciated. Worker exchange and capacity building programs to train the MUI members and MoA officials to supervise and monitor slaughtering effectively would be a positive step forward. Australians should also consider investing in abattoirs in Indonesia, and the Indonesian government must ensure easy market access for investors. LiveCorp has recently launched a strategic vision for improving animal welfare in Indonesia making Australia the only country in the world investing in animal welfare in its overseas markets. This goodwill toward Indonesia may also contribute to Australia’s own economic growth and strengthen Australia’s regional influence.

Risti Permani is a post-doctoral fellow of the School of Economics at the University of Adelaide.

1. Australian–Indonesian livestock trade: Ban the bans
2. Indonesia: Islamic courts as governance institutions
3. Clinton’s visit to Indonesia

The current disaster in Japan has provided an opportunity for Japan and China to further invest in their mutual international cooperation outside the security sphere such as the Six-Party Talks. It has done this in at least three ways.

First, China’s quick response in the wake of Japan’s largest recorded earthquake, tsunami and nuclear reactor crisis has demonstrated again that China and Japan can work together effectively and for their mutual benefit. This is in-line with their post 1970 normalisation relationship in which they have, for the most part, effectively separated politics and economics, known as Seikei Bunri in Japanese, allowing for continued economic development between the two states.

Following the onset of the recent crisis, China immediately offered 20,000 tons of fuel and supplies as well as expert advice. Importantly, this generosity has not been limited to the state, but also local and provincial municipalities, individual citizens and China’s Red Cross. This reciprocation of generosity is illustrative of the will, capacity and crucial ability to cooperate despite tensions in other aspects of the relationship.

Second, and perhaps equally important, are the Chinese rescuers on the ground, saving or involved in saving the lives of Japanese victims. From a public diplomacy point of view, the image of a your ‘competitor’ helping ordinary Japanese people in such a dire situation is a powerful image that can only create better will between the two countries.

Third, there is no doubt China’s aid is much appreciated by the Japanese government and people but there is another very important side of this story. For China, watching how the ordinary Japanese citizen and local governments have responded to this unprecedented disaster has been not only an exceptional demonstration of Japan’s disaster preparation, but also a salient demonstration of Japan’s exceptional ability to remain an orderly society even in the most desperate of situations. There has been no reported crime or looting, no mass panic and none of the chaos that we have seen in disasters such as Hurricane Katrina in the US.

Once the immediate crisis has passed and the rescuers have returned home, I suspect there will be more cooperation in the area of disaster preparedness. This will no doubt include a focus on the behaviour of ordinary Japanese citizens and what lessons can be applied in China.

All in all, the horrible earthquake and tsunami that took place on 11 March 2011 have provided opportunities and new lines of communication between Japan and China. These lines contribute to building trust between the two neighbours at the level of the state, local government and ordinary citizen that might do much to dampen nationalistic tensions and increase the collective sense that these two Asian giants are neighbours that not only can benefit from each other but are two giants that need each other.

Stephen Robert Nagy is an Assistant Professor of Japanese Studies at The Chinese University of Hong Kong and Senior Fellow at Waseda University’s Global Institute for Asian Regional Integration (GIARI).

1. The political and policy fall-out from the Japanese earthquake and tsunami
2. Sino-Japanese relations: flirtation or long-term engagement?
3. A sea of trouble in Sino-Japanese relations

The horror and devastation of the earthquake, tsunami and nuclear disaster in Japan continue to stun people all over the world — nowhere more so than in Japan itself, of course, where continuing anxiety is mixed with the numbness that such tragedies suffuse over the human psychology.

This is an awful period for the nation, picking itself up after being partially flattened. It is a period of helpless acceptance of loss. It is a period of struggling to find reasons where there are none. It is also a time of searching for scapegoats, as the hapless officials and workers at Tokyo Electric Power Company (TEPCO) battle like latter-day samurai warriors to get control of a disaster that their predecessors (and the geo-scientific advice on which they and insurers drew about the probability of these events in this region) failed hopelessly to predict.

Recovery and the massive clean-up will itself take a year or two, not to mention managing the fallout from the Fukushima nuclear power crisis. This is an immense national task for Japan. The supposedly selfish younger generation has demonstrated particular selflessness, pitching in to help the afflicted and volunteer in the heartbreaking effort to clean up the mess. Happily the recovery is being assisted by the international community on a scale unprecedented in Japanese history, with teams coming from the United States, Europe, China, Australia and other countries. And ordinary communities in Australia and all over the world have volunteered funding and held poignant services to commemorate their universal human loss.

Reconstruction requires focus on the future, a future that is difficult even to begin to ponder at this stage. There is natural paralysis in thinking beyond the present calamity. The immediate effect of the triple disaster is to put thinking about Japan’s reform and international agenda on the back burner. When farmers in the heartland of one of Japan’s main granaries are on their knees, how is it possible to contemplate prosecuting agricultural reform through commitment to comprehensive trade liberalisation within the proposed Trans-Pacific Partnership? It was a long shot anyway, but now it seems even more remote.

Yet focus on the future is exactly what is needed now, both inside Japan and out. It is the therapeutic and practical thing that needs to be done.

How should Japanese leaders and the Japanese people — and how should we — begin to think about Japan’s future now?

Japan must deal with a disaster, the longer-term consequences of which have to be managed from now. And in the overall scheme of things it is problem that can be managed, though it may be managed more or less well.

One issue is how to pay for rebuilding the assets destroyed by the earthquake, the tsunami and the nuclear accident. The estimates of these costs have been steadily growing — the highest estimate I’ve seen put them at US$600 billion; the official estimate is US$309 billion, around 6 per cent of GDP, including guesses at dealing with radiation damage; and more cautious figures put the costs at under US$200 billion including costing the loss of human capital embodied in around 30,000 souls who have lost their lives.

Even the upper estimate of capital loss represents perhaps only 1 to 2 per cent of Japan’s physical capital assets. At the end of World War II, a disaster with which the current one has been compared, Japan was left with merely one third of its (much lower) physical capital assets, not to mention the millions who’d lost their lives.

This week Nobu Yamashita and Sisira Jayasuriya review the debate that gathered pace in Tokyo last week on how to pay for recovery. They identify four options for financing reconstruction: diverting spending from current programs; introducing new taxes to raise revenues; borrowing from the public; and ‘monetizing the debt’ by direct purchase of government bonds by the Bank of Japan.  They conclude that ‘Japanese bond yields have in fact continued to fall even after the disastrous events of March 2011 and that there are no signs of any inflationary pressures. In the current circumstances, after two decades of battling deflation and a stagnant economy, more reliance on monetizing the debt is likely to maximise the stimulus effects of reconstruction while alleviating the pressures on currency appreciation. Some inflation may be a welcome thing in Japan and economic growth will itself tend to lower government debt’.

Another issue is how to think about the strategic international dimensions of securing Japan’s future. No country, perhaps, has greater interest in this, or more obligation to work the issue through jointly with Japan than Australia, with its critical role in underpinning the international dimension of Japan’s food, resource and energy security. Australia supplies over half of all Japan’s strategic raw material needs and, even though it’s not a supplier of oil, a quarter of Japan’s energy requirements — more than Saudi Arabia or any other oil producing state.

Good fortune, which has been in short supply in recent times, has Australian Prime Minister, Julia Gillard, visiting Tokyo in just a few weeks. As Jenny Corbett notes this week, she will be the second foreign leader of a major state (after President Sarkozy of France) to visit Japan since 11 March. This will be a time for expressing the solidarity of the Australian people and the international community with Japan. It will be a time for reviewing progress with recovery. Australia was among the first with commitments to the recovery effort on the ground. Ms Gillard will need to visit Sendai, however tight her schedule. But more than all of that her visit to Japan will be a time for her to set out a long-term vision of the comprehensive security partnership that Australia and our region will want to strengthen further with Japan beyond the immediate crisis.

The disaster in Tohoku has knocked out a sizeable slice of Japan’s food supply chain for some time, if not forever. This is a time for quietly explaining the huge advantage of reliable international (institutionally guaranteed) food security. That needs to be — and can be — articulated with effect. It is a time to explain quietly that the idea of a high food self-sufficiency ratio for Japan is not necessary or productive. A new Economic Agreement between Australia and Japan will contribute to providing the institutional guarantees. International markets cushion Japan against the shortages and escalating prices of food and other essential materials that otherwise would put added burdens upon the Japanese people. Nothing will be quite the same in the Sendai region, or in Japan, again.  Infrastructure won’t be rebuilt in the same way without private funding as Corbett says. Australia is already working with Japan on new models of infrastructure financing, for their own countries and across the region. The pace of that work together must now accelerate.

Ms Gillard’s visit will be a time to lay out, with feeling and sensitivity to the lonely position in which Japan now confronts its vulnerabilities, a forward-looking vision of the reliability of Japan’s partnership with Australia and with the Asia Pacific region — a vision that draws on the assets in the bilateral relationship and regional associations that have been put in place together over years.

1. Gillard to Japan: Friends in deed
2. The Trilateral Summit: a new era in China-Japan relations?
3. Japan now needs a credible fiscal plan

French President Sarkozy is the first foreign leader to visit Japan since the disasters of early March. His visit has been welcomed in Japan and has partly restored the unfortunate impression that the French jumped ship early by evacuating all their nationals.  Well-timed, symbolic gestures of support can have great impact. Would this be a good moment for a high-level gesture of goodwill, respect and support from Australia?  Absolutely. But a mere repetition of the mantra that Japan is our most strategically important ally in the region would be a wasted opportunity. These circumstances provide an important moment to take the bilateral relationship one big step towards new levels on many fronts.

On the humanitarian front Australia can offer assistance beyond aid and rescue teams. The traumatic effects on survivors are most significant for the children and young people orphaned or displaced. Children’s charities already say that early return to school helps survivors cope. Some can be relocated to other areas of Japan but this is an opportunity to expand student exchanges with Australia. Our schools and universities have a long, successful history of exchanges with Japan but in recent years support for these programs has waned so we risk a decline in the depth of student experience (and a growing generation gap for top-level expertise on Japan). We could now look at extending educational cooperation in new ways. There will be delays in the start of Japan’s academic year as schools and college facilities have been destroyed in affected areas. A rapid program of accelerated visas for student applications, combined with coordination among our educational institutions to offer places, could build a new generation of people-to-people links that will last a lifetime.

If natural disasters are becoming more frequent and more devastating in both countries and in our region, the role of scientific collaborations grows. Australia has world-class earthquake research that is closely linked with research in Japan.  There are other fields where our skills complement each other: on disaster prevention, research and relief.  These should be fostered with government and industry support, using the structures of collaborative research centres.   Japan and Australia should be jointly leading the region in coordinated approaches to disaster research, preparedness and response. A United States forces’ representative has proposed a formal US-Japan bilateral agreement on disaster response but Australia and Japan have as much or more at stake.

Australia now needs a new strategic dialogue and regional leadership with Japan on environment and energy security. This must include frank discussion of the role of nuclear energy.  Japan has an exceptional record amongst advanced industrialised countries in reducing energy use per unit GDP.  Australia is, for now, Japan’s and the region’s main supplier of energy resources other than oil. Both countries have a huge stake in shaping the way the region (including China) pursues alternatives and sets priorities on energy and environmental policies. France is trying to engage with Japan to develop new international standards and codes for nuclear power; Australia has as much if not more at stake.

At the heart of Australia’s relationship with Japan is economic security. The Australian Treasurer has revealed estimates of the short-term impact of the disaster on Australia’s mineral exports but most estimates suggest that initial negative effects to GDP from the natural disasters alone will be offset by reconstruction activity within 9 to 12 months. Uncertain power supplies adds complexity to forecasting but the demand for fuels to expand power from undamaged generators in other regions and for materials for rebuilding will rebound, with benefits to Australian exporters. Importantly, Japan’s economy has already changed, and will change even more as a result of this disaster. These changes will impact on Australia’s economic relationship and provide new focus for Australian government and industry.

Both Japan and Australia are already predominantly service economies (around 80 per cent of GDP is generated in the service sector of each economy). If uncertainty of power supply drives even more energy-intensive industrial capacity off shore for Japan, this trend will increase. Some Australian businesses have already recognised this. The future of our economic engagement lies in new models for building critical infrastructure; in jointly building, operating and servicing production chains throughout the Asian region; and in improving the productivity of creative, research and service sectors as an engine for growth. This will need structural reform in Japan and that will be politically difficult. Acknowledging that, the time has come for Australia to move beyond the present obsession with signing an FTA and get to grips with the range of other elements of our partnership with Japan.

Having embarked on the quest for an FTA, Australia and Japan should conclude it. But it needs to be an agreement that is the cornerstone of a new, cooperative relationship that doesn’t shrink from the future. The FTA is not an end in itself. Japan’s agriculture, along with the rest of its economy, needs to, and will, change. Australia will neither be a threatening agricultural giant nor an endless mine of resources forever. Australia and Japan can start now to jointly build sustainable agriculture in both countries to help secure food supplies, to create smarter economies to provide productive services facilitating lower cost production (often in other countries) and trade and to lead the region in intelligent solutions to energy and environment problems and in well-regulated financial systems.

Jenny Corbett is Professor of Economics and Executive Director of the Australia-Japan Research Centre in the Crawford School of Economics and Government at the ANU.

1. Australia-Japan economic partnership – Weekly editorial
2. Australia avoids the crisis, by luck and good management
3. Opportunity in crisis: Sino-Japanese relations after the earthquake

A natural disaster is not the worst of our fears: much worse is a society in disarray.

Japan’s most recent earthquake has once again reminded us all of the tragedy of the unpredictable and the futility of human strength. These days, no one can be completely safe from natural disasters; all of us live in an era of risk.

The difference lies in the sufficiency of preparation. With adequate preparation, we can, with skill, deflect danger, save countless lives, rapidly recover and rise from the ruins. In a society that is unprepared, natural disasters will be compounded by shortcomings of human fault and error.

Japan’s earthquake not only teaches us what is meant by this era of risk, but it also teaches us that the best preparation for a big risk is a big response.

After the 1995 Kobe earthquake, the chassis of Japan’s big nation and big society status played a significant role. The performance of the government at that time drew some criticism, but its incompetence did not lead to devastating consequences, as it was not the only branch bearing responsibility. The Japanese society at that time was a self-governing society; a self-governing society is a polycentric one, one with a dense web of load-bearing walls. If one or several of these collapses, the impact is minimal, and not enough to cause a national collapse. The rapid intervention of civil forces after the Kobe earthquake minimised the loss of life due to government failure. Even the Yamaguchi underworld group headquartered in Kobe came forward, providing food and daily necessities to some of the victims.

Japan, having learned from the Kobe earthquake, performed excellently in response to the recent earthquake. The government did not fail this time but was orderly, causing a quick about-turn of the popularity of Naoto Kan’s cabinet. This was a classic case of a courageous government refusing to be defeated by criticism, but rather learning and growing from it, and in doing so, recovering its dignity.

However, compared to the strength of the government, it was the strength of the nation and society that was the most touching. Japan’s media, represented by Nippon Hōsō Kyōkai (NHK), neither panicked nor applied sensationalism, but spared no efforts to provide a plain and accurate information service. Some people have lamented that the role of NHK in the disaster relief was greater than that of the government. But what is the point of public media? Why is the public utility of the media important? The Japanese media’s effective response in the earthquake should force us to reflect deeply on these questions.

Japan’s schools and communities, its civil society, without exception played their own role to help with the disaster relief. Neither receiving nor needing executive orders, they seemed to have a natural cohesion, throwing themselves into the relief effort in an instinctively orderly fashion. Free public phones, free shelter materials, free food supply, the orderly and smooth flow of public transport. All of this was mostly unsolicited and occurred in a low-key fashion.

The force of the natural disaster is great, but the strength of the social framework is still greater. This is a solid social chassis, forming a safety net warding off the risk of any major disasters, warming people’s hearts and blessing countless lives. How could a major 9.0 earthquake and a raging tsunami not cause hundreds of thousands, of casualties? Why was the entire social order able to operate effectively despite having been dealt such sudden and deadly blows? This social chassis is the basic reason.

Let our society become better prepared: to become more organised, let our social chassis become more solid and powerful. Everything that is conducive to this approach should be encouraged; everything contrary is to be condemned and curbed. Japan’s big nation and big society was laid down by the restructuring of constitutional government in the middle of last century, and the country has so far seen half a century of great results.

A society that lacks the ability to order itself, that can only rely on executive orders to mobilise and organise, is a society that is as stable as a plate of loose sand.

The strength of the civil society that grew from China’s 2008 Sichuan earthquake is still there; what’s to stop us from building upon it?

Our own foundations are not so weak, as the relief efforts after the Sichuan earthquake proved. This strength of civil society should not be short-lived, and we should take a responsible and constructive attitude towards our state and the nation.

This article was adapted from one originally published in Chinese on ifeng.com. David Kelly provided translation.

1. Opportunity in crisis: Sino-Japanese relations after the earthquake
2. Japan’s earthquake and its economic impact
3. The political and policy fall-out from the Japanese earthquake and tsunami

Australia is committed to doubling its foreign aid budget by 2015. This is a commendable objective and one that bucks the trend among most other major aid donors.

In this context, Australian Foreign Minister Kevin Rudd has announced a review into ‘the efficiency and effectiveness’ of the Australian development assistance program. Ideally, this should be the last ad hoc review. Australia would be better served by a review model similar to the Quadrennial Diplomacy and Development Review (QDDR) process initiated by US Secretary of State Clinton.

The key big picture challenges for the panel are:

• to match their ambition to the future $8 billion program, rather than being constrained by the more limited horizons of the current modest program;
• to identify realistic opportunities for Australia to play a global leadership role in the development area as we have done with regard to people with disabilities in developing countries; and
• to make clear the balance of risks in the difficult development business. In pursuit of efficiency and effectiveness the inevitability of some failures must be recognised and accepted.

There are a large number of specific issues that the Review will need to address, but in most cases the result is predictable because of the momentum already established and the clear national and global priorities.

Some key areas where the potential for conflicting arguments and competing ideas lie in:

• the geographic focus of the program;
• the issue of Pacific integration;
• the focus on security and governance;
• climate finance; and
• agriculture and resources.

Security and governance

Too high a proportion of Australian aid in the past decade was targeted at a flawed model of assistance to improve governance. Good governance matters but long term improvement in governance is more likely to flow from an educated and aware population than from an outside government sending in ‘experts.’

On the closely related issue of the security aspects of development, the Review needs to acknowledge that Australia should not apologise for recognising that its future security will be profoundly affected by the success of our development efforts. This is most obvious in Afghanistan but is also highlighted by recent controversy surrounding assistance to Indonesian schools. I have visited some of these schools and seen their importance to the development of Indonesia and for generating opportunities for the next generation of young Indonesians. But it is also profoundly in Australia’s interests for Indonesian families to have an alternative education option to radicalising influences.

Geographic focus

The point of contention over geographic focus is whether Australia can deliver assistance to Africa in a manner consistent with a commitment to efficiency and effectiveness. It is clear there is a case to do so as this is the part of the world where the commitment to the Millennium Development Goals is furthest from achievement. It is clear we will have resources to do so in an AU$8 billion budget. AU$500 million to Africa will leave AU$7.5 billion to do what we now do with AU$4 billion.

The question is: can the money be spent wisely and well?

Recent experience suggests that, with care and focus, it can. The current and prospective commitment to areas of Australia’s special knowledge, expertise or experience suggests that if we proceed cooperatively with partner countries and other donors, we can meet our criteria.

The proposition that we should focus on relevant areas of Australian expertise, agriculture and water has been well received. Building on a history of support for maternal health with special emphasis on training midwives is well focused. In putting these priorities before representatives of African countries, I found they were almost universally keen to add a fourth: mining. In these areas, working with regional bodies like the African Development Bank, we can deliver value for money for taxpayers and impact on the MDGs in Africa. Longer term, perhaps in the big scale-up years of 2014 and 2015, I strongly believe we should build on this basis by joining the African Development Bank.

Pacific integration

There are important issues about aid to the Pacific to be addressed. The Review has a strong basis to build on with the Partnerships model arising from the Port Moresby Declaration and the donor coordination based on the Cairns Compact. The key new questions to be addressed relate to broader issues of economic integration based on products, services, investment and labour flows and the remittances they generate. Another key to the future of the Pacific lies in the development of the tertiary education sector, at both university and technical levels.

Over the next decade climate finance will also have an increasing call on development spending and will need to be factored into planning.

Food and Resources

This may not loom large for the Review Panel but is a big issue for the future. It is important, not only for the obvious reason that recurrent food price crises put the achievement of the MDGs under pressure. There are also important opportunities that looming shortages will present for developing counties to generate wealth from their underutilised agricultural and mineral potential. No developed country has more to offer than Australia in assisting countries to seize these opportunities.

Accountability

As the program grows there will be a need to enhance its communication and accountability. Many worthwhile measures are in place but as a next step I believe the Panel should recommend that the Joint Committee on Foreign Affairs, Defence and Trade should establish a special sub-committee on aid and development.

Beyond 2015

The Review should also start the process of looking beyond 2015. At the moment, the task of doubling the aid program by 2015 is daunting enough. By the time of the next Australian election, parties will be called upon to state their positions for a term that will extend to 2016. We need to start thinking what that will mean or we risk losing the vitality and momentum that the aid debate is just now starting to enjoy in Australia.

Bob McMullan was formerly Parliamentary Secretary for International Development and is Adjunct Professor at the Crawford School of Economics and Government, Australian National University.

1. China and Australia: toward cooperative aid delivery
2. Australia: balancing the long with the short
3. Anticipating Obama’s visit to Indonesia and Australia