East Asia Forum http://www.eastasiaforum.org Economics, Politics and Public Policy in East Asia and the Pacific Tue, 25 Nov 2014 23:00:56 +0000 en-US hourly 1 Sri Lanka tilts to Beijing http://www.eastasiaforum.org/2014/11/26/sri-lanka-tilts-to-beijing/ http://www.eastasiaforum.org/2014/11/26/sri-lanka-tilts-to-beijing/#comments Tue, 25 Nov 2014 23:00:56 +0000 http://www.eastasiaforum.org/?p=44351 Author: David Brewster, ANU

A sea change is occurring in Sri Lanka’s strategic orientation. Recent developments suggest that Sri Lanka is becoming China’s new best friend and security partner in the eastern Indian Ocean. This would represent a major change in Sri Lanka’s foreign policy and could have significant consequences for regional security.

The immediate cause célèbre is the visit of a Chinese submarine and announcement of a new Chinese-built port in Colombo in September, followed by another visit in early November. A third is rumoured for later this month. These are no ordinary naval visits: their nature, frequency and timing are extraordinary. The first occurred during state visits by Japanese Prime Minister Abe and Chinese President Xi Jinping. Claims by Beijing that its nuclear-powered attack submarine is on deployment against Somali pirates are risible. Despite Colombo’s initial attempts at secrecy, the visits seem to be a deliberate signal by China that it intends to maintain a submarine presence in the Indian Ocean and that Sri Lanka will play an important role that strategy.

Sri Lanka has a longstanding policy of showing accommodation and reassurance towards India. In particular, Sri Lanka will not allow itself to be used by other powers to threaten India’s security interests. This policy has been followed more or less since independence. It was reflected in a 1987 agreement under which Sri Lanka committed not to allow any of its ports to be used by any country for military purposes in a manner prejudicial to India’s interests. Overall the strategy has served Sri Lanka well in dealing with its huge and sometimes difficult neighbour.

This stance has only really been called into question once, with disastrous results for Sri Lanka. During the 1980s, in the early days of the Tamil civil war, Colombo toyed with offers of foreign military assistance that some feared would lead to the establishment of a US naval base at the northern port of Trincomalee. These concerns were a significant factor in India’s decision to provide support for the Tamil insurgency and India’s subsequent military intervention in Sri Lanka.

What has caused a change in Sri Lanka’s stance? In recent years there has been significant Chinese investment in high profile infrastructure in the country. The Chinese presence in Colombo is palpable. Some of these projects, such as a new port at Hambantota in southern Sri Lanka, have led to claims that China seeks to build a string of naval bases across the northern Indian Ocean. It seems unlikely that Hambantota will become a formal Chinese naval base, but there is little doubt that the Chinese navy will be seeking dependable access to replenishment facilities in the region.

There have been increasing indications over the last six months of Sri Lanka’s willingness to host Chinese military-related facilities. It was recently revealed that China will take over management of a new and enlarged Phase II Hambantota port with berths dedicated for Chinese use. In July the government also revealed it intended to establish a Chinese-run aircraft maintenance facility near Trincomalee, ostensibly to support Sri Lanka’s air force. After strong protests from Delhi, the government may establish this facility in another location, perhaps next to Hambantota port. If nothing else, this is a reminder that the both the Chinese navy and air force will be new players in the Indian Ocean.

The timing of these developments is odd. Beijing is currently promoting what it calls the ‘Maritime Silk Road’ that would involve the construction of ports and other infrastructure across the Indian Ocean. This would include a string of dedicated component manufacturing facilities that would feed back to assembly in China — perhaps something akin to Japan’s ‘flying geese’ strategy in the 1970s. Sri Lanka has volunteered itself as China’s prime partner in this initiative. Yet both vociferously claim that the strategy has no military implications. The recent security developments seriously undermine these claims.

China may be simply seizing an opportunity. Despite some of the hype, China actually has few ‘friends’ in the Indian Ocean that could be depended upon to host military-related facilities. Pakistan is of course a long-standing ally, but its stability and dependability is looking increasingly questionable. Indeed, Xi recently cancelled a planned trip to Islamabad over security concerns. Many have also tagged Myanmar as a de facto ally of China. But Myanmar has never allowed China to use its military facilities, and its political dependability to China is also increasingly uncertain. Sri Lanka, with a stable and cooperative authoritarian regime strategically located in the central Indian Ocean, ticks many of China’s strategic boxes.

How will India respond to these developments? Delhi has expressed anger at these visits in the strongest terms and has told the Rajapaska government that they are ‘unacceptable to India’. But despite strong trade and defence links, including considerable training for Sri Lanka’s military, India’s options are relatively limited. Attempts to isolate the Rajapaksa government are unlikely to be considered an option: Delhi believes attempts to isolate Myanmar’s military regime after 1988 were a major strategic mistake that drove the regime closer to Beijing for decades. Delhi may try to reverse Colombo’s current path through a combination of engagement and coercion, although it is not clear what leverage it has. But decision-makers in Colombo will (or should) be acutely aware of Delhi’s actions in the 1980s when it perceived Sri Lanka may be used by other powers as a threat to India.

David Brewster is Visiting Fellow at the Strategic and Defence Studies Centre, the Australian National University.

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China’s aspiring global leadership http://www.eastasiaforum.org/2014/11/25/chinas-aspiring-global-leadership/ http://www.eastasiaforum.org/2014/11/25/chinas-aspiring-global-leadership/#comments Tue, 25 Nov 2014 11:00:40 +0000 http://www.eastasiaforum.org/?p=44346 Author: Thitinan Pongsudhirak, Chulalongkorn University

This geopolitical summit season has consolidated ongoing trends in international affairs. A still-rising China with global leadership aspirations, a resurgent Russia bent on restoring its superpower status, and sclerosis and dysfunction in Western countries is likely to dominate international politics for at least the next 20 years. In fact, we might only be at the beginning in this long time span where seismic global power shifts are taking place.

US president Barack Obama and Chinese president Xi Jinping look at each other during a press conference at the Great Hall of the People in Beijing during APEC, 12 November 2014. (Photo: AAP).

The challenge for countries around the Asia Pacific is what to do and how to respond. To promote regional peace and stability, China’s global leadership requires measured accommodation, enough to satisfy Beijing’s rightful place in the global order but not so much as to lead the Chinese leadership into an outright expansionist agenda.
Over the past two weeks, during the APEC summit in Beijing, the ASEAN and East Asia Summit in Naypyidaw, and the G20 leaders’ meeting in Brisbane, the patterns were clear. Everywhere Chinese leaders went, they were pestered with questions about China’s aggressive intentions in the East China Sea with respect to Japan and the South China Sea involving ASEAN member states, particularly the Philippines and Vietnam.

Similarly, Russian President Vladimir Putin was greeted with criticism and questions about Russia’s interventionist aims in Ukraine after it annexed Crimea in March. Whereas Putin tended to be prickly and defiant in response, Chinese President Xi Jinping and Premier Li Keqiang were deft and sophisticated. In place of rhetoric, China has been following up its geopolitical posturing with action plans and key deliverables.

For the East Asian region broadly, the Chinese have proposed a ‘one belt, one road’ regional development outlook, underpinned by the China-sponsored Maritime Silk Road and the Asian Infrastructure Investment Bank (AIIB). While the idea of using massive Asian foreign exchange reserves to finance Asian development is not new, Beijing has stepped up by providing US$50 billion to capitalise the AIIB, and this will be complemented by other signatories. Already 20 countries in Asia have signed up and more are likely to do so in the future.

The maritime beltway across East Asia is also financially backed by Beijing to the tune of US$40 billion. Coming soon after China’s instrumental role in setting up a BRICS bank — known as the New Development Bank, with an initial capital of US$50 billion, and involving Brazil, Russia, India, China, and South Africa — the Silk Road fund and the AIIB would be a game changer for regional development in East Asia. These schemes would also likely elevate China into a top role in the neighbourhood.

Understandably, the United States and Japan have opposed Chinese funding manoeuvres for fear of losing out to Beijing. The roles of the International Monetary Fund, the World Bank, and even the Asian Development Bank may be consequently eclipsed. But here, Chinese global leadership was further on display in recent top-level meetings.

To indicate goodwill and bilateral cooperation, Mr Xi signed a crucial climate change agreement with President Barack Obama. To assuage concerns about the growing rivalry between two regional free trade schemes, the US-peddled Trans-Pacific Partnership and the China-preferred Regional Comprehensive Economic Partnership, Beijing has provided a big boost to open regionalism and freer trade by proposing a Free Trade Area for the Asia-Pacific (FTAAP), previously an on-again, off-again regional trade configuration.

In fact, the FTAAP can be seen as Xi’s concession to the US. Instead of a competition between TPP and RCEP, China may have enabled both to be enmeshed in the FTAAP. And despite media images to the contrary, Xi and Japanese Prime Minister Shinzo Abe had productive meetings during this most recent summit season.

In the ASEAN realm, Beijing has not committed to the full formulation and implementation of the Code of Conduct in the South China Sea (CoC). But it also has not aggravated the outstanding territorial disputes between China on the one hand and the Philippines and Vietnam on the other. Instead, Chinese leaders kept saying that they viewed the South China Sea as stable and reiterated their intent to remain peacefully engaged in the area. It was a foot-dragging manoeuvre but it did not rule out the completion of the CoC in the future. The AIIB and the Silk Road fund are the sweeteners in exchange for the drawn-out and delayed CoC negotiations.

Along the way, China separately struck bilateral free trade agreements with Australia and South Korea. Both are treaty allies of the United States, and Washington did not object to either trade agreement.

The Chinese leaders just about covered all bases. They had something for everyone and showed no belligerence and bluster, as was sometimes the case in the past. This is not just a global charm offensive but a full-blown global leadership quest. As a rising superpower, China wants to act like a genuine leader, shouldering global burdens and responsibilities.

China’s leadership aspirations coincide with a time when US pre-eminence appears to be fraying around the edges. After his Democratic Party’s recent losses in midterm elections, US President Obama risks being a lame duck. His much touted global ‘pivot’ or ‘rebalance’ towards Asia now does not carry as much credibility as a few years ago when it was launched. Obama wanted to be a Pacific president but circumstances beyond his control at home, in eastern Europe and the Middle East have effectively denied his lofty goal. He has been generally well liked in Asia but Asians are not oblivious to emerging realities in their immediate landscape.

Simply put, the penultimate question for East Asia is: who leads? China might play more by the rules if Beijing is recognised and regarded as a full-fledged major global leader — certainly not the only one but perhaps eventually first among the two equals because of its location. This is not a time for alarming accommodation or dangerous appeasement. But the time has come for more give and take, for China to continue to show leadership capacity in return for greater global recognition.

Thitinan Pongsudhirak is associate professor and director of the Institute of Security and International Studies, Faculty of Political Science, Chulalongkorn University. This article was earlier published in the Bangkok Post.

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Japan’s unnecessary election http://www.eastasiaforum.org/2014/11/25/japans-unnecessary-election/ http://www.eastasiaforum.org/2014/11/25/japans-unnecessary-election/#comments Mon, 24 Nov 2014 23:00:09 +0000 http://www.eastasiaforum.org/?p=44341 Author: Aurelia George Mulgan, UNSW Canberra

Prime Minister Abe is subjecting his ruling coalition — and his nation — to an unnecessary election on 14 December 2014. Abe claims his decision is all about policy, but in reality it is all about politics. His stated rationale for calling the election is the need to secure voters’ endorsement of his administration’s decision to postpone the consumption tax rise to 10 per cent until April 2017. But his real reasons are based on cold calculations of political self-interest.

Japan's Prime Minister Shinzo Abe speaks during a press conference at his official residence in Tokyo, 18 November 2014. Abe called a snap election for December and put off a sales tax hike planned for next year until 2017. (Photo: AAP).

First and foremost, Abe is hoping to extend his term of office to six years. This has always been his goal, and he is prepared to lose some Lower House seats in order to achieve it. He judges that six years is what he needs to implement his policy agenda. His list includes consolidating policy changes in Japanese defence and security, as well as attempting more difficult changes such as constitutional reform — his principal ideological goal.

Also on the list is reviving the economy, which he understands is the key to his popularity. Abenomics has had mixed short-term success, and Abe realises that the economy is not going to turn around any time soon. This will undermine his administration going into a 2016 election.

Abenomics has not lived up to the marketing hype with which it was sold to the Japanese public. Part of the reason lies in the incomplete and watered-down implementation of the third arrow — structural reform to promote economic growth — which has largely been a flop. Abe’s growth strategy has amounted to lists of long-term policy goals. These have been long on slogans and short on implementation in the face of opposition from vested interests.

Another reason lies in the implementation of the unnamed ‘fourth arrow’ — fiscal reconstruction (code for increasing the consumption tax). This anti-growth component of Abenomics burdens it with mutually contradictory economic programs. Tax increases run directly counter to the fiscal stimulus arrow. The most Abe can claim is his three arrows are ‘on the way to achieving results’ and ‘a virtuous cycle in the economy where company revenue increases, employment expands, wages increase, consumption expands and the economic recovery is just about to be born’, as he said on the early evening TV show NHK News 7. In short, the much-touted economic recovery that was the promise of Abenomics is still just around the corner.

Second, Abe needs to arrest the decline in public support for his cabinet. Unchecked, this would have fuelled unrest in the Liberal Democratic Party (LDP) and possibly undermined his leadership of the party as well as of the administration. If the electorate did not remove him in the 2016 election, then his party might well have. The polls were showing the trend faced by all Japanese governments after a certain period of time — either shorter or longer — down.

A third and related political motivation is Abe’s aim to reshuffle his cabinet; drawing a line under scandals of money politics among the government ministers he appointed. Abe could hardly do this now after having only done so two months earlier in September. It would mean a reshuffle of a reshuffle. The parallels with his 2006–07 cabinet were particularly unfavourable given that they led to his resignation as prime minister at the time. In the current cabinet, the resignation domino threatens to start all over again. By going to an election, Abe can let the voters do his dirty work for him — getting rid of suspect figures such as Minister of Agriculture, Forestry and Fisheries Koya Nishikawa, who is most likely to lose his seat, along with former Minister of Economy, Trade and Industry, Yuko Obuchi, who has already resigned from the LDP.

Finally, Abe figures that he can use the tax hike postponement to his political advantage. He can go into the election on the premise of not raising the consumption tax, which he knows is supported by a majority of voters. No opposition party is against the postponement, and this prevents his opponents from using the tax issue to gain electoral traction against the ruling coalition. This is all part of a general strategy to catch the opposition parties on the hop. The Democratic Party of Japan is nowhere near restoring its major party status and will be incapable of making the seat gains necessary to put it back in office.

At present, politicians in the opposition parties are re-sorting themselves via switches in party membership and new electoral alliances, but these will be insufficient to present voters with the prospect of a viable alternative government. According to master electoral strategist and foremost proponent of a two-party system for Japan, People’s Life Party leader Ichiro Ozawa, what is necessary is to form a new party. Otherwise any policy agreement among opposition parties cannot be considered a completely united line. He is correct in arguing that ‘the people have to have an image of one party for it to be an option’. Currently the smaller parties are struggling to present a distinct policy profile to the electorate.

Those dissatisfied with the LDP and its performance in office (and there are many) will likely swell the ranks of non-voters rather than vote for any of the opposition parties. The polls clearly show that Abe’s decision to call the election is regarded unfavourably by a majority of voters.

For these reasons, then, the upcoming election should be seen as a mark of Abe’s political opportunism rather than a contest about substantive policy issues.

Aurelia George Mulgan is Professor at the University of New South Wales, Canberra.

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A new vision for Australia-India relations http://www.eastasiaforum.org/2014/11/24/a-new-vision-for-australia-india-relations/ http://www.eastasiaforum.org/2014/11/24/a-new-vision-for-australia-india-relations/#comments Mon, 24 Nov 2014 11:00:35 +0000 http://www.eastasiaforum.org/?p=44336 Author: Sourabh Gupta, Samuels International

Australia and India have not always been the best of friends.

Seven Indian prime ministers from across the political spectrum and spanning three decades have come and gone without paying a state visit to Canberra, a record broken only now with Prime Minister Narendra Modi’s recent visit to Australia following the Brisbane G20 Summit. Four unreciprocated visits were made by Australian prime ministers during the latter half of this period. Australia’s strategic discovery of a ‘shared values’ partner in India too has been a near-term development. The Coalition government under John Howard did not deem relations with New Delhi to be a significant interest, let alone a significant bilateral relationship, in its first Foreign and Trade Policy White Paper in 1997.

Australian and Indian friendship has been forged in war yet they have not always shared a uniform vision of the peace thereafter.

From the sinking of the German cruiser SMS Emden near the Cocos Islands in the Indian Ocean in November 1914 to the battlefields of Gallipoli, El Alamein and Burma, Australians and Indians have fought, and died, side by side. At the Paris Peace Conference in 1919 and again at San Francisco in 1951, the two countries went their separate ways. Prime Minister Billy Hughes stoutly defended racial privilege and sought territorial annexation in Paris. Nehru’s India, citing a range of objections from the dependent status of Japan to the forcible alienation of Taiwan from China’s fold, refused to show up in San Francisco. India’s engagement with — and importance to — the San Francisco system was marginal.

Australia and India are multicultural societies that value free association yet do not share a common belief in democracy’s role as a key organising principle in international relations.

The linkage between democratic political systems and a more peaceful world is readily apparent to Canberra, conditioned as it is in the Western tradition by Europe’s bleak post-Westphalian past where four of five great power transitions sowed conflict. New Delhi subscribes neither to the democratic peace and hegemonic power transition hypothesis, which views conflict as inevitable, nor to the premise that the likelihood of China’s peaceful rise will increase if the great maritime democracies of the Indo-Pacific are aligned in formation. Ad hoc ‘shared values’ defence arrangements in Asia hold little appeal to New Delhi. Regional tradition, historical circumstance, economic interdependence and the distribution of comprehensive national power, rather, will determine the fate of the Asian Century.

Australia and India share an abiding interest in the maintenance of a stable strategic balance in the Indo-Pacific yet hold no symmetry in view of the means to forestall one-power domination.

Canberra exchanged its apron strings of empire for a more self-reliant posture and capabilities within the US-led hub-and-spokes system. Within this alliance, it has styled itself variously as a middle power or a not-insubstantial local power and sought to translate its military loyalty into influence with Washington to ensure the latter’s sustained and enlightened engagement in Asia. Extension or acceptance of alliance-based mutual security obligations is inconsonant with the principles of New Delhi’s statecraft. It has chosen to rise instead in the international system as an independent pole, seeking out autonomy-minded partners along the way in the Indo-Pacific region and beyond. It is telling that in spite of the bonds of language and people-to-people ties, New Delhi’s favoured strategic partners in Europe are France and Germany — not the United Kingdom. Its essence of strategy in the Asian Century is to ensure that no one set of great power relations is advanced to the detriment of another. Far from aiming at forestalling one-power domination, this multi-aligned strategy has Beijing as a key pivot..

Australia and India are resident Indo-Pacific powers yet the exigencies of geography — and geo-strategy — are dictating separate approaches to the ‘Indo’ and to the ‘Pacific’ theatre of operations.

Relatively secure in its southern ocean, Australia’s defence strategy has concentrated on denying a significant external power with unfriendly intent from acquiring major strategic influence in its maritime periphery. As the supposed ‘downward thrust’ of Chinese power re-establishes itself in Southeast Asia, Canberra’s Pacific alliances, which geo-strategically ring the semi-enclosed seas of East Asia, are being tightened. Denied such margin of security by geography, independent India grafted a spheres-of-influence model on its subcontinental periphery — at times with Bismarckian purpose.

As its power projection capabilities in the Indian Ocean have grown in time, New Delhi’s leverage to exert pressure at sea for quiet on the Sino–Indian land border, as well as trade its (slight) naval footprint east of Malacca for tacit recognition of vital interests in its own oceanic backyard, has grown commensurately. Its underlying spheres of influence calculation though has remained intact. It is telling that even as Australia–Japan defence cooperation has raced ahead with logistics sharing, intelligence exchange, defence technology transfer, status of forces discussions and scenario-relevant military exercises, the ambition in the corresponding India–Japan relationship — let alone that with Australia — remains confined to cooperative non-traditional security functions.

Forty six years ago, Gough Whitlam, Australia’s remarkable Vietnam-era leader, had exhorted his countrymen and women to strive constantly to devise new ways of integrating Australia with its Asian neighbours, while simultaneously promoting among these neighbours policies based on regional consciousness and interdependence. His counsel remains as relevant today as then, and applies to both countries. Australia and India must constantly strive to identify and advocate, at home and to the region, the shared strategic interests that bind the Indo-Pacific together based on the twin pillars of regional consciousness and economic and security interdependence. Even as they do so, they should stay mindful of the gap in their own interests, traditions and worldviews.

Gough Whitlam’s prescient vision of a peaceful and prosperous region at the confluence of the two great oceans remains a tantalising prospect today. A conception of regional order that accommodates the secular and religious traditions of the great monotheistic and polytheistic faiths and seats its key military protagonists within the four walls of its primary security forum has no parallel in modern history. It is a vision of order worth striving for.

Sourabh Gupta is a Senior Research Associate at Samuels International Associates, Inc., Washington.

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The new nuance in Chinese diplomacy http://www.eastasiaforum.org/2014/11/24/the-new-nuance-in-chinese-diplomacy/ http://www.eastasiaforum.org/2014/11/24/the-new-nuance-in-chinese-diplomacy/#comments Mon, 24 Nov 2014 01:00:40 +0000 http://www.eastasiaforum.org/?p=44330 Author: Peter Drysdale, East Asia Forum

Much energy has been expended on projecting the impact of the rise of Chinese economic power on its political and military might and the strategic contest with the United States. In a conflation of geo-economic and geo-strategic analysis, two camps have emerged: one warns about the consequences of the United States not conceding strategic space as Chinese economic and strategic power continue to grow; the other asserts the continuing dominance of US military-strategic and economic power as Chinese power peaks, in some scenario or another. As the nuance in Chinese diplomacy over the past week or two suggests, the geo-political and economic world would appear a tad more complex than either camp allows.

China's President Xi Jinping during his recent visit to Australia and New Zealand, 21 November 2014. (Photo: AAP).

There is certainly no evidence that there is a one-for-one relationship between economic size and political and military power — defence spending and military capacity varies greatly as a share of GDP across countries — though there is clearly a degree of interdependence between these variables. The mobilisation of military capability is, for one thing, likely to lag behind the growth of economic size — itself the product of both the population base of countries as well as their industrial sophistication reflected in output per capita. And economic size and its impact through the international economy yield their own independent dividend in political power, although how that dividend is reaped depends very much upon the way in which the rules of the game in international exchange are organised.

In the interwar period, at the end of the age of imperialism, the industrial powers were also imperial powers and the international system was ordered largely around the contest of imperial power. After the Second World War, the Bretton Woods system entrenched a set of principles and rules that secured the gains from trade and international exchange without resort to the use of imperial and military power. It is true that the system needs a revamp — a matter that is squarely on the agenda of the G20 today — because the structure of governance and modus operandi of its core institutions such as the IMF, the World Bank and the WTO, need updating to reflect the growth in importance of the emerging economies and new issues. But it is still happily the foundation of a functioning multilateral trade and economic (as well as political) regime that underpins global economic security today. Only if that system were to fall into disrespect by the major powers or disintegrate would we revert to a world in which the correlation between economic and military power dominated overwhelmingly the economic and political security equation.

This — admittedly truncated — analysis serves simply to remind us that the international system today is, technically speaking, very much a mixed interest game. The cacophonous chorus around the analysis of the rise of China tends to fall quickly into casting it otherwise — as a simple zero-sum game and ill-prepares us for the range of nuance in strategies that can, and need to, be brought to bear on managing the shift in Asian power that is its consequence.

The APEC summit in Beijing began with the notable symbolism of the forced shut-down of pollution-generating factories for a week of welcome blue skies in the capital — a taste of how it might be if the big, hard decisions on pollution control and carbon emissions can be digested (as the Beijing wags put it, a new meaning for APEC as Air Pollution Eventually Controlled). The climate change agreement reached with the United States, of course, was not a binding international agreement on the two countries’ climate change strategies but was no less remarkable as a joint declaration of national commitments. Importantly, it signified China’s willingness to accept actual target dates for a reduction in total emissions. ‘That’s important for climate change’, the Economist declared, ‘but it is also a signal that China is going to grasp the responsibilities that come with being a global power’.

In the area of economic diplomacy, China launched the Asian Infrastructure Investment Bank just prior to the APEC summit and gained endorsement for the realisation of a Free Trade Area of the Asia Pacific (FTAAP). China also reached a substantive agreement with South Korea on their bilateral FTA, moved to conclude a significant bilateral with Australia and had a breakthrough on negotiations with the Americans to expand the coverage of the Information Technology Agreement — which promises to re-energise a US$1 trillion market in technology goods trade.

These developments may also have signalled the start of a shift in China’s foreign policy. In many ways, China to date has been a weak diplomatic power. It doesn’t have many allies, and has not had a clear vision of its goals on the international stage. This looks like it’s beginning to change.

Our lead essay from Mireya Solís this week asks why China chose FTAAP as its landmark initiative for the APEC summit. ‘The FTAAP’, she points out, was a concept which ‘was first developed by the Americans, so why did China borrow it to stake a leadership claim in defining the future of Asia Pacific economic integration?’

She advances three good reasons. First, FTAAP defines a grand regional vision that encompasses both China and the United States. Second, it takes the focus off the TPP without challenging it with an exclusively Chinese option — as the Regional Comprehensive Economic Partnership (the ASEAN+6 initiative) is commonly but wrongly described. And third, it puts China on the same pedestal in crafting a new regional and global trade order.

These developments, and signs of flexibility in China’s management of its neighbourhood problems in the South China Sea around the East Asian Summit and earlier with Japan at APEC, signal a mature and nuanced Chinese diplomacy. As Solís says, there is scant evidence that China is a revisionist power. China to date has been a relatively weak diplomatically. A more influential role in regional and global affairs will inevitably attract increased scrutiny. If it is prepared to accept and respond constructively to that, as it has in recent summitry and in managing its relations with Japan, South Korea and Australia, it may yet deliver a new model of great power relations, because of contemporary circumstances as well as by design.

Peter Drysdale is Editor of the East Asia Forum.

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China flexes its muscles at APEC with the revival of FTAAP http://www.eastasiaforum.org/2014/11/23/china-flexes-its-muscles-at-apec-with-the-revival-of-ftaap/ http://www.eastasiaforum.org/2014/11/23/china-flexes-its-muscles-at-apec-with-the-revival-of-ftaap/#comments Sun, 23 Nov 2014 11:00:17 +0000 http://www.eastasiaforum.org/?p=44323 Author: Mireya Solís, Brookings Institution

The 2014 APEC leaders’ summit witnessed a string of successes in Chinese trade diplomacy. Key among these successes was the endorsement of China’s signature trade initiative as APEC host: the realisation sooner rather than later of a Free Trade Area of the Asia Pacific (FTAAP).

United States President Barack Obama and China's President Xi Jinping in Beijing at the APEC CEO Summit on 10 November 2014. (Photo: AAP).

China also reached a substantive agreement with South Korea on their bilateral FTA and a breakthrough on negotiations with the Americans to expand the coverage of the Information Technology Agreement — which promises to re-energise a US$1 trillion market in technology goods trade.

But why did China choose FTAAP as its landmark initiative for the APEC summit? The FTAAP concept was first developed by the Americans, so why did China borrow it to stake a leadership claim in defining the future of Asia Pacific economic integration?

At least three motivations seem plausible.

First, to make a big splash in defining the trade agenda by pursuing the most ambitious goal of all: an Asia Pacific trade grouping incorporating both China and the US. Second, to prevent the Trans Pacific Partnership (TPP) from becoming the focal point of economic integration efforts and a reaffirmation of America’s leadership as a Pacific power. And third, for China to carve a much more proactive role in drafting the new rules of the economic order — from a position of equal standing with the United States. Potential entry into the TPP, after it enters into force, would not award China these advantages: China would have to abide by disciplines negotiated by others and would have to make significant concessions to ensure its accession.

Does China’s spate of trade initiatives at APEC augur the emergence of a Chinese-led international economic order? Not yet, as China’s trade diplomacy is reactive, not revisionist. China has moved defensively, agreeing for example to Japan’s longs standing proposal to negotiate a trade agreement among the ASEAN+6 countries (today’s RCEP), out of concern with Japan’s TPP accession. Moreover, China’s endorsement of FTAAP meets a core American national interest: that no lines will be drawn in the middle of the Pacific.

But make no mistake that China is seeking more influence in international economic affairs to match its ranking in global GDP. As China seeks a greater role in the management of the global economy, closer scrutiny of its leadership capabilities will ensue.

In particular, two questions loom large regarding China’s potential to build an alternative trade regime. First, can China become a focal point for economic integration? The preeminent role of China in Asia’s trade flows (as the top trading partner for many countries in the region) is widely known. But a lot of this is trade in components, with China still making a modest contribution to the value added of a final product consumed elsewhere. The key question is whether China can rebalance its growth strategy towards domestic demand and develop lead firms capable of generating their own supply chains in the region. Can China evolve from its position as a central cog in global supply chains, to become — in its own right — the lead economy for the region?

Second, can China offer a distinctive solution to the challenge of deep integration? Supply chain trade has put a premium on negotiating behind-the-border rules to ensure property rights and improve the business climate: service liberalisation, competition policy, regulatory transparency, and the like. But many developing countries have resisted the WTO+ agenda as encroaching on their policy space.

Can China offer a way out of this impasse? Negotiating a run-of-the-mill trade agreement (with rampant exclusions and thin on rules) will generate political gains for China (never to be dismissed), but will not yield an effective architecture to meet the institutional demands of the dominant driver of international trade: supply chains. What then is China’s vision for a twenty-first century trade regime?

Answers to these questions will be of paramount importance. The APEC summit meeting underscored that China’s views cannot be ignored, they need to be accommodated. Hence, the leaders’ statement delivered a carefully calibrated compromise agreeing to the realisation of FTAAP as early as possible (advocated by China), but only after the completion of ongoing pathways (code for TPP) at US insistence.

The United States effectively eliminated any reference to a specific timeline for FTAAP conclusion, but China managed to secure the launch of a collective strategic study on issues pertaining to FTAAP’s realisation. It remains to be seen whether this compromise will hold in the long run. Beijing’s roadmap for FTAAP (included as an annex in the leaders’ statement) blurs the issue of timing by stating that the early realisation of FTAAP should build on ongoing regional undertakings (not making their successful conclusion a prerequisite).

With the absence of a breakthrough in US–Japan market access negotiations, the statement from TPP leaders gathering on the sidelines of the APEC meeting was much more subdued, noting only that the ’end is coming into focus’. This is the greatest irony behind the inability of the United States and Japan to reach a deal: as time runs out to deliver a timely success on TPP they are letting China win by default.

Mireya Solís is Philip Knight Chair in Japan Studies and Senior Fellow, Center for East Asia Policy Studies at the Brookings Institution.

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A good week for global governance http://www.eastasiaforum.org/2014/11/22/a-good-week-for-global-governance/ http://www.eastasiaforum.org/2014/11/22/a-good-week-for-global-governance/#comments Sat, 22 Nov 2014 11:00:05 +0000 http://www.eastasiaforum.org/?p=44320 Authors: Alan S Alexandroff, University of Toronto, and Yves Tiberghien, UBC

For global governance watchers, this was the big week of the year. Between 7 November and 16 November, the world witnessed an APEC meeting in Yanqi Lake near Beijing complete with a bilateral China–Japan ‘breakthrough’ and a major US–China climate deal; an historic ASEAN and East Asia Summit held in Naypidaw, Myanmar; and a colourful G20 meeting in Brisbane, Australia.

Notwithstanding the chorus of those announcing growing disorder, global order seems better off after these summits.

The IMF, in its recent World Economic Outlook, points out that the world economy is in a difficult stage: global growth is slowing, trade protectionism remains a problem, inequality is rising and eroding support for globalisation, and environmental challenges appear to be rising faster than the global system appears to have the capacity to cope.

 US President Barack Obama, Australian Prime Minister Tony Abbot and Japanese Prime Minister Shinzo Abe shake hands prior to the G-20 summit in Brisbane, Australia on Nov. 16, 2014. The three leaders agreed to deepen their security cooperation. (Photo: AAP)

Many pundits predicted a weak post-midterm election period for Obama, tense relations between the West and Russia, uncertainties about a possible handshake between Chinese President Xi Jinping and Japanese Prime Minister Shinzo Abe, and weak institutional outcomes. Against expectations, the series of summits taking place over the last week and culminating with the G20 Leaders’ Summit in Brisbane made a material difference and advanced global governance.

The summits allowed leaders of key countries to arrest the slide toward conflict and zero-sum games, giving them a platform for mutually beneficial cooperation. This could be seen in the surprisingly positive US–China summit in Beijing, which may have given impetus for the modest US–India WTO breakthrough in Naypidaw, in turn setting the stage for a stronger final G20 declaration than expected.

And despite competition between the US and China on various fronts (such as trade, development, and global institutions), there were healthy signs on global economic architecture. There was reaffirmation of support for a pan-Pacific free trade effort (FTAAP at APEC and RCEP at EAS) and progress on global tax cooperation. More surprisingly, there was progress on anti-corruption efforts. Overall this means progress in strengthening global institutional architecture and a modest increase in trust for the global economy.

It is also clear that the two players that dominated the global game throughout the sequence were China and the US. Both played stronger cards than expected. They jointly produced the biggest surprise of the week, namely the four main bilateral agreements announced on 12 November. In addition to the climate deal with potential catalytic impact, the two countries reached agreements on IT trade going back to the WTO’s Information Technology Agreement, the strengthening of military-to-military contacts, and a reciprocal visa deal with 10-year visas for businesspeople and students.

By contrast, the voices from Europe, Japan, Russia, and India sounded weaker. It is fascinating to contrast the more multipolar situation in the London G20 in 2009 to the more ‘G2-like’ world of 2014. Likewise, the voice of middle powers such as Australia, Canada, and South Korea also seemed weaker at this summit. Australia as Chair fought against the US (and EU interests) on climate change and lost. It fought against the BRICS on Russia’s participation and also lost.

What of the tricky points?

Although word had been that Chinese opposition would preclude agreement on an anti-corruption strategy, in fact the Chinese opposition faded. And as a result the G20 has ratified a 2015–16 G20 Anti-Corruption Action Plan. Importantly in the Plan there is a call for countries to share information about trusts and shell companies used in tax evasion and money laundering.

In addition, the G20 took further steps to deal with tax avoidance. Though not a surprise, the efforts to advance the Base Erosion and Profit Shifting (BEPS) agenda appear to remain front and centre of G20 action. G20 leaders affirmed the principle of taxing profits in the country where value (and hence profit) is created. They also committed to finalising the BEPS Action Plan in 2015.

One surprise was the rather pointed statement on the failure to implement IMF quota reform. If the reform is not passed by the end of the year — that is, if the US Congress fails to pass the legislation to provide for a capital increase — the G20 declared that it would ask the IMF to prepare other options.

The US–China summit and the final G20 declaration with associated pledges for the Climate Green Fund (especially by the US and Japan) generated surprisingly positive momentum on the climate front. This was a strong statement — especially given Australian opposition — urging announcements on G20 countries’ nationally determined contributions to CO2 reductions in advance of the UN Climate Change Conference in Paris next year.

The bottom line on Australian efforts as Chair is that even though the government’s rhetoric far too often appeared better suited for an Australian election than a global summit, the Australians can be pleased that a number of initiatives made significant progress. There was consistent effort to advance the macroeconomic and financial reform agendas. Still, the APEC meeting was where the big agreements were announced.

All of this reveals a combination of advancement in global institutions and competition between the US and China. On the whole, the US and China both won and the global public good benefited as well. Competition between China and the US continues, not surprisingly, but the week showed that the major powers could advance collaboration even while remaining competitors, especially in the Asia region.

All in all it was a good week for global summitry, and good week for US and Chinese leadership too.

Alan S Alexandroff is Director of the Global Summitry Project at the Munk School of Global Affairs, University of Toronto.

 Yves Tiberghien is Associate Professor of Political Science and Director of the Institute of Asian Research at the University of British Columbia

 A longer version of this article first appeared here, at Global Summitry Project

 

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Where are Hong Kong’s moderate democrats? http://www.eastasiaforum.org/2014/11/22/where-are-hong-kongs-moderate-democrats/ http://www.eastasiaforum.org/2014/11/22/where-are-hong-kongs-moderate-democrats/#comments Fri, 21 Nov 2014 23:00:08 +0000 http://www.eastasiaforum.org/?p=44312 Author: Steven Yet, University of Toronto

After weeks of protests, the protracted stalemate in Hong Kong doesn’t appear to be over. While the Occupy Central movement has brought together civil society groups to protest for democratic change, the movement lacks active participation from the political side. Progress cannot be made unless the Occupy Central movement engages with the political community.

Any real progress needs the active collaboration of both political society and civil society. While civil society is able to launch large-scale protests — as seen in the Occupy Central movement’s ability to draw large crowds when it began its civil disobedience campaign in September — it lacks the organisation to push for progressive political reform, a role which should be taken up by political society, which has the power to influence the Legislative Council.

The political compromise between Beijing and Hong Kong democrats in 2010, though not comprehensive, was a notable moment in the history of Hong Kong democratisation. While acknowledging that any electoral reform must be in accordance with the Basic Law, both sides agreed on the proposal that the franchise of the five new special interest Functional Constituency seats be expanded to include all voters who were not eligible to cast a ballot in any functional constituency — a move that would render these seats popularly elected in all but name.

Why has this kind of real bargaining in the form of incremental democratisation now given way to confrontational tactics and radicalisation? The decline of moderate democrats is the key.

The political compromise in 2010 led to internal strife in the pro-democracy camp. The ‘moderate democrats’ within the Democratic Party moved away from the ‘radical democrats’, who were anxious at the prospect of a long wait for full democracy and opted for more drastic action. In a move to separate themselves from the radicals, the moderate democrats established the Alliance for Universal Suffrage, now called the Alliance for True Democracy.

The story was not over. The results of the 2012 legislative council election reflect a noticeable change in Hong Kong’s democracy movement. The political landscape has changed significantly since the 2012 elections. The Democratic Party was blamed for having “sold out” the pro-democracy camp in 2010 and suffered a catastrophic defeat, losing the position of leader of pan-democrats for the first time. In terms of seats, it dropped from eight to six. The loss was reflected more accurately in vote shares, with a 7 per cent fall compared with the 2008 election. In contrast, radical democrats from the People’s Power Party, the League of Social Democrats and the Neo Democrats gained three more seats, bringing their total to five seats in the Legislative Council. The radical wing, in particular, collected more than 15 per cent of the vote in the direct elections, surpassing the Democratic Party’s share.

The fall of moderate democrats in the Legislative Council, along with protests that forced the authorities to back down on the issue of national education in 2012, emboldened the radical wing of the pro-democratic movement.

The fact that civil society activists want to distance themselves from moderate democrats is not a healthy sign. The political impasse is due less to lagging public support than to a lack of mutual trust between Beijing authorities and democratic forces in Hong Kong. The moderate democrats are unable to mediate between Beijing and civil society activists, and any radical attempts only make the distrust between Beijing and the democratic forces in Hong Kong worse and reform less likely.

The current protests are led by civil society groups, including Occupy Central leaders, the Hong Kong Federation of Students, and Scholarism, rather than by moderate democrats in the Legislative Council. Civil society groups and the moderate democrats now need to work together in hopes of winning maximal concessions from Beijing. Civil society cannot achieve substantial progress on its own. If civil society and moderate democrats find a way to work collaboratively, both sides will have a better chance of achieving real progress.

Steven Yet is a doctoral student in the Department of Political Science at the University of Toronto. He is also an associate member at the Center for Civil Society Studies at the Chinese University of Hong Kong.

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Why the AIIB presents an opportunity for New Zealand http://www.eastasiaforum.org/2014/11/21/why-the-aiib-presents-an-opportunity-for-new-zealand/ http://www.eastasiaforum.org/2014/11/21/why-the-aiib-presents-an-opportunity-for-new-zealand/#comments Fri, 21 Nov 2014 11:00:14 +0000 http://www.eastasiaforum.org/?p=44316 Authors: Cassandra Shih, Victoria University of Wellington, and Benedict Xu-Holland, ANU.

So far 20 countries have taken up China’s open invitation to found the Asian Infrastructure Investment Bank (AIIB). Notably absent at the signing were Australia, Indonesia and South Korea, who did not definitively respond to the invitation. Until a week before the signing it seemed likely that Australia would join, but it eventually withdrew, citing ongoing transparency concerns similar to those voiced by US officials. The US likely sees the new bank as a threat to the US and Japan’s status as the regional norm-shapers of development finance.

The AIIB presents an opportunity for New Zealand to amplify its impact in the region. Though not a member of the AIIB, New Zealand is in a prime position to help manage future Pacific projects that attract AIIB backing. New Zealand’s small size and relative lack of geopolitical alignment allow it to pursue partnerships with both the US and China, while experience working in the Pacific makes its input on projects valuable.

China's President Xi Jinping walks with New Zealand's Prime Minister John Key after attending a meeting with the New Zealand-China Council in Auckland on November 21 2014. (Photo: AAP)

At its core, the establishment of the AIIB is a product of China’s dissatisfaction with existing US-dominated development finance institutions. China’s share of the vote in the Asian Development Bank (6.47 per cent) and the World Bank (5.17 per cent) does not reflect its economic power. Current levels of lending by the ADB and the World Bank fall far short of meeting the region’s acute demand for infrastructure investment. Loans from these institutions are also burdened by extensive transparency and good governance requirements.

China, on the other hand, has an interest in promoting a set of development norms based on political non-interference. China also stands to gain favour with its neighbours if its investment model can successfully spur regional development.

China has made large commitments to the New Development Bank (NDB) and the AIIB. So far China has taken responsibility for supplying around 40 per cent of the NDB’s US$100 billion contingency fund, more than twice the amount put forward by the other members, and half the AIIB’s initial US$100 billion capital fund.

The suspicion with which some view China’s expansion into multilateral development finance is unwarranted. While Beijing is attempting to increase China’s influence in the Asia Pacific, its actions amount to economic and political common sense. China has previously been criticised for being a passive power and demonstrating lacklustre leadership on international issues. Its significant capital reserves must be mobilised if the region’s infrastructure needs are to be met.

China wants to increase regional prosperity, boost its global leadership credentials, procure financial wins for Chinese state-owned enterprises and secure votes in organisations like the UN. China therefore has strong incentives to act as a responsible power.

Until recently, China has been averse to pooling its aid money with others for fear of losing autonomy. In 2012 it turned down an invitation from Australia to join the Cairns Compact to promote transparency in aid flows in the Pacific. A senior Chinese delegate Wang Yongqiu said, ‘We have different approaches and practices from Western developed countries. We feel it is unnecessary to accept this multilateral coordination mechanism, but we need time to study it’.

Now that China has established multilateral coordination mechanisms of its own, New Zealand should seek ways to contribute to the AIIB’s success, at least where the Pacific is concerned. The lack of involvement by other Western countries in the AIIB should not deter New Zealand. Indeed, New Zealand has a track record of firsts when it comes to China. New Zealand was the first developed country to sign a free trade agreement with China in 2008. It was also the first developed country to announce a trilateral development project with China in the Asia Pacific, with a NZ$50 million (US$38.5 million) project to improve water quality in the Cook Islands in 2012.

Of course, successful collaboration depends on clear-eyed risk assessment. Internationally, New Zealand has an iconic brand built around its reputation as a fair, independent, green and safe country. Threats to this brand are taken very seriously, with the memory of the 2008 Sanlu milk scandal still raw in the New Zealand political and business psyche. New Zealand must therefore be selective in the projects it chooses to become involved in.

Another risk for New Zealand is whether China–New Zealand development cooperation might inadvertently cool New Zealand’s recently strengthened security relationship with the US. In 2010, the Wellington Declaration was signed, symbolically patching the rift caused in 1984 by New Zealand’s anti-nuclear policy. Following the signing, the former US secretary of state, Hillary Clinton, described the US–New Zealand relationship as ‘stronger and more productive than it has been in 25 years’. Ironically, US appetite to re-engage with its traditional allies in the region is partly motivated by a desire to reinforce its sphere of influence in the face of a rising China.

Whether it is worth stepping back from this progress with the US to pursue opportunities created by the AIIB will depend on how willing New Zealand is to use the full policy space available and engage independently with its partners.

A successful New Zealand foreign policy depends on working with all significant powers in the Asia Pacific. A reliance on the economic goodwill of China and on informal security relations with its traditional partners means that New Zealand must walk a tightrope between the two. Remaining flexible and agile will be key to ensuring that New Zealand benefits from a rising China, while being able to advance Pacific development and the credibility of its independent brand.

Cassandra Shih is a recent graduate from the Victoria University of Wellington.

Benedict Xu-Holland is a student and Education Officer at the College of Arts and Social Sciences, the Australian National University.

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Political Islam in Bangladeshi democracy http://www.eastasiaforum.org/2014/11/21/political-islam-in-bangladeshi-democracy/ http://www.eastasiaforum.org/2014/11/21/political-islam-in-bangladeshi-democracy/#comments Thu, 20 Nov 2014 23:00:53 +0000 http://www.eastasiaforum.org/?p=44307 Author: Mubashar Hasan, Griffith University

Recently Bangladesh was side-tracked from an electoral democracy. Earlier this year, the ruling party Awami League formed government after a one-sided election. Bangladesh’s major opposition party, the Bangladesh Nationalist Party (BNP), boycotted the election on the grounds that it was not taking place under a neutral government and that elections held under partisan governments would not be fair.

Since the early 1990s Bangladeshi political parties had agreed to hold national elections under non-partisan, neutral governments after the collapse of the Ershad regime and the coming of multiparty democracy. The 2014 election marked a sharp break with this tradition.

Foreign aid, western NGOs, the World Bank and the IMF have helped Bangladesh make considerable progress in health, literacy and general wellbeing. As Amartya Sen has argued, the level of social progress achieved by Bangladesh had brought the country ahead of its much larger democratic neighbour, India.

The problem for Bangladesh, however, is that its politics — embedded with violence, corruption and clientelism — have betrayed its social progress. Worse, radical Islamism has also gained a stronghold in the country. As the gap between poor and rich in the country widened, the idea of Islam being an integral part of politics became more popular. 87 per cent of respondents to a 2013 Pew Research survey said that it is a bad thing that Bangladesh does not fully apply sharia law.

European and American history has shown that liberal democracy can flourish within a religious society. The specific problem for Bangladesh is that both major political parties have injected religion into key state policies such as the Five Year Plans and the state-run Islamic Foundation, as well as educational establishments such as schools, college and universities.

The state-sponsored Islamisation process, later backed by both the BNP and the Awami League, began in the 1980s with active financial support from wealthy Muslim states in the Middle East, who after their defeat in the Arab–Israel war in 1970s and because of their antipathy to Western support for Israel, initiated a global Islamisation process. The aim of this Islamisation process was to resist what these states saw as the Westernisation of poor Muslim states.

A large number of Bangladeshis equate democracy with aspects of economic development, like the building of infrastructure. And while this represents a failure of those who advocate democracy to explain what it is or how it benefits Bangladeshis, it’s easy to see why many are focused on the practical rather than the political. Bangladesh’s government and its NGOs need to work much harder to make ordinary citizens aware of the fruits of democracy including civil and political rights.

The dynastic nature of both national political parties, and the long-standing tendency of party leaders enriching themselves via corruption, can partially explain why both the Awami League and BNP try to distract citizens by promoting a religious identity. The BNP’s alliance with the right-wing Jamaat-e-Islami, a party modelled on the Muslim Brotherhood in Egypt, has made the political situation more complex.

The Indian government raised allegations that during the period of BNP–Jamaat government in 2001–06, with support from Pakistan’s spy agency, Jamaat was responsible for exporting terrorism to India, hence India’s support of the Awami League’s one sided election in 2014. In contrast to India, all Western nation states called for a new election.

In order to try to persuade the Awami League not to hold an election overseen by a partisan government, UN Secretary-General Ban Ki-moon sent his special envoy Oscar Fernandez Taranco, the Assistant Secretary-General for Political Affairs, to attempt to broker a deal between the Awami League and the BNP in 2013. He failed to broker an agreement, and left the country.

The distinction between Bangladesh’s major parties and conventional Islamist parties in terms of engaging or integrating Islam into politics is minimal. Major parties have both constructed an environment in which religion holds an increasingly strong influence in Bangladeshi society. Political Islam sets the framework of Bangladesh’s politics, and is likely to remain so for the foreseeable future.

Mubashar Hasan is a PhD candidate at the School of Government and IR, Griffith University. He is also the co-founder of Alochonaa, a non-religious and non-partisan platform to foster dialogue among civilisations.

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