7 July 2021
Indonesia COVID battle
Last week, the Indonesian government announced a partial lockdown and increased health spending and limits on foreign arrivals in response to a sudden spike in COVID-19 cases.
New infections have hit record numbers over the past week, and the daily death toll has risen above 700 in the world’s fourth most populous country.
President Joko Widodo has previously resisted calls for lockdowns, citing the economic impact and his belief that people would not comply. The “emergency” lockdown implemented on Saturday involves tighter restrictions on people’s movements, a ban on restaurant dining and the closure of non-essential offices.
However, a health data network, LaporCovid-19, warned that the rising number of non-hospital deaths was “a real portrait” of a “health facility collapse”.
A significant disruption in the affairs of Australia’s closest Asian neighbour would be a challenge for the Morrison government, which has been counting on close engagement with Indonesia on security and economic issues.
The Labor Party has accused the government of not paying enough attention to Australia–Indonesia relations, as the last ministerial visits to Indonesia took place before the pandemic started. However, Trade Minister Dan Tehan is due to visit Jakarta this month to mark the first anniversary of the Indonesia–Australia Comprehensive Economic Partnership Agreement.
Australia’s biggest single-country aid measure during the pandemic has been the provision of a A$1.5 billion stand-by loan to Indonesia last year. There are now calls for Australia to commit any surplus AstraZeneca doses to Indonesia, in addition to other promised support.
The Australian government should be prepared to assist if the Indonesian health care system is overwhelmed, but it will need to wait for Indonesia to make specific aid requests.
Countering Belt and Road
The federal government is looking to boost its overseas investment capability as it backs efforts by the United States, Japan and others to compete with China’s Belt and Road Initiative infrastructure plan.
Trade Minister Dan Tehan said the government will expand the powers of Export Finance Australia, an agency that supports exporters and overseas infrastructure projects.
Tehan wants the agency to be able to invest in businesses, in addition to providing the sector with insurance and loans, to give it “more flexibility to support important infrastructure investments in the Indo-Pacific or export-linked projects in Australia”.
When it was known as the Export Finance Insurance Corporation, the agency had a lower profile, but the government elevated it to a more frontline foreign policy role in 2018, increasing its capital by A$1 billion as part of the Pacific step-up policy. It has also been given a mandate to support the domestic defence industry and critical minerals exploration.
Now that it can invest in business, the EFA will take on more direct risk at a time when some private companies, including banks, are pulling back from investing in projects in the Pacific region.
Tehan says the development brings Australia into alignment with other countries, such as the United States, China, Japan, Canada and South Korea, “which are already making equity investments in our region to support their development and commercial objectives”.
While Tehan diplomatically named China among those “other countries”, his government’s decision to give EFA new responsibilities is consistent with a recent agreement of the Group of Seven to compete with the BRI.
While EFA’s capital is still tiny compared with that of the Chinese banks involved in the BRI, the agency’s new mandate is a significant addition to Australia’s aid toolbox, alongside innovations such as the Pacific worker mobility program.
Japan’s Olympic politics
Japan’s Liberal Democratic Party has failed to regain control of the Tokyo legislature following an election battle with parties that want more restrictions placed on the Olympic Games.
The LDP, which has dominated Japanese politics for half a century, won thirty-three seats on Sunday – eight more than it won in 2017, but still short of the sixty-four needed to secure a majority in the 127-seat assembly.
Tokyo’s governor is Yuriko Koike, a popular former TV host. Koike abandoned a senior position in the LDP to create the centrist, Tokyo-based Tomin First Party, but she is said to still have national leadership ambitions.
Tomin First lost seats at the latest election but can still command a majority in coalition with the two main national leftist parties.
The Tokyo election was closely watched for clues to the outcome of the upcoming national election, which LDP prime minister Yoshihide Suga must conduct by 21 October.
Suga gained the top job last September, unexpectedly taking over from Shinzō Abe. He has struggled to control the pandemic in Japan, and his government has pushed ahead with hosting the Olympics despite strong public opposition.
Suga is expected to call the national election before a mandatory party vote on his leadership on 30 September. He is counting on a successful Olympics to retain power.
Japan has become a closer security and economic partner for Australia in recent years, a development Scott Morrison emphasised by making Japan his first overseas trip since the COVID-19 outbreak. During that visit, Morrison and Suga pushed forward a new military cooperation agreement.
Australia–Japan relations could be unsettled if Japan were to experience leadership uncertainty similar to that which existed before Abe’s eight years in office.