Tag Archive for: Australia

Biden’s withdrawal from Afghanistan his first major blunder as president

President Joe Biden’s decision to withdraw US military forces from Afghanistan by 11 September 2021 is his first big blunder in office. This could cost America dearly in future years and should give America’s friends and allies pause to ask if Biden has the grit for the tough road ahead.

The president’s announcement, laughably titled ‘On the way forward in Afghanistan’, was nothing more than an unseemly bolt for the exit based, Biden tells us, on a ‘conviction’ he formed in 2008 that ‘American military force could not create or sustain a durable Afghan government’.

In fact, that is precisely what American, Australian and other forces delivered to Afghanistan: a flawed but functioning democracy, keeping the Taliban at bay, and preventing groups like al-Qaeda from using the country as a training base from which to attack the West.

Here Biden and his predecessor Donald Trump are on a unity ticket, locked onto a bizarre sabotage mission, negotiating, and now honouring, a ‘diplomatic agreement’ with the Taliban, while deserting the very Afghans who have fought with our forces over the past two decades.

Let’s be clear: this is an abandonment as complete as America’s failure to back South Vietnam after many promises of providing air support to Saigon in the face of North Vietnam’s advancing conventional forces in 1974 and 1975.

Biden’s statement gives the Taliban a green light to start massing forces against the capital. The president says: ‘the Taliban should know that if they attack us as we draw down, we will defend ourselves and our partners with all the tools at our disposal.’

‘Partners’ refers to NATO, Australia and other countries that seem to have been swept into a unilateral American decision to get the hell out of Dodge. Biden explicitly says that the US ‘will not stay involved in Afghanistan militarily’. He apparently decided—in that crystalline moment of ‘conviction’ in 2008—that Afghanistan cannot succeed.

Moreover, the withdrawal is happening without detailed thinking about what happens next. There is no plan for how the US will fight terrorism in the region, just a promise that ‘my team is refining our national strategy to monitor and disrupt significant terrorist threats.’

There is no plan for how the US will support the government in Kabul, just a vague assurance that ‘over the next few months, we will also determine what a continued US diplomatic presence in Afghanistan will look like.’

With no military forces to provide protection, I’ll tell you what that future diplomatic footprint will look like: nothing, nada, bupkis. Australia will be compelled to follow suit. Our mission in Kabul has a strong security detachment, but protecting an embassy compound is the last part of a system that must also stabilise the town, limit access to key government institutions and embassies and, at worst, enable evacuation to an airport. Without a larger military force, the Western diplomatic presence in Kabul will wither.

To whom should Kabul look for support? Biden has a suggestion: ‘we’ll ask other countries—other countries in the region—to do more to support Afghanistan, especially Pakistan, as well as Russia, China, India, and Turkey. They all have a significant stake in the stable future for Afghanistan.’

Yes, you read that correctly. The US is going to ask Russia to support Afghanistan. Presumably not like the Soviet Union did in its invasion of 1979. Russian President Vladimir Putin will not prop up Kabul, except to put his own proxies in power.

And China? Biden has no interest in promoting Beijing’s growing presence in Central Asia and the Middle East. China has prudently minimised its presence in Afghanistan but may indeed be interested to build a corridor of control through Afghanistan, linking up with its closest partner in the Middle East, Iran.

Beijing also has a close partnership with Pakistan. What could be attractive to China is the chance to build a condominium of influence, strengthening Beijing’s access to the ports of the Persian Gulf and the Arabian Sea.

In that outcome, apart from Afghanistan of course, the big strategic loser is India, which would then face a hostile China on its northeast as well as Chinese proxies in Myanmar under the generals and, to the northwest, in Pakistan.

Biden is right that these countries have significant stakes in Afghanistan, but their interests are not America’s interests, or ours. Beijing will, I suspect, be amazed at Biden’s invitation to supplant American interests in Afghanistan. Xi Jinping may judge that this confirms his assessment of American decline and withdrawal—a dangerous assessment, right or wrong.

This is the enduring reality of America’s strategic situation: Biden can withdraw the remaining 2,500 US troops from Afghanistan, but he can’t withdraw America from its global strategic interests, be they preventing the rise of terror groups, or limiting the malign behaviour of countries hostile to the US—China, Russia and Iran.

For a force deployment no larger than the annual ‘rotation’ of US Marines to Darwin, denying Kabul to America’s enemies was a valuable military investment. Leaving, with only the barest of notions about how to protect American interests in Afghanistan, will destabilise the region and more than likely create the basis for a new intervention half a decade or more in the future.

Biden told the press corps: ‘For the past 12 years, ever since I became vice president, I’ve carried with me a card that reminds me of the exact number of American troops killed in Iraq and Afghanistan.’

He stumbled on the numbers, simply couldn’t read them out, but the corrected transcript of his statement records that 2,448 US personnel died in the Afghanistan conflict. Biden’s announcement offers no solace to the families of those people, or indeed the families of Australia’s Afghanistan casualties, only the weary absence of strategic purpose and historical perspective.

The bigger threat from an aggressive, intolerant, authoritarian China is the strategic challenge of our age. Biden is right to focus on that, as we must, but the Middle East and Central Asia cannot be forgotten and will not be ignored.

I wonder how President Tsai Ing-wen of Taiwan reacted to Biden’s words that, ultimately, ‘only the Afghans have the right and responsibility to lead their country.’ Replace ‘Afghans’ in that sentence with ‘Taiwanese’, or ‘Australians’, for that matter.

As if the Afghanistan war wasn’t fought defending American and Australian interests and purposes. As if the next one won’t be. Lest we forget.

Australia’s illicit drug problem is getting worse

The 2014 rap song ‘Move that dope’, by Future, Pharrell Williams, Pusha T and Casino, talks about the push to sell drugs, including crack cocaine, and enjoy the spoils of the trade. Its underlying message is to move on from low-level sales of drugs to individual addicts to higher level pursuits.

Future’s song subscribes to the tried and tested assumption of a vertically integrated organised crime network, in which the closer you get to the source, the more profit there is to be made. But if that’s correct why, despite Australian law enforcement agencies’ successes, are most illicit drugs easy to obtain, their purity unaffected, domestic retail prices stable and regional wholesale prices decreasing?

One way of understanding Australia’s illicit drug supply challenge and the transnational serious and organised crime groups involved is by analysing likely profits at each layer of the vertically integrated networks producing, transporting and selling drugs. This is why today, ASPI is relasing its latest report ‘High rollers’: a study of criminal profits along Australia’s heroin and methamphetamine supply chains

Our new ASPI report, ‘High rollers’: a study of criminal profits along Australia’s heroin and methamphetamine supply chains, launched today, uses quantitative and qualitative data from the Australian Criminal Intelligence Commission and the UN Office on Drugs and Crime to provide a better understanding of the segmentation of Australia’s heroin and methamphetamine markets and the transnational connections of those markets. We examine the profits made by criminal actors at each level of Australia’s vertically integrated illicit drug supply chains.

The report helps to develop an understanding of the quantum of profits being made and where in the value chain they occur. Australians spent approximately $5.8 billion on methamphetamine and $470 million on heroin in 2019. Approximately $1.2 billion was paid to international wholesalers overseas for the amphetamine and heroin that was smuggled into Australia in that year. The profit that remained in Australia’s economy was about $5 billion. Those funds are undermining Australia’s public health and distorting our economy, and ultimately funding drug cartels and traffickers in Southeast Asia.

One key takeaway from the figures presented in the report is that the Australian drug trade is large and growing. Despite the best efforts of law enforcement agencies, methamphetamine and heroin use has been increasing by up to 17% year on year. Falling prices in Southeast Asia are likely to keep pushing that number up, while drug prices and purity in Australia remain relatively stable.

As production prices for methamphetamine continue to decline along with wholesale prices, more sophisticated transnational organised crime actors are likely to begin to examine their business models in greater detail. Industrial production of methamphetamine for high-volume, low-profit regional markets like Australia has significant benefits for them.

The data suggests that the more sophisticated transnational organised crime groups will seek to expand their control of the heroin and methamphetamine value chains to include greater elements of the wholesale supply chain as well as alternative product lines, such as synthetic opioids.

Given that many of the region’s most prolific organised crime groups have strong links to Chinese organised crime, Australia might not be immune from such vertical supply-chain expansions.

While ever-larger drug busts continue to dominate the headlines, the underlying fact is that methamphetamine and heroin imports continue to rise despite authorities seizing up to 34% of imported drugs. As our report shows, the profits in the methamphetamine and heroin trades are so large that, even if authorities were able to seize between half and three-quarters of imported drugs, they would be unlikely to put many trafficking networks out of business.

The data contained in the report suggests that disruption might be easiest (a relative term) at the points in the value chain where the profitability is lowest, because that’s where disruption can make the business uneconomic. So, while the wholesalers in Australia make the biggest proportional and actual profits, pressuring them enough to make their businesses unprofitable is probably hardest, while pressuring the point of origin—the growers or the precursor providers—might drive them out of business.

Of course, if the businesses are vertically integrated, you don’t have much choice other than to work to disrupt the broader business model.

With vertical integration, it’s about following the money and acting to limit the utility of the profits. Then, acting against high-worth individuals who have assets that can be seized would seem to be a useful strategy, as it strikes right at their profits at the point where those profits are concentrated.

Perhaps the most effective approach for Australia would be to continue to work with international partners to reduce the availability of precursor chemicals, and eventually pre-precursors. Methamphetamine and heroin supply chains could be most vulnerable and prone to disruption at the point of production.

Regional border control within and into the Mekong region is critical to constricting methamphetamine and heroin distribution. In the face of increased connectivity resulting from the Chinese government’s Belt and Road Initiative and ASEAN’s economic integration efforts, border agencies have limited capacity. Greater intra-regional border security cooperation and capability enhancement are critical to addressing this challenge.

Australia’s law enforcement agencies will need to revisit their focus on seizures and ‘decapitation’ (removal of criminal leaders and key facilitators), although the aggressive pursuit of the proceeds of crime, including assets seizures domestically and regionally, will remain a valuable policy lever and strategy option. The evidence in our report suggests that Australia’s onshore wholesalers are resilient to higher levels of arrests and seizures. Perhaps the rapid pursuit of larger numbers of mid-level dealers along the supply chains would have more disruptive impacts than lengthy investigations focused on organisational decapitation.

Regardless, the focus must be on supply-chain disruption. Perhaps Operation Sovereign Borders provides some precedent for such a supply-chain-focused approach. To control people smuggling, intervening ‘upstream’ (before arrivals into Australian jurisdictions), through partnerships and cooperation, has been effective. However, that model needs to be applied to the lower profit areas of the regional illicit-drug-supply and money-laundering chains. Here, arguably, you don’t have to affect the cost of business as much to make it uneconomic. If that assumption is correct, intervention needs to be focused on the points of production and transhipment from Myanmar. Enhanced border control, through capacity development, police-to-police cooperation and intelligence sharing, is critical.

Perhaps the most important message is that, in the absence of supply reduction, and even with more effective supply-chain disruption, our federal and state governments will need to invest more heavily in strategies to reduce demand and minimise harm. In a practical sense, that approach frees up law enforcement resources to concentrate on reducing the supply of illicit drugs.

The compass of Australia’s Asia strategy

The pandemic has geopolitical and geoeconomics equivalents. Disruption all around, amid the end of the old global order.

The central truths that set the topography of Australian grand strategy in Asia—the four compass points—haven’t fallen, but their alignments are shifting. New navigation is needed.

The first compass bearing is a major trend that’s tough for any Oz politician to talk about in public: the long-term decline of Australia’s relative power. Call this our Going South star.

When a bunch of development, diplomacy and defence leaders got together for a foreign policy rethink in 2019 (ah, how long ago that seems), their statement pinged relative decline first up: ‘Australia’s weight in the world is declining. Primarily, this is driven by two factors: firstly, the fall of Australia’s relative economic weight to other nations and secondly, the fragmentation of the international order from which Australia has benefited.’

In Asia, our waning weight is striking because once we were heavy. Back in 1990, China’s GDP was US$360 billion, while Australia’s was US$310 billion. From that point, the World Bank graph has China’s economy soaring up a mountain while Australia’s gently streams.

Close to the end of the 20th century, the Australian economy was larger than the economies of all ASEAN members combined. No more. It’s a given that the shift of economic and strategic power means Australia faces a ‘disruptive Asia’—a truism heavy with significance.

In a book on Oz foreign policy, 21 years ago, my starting point was Australia’s relative economic and military decline: ‘This core reality has shaped Australian assessments. It is a key trend often hinted at but rarely stated in blunt terms. In the phrase “relative decline” the important word is relative. Decline does not equate with decadence or internal failure. Australia can keep getting richer and ever more affluent.’

The still-happy-and-getting-richer message of ‘relative’ suffers because of Edward Gibbon’s great title: any Oz leader who says ‘relative decline’ knows what the voters will hear is ‘decline and fall.’ To avoid nasty headlines, the polity deals tacitly and tangentially with Australia’s relative loss of power.

Much easier to talk about is a related compass point: Australia’s Great Asia Project. The compass metaphor means this is our East star.

Asia is ‘fundamental to Australia’s future,’ a Canberra consensus that former prime minister John Howard expresses in his 2010 memoir, starting his Asia chapter with this sentence: ‘For more than 40 years, every serious political leader in Australia has been committed to the belief that close engagement and collaboration with our Asian neighbours was critical to Australia’s future.’ On the next page, Howard makes clear that the leader at the head of this line is Gough Whitlam. While the term ‘Great Asia Project’ is mine, see 1972 as the start date, as tacitly embraced by Howard.

Howard often hammered the debating point that Australia didn’t have to choose between its history and geography. Yet in embracing (or recognising) geography, the Great Asia Project is a defining choice. Obvious, even unavoidable. But still a choice. The consensus is set and Australia’s political unity ticket on our Asian future approaches its 50th birthday.

Australia knew Asia existed before 1972, but didn’t want to have to translate geography into policy. The importance of the project is the acceptance that Australia must function as part of Asia, not apart from Asia. The Commonwealth of Australia spent its first seven decades seeking security from Asia; since then we’ve sought security in and with Asia.

The get-with-the-Asia-strength sentiment complements the North point on our compass (our axis of rotation): the reordering of the way Australia operates as a democracy with an open economy and open society.

The march to a multicultural identity started in 1966 when the Coalition government of Harold Holt quietly began to inter the White Australia policy; full burial with loud fanfare was delivered by the Whitlam Labor government after 1972. Both sides of Oz politics did the big deed.

Remaking the nation’s face with a new non-discriminatory immigration policy, we remade political traditions, junking the original ‘Australian settlement’ mindset (white Australia, industry protection, wage arbitration, state paternalism and imperial benevolence). The term ‘Australian settlement’ was coined by Paul Kelly in one of the great works of Oz journalism as history, a magisterial tome with a superb title that resonates anew, The end of certainty.

The only time Oz leaders have broadcast the relative-decline reality was during that era when Australia was tearing down tariffs and casting off the protection mentality (most memorably with Paul Keating’s 1986 warning about Australia becoming a ‘banana republic’).

An open society, in and of Asia, is why ‘our ethnic face has made a decisive shift from Anglo-European to Eurasian,’ as George Megalogenis writes, turning Sydney and Melbourne into Eurasian cities: ‘Australia’s identity is undergoing epic transformation. In seventy short years, we have shifted from the most insular rich nation on Earth to being a global role model for diversity. It took fifty years to get from white to Anglo-European, but only another twenty to cross the threshold to Eurasian.’

Looking north, east and south, Canberra ponders what a Eurasian grand strategy will mean. And how that relates to the fourth point on the compass, the leader of the West, the United States.

The US alliance came through Donald Trump’s presidency unscathed. Canberra worked the bilateral relationship with success while quietly horrified at Trump’s multilateral mayhem; Malcolm Turnbull called Trump a ‘natural isolationist’ and ‘thoroughly dystopian’.

The US has bounced back before, and Canberra offers President Joe Biden a fervent welcome. The Western point of our compass, though, has lost much ‘credibility and influence,’ as Biden acknowledges.

As the pandemic fog clears, we can take some compass sightings across tough topography. Our stars do not align.

Can 2021 still be Australia’s year of Southeast Asia?

With multiple initiatives set to launch, 2021 was supposed to be the year Australia pivoted to Southeast Asia. Recent events in Myanmar will make this more challenging, but the underlying reasons for investing in Southeast Asia remain.

At the start of 2020, consultations for a new international development policy were full of voices worrying that Australia was stepping away from Southeast Asia following its Pacific step-up announcement. But by year’s end, the government had announced significant funding for a variety of projects across Southeast Asian nations.

In May, the ‘Partnerships for recovery’ development policy placed a priority on the Pacific and Southeast Asia as Australia’s immediate region. The rationale was clear: ‘These are the places where we have the most extensive partnerships and can have most impact.’ In July, the defence strategic update announced a decisive refocus on Australia’s immediate region, from the northeastern Indian Ocean through maritime and mainland Southeast Asia to the Southwest Pacific.

The October budget included $23 million to distribute Covid-19 vaccines in Southeast Asia, in addition to other investments in the Pacific and Timor-Leste. This was followed by the treasurer’s announcement of a $1.5-billion loan to Indonesia for budgetary support.

The renewed attention culminated in the prime minister’s announcement, following November’s ASEAN–Australia Summit, of ‘a new package of economic, development and security measures’ to support the region’s recovery from Covid-19. Highlights included:

  • $500 million for a regional vaccine initiative in Southeast Asia and the Pacific
  • $104 million for a security package to extend defence cooperation, including military health collaboration, cyber resilience and defence attaché postings across Southeast Asia
  • $232 million to develop a new Mekong–Australia partnership
  • $24 million to combat infectious diseases in the Indo-Pacific as part of Australia’s increased pledge to the Global Fund to Fight AIDS, Tuberculosis and Malaria
  • $70 million to bolster infrastructure advice to and partnerships with Southeast Asia 
  • $65 million for regional maritime states for enhanced training, technical advice and cooperation
  • $13 million to help partners work with technology standards-setting bodies
  • $46 million for eligible ASEAN countries to help implement trade agreements.

Put together, it represents Australia’s largest funding commitment to Southeast Asia since the 2004 tsunami.

A number of initiatives under this package are due to come online in 2021.

Australia planned to enhance its diplomatic representation in Myanmar by opening a liaison office in Naypyidaw, adding to its ability to support economic integration and development. The military takeover in Myanmar, however, means it’s not clear whether this will go ahead.

But the new ASEAN Centre for Public Health Emergencies and Emerging Diseases should open with Australia’s $21 million adding to funding from Japan.

And a new infrastructure initiative will open an office in Bangkok to provide quick-response technical advice on infrastructure decisions, such as project planning, prioritisation, procurement and transaction structuring, as well as sector policy regulation.

Australia and Malaysia held their first annual leaders’ meeting in January, at which they agreed to elevate their relationship to the level of a comprehensive strategic partnership.

But the biggest and most immediate factors in Australia’s Southeast Asia refocus have been the challenges posed by Covid-19 and China.

The scale of damage across the region wrought by the pandemic has been profound and has made it impossible to argue that Southeast Asia somehow no longer needs Australia’s support. An imperative to counter depressed global economic activity and trade fits comfortably with the Australian government’s domestic narrative on the need to support recovery—ensuring that the region ‘can recover quickly will stimulate economic activity and restore jobs at home and abroad’. The Covid-19 health emergency has shown that countries are interconnected and have a self-interest in supporting each other for their own health security.

At the same time, the rise of China and its influence in Southeast Asia have made clear that Australia can’t ignore its region in the face of intensifying great-power competition. The Southeast Asia package includes infrastructure initiatives which Australia would see as building countries’ resilience in the face of external pressure.

Australia is viewing development assistance as part of its strategic arsenal. While the additional funding in October’s budget was not counted as development funding—so as not to increase the development spend above the ceiling of $4 billion—the partnership package in November did increase the development budget. This suggests that the government recognises that the current investment is too low to meet Australia’s strategic objectives.

If Australia wants to have deep relationships in Southeast Asia, it has to invest. Australia can offer tangible, practical programs in areas where it has capability. As the Australian Council for International Development’s Bridi Rice notes, development cooperation shows off positive Australian traits like pragmatism and problem-solving.

Australia is working harder to coordinate the various elements of its power projection. The Southeast Asia package was presented as a whole-of-government initiative, with the Department of Foreign Affairs and Trade playing a coordinating role. There is an appetite for this, as demonstrated by enthusiasm from former officials for the Asia Pacific Development, Diplomacy and Defence Dialogue (AP4D).

It is positive to see Australia drawing on the full suite of defence, diplomatic and development tools to establish deep partnerships with the countries of Southeast Asia—a region that remains vitally important to Australia’s health, security and economy.

The port operators behind China’s naval expansion

The Chinese Communist Party’s first leader, Mao Zedong, once said that ‘political power grows out of the barrel of a gun’. Mao’s words echo a fundamental truth of China’s system of government—that the ruling party has its own military wing, the People’s Liberation Army. Soldiers in the PLA swear an oath to defend the CCP, not the Chinese nation, meaning that their primary task is to safeguard the interests of the party. The CCP’s ultimate goal is to ensure that its influence over the nation becomes so totalising that the interests of the two are indistinguishable. In this respect, the PLA ends up serving the dual role of safeguarding the CCP and defending the Chinese nation.

Just as the CCP has its own armed wing, it has its own commercial wings embedded in all of China’s powerful state-owned enterprises. These SOEs operate in a hybrid fashion, seeking out business ventures that generate profits while carrying out the interests of the Chinese state. China’s SOEs are legally required to have a party branch at the highest levels of the company hierarchy, and senior members of the board such as the managing director concurrently serve on the SOE’s party committee. This organisational structure makes sure that any business ventures undertaken by the SOE serve the interests of the company, the state and, most importantly, the CCP.

Xi Jinping has accelerated the party’s dominance over the state, military, nation and business. Chinese companies are expected to do the party’s work even if that means collaborating with its armed wing in the PLA or working with its political warfare agencies like the United Front Work Department. Under Xi Jinping’s leadership, the CCP is seeking to apply its internal disciplinary code to Chinese SOEs strictly and extra-territorially.

Our new ASPI report, Leaping across the ocean: The port operators behind China’s naval expansion, explores the links that two major Chinese maritime SOEs have with the CCP’s organs of political influence, its disciplinary apparatus and its militarised branch, the PLA.

COSCO and China Merchants, two companies that have taken a commanding position in overseas port operations and international maritime logistics, are subject to stringent control by the CCP and are increasingly willing to protect party interests overseas. A third of COSCO’s employees are members of the CCP, and a member of its party committee was a party disciplinarian in China’s Ministry of Public Security and the CCP’s United Front Work Department. China Merchants also has deep links with the CCP. One member of China Merchants’ party committee is a former deputy head of discipline inspection at the CCP General Office, and likely had a close working relationship with two current members of the Politburo Standing Committee.

Xi’s bid for total control over China’s SOEs has profound implications for countries that are open to foreign investment. Before Xi, the national security risks posed by the CCP’s integration into China’s SOEs could be ameliorated by requiring investigation, transparency and disclosure during a country’s foreign investment review process. These measures are no longer sufficient now that Xi has begun to strengthen his grip on the CCP and wield the coercive elements China’s national power.

Chinese companies are required by the country’s domestic law to assist with intelligence collection and national defence mobilisation. We should expect China’s SOEs to comply with any legitimate request by the CCP to assist with either mission in peace, war or the grey zone in between.

Indeed, there’s good evidence that such support is already being provided. For instance, COSCO operates its own militia, which is likely capable of conducting paramilitary activities such as maritime surveillance, counter-piracy missions and search-and-rescue operations. One of COSCO’s joint ventures has also been involved in taking Chinese tourists near illegally built PLA facilities in disputed areas of the South China Sea. The company’s involvement in the Greek port of Piraeus has also been supported by active-measures campaigns conducted by the United Front Work Department. COSCO appears to be developing the capability needed to comply with CCP requests to assist with intelligence operations, national defence mobilisation or grey-zone activities.

Australia and its like-minded partners, including the US and Japan, can no longer take a reactive approach to the expansion of China’s overseas port operations. Together, COSCO and China Merchants operate 36 ports around the world. If Chinese SOEs assume control of any more ports, Beijing will have secure access to some of the world’s most crucial shipping nodes and logistics hubs. In wartime, that could significantly undermine the freedom of action that Australia or its allies would need to defend their maritime interests and sea lines of communication.

More urgent, however, is the priority to build the resilience of countries that may be vulnerable to handing over critical infrastructure such as ports to Chinese SOEs. Coercion need not come from the PLA engaging in denial operations to secure access to a port shortly before a war breaks out or from an offensive cyberattack on a port’s digital infrastructure. Under Xi, the CCP has proven all too willing to rely on organs such as the United Front Work Department to orchestrate active-measures campaigns designed to compromise a country’s sovereign decision-making. Chinese SOEs may not be drivers behind such activities, but they offer the vehicles for them.

Australia, Japan and the US have some of the tools needed to help build countries’ resilience to coercion from the Chinese regime. They could begin by developing an international ports strategy through the ‘blue-dot network’, which was established in 2019 as a way of setting standards for high-quality infrastructure projects. Canberra, Tokyo and Washington should use the network to create a ‘Michelin guide’ for international port operations and investments. They could then post diplomatic personnel with expertise in critical infrastructure to agreed strategic locations around the world to promote blue-dot alternatives to investments backed by Chinese SOEs as well as advise on how to counter foreign interference.

Australia and its partners don’t have the power to change the nature of the CCP—and competing with Beijing dollar-for-dollar is a non-starter. But what we can do is create a world that is more resilient to the coercive measures Xi has developed a habit of using. A diplomatic strategy geared towards achieving that goal would make it much harder for the CCP to continue finding the logistical hubs needed to increase the PLA’s overseas presence and secure its success in wartime or grey-zone operations.

Australia should step up ahead of Pacific telco’s possible sale

A telecommunications company that operates in six Pacific island nations has reportedly received approaches from prospective buyers. This news has attracted considerable interest among security experts in Australia.

Digicel was established by Irish businessman Denis O’Brien and commenced operations in Jamaica in 2001 before expanding throughout the Caribbean and to numerous countries in Central America. It now operates in 32 countries, six of which are in the Pacific. Digicel’s first Pacific market was Samoa in 2006, followed by Papua New Guinea in 2007. It also operates in Fiji, Tonga, Vanuatu and Nauru.

Within Pacific markets, its dominance varies: it is the only mobile network operator in Nauru and it has a 92% market share in PNG but only a third of the market in Fiji. In addition to providing telecommunications services in PNG, the company also has a philanthropic foundation and offers online news and pay television services.

A weighty concern regarding the sustainability of Digicel’s operations in the Pacific is the substantial burden of debt held by the parent company, Digicel Group. O’Brien owns 99.9% of Digicel Group, which reportedly had a debt of US$7 billion in June 2020. In May, Reuters reported that Digicel Group had offered its Pacific business as security to its creditors in a restructure that reduced its debt by US$1.6 billion. Credit ratings agency Moody’s has suggested that the company is effectively defaulting on its loans. It seems likely that the Covid-19 pandemic has further dented the company’s balance sheet.

In December, it was revealed that Digicel Group had asked Citigroup for advice about a possible sale of its Pacific arm. It seems that the company’s motivation would be to use the cash generated from the sale to help to address its debt. If a sale were to go ahead, it’s unclear what might happen with the reported offer of the company’s Pacific operations as security in the most recent debt restructure.

Within the Digicel Pacific portfolio, the PNG operations are the largest in terms of number of subscribers (about 2.5 million users) and number of towers (about 1,000). Potential buyers would be eyeing the PNG part of the company with interest. When Digicel began to spread network coverage to rural areas that had never had any telephone services, people were delighted to hear the voices of their loved ones in other parts of the country. Despite substantial challenges with erecting towers in rugged areas with traditional land ownership structures, the network generated a lively small business ecosystem of telephone credit sellers and handset repairers. Over time, though, people started to express dissatisfaction with customer service, pricing and other issues. Today, some questions remain about Digicel PNG’s reputation, as well as the quality of its infrastructure network.

Recent rumours that the Australian government might step in to support, finance or guarantee an Australian bid for the Pacific arm of Digicel have raised a number of questions. Are there Australian companies that are interested in such a purchase? Would a consortium of businesses join forces to take advantage of this opportunity? Do they have sufficient Pacific expertise and experience to pull it off? If there’s insufficient Australian interest, would Australia underwrite a regional bid, possibly involving superannuation funds based in Pacific nations? Could the latter option present competition risks in places where such funds are already major investors?

A solution may be for the Australian government, under its Pacific step-up initiative, to discuss with Pacific governments an Australian-led program of support in the telecommunications sector. Depending on the wishes of Pacific governments, this could be aimed at buttressing regulatory regimes, enhancing regional coordination, strengthening cybersecurity and addressing other forms of security related to communications throughout the region. The program could include offering expertise, providing training and facilitating targeted financial grants.

But this should not be the responsibility of Australia alone. Other countries with a strategic interest in the region should be urged to participate—notably New Zealand, the United States and Japan (with which Australia is already partnering to extend electrification in PNG).

An Australian acquisition of Digicel won’t prevent Huawei from expanding its presence in the Pacific. Nor will it prevent other potential operators, such as China Mobile, from selling mobile and other communications services in any country in the region.

As Australia and New Zealand enhance the quality of their domestic communications through 5G and other technological advances, their capacity to assist the region to improve its communications ought to be considerable.

Huawei has a substantial foothold in PNG through its provision of internet and related online services via the new undersea cable network that connects major centres such as Port Moresby and Lae.

In the nations where Digicel operates, mobile services are generally the main form of communications. In PNG, the use of landlines is diminishing even for major companies. Mobile use dominates, and internet access and use are growing.

The Australian government, supported by interested allies, could productively discuss opportunities for modern communications (ideally developed with local business and industry partners) with the region’s governments and regulatory authorities. Such a strategy will not prevent Chinese state-owned entities from entering or expanding their operations, but it will offer the governments an opportunity to seek expert advice, enhance local capacity and develop modern, affordable communications—especially for the rural majority, which in the case of PNG makes up 80% of the total population.

But time is of the essence—especially if the sale of Digicel is pursued in the coming months. The Australian approach should be comprehensive and it must be undertaken with urgency.

Should Australia be buying border-security technology from China’s Nuctech?

The subsidiary of a Chinese defence conglomerate nicknamed ‘the Huawei of airport security’ is increasingly dominant in border-control and security-screening technologies globally.

Last month, Canada’s foreign affairs department backflipped on its plan to buy security scanners for 170 overseas embassies and diplomatic missions from Nuctech, a Chinese company part-owned by the Chinese government and once run by former Chinese president Hu Jintao’s son, Hu Haifeng. The reversal followed media coverage that provoked a review of the department’s procurement practices for security equipment.

At a parliamentary committee hearing on 18 November, Canadian government officials were grilled by MPs over the decision to entrust such a delicate security function to a company with close links to the Chinese state.

‘I’m sitting here, and I’m dumbfounded that this could have possibly happened’, said Conservative MP Kelly McCauley. ‘I’m sorry for sounding so critical, but good lord.’

The Canadian parliamentarian is not alone. There’s unease around the world about Nuctech’s growing dominance of the market for security-screening and border-control technologies, including among European parliamentarians, the US Senate Committee on Foreign Relations and the US National Security Council.

The Canadian case brings into sharp relief the changing security calculus in using technology equipment from long-established Chinese suppliers. The integration of hardware with computer networks has added a new dimension of data risk.

Security scanners in Canadian embassies might be a relatively small matter. But the widespread use of products and services from a state-controlled Chinese company with strong links to the defence sector for operational security functions in major airports and border crossings all over the world is a much larger issue.

Nuctech is the global market leader in vehicle and cargo security screening and a major player in several other security and border-control markets. It has factories in Poland and Brazil. It claims to export equipment, systems and services to 170 countries. The company intends to ‘move towards the future vision of contactless security checkpoints’, and biometrics, data and artificial intelligence are central to its products.

Earlier this year, responding to the pandemic, Nuctech ramped up production of its FeverBlock infrared face-temperature screening system, touting ‘thousands of orders’ for use at international airports and border posts. Data about people, vehicles and cargo crossing international borders or transiting through airports would have significant value to a range of actors, from corporations to national intelligence services.

Australian state and federal government departments have spent tens of millions on Nuctech equipment and services since the Australian customs service gave the company its first overseas order in 2001.

And, as in the Canadian case, Australia’s current processes and rules for government procurement may not take into account emerging data risks.

Chinese defence sector links

Nuctech is nested in a web of corporate relationships in China’s state-owned defence sector. Nuctech’s parent company, Tsinghua Tongfang, is controlled by one of China’s largest defence entities, the China National Nuclear Corporation, a vast state-owned conglomerate that specialises in dual-use nuclear technologies. Two other CNNC subsidiaries, the China Nuclear Power Technology Research Institute and the Baotou Guanghua Chemical Industrial Corporation, are on the US banned entity list, which restricts US companies from doing business with them on national security grounds.

A Nuctech subsidiary, FoundMacro, with which Nuctech shares a Beijing office, makes ‘counterterrorism’ products, including a vehicle-mounted microwave denial system that ‘assists secret arrest’, and an AI-enabled predictive warning surveillance system using sentiment analysis technology jointly developed with Russia.

In Xinjiang, the autonomous region in northwestern China that has been the site of mass arbitrary detention of Turkic and Muslim minorities since 2016, Nuctech is a supplier of public security equipment to the regional government and subregional jurisdictions. It has donated security equipment for use at border checkpoints and has marketed a range of products at police trade fairs including as recently as 2019. It has also fitted out the region’s highways with at least 40 sets of X-ray inspection systems and installed passenger-screening equipment at transport terminals.

Nuctech overseas

Nuctech was banned from US airports in 2014 after a confidential government report that has never been released. But in Europe, Nuctech airport-screening and public-security equipment is in wide use. Nuctech supplied security equipment to the 2020 World Economic Forum in Davos and the 2016 Olympics in Rio de Janeiro. A corruption scandal in Namibia, a bribery scandal in Taiwan and an anti-dumping action in the EU have not halted Nuctech’s increasing capture of market share in the security technology sector over the past two decades.

Wang Weidong, Nuctech’s vice president, credits the company’s innovation and good after-sales service with its success.

There are other views, most prominent that voiced by Axel Voss, a member of the European Parliament, that subsidies from Beijing have enabled Nuctech to embark on a deliberate policy of undercutting overseas competitors to fuel its dramatic global growth.

Nuctech in Australia

In Australia, Nuctech systems are installed at major ports and some airports. Nuctech has a number of contracts with state governments for the provision and maintenance of body scanners at prisons and courts. Publicly available data on the AusTender website indicates that the Australian government has done tens of millions of dollars’ worth of business with Nuctech since 2001.

In April, Nuctech was one of nine suppliers that received a standing offer from the Department of Home Affairs to supply and maintain ‘X-ray, trace and substance detection technologies for the Australian Border Force’s existing fleet of equipment’. Australian government regulatory inspection reports suggest that Nuctech, rather than the Australian government, is the ‘sole responsible authority for maintenance’ of its screening equipment installed at Australian ports.

Nuctech reported selling 100 sets of its FeverBlock infrared screening system for use in Australia and New Zealand earlier this year. Nuctech says the system ‘is suitable for rapid body temperature screening in public places … based on AI algorithms to accurately locate the face position, automatically measure the distance of the person, and perform it in real time’.

The Australian government also gifted over $300,000 worth of Nuctech X-ray machines to the Papua New Guinea customs service in 2018.

A spokesman from the Department of Home Affairs told us that the department and Border Force ‘currently only use Nuctech equipment for X-ray scanning of shipping containers’. The department did not answer questions about data-security measures.

National security risk

Nuctech’s own publicity materials indicate that the types of data at least some of its systems collect would be of interest to a range of governments and private entities. For example, its ‘land border system’ for inspecting vehicles at Kazakhstan’s Port Kolzhat, installed in late 2018, ‘automatically collected’ through the integrated system ‘vehicle dimensions, container number, gross axle weight, X-ray image, CCTV video and other information’.

The extent to which Nuctech services interlink with national border-control and customs databases, including passenger identification systems, is not clear. Its products include cargo X-ray scanners (one developed using technology created by Australia’s peak science agency, CSIRO); devices for detecting explosives and narcotics; and body scanners that incorporate a range of collection modes, including facial recognition, fingerprint scans and human body scanning ‘micro measurement’. It also sells systems incorporating ‘AI, big data and video analysis technologies to realise automatic identification of high-risk passengers’.

Any use of Nuctech’s AI or facial-recognition systems is likely to be, as part of normal operation, sending collected data to Nuctech. US security agencies appear also to be concerned that any connected security-screening device—even an X-ray scanner—could access sensitive personal or commercial databases, such as passenger travel history or shipping manifests, and transmit that information to Chinese state actors.

A European spokesman for Nuctech, sensitive to this line of criticism, wrote in Politico in October that ‘data generated by Nuctech’s products during use belongs to our customers only—the company does not have any access to it whatsoever’.

A director-general of the Canadian Centre for Cyber Security, Michele Mullen, told the Canadian parliamentary committee that the risk was not imaginary—the technology has rapidly developed and with it the risk. She said Nuctech’s X-ray machines now typically come with hard drives and USB ports, so they could conceivably be used for data downloads ‘with malicious intent’.

‘Because technology is evolving, things we didn’t use to look at, we now should start looking at’, Mullen told the hearing. ‘Capabilities … with embedded operating systems and USB ports, that didn’t used to exist on X-ray machines, now do.’

Like all Chinese companies, Nuctech is subject to the suite of national intelligence laws that require it to provide any data to the Chinese security agencies if asked. The Chinese government has systematic access to private-sector data through an extensive range of overlapping state security laws that apply to any corporation with data servers inside China. Nuctech’s close linkages with the Chinese state-owned defence sector underscore these risks.

As Australia has recalibrated its understanding of the national security risks posed by a more assertive China in the past few years, and begun to grasp the extent of alignment of Chinese corporate interests with the party-state’s global interests, the Australian government has legislated against ‘corrupt or coercive’ foreign interference, reformed its foreign investment regime and provided the university sector with guidelines on problematic research collaborations. It has banned Chinese telecommunications giant Huawei and other companies ‘likely to be subject to extrajudicial directions from a foreign government that conflict with Australian law’ from involvement in building Australia’s 5G network.

In March this year, five of Australia’s most sensitive government departments, including Home Affairs, scrambled to remove servers made by the Sydney-based company Global Switch, after its parent company, the UK’s Reuben Brothers, was acquired by a Chinese state-owned consortium, Elegant Jubilee, that claimed to be privately owned.

Ironically, the same department is outsourcing elements of border screening, with its sensitive data risk, to a company linked to a state-owned Chinese defence conglomerate. It does not appear to be uniformly considering sensitive data risks with procurement from countries that may pose cybersecurity risks.

If government procurement processes and rules are not flagging risks from foreign state-owned entities and sensitive data risks, it’s time for a framework on government procurement and other collaboration with foreign companies in sensitive sectors. Customs and border control should clearly be one of those sectors. Such a framework would identify services and technologies that may put sensitive data at higher risk and apply a thorough and uniform security assessment to companies bidding for procurement tenders in those higher risk areas.

Update: On 18 December 2020, the United States added Nuctech to its banned entity list ‘for its involvement in activities that are contrary to the national security interests of the United States’. The determination cited Nuctech’s ‘lower performing equipment’ as the reason behind the designation.

Defence’s responsibilities in an era of climate change

Climate change is presenting Australia’s Defence Department with new challenges on the domestic front. One of the more pressing is the need to safeguard defence installations across Australia as climate-driven natural disaster events become increasingly frequent and extreme.

This increasing severity of natural disasters, such as last summer’s bushfires, means that Defence will continue to be required to step up as a national disaster response force.

A framework for climate preparedness needs to be developed at all levels of Defence planning, especially in procurement procedures.

Defence has some policies and guidance in place for environmental management at its facilities, such as its Smart infrastructure handbook; however, it hasn’t yet developed a comprehensive long-term plan to manage environmental change.

The defence presence in the Northern Territory illustrates the range of issues that the organisation will need to focus on in the next decade and beyond. All defence activities, from basing to space programs, will be affected by extreme weather events.

Royal Australian Air Force Base Tindal, located close to the township of Katherine, has already had experience with such events. In 1998, one of the worst floods in the Northern Territory displaced nearly the entire population of Katherine. More than 5,000 residents were forced out of their homes in little over 24 hours. In the 22 years since that disaster, flooding has been a persistent issue for the town, which must remain on alert to deal with the threat of unexpected flooding.

The Tindal base recently received more than $1 billion to upgrade its facilities, including a large, flat area of concrete and bitumen and a 2.7-kilometre asphalt runway. The majority of funds ($737 million) will be allocated to extending the runway and creating new fuel storage facilities to improve accessibility for US Air Force aircraft.

Locals and environmental experts are concerned that run-off from the broad expanses of concrete and bitumen on the base will mean more overflow into Tindal Creek, which is the key source of floodwater in Katherine. The upgrades at Tindal will significantly increase the risk of flooding in the township.

If the expanded runways and tarmac exacerbate flood conditions, it won’t just affect the people of Katherine, but will also put millions of dollars of onsite defence assets at risk. It also could contribute to chemical contamination of groundwater in the area.

Getting this sort of work wrong can be hugely expensive and has the potential to damage Defence’s reputation in the communities in which it operates. Defence has already been in federal court over per-and poly-fluoroalkyl substances (PFAS) contamination of local groundwater, and agreed to settle a class action by Katherine residents for $92.5 million in March.

Earlier this year, the proposed redevelopment of RAAF Base Tindal was examined by the Parliamentary Standing Committee on Public Works, which recommended that the project be approved. In its original statement of evidence to the committee, Defence said that it would put measures in place to deal with the environmental impacts of the upgrade, including flooding and PFAS contamination.

These measures would extend existing water retention measures to the new facilities, such as the stormwater network in and around the airfield, built to divert run-off and reduce the extent of flooding. But nowhere in this document is there an acknowledgement of the greater risks to facilities posed in an era of climate change. Existing measures may not be enough.

This raises the broader question about Defence’s role and responsibility in protecting the environment and local communities in this new era. As a Commonwealth agency, Defence has obligations under the Environment Protection and Biodiversity Conservation Act 1999 to ensure that its activities do not have a significant adverse impact on the environment. This is supported by policies in the department’s Environment and heritage manual. But both the EPBC Act and Defence’s environmental policies will likely need to be updated to cope with the realities of climate change.

These issues will be complicated by expectation, noted in the government’s 2020 defence strategic update, that the Australian Defence Force will need to be ready to deploy to assist communities to deal with extreme weather events. But it’s unclear how Defence will resource and manage this new dimension of its mission.

The nature of public security in Australia is changing, and our institutions must be ready to change with it.

Policy, Guns and Money: Australia–Japan defence ties, bushfire royal commission and Myanmar elections

In this episode, ASPI’s Brendan Nicholson and Peter Jennings talk about Australian Prime Minister Scott Morrison’s recent visit to Japan to meet with Japan’s Prime Minister Yoshihide Suga and the in-principle reciprocal access agreement. They discuss the significance of the agreement and what it signals about the two countries’ future engagement in Southeast Asia and the Pacific.

Anastasia Kapetas, The Strategist’s national security editor, speaks with Robert Glasser, ASPI visiting fellow and former head of the UN Office for Disaster Risk Reduction, about the Royal Commission into National Natural Disaster Arrangements. They discuss the commission’s report, which was released in October and included 80 recommendations, and offer their thoughts on the report’s efficacy in helping Australia prepare for future natural disasters.

ASPI senior analyst Huong Le Thu speaks with Moe Thuzar, coordinator of the Myanmar Studies Program at the ISEAS – Yusof Ishak Institute, about the 8 November elections in Myanmar. They discuss the election process, the National League for Democracy’s victory and what it means for the future of Myanmar and the region.

Leveraging defence investment in post-pandemic nation-building

Nations aren’t built in silos. Nation-building, especially in Australia’s north, requires vision, leadership, cooperation and courage in spades.

The Department of Defence is a significant economic player in northern Australia, and its investments have intrinsic value to the whole nation.

Capitalising on Defence ventures is therefore crucial to successful nation-building, particularly in this region. Doing so, however, will require a change in the way defence industries are scaled.

After years of denial, policymakers are coming to grips with the challenges of achieving scalable and sustainable infrastructure investment. Defence planners, understanding that the warning time for a potential major conflict has shortened, know these investments are needed to mitigate vulnerabilities in global supply chains.

But our understanding of how to deliver infrastructure outcomes that respond to a more diverse range of needs is flawed. A more comprehensive view of the community benefit derived from national security and defence investment is required.

Much to the displeasure of a defence organisation focused on warfighting, the public, policymakers and the government are increasingly viewing it as a source for public good. While Defence has sought to position itself at the centre of government, the cost of doing so is increasing demands to perform non-traditional roles.

These demands hit a watershed moment during last year’s bushfire season when around 6,500 defence personnel provided support to emergency services across the country. Over the past several months, more than 3,200 Defence personnel have supported the government’s response to Covid-19.

The community is greatly comforted by the now-familiar sight of defence personnel supporting civil society by making face masks, assisting at state borders and facilitating traveller movements through our airports. But there is a more enduring role for Defence in the economy of Australian communities.

The global pandemic has revealed the fragility of supply chains, highlighting the impacts of fuel security on food security and essential services. The 2020 defence strategic update amplified this point further.  The bushfires and Covid-19 have exposed painful lessons about the interconnectedness and vulnerabilities of supply chains, including the implications for sovereignty.

It has been clear for a long time that Australia needs a more holistic, joined-up view of nation-building that recognises the role of defence investment. But despite this being the mantra of the last few decades, there’s been little progress on this approach.

Defence necessarily prioritises investments that support its own contingency planning. But it should consider where it sits relative to the supply chain needs of others in the community. This shouldn’t be a matter of prioritising Defence’s direct warfighting interests above others, or the interests of others above Defence.

As we approach the end of 2020, we have a heightened focus on nation-building as a means of accelerating the recovery from the economic effects of the pandemic. In today’s context, nation-building appears to mean fast-tracking infrastructure projects by ‘streamlining approvals, underwriting projects or the establishment of a special purpose vehicle with a capped Government contribution’.

But nation-building is about more than building roads. It’s about improving our economic, social and environmental outcomes through strategic investment. This requires taking a broad, holistic view to not only identify the opportunities but make the connections. For example, to contribute fully to local regions, Defence must address procurement barriers for local small and medium-sized businesses and empower local commanders to engage more meaningfully with regional councils.

In this environment, more transparency is needed on the lines of policy responsibility for national security investments in resilience and infrastructure. Defence should be a collaborative partner in these investments, which will drive whole-of-government economic benefits, including more significant economies of scale and cost-sharing both within and across portfolios.

Defence needs to think bigger, not smaller, and leverage the investment of others in Australia’s northern region in line with the emphasis on capability development in the 2020 update.

A more integrated focus on nation-building and enhancing national resilience would enable Australia to better leverage the combined infrastructure and capability investments of governments and the private sector.

In the past, long lead times meant that Defence could rely on market forces to build its infrastructure, but that is no longer the case. This is why an integrated approach with governments and the private sector is urgently needed. A further challenge for Defence is that its increased capital commitments for infrastructure spending are reducing its operational resources. At the same time, demand for operational facilities is rising.

As part of this effort, leveraging the full suite of Defence’s northern Australia investments is essential. As is ensuring the benefits arising from Defence capabilities in the northern region integrate with the private sector and community outcomes. Bringing forward $190 million of investment in approved infrastructure projects in the Northern Territory is a good start.

However, leveraging investment to deliver national solutions that respond to multiple challenges is more important than local economic sugar hits. This was the case before the Covid-19 pandemic and is now more critical than ever.

Our Covid-19 experiences and responses have demonstrated that market forces alone aren’t enough. We need to shift from reactive responses to pre-emptive solutions and preventive strategies. The pandemic has also shown that the public sector, industry and the community can resolve national challenges most effectively when they work closely together.

We need solutions that foster cross-sector, cross-government, multidisciplinary approaches that position us for an uncertain future of rolling and concurrent crises.

Of course, Defence cannot be the sole funder or the lead developer—a whole-of-region approach is needed. But it can drive the scalability of regional industry by improving alignment with regional infrastructure investment and engaging in longer-term planning in Australia’s north.