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Important News, Belangrijke nieuws, Nouvelles importantes, Wichtige News, Fontos hírek, Importanti novitŕ, Pomembne novice, Importante Notícias, Viktiga nyheter

Ing. Salih CAVKIC

Belang van Limburg
De Morgen
De Standard
Het Laatste Nieuws
La Libre Belgique


Deutsche Welle
West-D. Zeitung

The man of the year

Guy Verhofstadt
Mr. Guy Verhofstadt

The man of the year
L'homme de l'an
De man van het jaar

A proven Democrat, protector and fighter for justice and human rights in the World.

Een bewezen Democraat, beschermer en strijder voor rechtvaardigheid en mensenrechten in de Wereld.

Un prouvé démocrate, protecteur et combattant pour la justice et des droits de l'homme dans le Mond.

Eine bewährte Demokrat, Beschützer und Kämpfer für Gerechtigkeit und Menschenrechte in der Welt.

Dokazani demokrat,
 zaštitnik i borac za pravdu i ljudska prava u Svijetu.

The man of the year

Peace in the World

Mr. Barak Hossein Obama

The man of the year
L'homme de l'an
De man van het jaar

peace in the world

vrede in de wereld

la paix dans le monde

Garantie des Friedens in der Welt

mieru vo svete

mira u svijetu

Murray Hunter
University Malaysia Perlis

Perpetual Self conflict: Self awareness as a key to our ethical drive, personal mastery, and perception of entrepreneurial opportunities.
Murray Hunter

The Continuum of Psychotic Organisational Typologies
Murray Hunter

There is no such person as an entrepreneur, just a person who acts entrepreneurially
Murray Hunter

Groupthink may still be a hazard to your organization - Murray Hunter

Generational Attitudes and Behaviour - Murray Hunter

The environment as a multi-dimensional system: Taking off your rose coloured glasses - Murray Hunter

Imagination may be more important than knowledge: The eight types of imagination we use - Murray Hunter

Do we have a creative intelligence? - Murray Hunter

Not all opportunities are the same: A look at the four types of entrepreneurial opportunity - Murray Hunter

   The Evolution of Business Strategy - Murray Hunter

How motivation really works - Murray Hunter

Evaluating Entrepreneurial Opportunities: What’s wrong with SWOT? - Murray Hunter

 The five types of thinking we use - Murray Hunter

Where do entrepreneurial opportunities come from? - Murray Hunter

  How we create new ideas - Murray Hunter

How emotions influence, how we see the world? - Murray Hunter

People tend to start businesses for the wrong reasons - Murray Hunter

One Man, Multiple Inventions: The lessons and legacies of Thomas Edison - Murray Hunte

Does Intrapreneurship exist in Asia? - Murray Hunter

 What’s with all the hype – a look at aspirational marketing - Murray Hunter

   Integrating the philosophy of Tawhid – an Islamic approach to organization - Murray Hunter

Samsara and the Organization - Murray Hunter

Do Confucian Principled Businesses Exist in Asia? - Murray Hunter

 Knowledge, Understanding and the God Paradigm - Murray Hunter

On Some of the Misconceptions about Entrepreneurship - Murray Hunter

How feudalism hinders community transformation and economic evolution: Isn’t equal opportunity a basic human right? - Murray Hunter

The Dominance of “Western” Management Theories in South-East Asian Business Schools: The occidental colonization of the mind. - Murray Hunter

Ethics, Sustainability and the New Realities - Murray Hunter

The Arrival of Petroleum, Rockefeller, and the Lessons He taught Us - Murray Hunter - University Malaysia Perlis

 Elite educators idolize the “ high flying entrepreneurs” while deluded about the realities of entrepreneurship for the masses: - Murray Hunter

Lessons from the Invention of the airplane and the Beginning of the Aviation Era - Murray Hunter

Missed Opportunities for ASEAN if the ASEAN Economic Community (AEC) fails to start up in 2015 - Murray Hunter

Searching for an end game in the Korean Crisis

Murray Hunter


Over the last month the media has led the world to believe that North Korea, the United states and South Korea are standing 'eye ball to eye ball' on the brink of war.

Secretary Kerry's comments after meeting with his Chinese opposites State Councilor Yang Jiechi, and Foreign Minister Yang Yi, and later President Xi Jinping, and Premier Li Keqiang were guarded. However upon arrival in Tokyo Kerry reiterated his call to North Korea to denounce nuclear weapons before six party talks could be resumed. It looked like Secretary Kerry had fired the last shot in anger. Then for a few days with the Boston Marathon bombing, not a story could be found about this tense situation, as if it had just gone away.

Since the Boston saga, the US Chairman of the Joint Chiefs of Staff General Dempsey declared that the Foal Eagle joint military exercises with South Korea will continue indefinitely. The extension of these exercises gives North Korea 'little room to move".

Then the Chinese Chief of Staff General Fang Fenghui warned General Dempsey on his visit to Beijing on April 22nd that there would be another North Korean nuclear test sometime in the future. The media reported the movement of short range missile launchers to where the North already has musudan medium range missiles already deployed on the East Coast, where some commentators hint of a missile firing on April 25th to commemorate the anniversary of the formation of the armed forces. All the rhetoric and movements of hardware is part of the continuing "cycle of tension" the Korean Peninsula has been used to over the last 60 years.

To see how any possible "endgame" could occur, perhaps it would be a good idea to briefly examine each party's views and interests in this situation.

From the South Korean perspective, the threats from the North are seen as similar to the ranting of an immature child seeking attention. These outbursts are most often harmless, but if challenged incorrectly could lead to incidents. Consequently there is some unpredictability in this uneasy relationship. The closure of the Kaesong Industrial Zone probably has more to do with a sense of grief felt by the North over the South's strong rhetoric and participation in what the it sees as overzealous acts in the Foal Eagle joint military exercises with the United States. This is almost a separate issue to the tensions between the North and United States, as Kaesong represents a symbolic connection between the North and South. Most people in the South are putting up with these "tantrums" and going about with their everyday lives, which can be seen on the streets of Seoul. Although South Korean President Park Geun-hye's mother was assassinated by a North Korean agent, there are indications that she will take a strong line with the North. However President Park will most likely follow US counsel, indicated by the arrangements being made for her to address the US Congress upon her visit to Washington next month.

Japan has had enough and most probably seeks a continuation of the status quo within the peninsula and would be skeptical of any possible solution. The detection of radioactive fallout from a North Korean nuclear test last February is testing Tokyo's patience. However continued tensions may put pressure on Japan to take a more active military role in the region, which it does not want to do. Given Japan's history, there is a strong preference for a denuclearized Korean Peninsula and consequently Japan supports the six party talks process.

China is a major stakeholder in the region and Korea is a complex issue. North Korea is an ally of China, although philosophically and economically they may have drifted apart. However North Korea acts as a buffer between China and US forces, and for this reason China is relatively happy with the status quo. Any change in the status of North Korea, such as an economic collapse would force China's hand in needing to physically occupy the North or accept the absorption of the North into South Korea, which could mean US troops right on the Chinese border. With Obama's "Asian Pivot" looking more like a strategic competition doctrine with China, this would be a paramount concern.

Any change in the status quo would throw open the present balance of power which would have to redefined through strategic competition with the US, and would be drawn out and costly. China may not be ready for this challenge.

General Fang Fenghui said a few days ago, North Korea possessing nuclear weapons would not be in China's interests either. In the long term this would become an inconvenient problem for China just as much as the US.

The most difficult scenario for China to contend with would be a thawing in relations between the US and the North. This would potentially weaken Chinese influence with North Korea, and be seen as a form of US encirclement.

This crisis is testing China's new leadership and the China-US relationship. The current crisis is preventing any breakthrough in finding new ways to define and manage this relationship.

The Chinese leadership is probably bemused with the immaturity of both the US and North Korea over the last few months, and the recent Kerry's trip to Beijing indicated there are still a number of unresolved issues such as cyber security and exports of certain technologies the US is blocking. So Secretary Kerry's trip to Beijing actually showed how far away each other are on their views about the Korean Peninsula.

Perhaps China's influence, or willingness to restrain North Korea will be seen on April 25th, if North Korea decides to test launches any missile. If the North doesn't then may be China has convinced the North about being a responsible citizen, although we can't be sure of this as the North makes its own decisions.

The way ahead towards resolution and a great leap forward

What needs to occur now is dialogue, something that's been neglected. The Clinton negotiations and South's then President Kim Dae-jung's "sunshine policy" led to some positive results, where the Kaesong Industrial Zone stands as a symbol of that period. And perhaps that's why it still remains closed today. 

Does the North really have the capacity and intention to carry out its threats? Creating a crude nuclear bomb is one thing. But miniaturizing it and turning the bomb into a warhead that can be delivered on a precision missile is another. That's a great leap forward in technology that took the US, Soviet Union, China, France, Pakistan, and India years and a number of tests to achieve. The musudan missile supposedly on alert for firing on the east coast has never been tested.

There is a massive difference between the leader of North Korea and the United States.

The leader of North Korea Kim Jung-un is a young 28 year old trying to come out from the shadow of his father and grandfather, who has almost divine status among the people. Kim Jung-un has to assert his authority domestically and hold up to what he would see as US aggression. He knows what is happening to dictators around the world, and would feel a great sense of insecurity. North Korea is an insular society that has grown into one displaying signs of paranoia. The only defense mechanisms he has at his disposal is the repertoire of rhetoric and actions he inherited from his father. They have worked in the past and US pressure is forcing him to maintain these known patterns of behavior. It is currently very difficult for Kim Jung-un to adopt any new patterns of behavior when the same "cycle of tensions" are being played out.

During the 2008 US Presidential election campaign, so many people were sold on Barak Obama's promise to deal with the world's problems in a different way. Apparently the Nobel Peace Prize Committee reaffirmed these aspirations by awarding President Obama the 2009 Nobel Peace Prize in anticipation. But President Obama found dialogue not so easy, and also had establishment constraints around him. For example, Presidential advisors over the years have seemed to lack one important quality, the ability to understand how other countries see the US. In this way he is not in an dissimilar predicament of Kim Jong-un.

The US approach has always been adversarial as this is the easiest option, supported with a mighty military machine. Since the Korean War, the US has relied upon the dogma of military force to underpin its diplomacy. Relationships and personal networks between the two countries just don't exist. This approach didn't work and President Obama's Secretary of State in his last term Hillary Clinton, did not actually pull off any major international breakthroughs.

However when we look at both men, where would we suspect the most maturity resides? And this is President Obama's great opportunity for legacy, the opportunity to change the game.

Kim Jung-un sent a message via the basketball player Dennis Rodman "ask Obama to call me", might be interpreted to mean that "I am here and just maybe you have misjudged me. Let's get together and see what could happen". Maybe the significance and symbolism of Dennis Rodman being a basketball player and black has not been appreciated.

There are well known parallels to this. China had just gone through the turmoil of the Cultural revolution with the founder Mao Zedong at the helm when President Nixon made the historical trip to Beijing. And remember ping pong was a sport very importantly symbolic of the thaw in relations between the two countries. Through engagement China changed. So why not basketball?

Jimmy Carter left a legacy with the Middle East Accord between Egypt and Israel, and Reagan made his legacy with his role in the fall of the Iron Curtin across Eastern Europe and end of the Soviet Union.

This is the Obama opportunity, the potential legacy for him to go down in history as one of the great US Presidents, at least in foreign relations. And this is what Americans wanted in 2008 and the Nobel Peace Prize Committee anticipated in early 2009.

The ding dong rhetoric on our screens each day is taking everybody nowhere. Each party is really saying what they want in the outcome of talks and labeling them as prerequisites. Anybody who has completed "Negotiation 101" knows that doesn't work.

So now the US has extended its Foal Eagle exercises, North Korea will continue to make aggressive comments in retaliation, and the moment for Obama's finest accomplishment is being wasted. An Obama trip to North Korea would empower Kim Jung-un to go down the road of change. It is risky, but President Obama went to Burma, and Cambodia. But unlike Cambodia, Obama would be given a hero's welcome in Pyongyang and bring the best hope of peace on the Korean Peninsula in 60 years.

Obama would through his own personal charm and charisma through diplomacy achieve what all the military might of the United States has not been able to do in 60 years.

But President Obama will most probably not be counseled in this manner in Washington and he would have to make this judgment with his own intuition.  South Korea would also be very insecure with this initiative, and he would have to bring the South along with him.

Unfortunately, something as simple as pride and the ingrained behavioral patterns the "cycle of tensions" have created will prevent this scenario occurring. There is a chance Kim jung-un has been misread, and it may be time for Barak Obama to use his own 'gut feelings' on the matter rather than sticking to the 'win-lose' script currently in play. He has little to lose, a visit to Pyongyang would greatly enhance world respect for him. If he succeeded his 'Asian pivot' strategy would pay off big time.


Turks suspicious towards German Government

Dr. Hubertus Hoffmann

World Security Network reporting from Ankara in Turkey, April 25, 2013


Dear Friends of the World Security Network,

After eight business men with Turkish background (and one Greek and one police woman), living in peace and harmony within their home countries for many years, were murdered out of the blue in Germany by the Neo-Nazi duo Uwe Böhnhardt and Uwe Mundlos, supported by Beate Zschäpe, from 2000 to 2007 (NSU or Zwickauer Zelle), and the local internal secret services and the police were unable to discover the killers for ten long years, the b minority of Turkish origin in Germany of almost three million people became suspicious of the German government. Asked at the end of 2011, a majority of 55 percent of Turks in Germany thought that the killers were “in one way or the other supported by the German state”. This was the result of a poll of 1000 people questioned via telephone by the Center for Migration of the Ankara based Hacettepe University, which was discussed publicly at the large HUGO Conference in Ankara last week. Only 21 percent answered with “No”, with one quarter abstaining. 60 percent believe the German politicians want to manipulate the truth.

This mistrust was invigorated when the Higher Regional Court in Munich, where the trial against the only surviving terrorist, Beate Zschäpe, was supposed to start on April 17, 2013, distributed the 50 seats for journalists as usual on a “first come, first serve” bureaucratic basis, thus in fact precluding foreign media from Turkey or the New York Times or The Economist from covering this important event. This shows how quickly a friendship can turn sour and mistrust arise between different cultures in Europe.

On Friday, April 11, the Constitutional Court of Germany ruled that an adequate number of seats must be given to the Turkish media because of their special interest in the case, after which the Higher Regional Court in Munich decided to postpone the entire trial, which will now commence on May 6, 2013.  

Dr. Hubertus Hoffmann (right side) at the large conference Migration, Islam and Multiculturality in Europe in Ankara.: “The silent majorities in West and East must stand up and promote the true Christian and Muslim teachings of respect. Only this way mutual respect can grow. The World Security Network is participating in this important process by promoting “The Human Codes of Tolerance and Respect”, rules for everybody, parents, educator, religious leaders, politicians, media, sports and culture - how to enhance tolerance and respect towards other religions, ethnic minorities and races .We must highlight the Golden Nuggets of tolerance in our religions and actively promote them using best practices from all over the world.” (see and Facebook)

The large conference Migration, Islam and Multiculturality in Europe by the HUGO Research Network and Hacettepe University discussed these developments and Islamophobia in Ankara. It was organized by one of the best experts, Dr. Murat Erdogan, who as well serves on the International Advisory Board of the World Security Network Foundation.

The President of the Turkish Republic Abdullah Gül announced a new law for immigrants to Turkey, which became necessary as this prosperous country is now the target destination of migrants from Asia and Africa. He praised social diversity in a global village and the need for dignity and respect for human rights. Migrants should be seen as an enrichment of society, especially in Europe with an aging population.

Prof. Rita Süssmüth, the long-time President of the German Parliament, asked not to focus on differences but “what we have in common”. Women must become the main supporters of dignity and human rights due to their struggle for equal rights in the past. We should welcome challenges as they can become catalysts for revision and reorientation.

Islamophobia in Europe is mainly rooted in the bad image of Islam due to female discrimination and extremists killing innocent civilians in 9/11 and later in London and Madrid. This inflames the fear towards Islam and the Muslims.

Without more equal rights and respect towards women the gap between the Christian and the Islamic worlds will persist for much longer.

The benchmark of respect and tolerance between each other should be the mutual UN Charta with its 1945 demand for equality of men and women and the role model of Khadijah bint al-Khuwaylid, the first wife of the Prophet.

She was an emancipated and very successful businesswoman, hired young Mohammad who was 15 years younger, proposed him to marry her. She became the Mother of Islam as the first Muslim and supported the Prophet with love, protection as member of the most powerful clan in Mecca, and her b financial means.

The Islamist extremists with their perversion of faith and nationalism must be isolated on both sides as well. Islam never allows the killing of civilians and restricts the use of force to self-defense.

The silent majorities in West and East must stand up and promote the true Christian and Muslim teachings of respect. Only this way mutual respect can grow.

The World Security Network is participating in this important process by promoting The Human Codes of Tolerance and Respect – rules and best practices for everybody, parents, educator, religious leaders, politicians, media, sports and culture. It especially emphasizes how to enhance tolerance and respect towards other religions, ethnic minorities and races (see and Facebook). We must highlight the Golden Nuggets of tolerance in our religions and actively promote them using best practices from all over the world.

Turkish TRT TV channel interview about migration and Islam with Dr. Hubertus Hoffmann in Ankara in German.

Dr. Hubertus Hoffmann
President and Founder


The high Australian Dollar: Whose interests is the Reserve Bank of Australia looking after?

Murray Hunter

With an Australian dollar 10% overvalued according to an IMF official[i], and interest rates being among the highest in the world, maybe it's time to ask the question; Whose interests are the Reserve Bank of Australia (RBA) looking after? 

The RBA has so much influence over the Australian economy. It is solely responsible for Australia's monetary policy and supervising the banking system. But what may be of surprise to many is that the RBA is an autonomous body. Furthermore, the RBA is not directly accountable to the Australian people.

The Reserve Bank of Australia was formed in 1960 to take over the role of banknote issuing authority from the Commonwealth Bank. The Reserve Bank initially supervised the banks. However from 1 July 1998, the banking supervision function was transferred from the RBA to the newly created Australian Prudential Regulation Authority. The Reserve Bank Act was amended also to create a new Payments System Board, with a mandate to promote the safety and efficiency of the Australian payments system. New legislation, the Payment Systems (Regulation) Act 1998 and the Payment Systems and Netting Act 1998 were introduced, giving the Bank relevant powers in this area.

The Reserve Bank Board's obligations with respect to the formulation and implementation of monetary policy are laid out in the Reserve Bank Act. Section 10(2) of the Act states:

‘It is the duty of the Reserve Bank Board, within the limits of its powers, to ensure that the monetary and banking policy of the Bank is directed to the greatest advantage of the people of Australia and that the powers of the Bank ... are exercised in such a manner as, in the opinion of the Reserve Bank Board, will best contribute to:
(a) the stability of the currency of Australia;
(b) the maintenance of full employment in Australia; and
(c) the economic prosperity and welfare of the people of Australia’[ii].

From 1993, the Reserve Bank formally focused on the objective of price stability where inflation was to be held to an average of 2-3 per cent over a period of years.

In December 2007, following the change of Government, a new Statement on the Conduct of Monetary Policy was jointly issued by the new Treasurer  Wayne Swan, and the Governor of the Reserve Bank, Glenn Stevens. This Statement incorporated substantive amendments enhancing the independence of the Reserve Bank and covered practices regarding transparency and communication. A revised Statement on the Conduct of Monetary Policy was issued following the 2010 election, which explicitly covered the Reserve Bank's mandate for financial stability[iii]. Effectively the Reserve Bank of Australia became fully autonomous.

The Reserve Bank Board is made up of nine members which includes the three ex officio members of the Board, consisting of the Governor of the Reserve Bank, who is Chairman of the Board, the Deputy Governor of the Reserve Bank, who is the Deputy Chairman of the Board, and the Secretary to the Treasury. In addition, there are six external members who are appointed by the Treasurer for a period of five years. The board normally meets eleven times each year, where one of the responsibilities is to set official interest rates (the overnight bank cash rate).

The power of the RBA over Australia's economy is immense. Public pronouncements by the bank governor can stir stock and currency markets. Those decisions are made by an independent board who get their advice from both formal and informal sources that are undisclosed. This lack of any transparency in decision making can run potential conflict. Former Prime Minister John Howard blamed the Reserve Bank for his election loss in 2007, accusing the bank of meddling in domestic politics by announcing a rate rise [iv].

If one undertakes a very quick internet search on the current RBA board members, it will be found that the directors have links to multinationals, media, right wing think tanks, and other foreign interests [v]. The Reserve Bank Governor Glenn Stevens, portrayed by the Australian Financial Review as the most powerful man in Australia is an avid New American Standard Bible reader [vi].

Who is appointed the board in order to ensure that the monetary and banking policy of the Bank is directed to the greatest advantage of the people of Australia? There is no provision that the RBA board have any representative to specifically look after the public interest. Nor are there any representatives to represent small business and Australian wage earners.

So what is the state of the economic and financial environment the RBA has been stewarding on behalf of the Australian people?

The RBA has allowed the Australian Dollar to rise to record highs against the US Dollar and other currencies. Although this reflects some weakness in the US Dollar, the Australian Dollar is high in its own right and is attracting inflows from investors wishing to benefit from relatively high interest rates in Australia. The high Australian Dollar although making imports cheaper is keeping a check on domestic inflation. However this is putting Australian exports in a precarious position, where industries are being devastated. This is costing many thousands of jobs. Rural industries in Australia are also finding it very tough competing against cheap primary produce imports. This could cause the shut down many rural industries all together in the not too distant future. Local manufacturers have been crippled in many industries, while import orientated businesses have flourished. Australian business models today are more focused on developing overseas supply chains rather than innovating new technologies.

The higher Australian Dollar is also making Australian Universities more expensive for foreign students, where drops in enrollments are occurring [vii], and a there is also a decline in foreign tourists visiting Australia [viii], and more Australians holidaying overseas [ix].

There are no doubts that the high valued Australian Dollar is forcing a restructuring of the Australian economy, if not Australian society as a whole. The resources boom saved Australia from a recession in 2008, and is keeping the economy buoyant today. However by allowing the Australian economy to become too narrowly focused on resource exploitation, the manufacturing and farm sectors have become almost squeezed out of existence. This to some degree has been replaced by a large service sector to absorb employment.

The high dollar has created wealth for Australia, as the pundits claim, however wealth is also been redistributed away from middle Australia, which is reflected in the slowly rising unemployment rate. Although a high dollar keeps down inflation, the high costs of this are starting to show.

The combined effects of financial deregulation, the high Australian dollar, and the relatively high interest rates the RBA sets comparatively to the rest of the world [x], is attracting money from all around the world into Australian bonds. The big four banks are having a bonanza as their bonds are guaranteed by the RBA. With AAA credit ratings, the big four are able to borrow from the RBA at the best rates. The big banks are able to issue bonds that are secured with assets where the smaller banks cannot, thus greatly disadvantaging the smaller banks.

Over the last few months the major banks have been able to raise more than $20 Billion of new funding through their AAA-rated covered bonds to government and other investors all around the world [xi].

The Government action of guaranteeing private banks has created a "moral hazard" where the banks are insured on the assumption of being too big to fail. History has shown this as a recipe for irresponsible behavior. Today the scenario exists where the tradeoff between risk and return has been eliminated. In Australia, the lower risk banks with the highest credit ratings are able to provide higher returns than the smaller banks with the lowest credit ratings, a complete reversal of the inverse relationship between risk and return, that the Australian taxpayer has guaranteed [xii].

Today in Australia, responsibility for economic policy is divided between an elected government, which exercises fiscal measures, and the RBA which exercises monetary measures. The rationale for this is to take away the temptation for elected governments to manipulate monetary policy for electoral advantage. However in the light of the recent EU financial crises, this division should be reviewed to prevent any potential financial crisis occurring in Australia, no matter how remote this possibility may appear today.

We are likely to witness and example of policy conflict between the Government and RBA in the coming months. Due to the election this year, the Australian Government is under great pressure to deliver a surplus budget. The RBA policy on maintaining a comparatively high interest rate, at a time the government is cutting spending may lead to an economic slowdown, if the RBA board doesn't take action to lower rates further to compensate for the government's fiscal actions. How the RBA handles this will be interesting.

This leaves Australia in a medium to long term predicament, in need of national debate. Today the Australian economy is being driven by the longest commodity boom the country has seen. This is being driven by urbanization in China, but this will not last forever, just like the gold rushes of the 1800s, and wool boom in the 1950s.

Australian society has changed into a service society, without much of an innovation base. The nature of the Australian economy has become dangerously narrow. The increasing relative wealth of Australians is covering up the need for Australian policy makers to discuss the future direction of Australia's economy. New industries that maintain high levels of employment need to be created.

Today, it is apparent that structural change within the Australian economy has been left entirely up to the board of the RBA to decide. There is not much time to prepare for the end of the mining boom. This national discussion must be held sooner rather than later. If Australia faces an economic downturn from a resource bust, then the economy would most likely lunge into a deep recession. The existing service economy would also collapse, where there will be no sector capable of driving the economy out of recession.

Although interest rates are heading down, closing the parity gap between Australia and the rest of the world, this will probably have little effect on the Australian dollar. This means that manufacturing and construction will continue to decline, putting more pressure on unemployment over the next twelve months. This may assist in making housing relatively more affordable for Australians, but only marginally so, much less than the RBA would be hoping for to compensate for the slowdown within the mining sector. This could result in lower economic growth than is expected, as lowering interest rates will have little effect on consumers already high in debt. This may force the RBA to intervene directly in over the value of the Australian dollar, something the RBA Governor Glenn Stevens would be very hesitant to do [xiii].

Perhaps the RBA's profits and surpluses could be ploughed into a sovereign wealth fund on behalf of Australia, in a similar manner  to the Singapore Investment Corporation (SIC). These funds could be invested into strategic overseas assets that will put downward pressure on the Australian dollar, and also assist in generating national wealth when the mineral boom starts to decline.

The benefits of a high Australian dollar are negated by the high costs of living that now exist within Australia. This negates any comparative advantage for small to medium manufacturers. The destruction of Australia's manufacturing industry requires urgent attention, as new employment opportunities must be found. Traditional employers like Holden just laid off another 500 employees within the last week [xiv]. There seems to be very little national debate about the underlying reasons behind the current unemployment rate of 5.6%. History shows that this is an election loser for governments. 

The RBA's policies have given the big four banks a special advantage, where bumper profits are being made [xv].

We have also seen how little transparency the RBA exhibited during the Note printing bribery scandal [xvi], which is a worry when the Australian public are trusting this institution to run the country's monetary policy. We need to take a lesson from the banking crisis in Cyprus, as Australia is exposed to the world through a highly traded currency and vigorous bond market. Who is looking after the public interest at the RBA?

In Australia today, there is very little concern about how much influence the RBA has over the structure and future directions of the Australian economy. The future shape of what the Australian should be like in the future is a matter for national discussion. These issues are outside the brief of the RBA, but are of concern to every Australian.

Again the question can be asked, In whose interests is the RBA Board acting for?


[i] Exchange rate forecast for Australian (AUD) and New Zealand (NZD) dollars - 'Aussie' and 'Kiwi' set to decline as both currencies are overvalued by 10%. Future Currency Forecast, April 19,

[ii] Reserve Bank of Australia, A Brief History,

[iii] Reserve Bank of Australia, "A Brief History".

[iv] Howard, J., (2010), Lazarus Rising, Sydney, Harper.


[vi] Haigh, G., (2012), Why Glenn Stevens is the man who really runs Australia, Financial Review, 4th August,

[vii]  As at year-to-date (YTD) January 2012, there were 256,087 enrolments by full-fee international students in Australia on a student visa. This represents a 10.7% decline on the same period in 2011, See:

[viii] See:

[ix] Saurine, A., (2012), Aussies Holidaying overseas in record numbers,, February 7,

[x] McDonald, S., (2011), Sovereign Crisis Drives Investors to Aussie Banks Bonds: Australia Credit, Bloomberg, June 20,

[xi] Uren, D., (2012), Global holdings of the Aussie dollar on the rise, The Australian, 24th September,

[xii] Bouris, M., (2012), Our banks: too big to fail, too few to be competitive, The Drum, 7th February,

[xiii] Full transcript of interview with RBA's Stevens, Financial Review, 19th December 2012,

[xiv] McArthur, T., (2013), Holden to lay off 500 workers, Yahoo!7Finance, April 9,

[xv] Richardson, D., (2010), A License to Print Money: Bank Profits in Australia, The Australia Institute, Policy Brief No. 10, March,
[xvi] Hunter, M., (2012), Australia "Do as I Say, Not as I Do" - The Ongoing Reserve Bank of Australia Bribery Scandal, The 4th Media, November 7,


Is Secretary Kerry's trip to China a "face saving" measure?

Murray Hunter


In his first trip to the region after becoming US Secretary of State and after a whistle stop in South Korea John Kerry flew into Beijing to meet with China's State Councilor Yang Jiechi and Foreign Minister Wang Yi on Saturday. If one reads the BBC report about this meeting, it appears written in a manner to make us believe that China is sympathetic to the US version of events and condemning "any provocative acts" from North Korea[i]. However this is a quote from John Kerry himself, rather than any official statement from the Chinese Government. In fact Yang Jiechi stated that China is "firmly committed to upholding peace and stability and advancing the denuclearization process on the Korean Peninsula.......peaceful through dialogue", (also reported later in the article) without any further elaboration.

The only agreement the US got with China was that both sides agreed to further discussions.

So what was the purpose of Kerry's trip to China?

The chronology of events on the Korean Peninsula are well known. However in the "western media", events have been portrayed in a manner where anything that North Korea says is a provocation and anything the US does is a necessary defensive response. This is hardly objective when North Korea is well known for its "aggressive statements" especially around the time of the joint US-South Korean Foal Eagle joint military exercises each year. In addition, North Korea's statements have not been followed with any specific actions, except the closing of the Kaesong Industrial Zone, and the US is not just talking but moving some of its most sophisticated military hardware right onto the doorstep of North Korea. North Korea may be guilty of verbal escalation, but the US is the only party that has actually escalated anything militarily, although the "western" media is continually warning of possible North Korean Military action, which until today has not happened or even looks like happening.

Every BBC online article publishes a map of the supposed range of North Korean missiles and warheads, that have not even been tested by North Korean to validate these claims. No articles have asked the question whether North Korea actually has the capacity to produce nuclear weapons that are capable of being put on missiles as warheads? From the test of a crude bomb to miniaturizing bombs that actually work is a major step in technology, which is unlikely Korea possesses at present[ii].

Some very brief historical context may shed some light on this show of force not witnessed for decades.

The Clinton Administration signed an accord with North Korea's then leader Kim Il-sung where Japan agreed to build a light water reactor for electricity generation and supply oil until the reactor was ready to go online. The then South Korean President Kim Dae-jung also initiated the "Sunshine policy" with the North in an effort to build up trust and cooperation which would lead to an eventual form of unification, a deep aspiration of most Koreans. It was out of this agreement with Kim Dae-jung's successor Roh Moo-jung that a further agreement was made to build the Kaesong Industrial Zone, something that gave a symbolic connection between the North and South.

This eventually led to an exchange of visits in 2000 between the US and North Korea where then US Secretary of State Madeleine Albright went to Pyongyang and Vice Marshal Jo Myong-rok, the second in command in North Korea visited Washington. At this point the US and North Korea were on the verge of official diplomatic recognition and the North agreeing to end its missile testing program.

However upon the incoming of George W. Bush as President the pending missile agreement didn't precede as the new administration did not believe North Korea could be trusted. Then came 9/11 and President Bush labeled North Korea as one of the "axis of evil" in the forerunning rhetoric to the wars in Afghanistan and Iraq.

US accusations in 2002 that North Korea was operating a uranium enrichment plant saw application of further sanctions on North Korea. The North seeing the US invasion of Iraq would have easily contributed to Pyongyang believing that this could happen to the them.

In 2006 North Korea exploded its first small nuclear bomb. This at the time led to some skepticism where some believed the explosion was faked with an extremely large amount of TNT[iii].

President Bush under Condoleezza Rice's advice urged US participation in six party talks with North Korea involving China, Japan, Russia, and both North, and South Korea. These talks led to North Korea blowing up the Yongbyon cooling tower as proof that no uranium enrichment would take place.

Then in 2008 when Barak Obama was running for US President and promised that his administration would talk to both Iran and North Korea, there was some hope in Pyongyang that the steady peace process may continue. However upon Obama taking office this hope was quickly dashed with the new Secretary of State Hilary Clinton adopting the doctrine of "strategic patience" waiting for Kim Jong-Il to die and see a regime collapse through internal power struggles. Both Obama and Clinton made it clear to North Korea that there would be no more talks until the North would denounce nuclear weapons and open up the country. Kim Jong-Il soon died passing on leadership to his son Kim Jong-un, without any change in policy or outlook.

In addition South Korea's then President Lee Myung-bak also took a harder line on North Korea, dismantling the "sunshine policies" of his predecessors.

In 2010 the Obama Administration sent a delegation of former high ranking officials to Pyongyang who met with senior officials of Kim Jong-Il's Government. It was reported that even though North Korea was willing to ship out all nuclear fuel rods to a third country in exchange for a US pledge that it has no hostile intent towards North Korea, the Obama  Administration wasn't interested[iv].

Then in March 2010, North South relations deteriorated with the torpedoing of the ROKS Cheonan, a South Korean Warship, killing 46 South Korean sailors. Although the North has denied responsibility for this act, an investigation in the South put the blame on the North. However China[v], Russia[vi] and the United Nations Security Council all did not concur with the conclusion of that report[vii].

Then the North warned the South if any shells during a South Korean military exercise landed across the disputed border, they would retaliate with shelling of their own, which they did, killing seven civilians on the Island of Yeonpyeong. South Korea appalled with the North's retaliation continued the exercises scaling up tensions in the area. These tensions only subsided when the South stopped the exercises upon US warnings.

These current tensions were started by the North launching a satellite into orbit, which many countries have done before. Then in February, the North carried out another nuclear test and the UN placed further sanctions upon North Korea. Tensions continued to rise with escalations of talk and "sabre rattling" as the world has been watching over the last month.

From the North's perspective, the United States literally bombed North Korean into the ground during the Korean War, and they showed again during the Iraq war that they are fully capable of doing it again. Kaesong Industrial Zone is something that is very symbolic of Korean unity and its closure could be viewed as a display of the North's anger towards the South's rhetoric. Finally, with China's change in direction over the last few years, Pyongyang could be a little uncertain about China's support if a war with the US eventuated. 

The North talks of annihilating the US, while the US talks about bringing down the current regime in Pyongyang.

Administration rhetoric and media reporting about this "reckless regime bent on nuclear war" according to US Defense Secretary Chuck Hagel presents what he called "a real and clear danger and threat". The build-up of US defensive missile systems on Guam, Alaska and on the West Coast of the United States to counter this "grave threat" will require funding. One wonders how much did the issue of future military funding come into the administration's calculations?  Media reports indicate a change in many congress members attitudes to funding cuts sine these tensions started[viii].

Then last Thursday President Obama and his spokespeople sort to calm down the situation through winding back the military exercises with South Korea to lower tensions. Then came Secretary of State John Kerry's trip to the region on Friday.

The United States cannot really afford military action against Korea, it's not in their interest. North Korea is a "good enemy" to have, and can be "managed" through upping and downing tensions on the peninsula. Korea is a good excuse to place military hardware close to China in the East Asian region. A collapsing North would be a disaster for the US, which would result either in a united Korea where there would no longer be any excuse for a strong military presence, or there could be some conflict between China and the US to install some other form of order in the vacuum.

So the Author is postulating the Secretary Kerry's trip to China was the result of a miscalculation by the administration in heightening the tensions on the Korean Peninsula where any further escalation could lead to irrational responses in defense. From a North perspective an attack could be seen as the best defense in these tensions.

In realizing this miscalculation John Kerry had to visit China to seek some form of "face saving" measure where the US could unilaterally de-escalate the rhetoric and action without being seen to back down.

This points to very poor policy handling on the part of the Obama Administration in this episode on the Korean Peninsula. Unfortunately the Clinton approach of the 1990s was dropped in favor of the Bush-Cheney "strategic competition and aggression" doctrine. This escalation was aimed at both "enhancing North Korea's image as an enemy", and making an excuse for more military activity in the region. By doing so the Obama Administration is the first to trigger a Chinese Level One military mobilization in many years since the Korean War[ix].

With the US putting conditions on North Korea before the six party talks can be resumed, the Administration is playing tactical military games with North Korea without any ability to communicate which is extremely dangerous. Maybe Kim Jong-un's message through Dennis Rodman "Obama should call me" did have more significance to it than was given credence at the time.

For the citizens of the region, it appears the media has also through its manner of reporting played some role in heightening the tensions. In fact the playing up of tensions by the media, may have put the Obama Administration in the corner in need to "save face" and deescalate tensions. There has been very little reporting from the North Korean perspective where most media has chosen to report only what the US Administration is saying. Even the London School of Economics has put in a formal complaint to the BBC because BBC officials didn't disclose their true intentions of making a derogatory documentary about North Korea during a student visit there[x].

If there is to be a long term solution to the Korean Peninsula the Obama Administration needs to think very hard about what they need to do, as what they are currently doing is not working. Secondly, the media through skewed reporting has actually become one of the tools of the US Administration during this Korean escalation. The memories of weapons of mass destruction and the Iraqi war are still fresh and that makes one worry if the truth has been the greatest casualty of this incident.




[ii] Klug, F., (2013), North Korea still far away from backing up nuke threats, Associated Press,

[iii] Park, J., (2009), The North Korean Nuclear test: What the seismic data says, Bulletin of Atomic Scientists, May 26,

[iv] Shorrock, T., (2010), Obama's Only Choice on North Korea, The Daily Beast, November 24,

[v] Shimatsu, Y., (2010), Did an American Mine sink South Korean Ship?, New America Media, May 27,

[vi] Russian Navy Expert Team's Analysis on Cheonan Incident, The Hankyoreh, July 29, 2010,

[vii] Presidential Statement, Security Council Condemns Attack on Republic of Korea Naval Ship "Cheonan, July 9, 2010,

[viii] Zengerie, P., (2013), Congressan who made North Korea nuclear comment opposes missile defense cuts, Reuters, April 12,

[ix] China mobilizes military, on 'high alert' over N. Korea threats, Russia Today, April 2,



Asia-Pacific at the Crossroads - The Implications for Australian Strategic Defense Policy

Murray Hunter

Should Australia engage Asia in fantasy or reality?

Since the Australian Government's last White Paper on defense in 2009, there have been rapid changes within the Asia-Pacific region.  As a consequence, the forthcoming Australian defense white paper will be perhaps the most important that has ever been prepared. With a rising assertive China, the US adopting an "Asia Pivot" doctrine, and a host of rising Asian powers, the Australian Government cannot defer the strategic complexities of the region to the 'never never' of 2030 like the 2009 paper did.

Australia has long lost its ability to project military power  overseas. The retirement and scrapping of the last Australian aircraft carrier HMAS Melbourne in 1982, and the Hawke Government's decision not to replace it, and subsequent air squadron decommissioning left the Australian armed forces "land based" [1][2].The country  did not take the opportunity in the 1950s to possess nuclear weapons as a deterrent when it arguably could have. Consequently, today Australia is facing the prospect that some Asian nation's economies will overtake it very soon, and will develop superior military forces within the region.

Australia is left with small professional military services that would have little impact "on the ground" in any strategic operations. Australia has largely invested in hardware to suit strategic tasks,  like frigates to accompany US task forces, and submarines capable of patrolling the waters of North-East Asia, based on a defense doctrine of supporting the US alliance. Australia's military forces are configured for different types of threats than are emerging today, based on the assumption that Australia should be a middle power.

In terms of 'soft power' where Australia's needs have already been  reflected in the "Australia in the Asian Century" white paper, the country has a mammoth amount of work to do before it can be even think of being influential  within the region. As the author discussed in other places, there are obstacles to achieving these ambitions which the Asia White Paper has not even identified as barriers for Australia to overcome[3].

Arguably, Australia's influence  declined in South-East Asia during the Howard years, due to his administration's focus upon an inherited geopolitical orientation based upon a world view originating during the Menzies era that placed the US alliance as the government's policy centerpiece[4].

Consequently, Australia is now within a region where it no longer has superior military capabilities. The only natural defensive asset at its disposal is the air-sea gap between the Australian mainland and South-East Asia, which must become a major consideration in future defense scenarios.

The new defense white paper is coming out at a very appropriate time where a very objective account of the shifting strategic environment must be honestly portrayed. The 2009 paper missed on this, and in addition presented a flawed asset acquisition plan, with some 'opportunistic' purchases. Submarine purchases seem to have been based more on commercial rather than strategic considerations. Financial plans also appeared to be flawed, where some monies were actually returned to Treasury because purchases could not be made in time.

Thus the 2013 paper must be prudent enough to shape Australia's approach to the emerging new world order, before it happens.  It must very carefully lay out the various strategic options open to Australia and select one. This may mean the continuation of Australia as a follower within the US alliance, seeing Australia as an engager and shaper of a new regional order redefining the meaning and objectives of the US alliance, or formally withdrawing from the regional stage all together, among other options. The coming paper should however debunk the fantasy of Australia being a 'middle power'  and realistically configure the country's defense forces according to Australia's real needs.

However this paper is being developed in the long run up to a national election where both major sides of politics are in full adversarial  flight with little intention of forming any bipartisan for the future. In addition, the Tai Pans  of the defense establishment and both sides of Australian politics live within the paradigm of the sacredness  of the US alliance, where it has become beyond the reach of objective evaluation.

In addition to this pro-alliance view within its current form, Treasury influence is certainly dominating the paper's assumptions. The influence of Treasury was seen in the way that the objectives of the 2009 paper were quickly scuttled with 10% defense budget cuts in real terms in 2012-13 budget.  Leaked documents show that the coming white paper is being framed within current fiscal constraints where a newspaper quoted from an early draft of the paper that "a return to budget surplus is important to Australia's defense"[5]. Thus Treasury would prefer the development of the defense forces to take account of other fiscal priorities like increased needs for health care and social services to support an aging population.

Aspiring China

China was always one of the leading civilizations in the world until the 19th and 20th Centuries when  civil unrest, famines, military occupations, and the closing off of the county to the outside world immediately after the communist revolution dramatically decreased its influence upon the world. Since the late 1970s China slowly opened up to the rest of the world and undertook much structural economic reform, leading to a more than tenfold increase in GDP.

China's economic growth has propelled the country to become the world's largest exporter, and the second largest economy today. Domestically new cities have sprung up everywhere within China and the country has been linked through modern transport systems. Consumerism is also rapidly rising, which can be expected to take over as a driver of economic growth during the next decade.

Part of this economic expansion has required China to secure sources of oil, minerals, and other raw materials around the world. With the enormous trade surpluses China has accrued, many strategic assets have been acquired, along with many international brands like Volvo. China has also contributed to the development of infrastructure around the world such as a rail linking Zambia's copper mines to Dar Es Salam as an entrepôt. China has become interested in food production in both Africa and Brazil.

From the Chinese vantage point, its sea lanes must be protected to ensure the continued free flow of raw materials. This makes the Indian Ocean very important as it is a major oil supply line. China also has a number of competing claims with Vietnam, Malaysia, the Philippines, Brunei, and Taiwan on islands and their associated economic zones within the South China Sea, where economics, politics, and nationalism continue to make this area a potential 'hotspot' for conflict[6]. China is still a traditional rival with Vietnam, Taiwan is trying to reassert its status as an independent player in the region, there is a tense relationship with Japan, a stagnant relationship with India (Kashmir) maintaining a militarized boundary, and concerns about a highly militarized Korean Peninsula, with an ally where China's influence would appear to be waning. The Diaoyu Islands dispute is still going on between China, Japan and Taiwan. The economic rise of South-East Asia is also bringing on a much more  strategic significance to the region.

The People's Liberation Army (PLA) consists of all the services, land, sea, and air. It is the largest armed forces in the World with more than 2.25 million personnel, of which 1.6 million are ground force personnel. The armed forces has been modernized during the last few years with military spending increasing over 10% per annum over the last decade. The official military budget for 2012 was announced at US $106.4 billion, however this is still less than 20% of the US defense budget of US $662 billion for 2012[7]. An International Institute for Strategic Studies report in 2011 made an assessment that if current rates of spending continue, China's military capabilities will match those of the United States within 15-20 years[8], however China within the Asian region may match US capabilities much sooner than that. This of course will also depend upon China's economic performance over the next decade.

This doesn't mean that China won't have many challenges ahead. China may soon become the largest economy in the world, but may still lag behind the US in R&D and new technology innovation. Per capita income in China will still lag behind the US and many other countries. The environment and disparity between the coastal and inland areas of China still requires some very skilled economic planning and development. An aging population, leading to a shrinking labor force may one day mean that low cost manufacturing will be pressured to move from China to other countries in the future, leading to the question of what industries will replace them.

Although China may have been more assertive of late, in the foreseeable future it will not be possible for China to develop strategic dominance within the region. The US, Japan, India, and growing Asian military forces would make that too much work. So from China's point of view, power sharing may be the pragmatic option.

China is also developing its 'soft power'. This approach to the region was intensified with the Beijing 2008 Olympics and Shanghai Expo in 2010. China has developed CCTV as an international news channel competing against the BBC and CNN. China has also funded a number of Confucian Institutes around the Asian region, and perhaps one of China's best 'soft power' assets are its very own citizens doing business around the world. This is one factor that is changing peoples' impressions of China.

Australia's economic future lies with China for the foreseeable future. China probably saved Australia from going into a deep recession in 2008. China has been buying Australian minerals at high prices which has led to a favorable terms of trade for Australia. China is changing the structure and nature of the Australian economy much more than is being acknowledged. Chinese influence has enhanced both the tourism and education sectors. It is in Australia's interests to maintain and enhance these trade ties with China.

The reality is that China is no strategic threat to Australia. Its Australia's largest trading partner and this trade relationship needs to be supported with a consistent strategic relationship that accepts China's place and the new roles it will play in the region. China is an integral part of the region and its influence will increase dramatically. There is no logic trying to check China's growing influence in the region if it is legitimate. It's only dominance that may be of concern. And this can be extended onto the China US relationship. There are no natural or historical reasons why there should be any strategic competition between these two nations.

Australia's influence with China will only grow through cooperation. It is the development of forums like the annual leadership talks agreed to between China and Australia during Prime Minister Gillard's recent visit to China that will dramatically increase dialogue and cooperation in the future[9].  Any strategic competition under the umbrella of the US alliance would only lead to undesirable consequences within the bilateral relationship, so Australia may have a potential role to play in shaping new possible approaches between the US and China.

The US Alliance

Australia had always been concerned about the defense with Russia and German expansionism in the late 1800s, even before the colonies federated into the Commonwealth of Australia. The fall of Singapore, the subsequent  surrender of Allied forces on the island, and bombing by the Japanese on the Australian mainland, and submarine raids on Sydney drove the point home that Britain was no longer capable of assisting in the defense of Australia[10].  With most  Australian forces over in Europe, the United States moved into Australia as a base to launch the pacific campaign against Imperial Japan in 1942 after the Japanese attack on Perl Harbor and the US retreat from the Philippines.

Gratitude for assistance at Australia's time of need and a good working relationship between the US and Australia during the Second World War led to the formation of the Australia, New Zealand, United States Security Treaty (ANZUS)  as a three way defense pact, which is still in full force between Australia and the United States. This came at a very convenient time when new nations were forming in the region as colonial powers withdrew, new doctrines and conflicts descended upon Asia with the "domino theory" appearing a realistic scenario to policy makers during the early stages of the cold war. The United States became a very suitable ally to model foreign policy upon.

Annual steering meetings are held between the US Secretary of State and Australian Foreign Minister (AUSMIN) are held to discuss defense matters. Both Australia and the US hold regular joint military exercises, and Australia has followed the United States into every major action since World War II, including Korea, and Vietnam, Afghanistan, and Iraq.

The value of the US alliance to Australia is highly dependent upon US policy and relations with China. However through observation one would believe there has been a slowly shifting policy towards China, accompanied with some deterioration in bilateral relations. This has led to a relationship between the US and China today which seems to be based more on mutual suspicion and rising competition rather than dialogue and cooperation[11].

Obama's visit to Thailand, Myanmar, and Cambodia in November last year could have raised Chinese suspicions about US intentions particularly over the rhetoric concerning disputed islands in the South China Sea, sending the wrong messages to Beijing. At the same time Chinese Premier Xi Jinping is stepping up Chinese military activity in the South China Sea to defend disputed territories[12], which is a recipe for heightening tensions.

Chinese power is certain to continue growing in the Asia-Pacific and US power will not decline in the region as many predict due to financial constraints. So there is no natural solution with Chinese and US policy differences on North Korea, Syria, and Iran, etc. The sending of marines to Australia, approaches to Myanmar, shoring up alliances with South Korea and Japan, potentially indicates an aggressive stance. Without a regular and open dialogue this is leading to unnecessary tensions.

From this paradigm, the US could consider changing its military doctrine of treating China as an enemy and not appearing to be "encircling China". If the US continues upon a strategic competition posture, configuring its forces with the capability to carry out a war in the Western Pacific, this will just cause tensions, which would just cause a cold war scenario. For example in the Hainan Island incident where there was a mid-air collision between a US and China aircraft in 2001 did nothing to lower tensions. Surveillance flights testing air sovereignty add continual stress upon the relationship where any time a small mishap can result in another incident[13].

Dealing with China as a rising power is of major importance to Washington. From an Australian view, it would be best for the US to see the potential for power sharing in the region, rather than pursue a strategic competition paradigm. US financial integration with both country's trade, foreign direct investment, and China as a major holder of US Treasury bonds should be incentives to do this.

However this requires a new strategy to create a new regional order where Australia could play a very constructive role. This requires the policy makers in both Washington and Canberra to define this new doctrine that will embrace cooperation and mutual acceptance of each other's legitimate position within Asia. This means accepting a Chinese military build-up in proportion to its status as an economic power. China sees the need to upgrade its old military hardware which is 20 years behind that of the US[14].

This is a big ask. This would require the US reconsidering the use of trade restriction apparatus as policy instruments against China, more favorable consideration of technology transfer and direct foreign investment by China in the US, etc. This also requires recognizing that US-China relations are multidimensional and that military posturing are manifestations of seeing relations within uni-dimensional contexts. Perhaps this would do a lot to reduce trade imbalances and increase US exports to China.

This may also require the rethinking off the Trans Pacific Partnership (TPP) which is seen by China and even some other Asian nations as means of promoting US exports and undermining the momentum of the East Asian Economic Cooperation that didn't involve the US. This is not the first time the US has dumped Asian initiatives. The US opposed former Malaysian Prime Minister Mahathir's proposal for the establishment of an East Asian Economic Caucus in the early 1990s and Japan's imitative for an Asian Monetary fund during the Asian financial crisis in 1997. The US must grow more comfortable with the notion that not all new ideas will originate from them in the future, but this doesn't mean that the US will not have a major role to play.

There is some confusion by China about what President Obama is actually thinking and what US policy actually is. US policy towards China will only be really known once Obama sits down with China's new leader to discuss many bilateral and regional matters.

From the Australian point of view, the value of the US alliance is defense assistance against a military threat which was validated by the 2009 white paper's concern over China's Pacific expansion. This assumption until recently has not really been questioned. However, if China is not a threat, then the traditional objective of the US alliance in regards to China is no longer valid in its current assumptions.

This should not mean an end to the treaty, but rather a re-evaluation of the objectives of the treaty through the existing AUSMIN mechanism to redefine new potential directions for the alliance under a new Pacific doctrine. Strategic competition with China is not in Australia's interest, and a US role that works directly for Australian interests is what should be sort.

Know Thy Neighbor - Indonesia

Indonesia is on its way to becoming a major power in the region. Indonesia's GDP (PPP) is already larger than Australia at USD 1.212 Trillion, the 16th largest economy in the world[15]. This growth is occurring through the whole archipelago of Indonesia rapidly transforming the country into a much more advanced economy[16]. With a consistent annual growth rate of around 6% Indonesia's influence within the region will grow dramatically.

Former Australian Prime Minister Paul Keating placed great importance upon the Australian-Indonesian relationship in the 1990s, however this failed to evolve under the Howard Government. As a consequence annual ministerial meetings between the two countries has focused on the smaller issues like people smuggling, asylum seekers, live cattle exports, and Australian prisoners in Bali, rather than important regional and geopolitical issues[17].  As a result the Australian Indonesian relationship has not grown into a mature one, being very little above transactional, with few deep personal engagements between the leaders of both countries. This lack of personal rapport was partly to blame for the situation that nearly led to major clashes between TNI and Australian troops in East Timor in 1999[18].

Nowhere more could this be seen more clearly was in President Susilo Bambang Yudhoyono's (SBY) and Prime Minister Kevin Rudd's respective addresses to a joint sitting of the Australian Parliament in  2010, where Rudd spoke of the achievements of the relationship, while SBY talked about the challenges ahead. Specifically SBY warned of a mindset stuck to rigid old stereotypes, where a lot has to be done to improve 'people to people' contact to understand the facets of each other's life. Most importantly, SBY mentioned that the Australia-Indonesian relationship must be opportunity driven to move onto new issues and bring the relationship to its full potential. SBY went on to effectively suggested that Australia and Indonesia explore the prospects of playing a role in developing a new world order that would be beneficial to all[19].

Former Prime Minister Paul Keating in his delivery of the Keith Murdoch Oration Lecture in November 2012 stated "Policy towards our nearest, largest neighbor Indonesia has languished lacking framework judgments of magnitude and coherence. It's as if Indonesia remains as it was before the Asian financial crisis, before its remarkable transition to democracy, and before the refiring of its wealth machinery"[20].

At face value, it appears that Australian policy makers still have a lot of thinking to do about the Indonesian relationship. Although the "Australia in the Asian Century" white paper calls on Australians to learn more Indonesian language at school and more cultural exchanges between the peoples of the two countries, the Department of Foreign Affairs and trade (DFAT) regularly issues travel warnings to Indonesia, effectively telling Australians not to visit Indonesia. In addition the halting of live exports of cattle to Indonesia and stationing of 2,500 US marines in Darwin without first advising the Indonesian Government does little to develop trust and openness between the two countries. Aid is also not the answer. Australia's relationship with Indonesia must go far beyond aid to build up any much deeper understanding.

Indonesia has a much more sophisticated view of the world than Australian policy makers have given credit for. The Indonesian view of the world sees the issues of energy, food, and water security becoming paramount concerns when the world's population approaches 9 billion people. SBY speaks of the need for a new global architecture, seeing China and the US as rivals who need each other. Regional powers, of which Indonesia s one must play a role along with both China and the US in promoting and maintaining peace and cooperation[21].  In terms of the China-US rivalry, Indonesia is pursuing a policy of dual co-existence where the legitimacy of both powers in the region is recognized and respected. Consequently Indonesia doesn't see itself as having any foreign policy obstacles in dealing with both powers. Indonesia is interested in developing the 'rules for the road' in managing conflicts and disputes in the South China Sea. In picking up this role as an indirect conduit between Beijing and Washington, Indonesia sees this as the most productive role it can take in maintaining a peaceful region[22].

Ironically for Indonesia, this is seen as a conservative posture, where for Australia this same approach would be seen as a radical shift.

What does the Australian Defense Forces Really Need for What they are Doing Today?

Another important consideration for Australian strategic defense policy is to look at what the Australian Defense Forces (ADF) are really doing. Primarily the ADF has taken on combat and support roles in Afghanistan and Iraq, special operations, been involved in nation building in Timor Leste, tsunami relief in Aceh, Indonesia, some policing work on the Pacific Islands, and responded to domestic emergencies like bushfires.

Defense spending has been allocated towards fighter aircraft, building land based capabilities, warships, submarines, and other items needed to wage war for what there are little prospects for. So from a budgetary point of view, the best spending strategy would be to use limited funds to equip the ADF for what it is actually doing. However this would radically shift Australia's defense doctrine.

This creates a paradox. If scarce resources are spent wisely and Treasury maintains a major influence upon the fiscal boundaries of Australia's defense policy, then should the defense policy actually be allowed to change? This would require question coming into the debate like "Can Australia's spending on strategic military items make any difference to the strategic balance of the Asia-Pacific region?" and further "Does the maintenance of the US alliance in the present form present benefits to Australia?"  If Australian strategic defense policy is to maintain its existing doctrine then Defense will have to override Treasury and new spending formula worked out. The question here is "How much is the current US alliance arrangements worth?"  Conversely, if Treasury in Canberra will continue to dictate constraints on policy formulation, then it is necessary to completely rethink Australia's defense policy in accordance with the fiscal realities Treasury lays out. And incidentally this would be an excellent way to sell any new radical shift from existing doctrine to the public of Australia. 

However not since the days of the Whitlam Government has Australia had a truly independent outlook on the world. This came with grave consequences. So changing Australia's strategic direction would take great courage, long consultations with the Australian electorate, and then with friends and allies. This requires a major social shift away from Australia seeing itself not as overseas Europeans residing as a middle power, but as an Asian society on the Asian-Pacific rim, to rid policy formulation from the shackles of history. And remember Paul Keating tried to achieve this once, but was rejected by some of Asia's more vocal politicians, although circumstances may be very different this time round.

However there is an immense threat from Indonesia which is rarely discussed in terms of Australia's strategic defense. In the future some form of catastrophic disaster on the Island of Java such as an earthquake, massive volcano eruption, and/or tsunami will occur. Java is located on Asia's "ring of fire" and has had a number of volcano eruptions over the last century. A massive natural disaster could leave millions homeless in appalling conditions, just North of Australia. This scenario would be an immediate threat to the security of Australia if a mass exodus via anything that could float headed towards Australia, creating a refugee situation Australia would find very difficult to handle.

What are Australia's Strategic Defense Options?

If the coming White Paper on Australia's strategic defense policy canvasses options, these could be summarized as follows;

1. maintaining the US Alliance

This option is about maintaining the view that Australia is a 'middle power'  and aligned to US policy. This is the easiest scenario for the white paper as it requires no fundamental change in Australia's defense doctrine. However Australia under the scenario of strategic competition, should the Obama Administration pursue this direction will lose independence to form its own policy towards its largest trading partner China. This approach will potentially cause tensions  and hinder the development of the China relationship. If Australia becomes locked into the scenario of strategic competition between the US and China, then its emerging influence within the Asian region will also be weakened with the perception that Australia is not confident of making its own way in the world.

However if the US adopts a much more cooperative approach towards China, then the US alliance will be valuable to Australia. A more cooperative approach would empower Australia within the alliance due to the potentially good relationship that it could develop with China.

The US alliance is the preferred option of the government and would mean a continued emphasis on purchasing strategic assets to perform Australia's perceived responsibilities within the alliance. There is also a possibility that Canberra may develop the resolve within the relationship to change the assumptions of the alliance to fit the changing realities of the region.

2. Going back to "fortress Australia"

If the US alliance is deemed to be of limited value to Australia strategically in the future, then a withdrawal from the region to develop a tactical self defense capability would be an option.  This 'back to the future' scenario was the conclusion of the 1976 White Paper on defense under the Fraser Liberal Government. The postulation was that Australia should be able to defend itself from regional powers without the assistance of any other nation.

Australia would need a much larger air force. Joint strike fighter aircraft would need refueling capabilities to keep in them in the air longer and provide the ability to strike forces on their way to Australia. The size of the professional army would have to be larger and the small numbers compensated with very sophisticated equipment. New technologies like the use of drones for surveillance will cut costs. Smaller submarines that can patrol shallow waters would be preferred to the larger submarines Australia is buying. Smaller ships that can patrol, search and destroy other shipping are necessary, rather than large warships. Australia already has assets like JORN over the horizon radar that can view approaching aircraft across Northern Australia.

Sea and air denial would be the key to the Australian defense strategy, taking advantage of the air-sea gap around Australia. This would be a tactical rather than a full strategic defense capability, because a strategic defense strategy is not affordable. The major premise of this tactical defense is to make it too difficult and costly for any enemy to attack Australia.

According to Professor Hugh White of the Australian National University this type of defense capability would cost around 4% of GDP[23]. This expenditure would take Australian defense spending back to 1960s and 70s levels. However to economize this option, savings could be achieved through decommissioning and cancelling orders for superfluous  assets to this strategy. The ANZAC frigates currently configured to escort amphibious forces long distances could be reconfigured for other purposes.  These were all inherited from the Howard Government which purchased them on advice from Defense with little questioning at the time.

The advantage of this option is that Australia becomes independent in terms of defense. Ironically this option actually corrects the situation where Australia with its current military configuration today is technically at risk because it could not defend itself.

Of course this option requires a deep public debate and eventual political bipartisanship. A committed bureaucracy to plan and develop this option is also very essential. Purchase decisions must be made according to specific needs rather than commercial considerations. With the right choice in hardware a sea air denial capability can be achieved.

This option does not automatically rule out the continuation of the  US alliance but would limit Australian participation in the traditional ways it has in the past. Australia could look at the Singapore Defense Force model which has been built around the Israel model of defense, utilizing a small force with a brutally effective defensive power. The paramount question with this option is What forces does Australia actually need?"

It will be Australia's policies and diplomacy towards its neighbors that will comprise the most effective defense, which leads to the next option.

This option will most probably not be discussed at any length in the forthcoming White paper.

3. Towards Asian Integration

The third option which should be well canvassed in the coming White Paper, at least as a supplementary strategy is developing integration with the Asian region, based upon the old "Thai" adage that "good relations with your neighbors are your best form of defense".

The integration option is about promoting a stable new regional order using diplomacy and 'soft power' options of trade, business investment, cultural, and other social endeavors. This recognizes that Australia can only handle its threats through diplomacy and non-military means. This doesn't mean that Australia abandons its defense completely.

The major focus in the integration option is finding innovative ways to build a new order that will accommodate China's new power aspirations and US interests in the region. This is challenging as the US will be very hesitant to give up primacy to accommodate China. However US presence is important to balance between China and Japan, and the situation on the Korean Peninsula. Australia needs to up-talk trade and economic integration over military competition.

This means creating an environment where;     1) There will be no contested geospace,     2) There is shared power that keeps the US engaged and China's legitimate place in the region is respected to stop competition, and     3) There are ways to manage potential conflict among members of the region.

This new order has to be achieved very quickly due to Chinese and US aspirations. If achieved then the region can turn to the issues of financial markets, climate change, trade, oil, food production, and regional security with the production of regional public goods to achieve desired mutually agreed ends.

The one positive force for this option to become a future reality is increasing economic integration between the states of the region.

Both Australia and Indonesia want good relations with both China and the US, and share visions about regional cooperation. Under this scenario Indonesia would become Australia's best defense asset. Indonesia is a natural geo-buffer between Australia and the rest of the region, and current Indonesian foreign and defense policy is compatible with Australia's interests. Through Indonesia, Australia would develop an effective forward defense as was Australia's policy back in the 1960s.

If Australia's relationship with Indonesia is handled poorly, then Indonesia will become a massive liability from Australia's point of view, as the Timor Leste incident back in 1999 showed. Where Australia was once able to defend itself against any potential Indonesian threat, this is not the case today.  There is no certainty about how the US would react in any altercation between Australia and Indonesia.

Consequently it is paramount for Australia to build Indonesia into a strong ally. This requires opening up a new chapter in Australian-Indonesian relations. Australian interests are more closely aligned with Indonesia's than the US, a point still not understood in Canberra today. With the Howard Government in 1999 basically tearing up the security treaty that the Keating Government signed with Indonesia., and many criticisms of the Lombok treaty signed between Indonesia and Australia in 2006, there is still a lot of work to be done.

The integration option still requires an Australian Defense Force that has the capability to go to trouble spots to assist in peace keeping, disaster relief, and special operations in accordance with Australia's strategic interests. This is particularly important in a region where there are still a number of tensions and potential "flash points" that may arise in various parts of the Pacific, West Papua, and Sabah, etc. There will enviably be some major natural disaster on the Island of Java that Australia will need to assist.

The doctrine of integration requires Australia to become comfortable with different views of democracy and government. Australia should not try to make the rest of the region resemble Australia and will have to accommodate different value sets throughout the region. Australia must focus on both the bilateral and multilateral relationships , independence and succession movements, political Islam, and human rights in a very skillful manner. This requires a deep change in the national psych. The 'Austro-centric'  view of the region needs urgent revamping[24]. One of the paramount barriers Australia has to overcome is an understanding that its own cultural values are not necessarily universally accepted across the region.  Australia's acceptance of the wide array of Asian views within the region is necessary, so that Australia can one day become an equal partner within it.

If there is no enemy to defend against, then this option is best. This option requires Australia to invest in cultural and intellectual infrastructure that will lead to a better understanding of the region, just like the Australian National University (ANU) was established in 1946 to assist in the development of foreign policy[25].

4. The 'New Zealand' Option

Finally something should be mentioned about the New Zealand option, although it is totally unlikely that Australia would ever consider this posture. With the New Zealand Government assessing extremely low level threats within the region of the Pacific where the country is situated, the government decided in 2001 to decommission all combat aircraft within the Royal New Zealand Air Force (RNZAF). This was done by cancelling and order for 28 F -15 fighters and disbanding a squadron of Skyhawks and Aeromacchis[26].  Most of these aircraft have been sold off. Today, the RNZAF only flies logistic and support operations primarily involved in peacekeeping missions and natural disaster assistance both domestically and internationally.

New Zealand's Army consists of 4,500 fulltime, and 2.500 part time troops. It is a small force but well equipped professional force. The New Zealand Navy has 4 frigates, 2 ANZAC class from Australia, and 2 MEKO 200 design from Germany, with eight other vessels in service.

New Zealand maintains a 'credible minimum force' where defense expenditure has gone down to 1% of GDP.

New Zealand is still a signatory to the ANZUS Treaty. However Anti-Nuclear legislation passed in the New Zealand Parliament by the Lange Government in 1986 banning nuclear ships from New Zealand ports made the US withdraw its obligations to New Zealand, where ANZUS military exercises are now only bilateral between Australia and the United States. New Zealand retains a close bilateral military relationship with Australia. Nevertheless, the relationship between New Zealand and the US is still close where, where Condoleezza Rice upon her visit to new Zealand called New Zealand "a friend and ally" [27].

Experience has shown that the 'credible minimum force' option has limitations, and New Zealand is undergoing a major defense equipment upgrade. In an ideal world, this would be a good option, however Australia is in a different geographical location, where a major threat could very quickly emerge in a neighboring country where a hostile government emerges through throwing out a friendly government to Australia through a coup.

Conclusion - "How far will the US alliance influence Australia's strategic defense policy?"

The coming Defense White Paper is certainly the most important strategic assessment that Australia has needed to make. With the massive shifts in the strategic environment , it will be interesting to see if there is any major reconfiguration in Australia's policy to engage the region, especially in relation to China, the US, and Indonesia.

The odds are from the leaks that fiscal conditions have limited the scope of thinking and response, particularly in a policy area that has little public interest in an election year. Bipartisan political support will be very difficult to achieve with a political opposition looking for issues to attack the government on, although if there is a change of government in September there would probably be very little policy change anyway. 

The paper will most probably be a paradoxical one reiterating the importance of the US alliance, while financially making a strategic withdraw, a scenario that would receive lukewarm support in Washington. The question here is how Australia will handle the future US alliance? Will the Australian Government announce they will seek to update it in line with the evolving regional scenarios and seek the US to pursue a cooperative rather than strategically competitive relationship with China, or will there be a reliance upon the US to determine the strategic direction?.

How China receives the white paper will greatly depend upon how the above questions are answered.  The rhetoric must not be about seeking primacy in Asia via the US alliance, but rather about seeking a sharing and respect for the legitimate right of China to share power in the region. If the concept of strategic competition is changed to strategic cooperation, the Australian policy may  garner respect in the region.

The White Paper may pick up on some to the third option and seek an integrated Asian region, utilizing a greater emphasis on a diplomatic and 'soft power' approach. However Indonesia has already taken this 'middle ground' and it would remain to be seen whether Canberra could work with Indonesia, not necessarily as the innovator, in these initiatives.  This may not be easy for diplomats in Canberra to do, which leads onto Australia's whole outlook through diplomacy.

Australia's biggest challenge internationally will be its diplomacy, which has declined in effectiveness throughout the Asian region since its peak in the Keating-Evans days in the 1990s[28]. The Australian Department of Foreign Affairs and trade (DFAT) must first admit how poor diplomatic relationships really  are in Asia.

Finally, although the White paper will no doubt pick up on Cyber warfare, and terrorism in general, it is likely to be silent on a battleground very rarely spoken about - the war for control of corporate and resource assets. The problem here is no one is really sure whether foreign control of Australia's assets are a good thing or not. There needs to be a national debate on this issue. This is where a real battle is going on and the China, the US, and Singapore are well advanced in playing this out[29].

How the defense Tai Pans frame the 2013 defense white paper will determine whether Australia looks at the Asia-pacific region with a sense of fantasy or reality.


[1] Stevens, D., Sears, J., Goldrick, J., Cooper, A., Jones, P., Spurling, K., (2001), In: Stevens, D., (Ed.), The Royal Australian Navy, The Australian Centenary History of Defense (Vol 3.), South Melbourne, Oxford University Press, P. 227.

[2] The HMAS Melbourne was eventually sold to China for scrap. It was closely examined with many of the flight deck designs and steam catapult reversed engineered by the Chinese. Reports claim the opportunity to examine HMAS Melbourne made a large contribution to the development of Chinese aircraft carrier program. See: Story, I., & Ji, Y., (2004), China's Aircraft carrier ambitions: seeking truth from rumors, Navel War College Review, Vol. 57, No. 1, pp. 77-93.

[3] See: Hunter, M., (2012), Australia in the "Asian Century" or is it lost in Asia? China & US: Australian Dilemma, The 4th Media, November 4,

[4] John Howard in his autobiography "Lazarus Rising" mentions former Prime Minister Sir Robert Menzies no less than 30 times.

[5] Uren, D., & Rout, M., (2013), White Paper Backs Defence Cuts, The Australian, February 11,

[6] Dawson, A., (2013), No useable oil in disputed areas: US, Bangkok Post, April 7,

[7] Ramzy, A., (2012), China Announces 11.2% Increase in Military Spending, Time World, March 5,

[8] Apps, P., (2011), East-West military gap rapidly shrinking, Reuters, March 8,

[9] Kenny, M., (2013), Gillard Lands a big One with China Deal, The Age, April 10,

[10] beaumont, J., (1996), Australia's War: Asia and the Pacific, In: Beaumont, J., (Ed.), Australia's War, Sydney, Allen & Unwin.

[11] Burkitt, L., (2011), China's Big Threat? The U.S., The Wall Street Journal, January 17,

[12] Ng. T., (2013), Xi Jingping call on navy to be prepared for struggle, South China Morning Post, April 12,

[13] Blanchard, B., & Stewart, P., (2011), China Protests U.S. Spy Flights Near Its Coast, Reuters, July 27,

[14] Reed, J., (2011), China's Military Tech 20 Years Behind U.S.,, Defensetech, June 8,

[15] See:

[16] Manurung, N., (2013), Ghost of Suharto Seen in Boomtowns Leading Indonesia Growth, Bloomberg, April 11,

[17] Gartrell, A., (2010), Gillard to visit Indonesia, The Sydney Morning Herald, October 20,

[18] Farrell, J., (2000), Peace Makers: INTERFETs Liberation of East Timor, Rocklea, QLD, Fullbore, pp. 56-57.

[19] Speech by President Susilo Bambang Yudhoyono to a joint sitting of the Australian Parliament, Canberra, Australia, 10th march 2010,

[20] Keating Lashes Aust Approach to Indonesia, AM, November 15, 2012,

[21] Siregar, A., O., (2013), A new attitude in Indonesian diplomacy, The Jakarta Post, March 28,

[22] Nelson, B., (2013), Amid US-China Competition, What are Indonesia's Strategic Options?, Jakarta Globe, April 2,

[23] See: Hugh White, Public Lecture at The Australian National University, "Abandon the Alliance? How China's rise will shape Australia's future, 22nd July 2010,

[24] Hunter, M., (2012), Australia in "Asian Century" or is it lost in Asia?

[25] History of ANU,

[26] Review of the Options for an Air Combat capability, The New Zealand Ministry of Defence, 2001,

[27] Condoleezza Rice in NZ, Scoop Independent News, 26th July 2008,

[28] Gareth Evans as Foreign Minister under the Keating Prime Ministership played a role in creating the Chemical Weapons Convention and Asia Pacific Economic Cooperation (APEC). He developed a UN peace plan for Cambodia, and negotiated the Timor Gap Treaty with Indonesia,

[29] See: Hunter, M., (2013), Who Really rules Australia?: A tragic tale of the Australian people, Eurasiareview, March 26,, Hunter, M., (2013), Who Rules Singapore? The only true mercantile state in the world, Eurasiareview,March 24,



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