3 October 2012 | Vol. 3, № 15.

From the Editor’s Desk Dear FDI supporters,

Welcome to this week’s edition of the The Landmark Study analysing the food Strategic Weekly Analysis. and water security situation in Southern Africa, and how Australia might respond, This week we published a Strategic is due to go to the publisher next week. Analysis Paper titled Australia, China and The second study, examining the same the : Maintaining an issues in the Middle East, is well Equilibrium in the Indo-Pacific. Written by underway. Visiting Fellow, Saloni Salil, the paper proposes that Australia should not focus We are also about to publish a major on preparing in case of a war with an study that examines our ability nationally Asian power but, instead, focus on to deal with a major catastrophic disaster. working with Asian powers to develop The study will concentrate on the Pilbara even greater co-operation and region, which is experiencing an engagement in the region. India and unprecedented expansion of its minerals Indonesia are seen as possible partners in and energy sectors. A relatively minor this process. disruption may result in a significant and costly loss of production. To help prevent Saloni Salil is a post-graduate research and alleviate such disasters, Australia scholar from the Department of requires a national capability. Geopolitics and International Relations in India’s Manipal University. I trust that you will enjoy this edition of the Strategic Weekly Analysis. Upcoming papers from the Indian Ocean Research Programme include an analysis Major General John Hartley AO (Retd) of some of the steps India is taking to Institute Director and CEO increase its political, economic and Future Directions International strategic engagement with Burma. We also continue our series examining the national involvement of various countries in the Indian Ocean Region. *****

India− Visa Deal: A Boost for Trade and Bilateral Co-operation?

India and Pakistan have agreed to liberalise their visa arrangements. While the trade benefits may not be great, at least initially, the move should still be a positive step forward in the bilateral relationship.

Background

Announced on 8 September, the visa deal came during a three-day meeting between Pakistani Foreign Minister Hina Rabbani Khar and her Indian counterpart, S.M. Krishna, in . Under the deal, eight categories of visas are to be liberalised. Changes include the provision of a visa on entry at the land border for the elderly and young and, most importantly, the provision of multiple-entry and multiple-city visas for businesspeople with annual turnovers of over three million Pakistani rupees ($30,600).

Comment

The latter is particularly significant in view of recent trade developments. These include Islamabad’s decision to grant most-favoured nation (MFN) status to India — India having granted the status to Pakistan in 1996. Pakistan has promised to grant MFN status to India by December this year by moving from a system in which only items stipulated on a “positive list” could be traded, to one in which a small “negative” list covers excluded items, for example those relating to defence. India has also liberalised its regime by agreeing to remove yarn and textiles from its negative list and allowing Pakistani businesses to set up in India.

India sees such developments as consistent with what Krishna refers to as its “step-by-step approach” to the relationship. India has for many years held the view that this is the best way forward, rather than pushing for dramatic developments in relations, for instance over Kashmir. New Delhi believes that a Pakistan that is more solidly stitched into the Indian economy is more likely to abjure the highly disruptive tactics in support of trans-border terrorism that have been witnessed from Pakistan in recent years. India is also keen to support what it sees as the delicate process of civilianising the Pakistani polity, consonant with its belief that it has been the military — and especially the Inter-Services Intelligence — that has been most heavily engaged in supporting terrorism.

The step-by-step approach is also seen by New Delhi as being consistent with its persistent demand that Islamabad do more to bring those responsible for the 26 November 2008 attacks on Mumbai, and other attacks on India, to justice. For India, this is the “bottom line” in terms of achieving any significant breakthrough in relations. For its part, Islamabad claims that it doesn’t have sufficient evidence to progress with the cases. The issue is complicated by the arrest in India of Abu Jundal, who allegedly planned the 26 November attacks, and has claimed under interrogation that the ISI was involved — a claim similar to that made by David Headley, another Lashkar-e-Taiba operative associated with the attacks, during his trial in the United States.

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Indian Prime Minister Manmohan Singh is set to visit Islamabad some time before the Pakistani election, which is scheduled to take place in the first half of next year. But so far New Delhi has not committed to a date, saying the visit would need to achieve something significant, probably in reference to a breakthrough on terrorism. Such a breakthrough is currently unlikely. Even if the civilian government wished it, the military remains attached to its “tame” terrorist groups like Lashkar-e-Taiba and the Haqqani Network as a potentially useful force de frappe in the context of Kashmir and Afghanistan.

The outcomes in trade, too, may be slow and painful to realise. Trade between India and Pakistan is currently minimal at US$2.7 billion (although the third country transactions between India and Pakistan, mostly via Dubai, bring the total two way trade to US$10 billion). According to , even with MFN status, non-tariff barriers, such as onerous labelling provisions and lack of trade facilitation at the borders, are likely to keep trade low for some time.

Meanwhile, Chinese goods are flooding into Pakistan under its MFN arrangement with Beijing. India also faces challenges from Chinese manufacturing. A further challenge is that the Indian and Pakistani economies are not particularly complementary. Even with the best will in the world — which is currently lacking — progress will be incremental. Where there could be greater trading traction, however, is at the local level between the two Punjabs, both of which are dynamic sub-regions of their respective economies. Niche items like Pakistani light cotton products for women’s fashion, which could prove popular in India just as they have in Pakistan, could also benefit from the new regime.

The most recent developments may still be seen as a positive step forward for India−Pakistan relations. The challenge now is to maintain positive momentum of the step- by-step approach to improving bilateral relations. However, a terrorist attack that is seen to have originated in Pakistan could derail this process at any time.

Dr Sandy Gordon FDI Associate

About the Author: Dr Gordon is a Visiting Fellow at the College of Asia and the Pacific, Australian National University, Canberra. He is a specialist of South Asia and the Indian Ocean and co-editor of South Asia Masala.

This article first appeared in the East Asia Forum, 25 September 2012.

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Multiple Internal Challenges for South Sudanese Oil Supply

Corruption, security, social discontent and lack of infrastructure will significantly constrain South Sudan’s oil producing capability.

Background

Much of the commentary on South Sudan’s post-seccession oil production has focussed on the dispute with Sudan. Signs suggest that September’s meeting between leaders from Sudan and South Sudan has produced a modus vivendi between the two parties. Oil-rich South Sudan will, however, still face multiple challenges in encouraging investment in its vitally important oil sector.

Comment

In late-September, the leaders of Sudan and South Sudan held direct talks, aimed at resolving the long-running border and oil disputes. Initial analysis suggests that the discussions, held in Addis Ababa - both the Ethiopian capital and home to the African Union (AU) – may have produced consensus over both the border and oil revenue. Additionally, the AU, the broker of the mediation process, has proposed an October 2013 referendum to decide the future of Abyei. The potentially oil-rich region has been claimed by both states and was the flashpoint in April, as the dispute escalated to the brink of war.

Negotiation and agreement bode well for both countries’ economies, which are inextricably linked to oil production and export. The northern area of Sudan retains the region’s processing and exporting facilities. Conversely, the South boasts two-thirds of pre- independence oil reserves, which will provide a much needed source of revenue for the undeveloped state.

Significantly though, it is not simply external pressures that will test South Sudan’s hydrocarbon sector. Oil companies seeking opportunities in South Sudan will face multiple challenges, including corruption, a lack of infrastructure, social discontent and political instability.

While undoubtedly impacting its northern neighbour, South Sudan’s decision to shut-down oil production has resulted in significant strain on its own economy. As is often the case in Africa, it is ordinary citizens who have felt the impact of the government’s decision. As a result of an austerity budget imposed due to declining revenue, the Juba government has found it increasingly difficult to pay civil servants. As a consequence, according to British risk consultancy firm Maplecroft, graft and bribe-seeking among public sector workers may pose an increasing risk to business.

Declining revenue has also led to scarcity, particularly in fuel and foreign exchange. Conscious of its weak position, the South Sudanese government has blamed a variety of foreign parties, including foreign traders, for the state’s poor economic conditions. Jingoism from the government may promote xenophobia, creating a hostile business environment.

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Infrastructure issues may also pose a challenge for oil companies. As a result of South Sudan’s poor economic activity, almost all goods must be imported from Kenya and Djibouti. This is a long and expensive process, made worse by the state’s poor road infrastructure and air transport services. Deficiencies are likely to continue, and potentially worsen, given the government’s current policy of abandoning existing oil infrastructure in favour of developing new pipelines to the Kenyan port of Lamu.

Social discontent, exacerbated by declining economic conditions, may also lead to political instability. Post-independence euphoria will be short-lived, particularly if the government fails to deliver outcomes. In mid-September, reports emerged of an alleged mutiny in the Upper Nile State and the Ramciel area of Lakes State, a site that will serve as the young nation’s capital. An unstable security environment will not only pose a risk to assets and personnel, but also the government’s ability to control its own security forces.

Looking ahead, despite a potential resolution to the Sudan-South Sudan disagreement, the region’s oil flow still faces a number of challenges, which are likely to restrict its output.

Liam McHugh Research Manager Northern Australia & Energy Security Research Programmes [email protected] *****

Western-Afghan Cultural Differences Need to be Understood as 2014 Approaches

A greater understanding of cultural differences is increasingly important if the gains made by Western forces in Afghanistan are to last beyond the approaching drawdown.

Background

With the withdrawal of Western forces now to be completed by the end of 2014, it is important, even at this late stage, to address the issue of cultural differences in this conflict. The increase in “insider” or “green on blue” attacks, by some 75 per cent in 2012, has been attributed to a combination of misunderstandings and cultural differences.1

Comment

On 6 October 2011, veteran NBC Special Correspondent, Tom Brokaw, asked General Stanley McChrystal (Rtd), former Commander US and International Security and Assistance Forces (ISAF), whether the US knew enough about Afghanistan, its culture, language and history. Gen. McChrystal revealed that they did not and still have made no substantial effort to gain that knowledge.2

1 ‘Foreign troops killed in Afghanistan’, English, 16 September 2012. 2 Council on Foreign Relations, HBO History Makers Series with Stanley McChrystal, 6 October 2011. .

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This insightful comment gives credence to the vital importance of knowing your allies as well as your enemy.

Anthropologist Professor Thomas Barfield explains that, over the past eleven years, non- government organisations treated the Afghan Government as a nuisance rather than a partner in relation to aid projects. This reduced the capacity of Afghans to manage the projects and, in turn, added immeasurability to the cost of such projects. It also reduces the legitimacy of the government in the peoples’ eyes, something that the international community seems astoundingly oblivious to.3

Ahmed Rashid writes that frustrated US officials in Afghanistan warned that Washington had gathered no serious intelligence on the Taliban threat until 2006. Lieutenant-General David M. Rodriguez confirmed, in 2007, that although the US forces fought very hard to understand how Afghanistan worked, they still had a very shallow knowledge.4

It is important to note that the Soviet Union, during its 1979-89 occupation, found it difficult to establish credible depth within the population. It did, however, find a constituency via mass organisations such as the Democratic Youth Organisation of Afghanistan and the Democratic Organization of Afghan Women, which increased their memberships to 220,000 and 130,000 respectively by the end of the 1980s. The People’s Democratic Party of Afghanistan, which had a membership of around 2,000 to 3,000 in 1979, was boosted to 205,000 by March 1988.5 We already know that, beyond 2014, a large number of Western military mentors/advisors will remain in Afghanistan to assist both the local military and the police forces to continue to build and maintain their strength and ability, so as to secure the country from insurgents. Unless those mentors have the requisite cultural and linguistic training, any gains that have been achieved will be lost very quickly.

When West meets East, as in the case of Afghanistan, a state beset with chronic poverty, abominable literacy levels, endemic corruption, religious tensions and regional interference all overlaid by thirty years of conflict, the need to understand its culture and history are paramount.

Lindsay Dorman FDI Associate

About the Author: Lindsay Dorman was lecturer in International Relations at the South Perth Learning Centre, 2009-11 and was Honorary Secretary of the United Nations Association of Australia (Western Australia Division) from 1999 to 2005. He holds a Master’s Degree in International Relations from Curtin University.

3 Barfield, T., Afghanistan: A Cultural and Political History, Princeton University Press: Princeton NJ, (2010), p. 316. 4 Rashid, A., Pakistan on the Brink: The Future of America, Pakistan and Afghanistan, Viking Press: New York, (2012), p. 74. 5 Kipping, M., ‘Two Interventions: Comparing Soviet and US-led State Building in Afghanistan’, Afghanistan Analysts Network, April 2010, Executive Summary, p 8.

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***** India Boosts Security Relations with Maldives as Indian Ocean Competition Continues

India’s increasing involvement and influence amongst smaller island states mirrors China’s expansion in the region. Given the economic links between India and China, however, a direct confrontation is unlikely.

Background

In September 2012, India increased its security relations with the Maldives. Indian Defence Minister A.K. Antony announced that India would train Maldivian air force and navy personnel and extend by two years the deployment in the Maldives of an Indian helicopter squadron. Also announced was the stationing of defence staff in the Maldivian embassy in New Delhi, assistance for Malé with the surveillance of its Exclusive Economic Zone and an economic support package worth a further US$500 million. While the announcements can be seen as the latest developments in the competition between China and India for influence in Indian Ocean states, the recent visit to India of Chinese Defence Minister Liang Guanglie resulted in a consensus that India and China would co-operate maintain stability and peace in the Indo-Pacific region.

Comment

China has been consistently expanding its own interests in island nations on India’s periphery – the Maldives, Sri Lanka, Seychelles, and Mauritius – all countries in which India has traditionally been the main strategic provider. China has provided those countries with millions of dollars in aid and infrastructure projects and has also provided training and equipment to the Seychelles defence force. The perceived threat to India’s influence in the region and, potentially, its security, has led to increased aid to these countries from New Delhi. That is especially so in the Maldives, which sits on an important sea line of communication between the Middle East and East Asia.

The increasing warmth in relations between India and China stems from Beijing’s concern over the growing India-United States relationship and China’s own interest in India as an important trading partner. The Defence Minister’s visit to India, the first to occur in eight years, recognises India’s growing strategic weight, the desirability of restarting defence exercises and the interest China has in maintaining its relationship with India. It was a confidence-building measure aimed at reducing tensions between the two countries, in which China tried to calm Indian concerns over its relations with states in the Indian Ocean region.

It is important to note, however, that prior to arriving in India, General Liang visited Sri Lanka, where China is funding the building of a major port in Hambantota. Beijing has also supplied Colombo with US$12 million in military aid. China’s increasing military build-up and its aggressive stance in the East and South China Seas against Japan and the Philippines has

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led to increased concern over how assertive a rising China may be when pursuing its interests.

The size and strength of China has long made it a source of concern for India. Like China, India is undertaking a significant enlargement and modernisation of its navy. The possibility that the expanding naval power of both countries will lead to conflict is currently exaggerated. Subject to the emergence of a future security dilemma, regional economic integration and the safe passage of trade though the waters of the Indo-Pacific are in the interests of both Beijing and New Delhi.

Zamaris Saxon FDI Research Assistant Indian Ocean Programme

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The United States Backs Burma: Imports Ban to be Lifted

While the process may be slow, with few immediate effects, the decision to begin lifting the ban on Burmese imports is a show of support from Washington for President U Thein Sein and his reform process.

Background

Following her most recent meeting with Burmese President U Thein Sein, US Secretary of State Hilary Clinton announced that the United States will lift its ban on the importation of Burmese goods. While questions linger over Burma’s links with North Korea, Washington now appears convinced that the remarkable changes implemented by President Sein are permanent.

Comment

In their third meeting together, just prior to President Sein’s address to the United Nations General Assembly in New York, Secretary Clinton announced that the process of easing import restrictions would begin. The decision offers recognition by the US that President Sein is sincerely committed to reforming his country. It is proof that Washington considers that the time for sanctions has passed and that keeping them in place would, in fact, be counterproductive, as noted by FDI Senior Visiting Fellow and leading Burma expert, Dr Andrew Selth:

Washington’s hard line will impede the implementation of reforms — most of which will depend on foreign capital, technology and expertise. It also weakens the position of the president and other reformers in Burma, and strengthens the hand of conservatives opposed to the scope and pace of change.6

6 Selth, A., ‘US Sanctions Against Burma: Neither Rhyme Nor Reason’ Future Directions International Strategic Weekly Analysis, Vol. 3, № 34, 5 September 2012.

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The president’s position will have been strengthened by the announcement, but it will not be an overnight change. The ban will be lifted on a sector-by-sector basis, with Obama Administration officials liaising with Congress to work through the restrictions imposed by the 2003 Burma Freedom and Democracy Act. Exactly what the US might purchase from Burma remains uncertain, but the country does have a large, low-cost labour force, albeit very much an unskilled one. Working against further trade are the erratic electricity grid, poor infrastructure and – a consequence of the country’s long isolation and a powerful motivation for the reform process – a narrow range of products on offer, with few customers other than India or, especially, China.

In another remarkable move that confirms the scale of the changes in both Burma itself and its relationship with Washington, the Burmese authorities welcomed a State Department delegation on a recent fact-finding tour to the violence-plagued Rakhine province. Such approval would have been unthinkable under the former military regime.

In another clear contrast to the previous government, President Sein praised opposition leader Aung San Suu Kyi in his UN address. The president lauded Ms Suu Kyi’s role in Burma’s reforms and congratulated her on receiving the Congressional Gold Medal from the United States Congress, its highest civilian award. Ms Suu Kyi has been equally effusive, praising President Sein for his own commitment to the reform process.

Such mutual praise offers public confirmation of Burma’s reform trajectory, but the country’s relations with North Korea remain an area of concern for Washington. Despite announcements from Naypyidaw that it would reduce its ties with Pyongyang, a public break is yet to occur. According to the State Department, discussions on the topic are continuing, with the US satisfied that Burma is ‘taking the right steps’. For now at least, it seems Washington is willing to give Burma the benefit of the doubt on that issue.

Leighton G. Luke Manager Indian Ocean Research Programme [email protected]

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India Escapes Calamitous Drought

A turn-around in India’s seasonal level of rain will assist the country to recover from crippling drought.

Background

Two months of dry weather sent India’s government into crisis mode, as expectations of widespread crop failure threatened the country’s already precarious food security. A reversal in rainfall patterns, however, appears to have alleviated that threat. As the monsoon season draws to a close, India’s food production is likely to fair markedly better than initially expected.

Comment

Midway through this year, much of India was experiencing drought-like conditions. Rainfall during the two crucial months of June and July, on which successful seasonal crops depend, was abnormally low compared with the two previous years. As recently as two months ago, meteorologists had forecast the worst monsoon in 65 years, in terms of rainfall received. The worst hit parts of the country received 60-80 per cent lower rainfall than normal, which prevented the sowing of certain crops and reduced the water levels of major reservoirs across India.

Source: India Despite the poor start to the monsoon season, four straight weeks of above-average rainfall during September have helped this major food-producing nation to recover quickly. Although some areas remain severely affected by the initial dry weather, the heavy rain has allowed a majority of states to produce higher than expected yields of summer crops, and may even enable early planting of winter crops. In light of the fortunate turn-around, India’s government has allowed food exports to continue uninterrupted, which is a major boost to regional food security because of the reliance of India’s neighbours on its commodities.

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Source: Reuters India

Monsoonal rains are vital to the country’s food stability; they provide almost 70 per cent of the total annual rainfall that its various agricultural sectors depend upon for survival. The end of September marks the end of India’s monsoon season, with rain already easing. Although the overall moisture level is still down 10 per cent on previous years, the recent downpours appear to have been sufficient for India to avert catastrophic crop losses and future food shortages. While not completely reversing the damage caused by dry weather at the beginning of the season, the rain should allow yields for summer crops such as rice, cane, soybeans and cotton to improve, which will be a welcome development for India’s half a billion poor and food-insecure people.

Jay Vella Research Analyst Global Food and Water Research Programme [email protected]

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What’s Next?

 Throughout the week, Singapore will continue live-fire military exercises.

 Malaysia will host peace talks between the Pilipino Government and the separatist Moro Islamic Liberation Front. Commencing 2 October the talks are expected to last three days.

 Also in Malaysia, the High Court is due to announce a decision on the

operating license of rare earth organisation Lynas Corp. Ltd on 4 October.

 From 3-5 October, regional maritime security will be discussed in Mombassa, Kenya by East African officials.

 Later this week, Pakistan’s Federal Cabinet will convene to discuss strategies to reduce power outages. Prime Minister, Raja Pervez Ashraf, has requested Ministers for Finance, Water & Power and Petroleum and Natural Resources to brief the special meeting.

Any opinions or views expressed in this paper are those of the individual author, unless stated to be those of Future Directions International.

Published by Future Directions International Pty Ltd. Desborough House, Suite 2, 1161 Hay Street, West Perth WA 6005 Australia. Tel: +61 8 9486 1046 Fax: +61 8 9486 4000 E-mail: [email protected] Web: www.futuredirections.org.au

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