opinion MARCH 29, 2015 5 China’s fi nancial PARADOXES WHEN JOKOWI IS MUCH MORE TRUSTED John West result in a wave of loan defaults in THE GLOBALIST/WASHINGTON DC China, damaging the regular bank- ing system and potentially creating hina’s international fi nancial a wave for investors and companies than Megawati in leading PDI-P showmanship at the Asian In- that have put money into shadow Cfrastructure Investment Bank banking vehicles,” the McKinsey should not distract attention from report argues. Megawati has lost credibility as party boss 2014 presidential race, even though Susilo its deep fi nancial fragilities at home. “Don’t worry, China won’t crash,” VIEW POINT and that Jokowi is perceived as one of its Bambang Yudhoyono had already defeated The UK recently defi ed its “spe- was the message from Premier Li most promising leaders. her twice in the 2004 and 2009 presidential cial relationship” with the United Keqiang at the end of the recent Na- There are a couple key reasons for the elections. States by applying to join the China- tional People’s Congress. But even public’s growing impatience with Megawati The PDI-P now needs Jokowi more than led Asian Infrastructure Investment Premier Li acknowledged that the and her family. For starters, many PDI-P sup- the President needs Megawati. The former Bank (AIIB). Chinese economy faces a long pe- porters, even Megawati’s die-hard followers, Jakarta governor and Surakarta mayor has, Other leading European coun- riod of adjustment. felt angered and disappointed by her emo- thus far, been much luckier than his prede- tries France, Germany, Italy and At this stage, the Chinese govern- tional defense of National Police chief can- cessor. During Yudhoyono’s 10-year term, he Switzerland quickly followed suit. ment has the fi nancial wherewithal didate Comr. Gen. Budi Gunawan. She was was often betrayed and cheated by his own And there is now talk that Australia, to deal with its debt challenges and reportedly outraged with Corruption Eradi- coalition members in the Golkar Party and Korea and even Japan might be the stave off a full-blown fi nancial crisis. cation Commission (KPK) leaders when the Prosperous Justice Party (PKS). They next AIIB suitors. Premier Li also indicated a willing- they named her former adjutant as a graft gained lucrative Cabinet positions but often China’s leadership in the creation ness to continue propping up the suspect in January. The media reported that attacked Yudhoyono’s government through of the AIIB and also the New Devel- economy if necessary. she tried to force President Jokowi to install the legislature. opment Bank (formerly the BRICs But as the case of Japan two de- Budi as the new police chief, despite public Having accomplished next to nothing, the Development Bank) is a direct chal- cades earlier highlights, public fi - protests. Speculations about her motives read opposing Red-and-White Coalition is now lenge to the US-dominated post-war nance can get quickly out of shape if like screenplays for soap operas. collapsing. Two of the major opposition par- international fi nancial system cen- the government does not promptly The Indonesian public is upset that the ties, Golkar, the second largest party after the tered on the IMF and World Bank. address fi nancial problems. Kornelius Purba political elites systematically destroyed the PDI-P, and the United Development Party It is thus seen by many as sym- To prevent a recurrence, the gov- JAKARTA KPK. And in relation to that it is very diffi cult (PPP), are deeply divided, as is the National bolic of the fi nancial power of China ernment must implement structural for Megawati and her party to cover up their Mandate Party (PAN), though on a smaller — and the waning infl uence of the reforms to empower provincial gov- displeasure with Indonesia’s most trusted scale. It is beginning to seem as though the United States. ernments to raise suffi cient tax rev- state institution. The party is ranked number only solid opposition parties remaining are But China’s international fi nan- enues to fi nance their expenditures er inner-circle supporters quickly one when it comes to the number of politi- Gerindra and PKS. The leader of the opposi- cial showmanship should not dis- and to enable the fi nancial system questioned the motive of pollster cians jailed for graft. tion, the loser of the July presidential elec- tract our attention from China’s to allocate fi nance more effi ciently. Lembaga Survei Poltracking Indo- Until last week, the party was still eager to tion, Prabowo Subianto, evidently realizes deep fi nancial fragilities at home. Too much of China’s fi nancial re- nesia after it announced its fi ndings foil Jokowi’s attempt to name National Police that being too harsh with Jokowi will nega- China’s total debt has risen from sources are currently being wasted. Hlast Sunday that public trust in Indonesian deputy chief Comr. Badrodin Haiti the new tively affect his camp. US$7 trillion in 2007 to $28 trillion Some observers have argued that Democratic Party of Struggle (PDI-P) chair- police chief after he withdrew Budi’s nomi- Megawati will remain unchallenged in by mid-2014, according to a recent China could use its immense for- woman Megawati Soekarnoputri had drasti- nation. The childish attitude of the politicians the upcoming PDI-P congress. But Puan will report by the McKinsey Global In- eign exchange reserves (about $4 cally declined. Her daughter, Puan Maharani, is irritating. From time to time they indicate likely face bitter rejection as the next party stitute. It accounts for more than trillion in value) to solve its sudden and son, Prananda Prabowo, seemed even that they will abandon Jokowi, who would be chief, given her inability to perform both one-third of the growth in debt glob- debt problem. But it’s not as simple worse in the eyes of the public. left standing alone without control over any as party executive and as a minister, which ally. Representing 282 percent of as that. Hanta Yuda, the executive of the poll- of the country’s political parties. would leave her accomplishments amount- GDP, China’s debt is now even larger Such an approach would require ing company, said the PDI-P should speed Indonesians also felt frustrated because the ing to nothing more than being Megawati’s than that of the United States (269 selling foreign currency-denominat- up leadership regeneration, since the public PDI-P often acted in opposition to Jokowi’s daughter. percent) or Germany (258 percent). ed investments and converting the wanted to see new leaders. plans, despite the fact that the PDI-P leads If Megawati wants the party to maintain China’s rapid debt buildup is proceeds into renminbi. This would The PDI-P will hold its congress next the ruling Great Indonesia Coalition. PDI-P relevance with the times and its current sup- about double that of the United push up the renminbi exchange rate, month in Bali. Only a miracle could change politicians in the House of Representatives porters, she has little choice but to accommo- States before the global fi nancial harming exports at a time of eco- the fact that Megawati, the country’s fi fth seem eager to disrupt the government’s activ- date Jokowi in the party. It will not be easy crisis or that of Korea before the nomic weakness. president, will be unanimously reelected for ities. The opposing Red-and-White Coalition for her to criticize the government because Asian fi nancial crisis. If the current China must now navigate a major another fi ve-year term. often shows greater understanding — and her motives would be all too evident. Hope- pace of debt buildup continues, turning point in its development tra- Citing the survey’s results, Hanta said Pres- perhaps even greater support — for govern- fully she will be smart enough to offer Jokowi China’s debt would reach 400 per- jectory. A period of slower growth is ident Joko “Jokowi” Widodo was more desir- mental policies than the PDI-P. a position on the party’s new executive board. cent of GDP by 2018. being heralded as the new normal. able than Megawati as future PDI-P party Megawati apparently cannot accept that It will boost the party’s credibility while still This debt surge is the result of But what is most important is un- leader, a party based on the ideology of her she does not control Jokowi and such stub- allowing her to rein queen of the PDI-P. the government’s stimulus program locking productivity as a fresh driver father, fi rst president bornness has become a great burden on his Megawati can no longer act as the party’s in response to the 2008 “Lehman of growth and industrial upgrading Sukarno. administration. Her own daughter, Puan, has virtual dictator. She may be credited for the shock”. This stimulus took the form now that the demographic dividend The survey merely made no visible contribution, despite being party’s massive amount of support but she has of an explosion in directed bank of cheap labor has come to an end. confi rmed public awarded the post of Coordinating Human done little to transform the party into a mod- lending, mainly to state-owned en- This will require urgent imple- sentiment that Development and Culture Minister. ern democratic institution. For the sake of her terprises and local governments. mentation of the commitment of the It was Megawati herself who nominated own interests, and the interests of her family, More recently, this was followed by a 2013 Third Plenum to allow market Jokowi as the party’s presidential candidate Megawati should share her power in the PDI- boom in shadow banking fi nance. forces to be the decisive factor in re- in the July election. But I suspect her decision P with President Jokowi. She increasingly has China’s debt is concentrated in source allocation. was not based on a sincere desire to support less and less room for her dictatorial political the SOE sector. Indeed, at 125 per- In the past, China’s economic pol- the best available candidate to become In- maneuvers. Something has got to give. cent of GDP, China now has one of icy makers have proven themselves donesia’s seventh president. She was simply the world’s highest levels of corpo- adept at navigating treacherous wa- making a compromise and attempting to ac- rate debt. While China’s govern- ters. But introducing more market cept the bitter reality that very few Indone- The writer is the senior managing editor at ment debt is more modest at 55 forces into China’s still state-domi- sians wanted her to return to the State Palace. The Jakarta Post. percent of GDP, this could change nated economy with all the creative Megawati, who ruled the country from quickly if the government were destruction that entails, while at the 2001 to 2004, had ambitions to run in the obliged to bailout SOEs or to recap- same time fi nding a path out of the italize fi nancial institutions. clutches of fi nancial instability, will China’s debt binge has created require even more skillful policy many vulnerabilities. Unregulated making than in the past. shadow banking accounts for nearly In contrast to its domestic policy half of new lending since 2008. Some prowess, China has not been adept at local government infrastructure making friends with its neighbors like projects are not capable of generat- Japan, the Philippines or Vietnam, or ing fi nancial returns to enable debt its own antipodes such as Xinjiang, repayment. Tibet, Hong Kong or Taiwan. And nearly half of China’s total The AIIB could serve a very use- debt is directly or indirectly related ful role in fi nancing some much- to the volatile real estate sector. needed infrastructure in South East Real estate prices in China sky- and South Asia, thereby improving rocketed over the past decade, in- China’s soft power. creasing by some 500 percent from But it will also be used to enable 2004 to 2013. Some analysts have President Xi Jinping and his govern- described China as the biggest bub- ment to project their imperial image ble the world has ever seen. to their neighbors. A price correction has already be- How all this plays out will be fas- gun. In fact, a slump in the housing cinating to watch. It is not irrelevant market seems to be accelerating, as that the people of little Sri Lanka housing prices have fallen in each of have just voted out a government the past six months. which had sold its soul to Beijing. “A plausible concern is that the combination of an overextended property sector and unsustainable The writer is executive director of fi nances of local governments could the Asian Century Institute. Israel’s victory of fear

Shlomo Ben Ami most revered former heads of Moss- non-state actors like Hamas, Hez- ment to the creation of a Palestin- group grievances. opponents could achieve a break- PROJECT SYNDICATE/TEL AVIV ad, Israel’s intelligence service, came bollah, and now the Islamic State, ian state. The Palestinians, having The Israeli right’s current po- through is misplaced. The Palestin- together to oppose the re-election of cannot afford to run elections on so- turned down the peace proposals of litical dominance is fed by a wide- ians, after all, never accepted any of enjamin Netanyahu is prob- a man they described as a threat to cioeconomic platforms as if it were a left-leaning governments as well as spread yearning for Jewish roots, the left’s peace proposals over the ably the most defi cient prime Israel’s security. peaceful West European duchy. the most comprehensive US peace a deep-seated fear of Arabs, and years, and the current fragmenta- Bminister in Israel’s history. But one does not have to be a se- The pathetic attempt by Netanya- proposal, the so-called Clinton pa- an uncompromising mistrust of a tion of Palestinian politics — defi ned His blunders and vices have been curity icon to see how Netanyahu hu’s opponents to shift the campaign rameters, appear to such voters as “world,” the so-called international by a weak and ineffective PLO and a laid bare in great abundance during has burned Israel’s bridges with the to the spiraling cost of living and not really interested in peace. community, with which Jews have Hamas obsessed with an irrational his nine years in power. When he international community, particu- prohibitive housing prices was easily They also agree with Netanyahu a centuries-old dispute. The left’s and self-defeating war option — does embarked on his most recent cam- larly the United States, Israel’s most defeated by that compelling message. that Israel’s disengagement from yearning for peace is seen as naive, not give room for much optimism. paign for re-election, even his own indispensable ally and benefac- One must, after all, ensure life, before Gaza, and the subsequent rise of if not an exercise in political lunacy The Israeli left certainly cannot supporters and constituents could tor. Not only did he openly seek to working on the cost of living. Hamas there, proves that every piece (and in either case an unpardonable be expected, after years in opposi- not hide their disgust at his egoma- sabotage President Barack Obama’s betrayal of Jewish identity). tion, to crack the code of Israel’s niacal behavior and his wife’s em- negotiations with Iran by aligning Netanyahu positioned himself labyrinthine politics and lead the barrassing public conduct. himself with Obama’s Republican Achieving a two-state solution would be a as a magnet for the fears and com- country toward a peace agreement Beyond Netanyahu’s noxious opponents; two days before the formidable task even if Israel had not explicitly plexes of a broad array of aggrieved with Palestine. If the Palestinians personal characteristics, Israel has election, he suddenly reneged on voters, including Russian immi- are to avoid the sad destiny of the consolidated its position as one of his commitment to the two-state voted against it. grants, Orthodox Jews, most tradi- Kurds, the world’s largest stateless the OECD’s most unequal countries solution, the cornerstone of the in- tionalist Israelis, and religious set- nation, and if Israel is to extricate under his rule. Netanyahu, the most ternational community’s vision for Like their prime minister, this of land that Israel relinquishes is des- tlers. Whether motivated by tribal itself from its suicidal march to an fanatic neo-liberal leader in Israel’s achieving peace in the Middle East. ever-growing constituency does not tined to turn into a base for launching animosities, an ideological rejection apartheid state, both parties need history, asked the country’s penuri- Given all of this, why did Israeli trust Arabs, including those who are missiles against the country. of the peace process, or cultural the world to save them from them- ous middle class and poor to re-elect voters reward Netanyahu with a their fellow citizens. Liberal Israelis There is, however, another rea- estrangement from Israel’s liberal selves. But does the world have the him on a record of high living costs, third consecutive term as prime were shocked by Netanyahu’s warn- son for Netanyahu’s victory. The left elites, anyone who feels alienated will, and the wisdom, to act? unaffordable housing and a 21 per- minister (indeed, with his most ing on Election Day of “Arabs voting failed to recognize that Israeli elec- — ethnically, culturally, or socially cent poverty rate. Yet re-elect him comfortable margin of victory since in droves, bussed in by the left”. tions are not strictly political affairs; — joined Netanyahu to defeat those they did. his fi rst election in 1996)? Quite But to his constituents, emulat- they are an expression of an ongoing on the left who had usurped Jewish The writer, a former Israeli foreign Nor could Netanyahu fi nd any simply, the vast majority of Israe- ing the racist politics of Europe’s far Kulturkampf in an ethnically kalei- history and betrayed Eretz Israel. minister, is Vice President of the respectable security experts to lis agree with Netanyahu in a fun- right was a legitimate exhortation to doscopic society. Israeli elections Achieving a two-state solution Toledo International Center for vouch for his return to power. Some damental respect: A small country turn out. are in some ways a tribal affair; peo- would be a formidable task even if Peace. He is the author of 180 generals and war heroes, chief surrounded by enemies, in a chaotic Nor were they scandalized when ple vote on the basis of memories, Israel had not explicitly voted against Scars of War, Wounds of Peace: among them Meir Dagan, one of the region of failing states and vicious Netanyahu reneged on his commit- insults, religious sensibilities, and it. Indeed, the hope that Netanyahu’s The Israeli-Arab Tragedy.