11 February 2015 | Vol. 6, № 4. From the Editor’s Desk

Dear FDI supporters,

Welcome to the Strategic Weekly affected since 2012. In what Analysis. may well become the much-needed breakthrough, the leaders of the two Our coverage opens this week with an main political parties – former civil war investigation into the prospects of an foes – held their first meeting. While imminent conclusion to the protracted many issues remain, the meeting was a negotiations between and success and offer hope for the future. Bangladesh over the water-sharing agreement for the Teesta River. We close this week’s edition with an analysis of the latest developments in Next, we turn to the topic of Sino-Indian Yemen. While the troubled country may relations ahead of Indian Prime Minister be obscure to many, its strategic location ’s upcoming visit to and the presence within its borders of al- Beijing. It is highly likely that Mr Modi will Qaeda in the Arabian Peninsula give it a raise India’s concerns over that assistance greater importance than it might given by China to Pakistan for its civilian otherwise enjoy. nuclear energy programme. I trust you will enjoy this edition of the Turning to Indonesia, we examine the Strategic Weekly Analysis. warming ties between Jakarta and Kuala Lumpur, after a period of tension Major General John Hartley AO (Retd) between the two neighbours and the Institute Director and CEO successful visit to Malaysia by President Future Directions International

Joko Widodo.

Looking to Africa, we assess the prospects for an end to the instability that has

*****

Sharing of Teesta Water Critical for India-Bangladesh Relations

Bangladesh is hopeful that an upcoming visit from West Bengal Chief Minister Mamata Banerjee, scheduled for 19 February, will accelerate progress on the Teesta water-sharing negotiations.

Background

Bangladesh is a lower riparian state to the 53 rivers that it shares with India. As a result, the country is vulnerable to the interests of its upstream neighbour. The Ganga Water Sharing Treaty of 1996 remains the only water-sharing agreement that is in force between the two countries and differing priorities over shared water resources are raising concerns for Bangladesh over its future access.

Comment

Concluding negotiations over the sharing of the waters of the Teesta River will be crucial for India-Bangladeshi relations this year. During a meeting between Bangladeshi Prime Minister and Indian Prime Minister Narendra Modi in September last year, the water sharing treaty and implementation of the Land Boundary Agreement were the two priority issues to be resolved.

The Teesta water sharing agreement was postponed in 2011 due to objections by West Bengal Chief Minister Mamata Banerjee. Resistance to, and the continued postponement of, a water-sharing agreement has the potential to threaten bilateral ties between India and Bangladesh.

Securing water sharing arrangements for the Teesta River are of vital importance to Bangladesh, which depends on a regular supply to support irrigators, agriculture and local communities in the north-east. The river is the fourth-largest in the country and current management often leaves Bangladesh with too little water during the dry season and too much during the wet.

Despite reassurances from leaders that India will not act unilaterally, hydro-development within India is causing growing concerns for Bangladesh. A barrage built at Gazaldoba in West Bengal diverts 80 per cent of the Teesta River’s water flow through a link-canal to the upper Mahananda River. Within Bangladesh, the Teesta River Basin is home to approximately 21 million people, who are likely to experience significant adverse effects from ongoing flow diversions.

For India, a lack of consensus is stalling progress and preventing further development in other areas. Dhaka is unlikely to co-operate, for example, over the development of transit facilities to landlocked states in India’s north-east, unless India reciprocates by finalising the water sharing agreement.

Following Ms Banerjee’s visit to Dhaka later this month and a prospective visit by Mr Modi to Bangladesh this year, there are hopes that the Teesta Water Sharing Agreement will be

Page 2 of 11

concluded in 2015. While it has been suggested by the Indian media that the agreement will not conclude before the 2016 West Bengal elections, it is in India’s interest to do so sooner rather than later. A lack of consensus among Indian stakeholders must be addressed and firm central leadership may need to be exerted to reach a timely and amenable agreement. Doing so will be in the best interests of both parties.

Sinéad Lehane Research Manager Global Food and Water Crisis Research Programme

*****

Modi in China: The Pros and Cons of the China-Pakistan Nuclear Energy Nexus

If the upcoming Modi-Xi discussions include India’s reservations regarding Pakistan, the Sino-Pak civil nuclear energy deals will undoubtedly be close to the top of the list of topics to be discussed.

Background

Indian Prime Minister Narendra Modi is scheduled to visit China for discussions with President Xi Jinping before the end of May this year. While their discussions will centre on India’s need for infrastructure capital and investment, it is likely that Pakistan will also figure in the discussions. Modi will undoubtedly raise his concerns about China’s transfer of civilian nuclear technology to Pakistan and the necessary safeguards adopted by Islamabad to prevent its abuse.

Comment

China has, until recently, refused to comment upon its civilian nuclear ties with Pakistan. Earlier this month, however, Wang Xiaotao, a Vice-Minister of the National Development and Reform Commission (NDRC), which is responsible for state planning, is reported to have said that China has assisted Pakistan in constructing six nuclear reactors with a total installed capacity of 3.4 million megawatts. This is said to be the first time that a senior Chinese official has made any kind of formal statement on the subject.

There are some international concerns about this pronouncement. China has been a member of the Nuclear Suppliers Group, a regulatory body that oversees the flow of civilian nuclear technology internationally, since 2004. It was expected that, since it had already begun construction of the Chashma 1 and 2 reactors in Pakistan at the time, it could not be expected to walk away from the projects but would not undertake to construct any more in Pakistan. In 2010, however, the China National Nuclear Corporation reported that it would transfer the technology required for two more reactors to Pakistan, since they were part of

Page 3 of 11

the original agreement between the two countries. Pakistan, for its part, says that the four nuclear reactors comprise part of its overall plan to generate close to 9,000 megawatts of electricity using nuclear technology by 2030. This will help alleviate its chronic power shortage, a drawback that, the Asian Development Bank estimated in 2013, reduced the country’s GDP growth by two per cent annually. At issue here is the assumption that, for Pakistan to achieve that goal, China will need to transfer technology for more than just two more reactors. Beijing has, in fact, announced that it will help Pakistan to construct two reactors near Karachi and three more reactors at other sites.

The problem that Modi will face in Beijing, if he does broach the issue, is that New Delhi set precedents that Islamabad now uses to make its case. India, though a non-signatory to the Nuclear Non-Proliferation Treaty (NNPT), sought a waiver from signing the Treaty and acquired it through the efforts of the . That being the case, Modi has no real basis for trying to prevent Pakistan, also a non-signatory to the NNPT, from also acquiring an exemption from the Treaty, but through China. He could argue that India did not go against the terms of the Treaty either before or after it acquired its waiver, unlike Pakistan, which saw the infamous A.Q. Khan network provide nuclear technology to several countries. Pakistan, however, could retaliate by claiming that that was in the past, that Khan was punished for his role in that affair and that the government was not involved in it at any rate. Beijing, if it chose to alleviate Modi’s concerns, could counter with the argument that a major reason for the rise of extremism in Pakistan is a lack of energy resources, industrialisation and employment. By providing Pakistan with nuclear technology, it could argue, it is reducing the underlying causes of extremism and greatly reducing the ability of extremist organisations to recruit members. Modi will find it difficult to counter that argument. China will, moreover, want Pakistan to remain an effective proxy in its efforts to keep India off-balance while its attention is focussed to its east.

Beijing should, however, learn from its mistakes in the South China Sea, when it drove the Philippines and Vietnam closer to Washington by being overly aggressive and not addressing the concerns of those two countries. It should be careful not to repeat that mistake with India, especially at this time when New Delhi is still basking in the afterglow of the Barack Obama visit. To this extent, it is likely that Xi will emphasise his offer of a US$20 billion loan to India to develop its infrastructure with the caveat that New Delhi use at least part of the loan to purchase high-speed rail technology and trains from China. Given Modi’s desire to enhance India’s ties with Japan, however, he will want to acquire the equivalent Japanese product.

Effectively, China will opt to retain the status quo and leave it to Modi as to whether he chooses to deepen India’s relations with China.

Lindsay Hughes Research Analyst Indian Ocean Research Programme

*****

Page 4 of 11

Malaysia-Indonesia Relationship Stronger After Presidential Visit

The Malaysia-Indonesia bilateral relationship is on a firmer footing after Indonesian President Widodo’s visit to Kuala Lumpur, although relations could still be damaged by a lingering trust deficit.

Background

In his first bilateral trip abroad since taking office in October 2014, President Joko “Jokowi” Widodo arrived in Malaysia on 5 February for a two day visit. Relations between the two neighbours have been tense for some time due to allegations of mistreatment of Indonesian workers in Malaysia and unresolved maritime borders. Business-to-business relations between the two countries also appear to be on a firmer footing with the signing of a memorandum of understanding between an Indonesian company and the Malaysian carmaker, Proton.

Comment

There were concerns that the Indonesian practice of sinking foreign fishing vessels, including those from Malaysia, operating within its territorial boundaries would lead to worsening relations between the two neighbours. This has not been the case, at least if public statements are to be believed. Both Jokowi and his Malaysian counterpart, Prime Minister Najib Razak agreed that foreign fishers in disputed areas should be expelled from the area while those who have entered territorial waters should be subject to existing state laws.

In the lead up to his visit, however, another issue threatened to derail talks between the two leaders. Days before he arrived in the country an advertisement was released in Malaysia that was deemed insensitive by the Indonesian Embassy in Kuala Lumpur. The advertisement by a vacuum cleaner company that urged Malaysians to “fire your Indonesian maid now” did not, however, jeopardise the visit.

It is estimated that there are 2.4 million Indonesian workers in Malaysia, employed mainly as maids and on palm oil plantations. Allegations of foreign workers being poorly treated have long hampered warmer relations between the two neighbours. It has also been suggested that many Indonesians are working illegally in Malaysia. Jokowi and Najib agreed that, in an

Page 5 of 11

effort to reduce the number of illegal Indonesian workers in Malaysia and to better ensure the well-being of those permitted to work in the country, only one channel would be used to employ Indonesian labour from now on.

Both countries agreed to initiate a two-track approach to resolving the decades-old maritime boundary dispute. The new approach involves the appointment of special envoys and the creation of a technical committee to oversee the negotiations. While the most contentious area is the Sulawesi Sea (formerly known as the Celebes Sea) off the east coast of Borneo, other boundaries in the South China Sea and Malacca Strait are also open to contention. The Sulawesi dispute is centred on the Ambalat block, an area of the sea that is rich in oil and gas resources.

If recent statements by the newly instated Air Force Chief of Staff, Chief Marshal Agus Supriatna, are anything to go by, one should not be too hopeful for the resolution of the maritime border dispute in the near future. He recently announced that Indonesia ‘must pay attention to several air bases and put more forces in those areas so that other countries will not infringe upon our territorial integrity.’ One of these air bases is the Tarakan air base near the disputed Ambalat block.

Further discussions on maritime border issues are expected to be held when the Indonesian Defence Minister, Ryamizard Ryacudu, meets his Malaysian counterpart, Datuk Seri Hishammuddin Tun, later this month.

Jokowi also visited a factory of the Malaysian car manufacturer, Proton. While visiting the factory, he witnessed the signing of a memorandum of understanding between the carmaker and a relatively unknown Indonesian company, Adiperkasa Cirta Lestari (ACL). Rumours of cronyism have surfaced as the Chief Executive Officer of ACL, Abdullah Mahmud Hendropriyono, is alleged to have close ties to Megawati Soekarnoputri, Jokowi’s chief political backer.

Jokowi’s visit heralds a turning point in Jakarta’s relations with Malaysia. Promises to resolve issues involving Indonesian workers and long-standing border disputes show that there is a high degree of diplomatic goodwill between the two neighbours. The signing of a preliminary business agreement between Proton and ACL indicates that economic links are also improving. Mistrust still persists, however, as recent statements by the Air Force Chief of Staff suggest. For the time being, therefore, the bilateral relationship is likely to remain tenuous and prone to periods of tension.

Mervyn Piesse Research Analyst Indian Ocean Research Programme

*****

Page 6 of 11

Progress Made as Mozambique’s Political Leaders Meet at Last

The nascent rapprochement between the leaders of the two main Mozambican political parties is a positive development and a necessary step towards ending the threat of instability that has hung over the country since the October 2014 general election.

Background

In a landmark meeting in the capital on 7 February, Afonso Dhlakama, long-time leader of the right-wing main opposition party, Renamo (Resistência Nacional Moçambicana) held discussions with President Filipe Nyusi of the ruling Frente de Libertação de Moçambique (Frelimo).

Nyusi had indicated his willingness to enter into discussions with Dhlakama and, in a move that will prove vital to securing the country’s stability and assuaging investor confidence, the two leaders announced an end to the boycott by Renamo of the national and provincial parliaments. The 89 Renamo MPs elected to the National Assembly and the 294 Renamo representatives elected to the ten provincial assemblies will now officially take their seats. Discussions are continuing over the integration of Renamo personnel into the military and Renamo’s insistence on appointing half of the senior positions in the police and defence forces.

While the agreement is in the early stages and much remains to be resolved, it is a vital move towards stability and reassuring the foreign investors who are crucial to the continuing development of the country’s important resources sector.

Comment

Frelimo has ruled Mozambique since independence from in 1975 and emerged victorious over Renamo after a 15-year civil war that ended in 1992, but the ill will between the former foes continues to colour Mozambican politics.

Simmering tensions between Dhlakama and former president led to Dhlakama and his inner circle reprising their civil war tactics in late-2012, with a retreat to an isolated bush camp from where they launched guerrilla attacks against government officials and civilians alike, as leverage in negotiations with the Guebuza Government over electoral reforms. Renamo revoked the 1992 peace agreement and boycotted the 2013 local government elections. Dhlakama agreed to a ceasefire on 5 September to allow the 15 October 2014 national and provincial elections to take place as planned.

President Guebuza stepped down after serving two constitutionally-mandated terms and securing the appointment of Nyusi as his successor for the election. In the poll, Frelimo again secured a resounding victory over both Renamo and centre-right newcomer, the Movimento Democrático de Moçambique (Mozambique Democratic Movement, or MDM), headed by Daviz Simango, a former Renamo member and successful high-profile mayor of the port city of Beira, the country’s second city. Both the opposition parties increased their number of parliamentary seats at the expense of Frelimo.

Page 7 of 11

Dhlakama disputed the election results, calling them flawed. He threatened to establish a breakaway region in the north of the country, headed by himself, and announced that Renamo MPs would not take their seats in the national and provincial assemblies or attend the swearing-in ceremony of President Nyusi.

Dhlakama’s call for a Republic of Central and Northern Mozambique is still to be retracted. The provinces in these areas are Renamo’s traditional areas of support and which have long felt themselves to be neglected by the Frelimo government as punishment for their support of Renamo and, since 2009, of the MDM.

Heavy wet season rainfall in those areas in January 2015 caused over 150 deaths and widespread damage to housing and infrastructure. International ratings agency Moody’s expects GDP to be reduced by between 0.2 and 0.5 per cent as a result. The United Nations has allocated US$3.2 million dollars to aid people in Zambézia province made homeless by the flooding.

In the case of Dhlakama, an interesting comparison can perhaps be drawn with the situation of the so-called “born free” generation in : young, first-time voters born after the end of apartheid in 1994. Despite the overall popularity of the Frelimo Government and Renamo’s actions during its recent decampment to the bush, Dhlakama reportedly gained a surprising level of support among younger voters with no direct experience of the long and bitter civil war. In a touch of irony, such voters were apparently attracted by the image of Dhlakama as an anti-establishment figure, but that ignores the fact that the “outlaw” very much wants to be at the head of the establishment and has been fighting to achieve just that since taking over the Renamo leadership in 1979.

It also highlights the fact that, given the nature of Mozambican politics, anything can happen. These latest developments are nonetheless positive and if the country is to maximise the potential of its resources industry, it needs to demonstrate unequivocally its commitment to good governance and the rule of law. The Nyusi-Dhlakama rapprochement is a necessary step in that direction.

Leighton G. Luke Manager Indian Ocean Research Programme

*****

Yemen: Higher Tensions but Lower Prospect of Sectarian Violence

While it is unlikely that the situation in Yemen will escalate to widespread sectarian violence, it will also be difficult for the Houthis to maintain power as they become increasingly isolated in the face of escalating economic pressures.

Page 8 of 11

Background

Since the latest FDI update on Yemen, Houthi rebels have taken control of the capital, Sana’a, forcing the dissolution of the government and announcing the formation of a replacement led by them. A few days after that announcement, United Nations officials convinced the Houthis to resume negotiations with other political parties. These talks, however, seem to have failed again with two parties withdrawing within hours of the talks and the Islah party stating that it would boycott the talks according to the New York Times.

Comment

With the Houthi takeover, some have expressed concern over an outbreak of sectarian violence in Yemen. That the 65 per cent Sunni majority is now effectively facing Shia minority rule may be a cause of concern for the Shia-aligned Houthi rebels. This, however, is a rudimentary outlook as party rivalry in Yemen is not centred on a Sunni-Shia divide.

The majority of Sunni Muslims in Yemen belong to the Shafi’i branch and the majority of Shia Muslims to the Zaidi branch. In his book Regionalism and Rebellion in Yemen, Stephen Day noted that both of these branches are defined as moderate within the larger Sunni and Shia tradition, and that the religious divide in Yemen was never as severe as that in other parts of the Middle East. The Shafi’i-Zaidi divide is unique to Yemen and its political implications, therefore, may be different to traditional understandings of the Sunni-Shia fault line.

According to Atiaf Alwazir, an independent writer based in Sana’a, the Houthi movement consists of both Zaidi and Shafi’i supporters, with many well-known Zaidi scholars and religious centres divided on their stance towards the Houthis. Support for the Houthi movement can be attributed to widespread discontent towards the previous government, along with the Houthis stance against fuel subsidies and government corruption. The nature of this support may thus reduce the likelihood of the Houthis implementing a sectarian Zaidi government.

On the other hand, continued conflicts between the Houthis and al-Qaeda in the Arabian Peninsula may be seen as rooted in sectarianism. As noted before, however, the majority of Yemenis are of the more moderate Shafi’i and Zaidi branches. It is unlikely, therefore, that the Houthi-AQAP rivalry will spill over into a broader, Yemen-wide, Sunni-Shia conflict.

In a televised statement, the Houthis announced that they will form a five-member presidential council to manage the country through a transitional period of up to two years. It will be difficult for the Houthis to maintain power for that length of time, given that Saudi Arabia has refused to continue its multibillion dollar aid if a Houthi regime is in charge. Any significant support from Iran is also unlikely, given the heavy sanctions and low oil prices that are greatly weakening that economy. The Gulf Co-operation Council has also publicly denounced the actions of the Houthi rebels, stating that ‘this Houthi coup is a dangerous escalation which we reject and is unacceptable. It totally contradicts the spirit of pluralism and co-existence which Yemen has known’. Houthi control is also concerning to the international community, given that the rebels are publicly opposed to US drone strikes. Drones strikes in Yemen are a central part to the US campaign against AQAP, and its success can be attributed to the support of the previous Yemeni Government.

Page 9 of 11

A Houthi-run Yemen, therefore, is likely to become increasingly isolated while facing an array of challenges. This could help AQAP to consolidate its power and fuel sectarian tensions, although widespread sectarian violence is unlikely to result. This is especially concerning, as AQAP is the strongest of the al-Qaeda branches. If Yemen becomes unstable, the strategic location of the country along the Bab-el-Mandeb strait and the Gulf of Aden could threaten oil and flows in the region and beyond, through the Suez Canal.

Jarryd de Haan Research Analyst Indian Ocean Research Programme

*****

What’s Next?

 Sri Lankan Foreign Minister Mangala Samaraweera will visit the United States on 11-12 February.

 The Institute of Defence Studies and Analyses will hold its 17th Asian Security Conference in New Delhi on 11-13 February. The theme for this year’s conference is “Asian Security: Comprehending the Indian Approach”.

 South African President Jacob Zuma will present his State of the Nation Address to a joint sitting of Parliament in Cape Town on 12 February.  Also in Cape Town, the annual “Investing in African Mining Indaba” continues until 12 February.

 Chinese Foreign Minister Wang Yi will visit Pakistan on 12 February.

 Iraqi Foreign Minister Dr Ibrahim al-Jaafari will make an official visit to New Zealand on 13 February. He will meet with Prime Minister John Key, Defence Minister Gerry Brownlee and Foreign Minister Murray McCully to discuss New Zealand military assistance to the Iraqi Government.  US Deputy Secretary of State Antony Blinken is visiting South Korea, China and Japan until 14 February.

 New Zealand Associate Trade Minister Todd McClay wraps up a week-long visit to the United Arab Emirates, Saudi Arabia and Qatar on 15 February.

 Sri Lankan President Maithripala Sirisena will visit India on 15 February.

 The First Renewable Energy Global Investors Meet and Expo will be held in New Delhi on 15-17 February.

Page 10 of 11

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

Published by Future Directions International Pty Ltd. 80 Birdwood Parade, Dalkeith, WA 6009 Tel: +61 8 9389 9831 Fax: +61 8 9389 8803 E-mail: [email protected] Web: www.futuredirections.org.au

Page 11 of 11