6 May 2015 | Vol. 6, № 16. From the Editor’s Desk
Dear FDI supporters,
Welcome to this week’s edition of the and former Prime Minister, Navin Strategic Weekly Analysis. Ramgoolam, continues.
We begin this week with a look at post- We conclude our coverage this week with earthquake Nepal, where the prognosis an analysis of the need for Indonesia to for disease outbreaks ahead of the reform its foreign investment laws so that monsoon season is not good. it can more fully utilise the skills, knowledge and capital of foreign We then turn to the Middle East, where companies to ensure that supply will be we examine the growing closeness in able to meet demand. Franco-Saudi relations, following the successful visit to the kingdom of I trust that you will enjoy this edition of President François Hollande. the Strategic Weekly Analysis.
Moving next to India, we analyse the Major General John Hartley AO (Retd) implications of the government’s land Institute Director and CEO acquisitions policy for both the country’s Future Directions International nuclear energy ambitions and its farmers.
Looking next at Mauritius, we consider the bid by former Foreign Minister Arvin Boolell for the leadership of the Labour Party, as the fallout from its record electoral defeat and the arrest of leader
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Water and Sanitation Prioritised in Nepal as Monsoon Season Looms
Addressing the limited availability of fresh water and poor sanitation have been prioritised in Nepal, as overcrowded camps and the imminent arrival of the monsoon season increase the risk of a disease outbreak following last month’s earthquake.
Background
On 25 April, Nepal was struck by a 7.8-magnitude earthquake that killed over 7,500 people and injured thousands more. More than eight million people are estimated to have been affected and communities at the epicentre of the earthquake remain cut off. Access to, and the supply of, safe water and sanitation has long been a challenge in Nepal, which is located in one of the world’s most earthquake-prone regions. The vulnerability of the population to disease outbreaks following the disaster will make this challenge all the more acute.
Comment
According to the UN Office for the Coordination of Humanitarian Affairs (OCHA), more than 130,000 houses were destroyed and over 24,000 people are now living in makeshift camps following last month’s earthquake. Relief workers are struggling to meet the needs of these camps as the number of people seeking shelter continues to rise. The slow disbursement of aid is hampering relief efforts. Nepal has only one international airport and authorities have advised that larger aircraft will not be able to land on the tarmac in an effort to avoid further damage to it. Customs clearance of supplies is also causing delays and frustrating aid workers, who are concerned that the delays are slowing down response times.
Within the camps, the limited availability of shelter, overcrowded conditions and poor sanitation are increasing the risk of disease. Aid agencies are providing clean drinking water and hygiene packs where available and the Nepalese Health Department, along with international agencies, is running awareness and education campaigns highlighting the importance of hygiene and sanitation and listing the “dos and don’ts” for maintaining health. Continuing to supply these resources over the long term as demand grows is, however, a significant challenge.
Open defecation is widespread and sanitation facilities are non-existent or severely limited. Chlorine tablets and purifiers have been distributed in an attempt to further secure safe water supplies. It is unlikely, however, that these efforts are enough to prevent the outbreak of disease. The spread of cholera and other water-borne diseases is a particular risk within Nepal and disease mitigation will be severely hampered by the coming monsoon season in June. Makeshift camps, heavy rains and open defecation create an environment where a health and sanitation crisis will be difficult to control.
Medical facilities will not have the capacity to respond to disease outbreak should it occur; hospitals are already overstretched and there is a shortage of supplies and facilities. While current conditions may limit the ability of the authorities to prevent a sanitation and health
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crisis, it is crucial that preparations are made now to contain and manage outbreaks when they occur.
Some camps are managing the risk by creating sites away from tents for sanitary needs. Waste management and controlled open defecation sites should be replicated across all camps. In a country where only 37 per cent of the population had access to improved sanitation facilities in 2012, however, this will not be an easy task.
Customs processes also require support and improvement. The traffic load of Nepal’s airport is unprecedented and clearing aid more quickly will assist with response times and clear the airport faster for more incoming aid. Long-term political ineffectiveness and a relatively informal local government system will create challenges in this process. Emergency response teams are already supporting the efforts of local authorities to manage aid flows and it is likely that a more efficient system will be put in place as initial relief efforts turn to more long-term rehabilitation.
Supplying medical facilities and ensuring that safe drinking water continues to reach communities are paramount in reducing the risk of disease. Infrastructure, including water, sewage and public works infrastructure, has been crippled. It will be months, if not years, before it is repaired; in the meantime, the government will need to ensure that a regular, reliable source of safe water is available. The Nepalese Government does not have the capacity to do this alone. As initial recovery efforts continue, preventing a second crisis in the form of a health and sanitation emergency will require innovative and responsive solutions and long-term international support.
Sinéad Lehane Research Manager Global Food and Water Crisis Research Programme
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Franco-Saudi Discussions May Boost Regional Co-operation
The Joint Statement by France and Saudi Arabia expressing their reservations about the Iranian nuclear deal and regional conflicts could be a precursor to closer co-operation in resolving future conflicts in the Middle East.
Background
French President François Hollande visited Saudi Arabian King Salman bin Abdulaziz al-Saud on 4 May to discuss Iranian influence in the Middle East region, specifically in Yemen and Syria. According to the Al Arabia News network, they released a joint statement after the meeting stating that both countries ‘confirmed the necessity to reach a robust, lasting, verifiable, undisputed and binding deal with Iran’. It added, however, that ‘This agreement must not destabilise the security and stability of the region nor threaten the security and
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stability of Iran's neighbours’. According to Reuters, while discussing the visit, a French diplomat noted that ‘[France and Saudi Arabia] have a real fear that when sanctions are lifted, Iran will be able to finance all its proxies across the region.’ The visit comes a day before a scheduled Gulf Co-operation Council (GCC) meeting in Riyadh where Hollande will be the second-ever guest of honour.
Comment
Saudi Arabia’s initial response to the nuclear deal was cautious, but its opposition to the deal is not surprising. According to a statement released by the Saudi Press Agency soon after the deal, ‘The council of ministers expressed hope for attaining a binding and definitive agreement that would lead to the strengthening of security and stability in the region and the world’. The statement also stressed the importance of non-interference in the affairs of Arab states, a likely reference to Iran’s role in several conflicts in the Middle East. From Saudi Arabia’s perspective, a nuclear deal could see sanctions lifted on Iran, reviving its economy and possibly enabling Tehran to increase its regional influence. This is problematic given Riyadh’s strong perception of Iranian influence in Yemen and Syria. Riyadh, however, is in no position to boycott the deal, although it seems likely that it, along with the GCC, will use its support for the deal as a bargaining chip for weapons systems and security guarantees from the United States. According to the Wall Street Journal, the GCC member states plan to use a meeting in Washington next week to request additional fighter jets, missile batteries, surveillance equipment and defence agreements as a counter-measure against Iran.
During the nuclear negotiations, France’s hardline stance came as a surprise. In speaking to the French Europe 1 radio network during the negotiations in March, Foreign Minister Laurent Fabius expressed dissatisfaction with the trajectory of the talks and highlighted the need for a ‘robust’ and ‘solid’ agreement that would guarantee that Tehran would be unable to build a nuclear weapon. President Hollande also cautioned that France ‘will be watchful’ to ensure that Iran cannot access nuclear arms under the agreement. Consequently, France has differentiated itself from other Western countries involved in the talks and aligned its views closer to those of Saudi Arabia.
President Hollande’s alignment with the Saudi position comes soon after Mr Fabius, expressing support for the Saudi coalition in Yemen, told reporters that, ‘we are here to demonstrate our support, especially political, to the Saudi authorities’. In the 2013 French White Paper on Defence and National Security, contributing to the stability of the Middle East and the Arab-Persian Gulf is listed as the fourth strategic priority of the Hollande Government. Under this heading, the paper notes, ‘The United States has dominant strategic influence in the region, but France is stepping up its presence and defence co-operation.’ That position was confirmed with the signing of a US$7 billion deal for the sale of 24 Dassault Rafale fighter jets to Qatar on 4 May. Meanwhile, discussions over the sale of some 60 jets to the United Arab Emirates have been reinvigorated at the ministerial level, with talks in Abu Dhabi on 2 May between French Defence Minister Jean-Yves Le Drian and his Emirati counterpart, Abu Dhabi Crown Prince Mohammed bin Zayed. Media reports indicate that Kuwait is also considering the Rafale and the sales to fellow GCC members Qatar and the UAE may work in France’s favour.
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Riyadh, which remains concerned over what it sees as the “weakening” stance of the US on Iran, will welcome further co-operation with Paris. France, like Saudi Arabia, also remains a strong opponent of Syrian President Bashar al-Assad. Common ground between France and Saudi Arabia on Syria, Yemen and Iran may present opportunities for regional co-operation, but any prospects for long-term French commitments in the Middle East remain tenuous. While the deepening ties between Paris and Riyadh may not have any major strategic ramifications for the region, they do underscore the role of France as an active player in the Middle East and, depending on the circumstances, may complicate US policy there.
Jarryd de Haan Research Analyst Indian Ocean Research Programme
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Land Acquisition: Another Hurdle for India’s Nuclear Dream
India’s dearth of effective policy is hampering its goal of increasing its nuclear-generated power.
Background
A major election plank of the Modi Government was the production of electricity to power India’s economy and renew its deteriorating infrastructure. The creation of nuclear reactors was a major part of this goal. The Modi Government, consequently, agreed to establish insurance cover for foreign firms that supplied the reactors in case of accidents and is working with the Japanese Government to overcome its reservations pertaining to India not being a signatory to the Nuclear Non-Proliferation Treaty. In the wake of Mr Modi’s recent visit to France, Germany and Canada, Areva of France has agreed to build nuclear reactors in India. It is likely that Siemens of Germany will provide Indian organisations, such as Larsen & Toubro, with technology relating to the construction of reactors and Canada has agreed to supply India with uranium, permitting New Delhi to further diversify its energy sources.
Comment
The Modi Government, keenly aware of the need to balance international environmental concerns with the power demands of its growing economy, has made the generation of nuclear power a major facet of its energy policy. The country, which is currently ranked thirteenth in terms of power generated from nuclear sources, has an installed capacity of 5,780 megawatts but wants to nearly double that figure to over 10,000MW by 2019 and then increase it to 63,000MW, a goal of the Department of Atomic Energy, by 2031-32. New Delhi has approved plans to build 16 reactors of indigenous design, jointly capable of generating over 11,000MW, and a further 28 reactors in conjunction with Russian, French and American organisations, with a combined output of over 28,000MW, bringing its total
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nuclear generating capacity to close to 40,000MW. This could have a far-reaching role in moving India along its grand strategy towards becoming a major power.
The Modi Government, like its predecessors, faces several internationally-created hurdles, including the ones alluded to earlier, in developing its nuclear power plans, but these are not the only ones that it must negotiate. A major internal hurdle is a lack of sophisticated land acquisition policies that acts as a setback to providing nuclear power organisations with clear ownership of the land on which to build their power plants. Land is required in the southern states of Tamil Nadu, Karnataka and Andhra Pradesh, in the western states of Maharashtra, Gujarat and Rajasthan, in Haryana in the north, in Madhya Pradesh in central India and in West Bengal in the east. The high incidence of so-called “farmer suicides” – an estimated 300,000 since 1995, however, makes New Delhi pause to evaluate the impact that this phenomenon could have upon its goals.
In December 2014, the BJP Government recommended legislation that made significant changes to the way that land was acquired for the creation of such infrastructure as industrial corridors, defence, housing and “smart cities”. Faced with the loss of their property, reduced rainfall and mounting debt, many farmers have committed suicide, a point made most dramatically by a farmer from Rajasthan who climbed a tree in New Delhi at a political rally and hanged himself. It is telling that, despite this act, the politicians speaking at the rally continued to do so regardless. The incident soon acquired political overtones with the opposition Congress Party accusing the BJP’s land acquisition policy of having caused the farmer’s death. The BJP, unsurprisingly, denied any link between land acquisition and the death of farmers. The Congress Party likely did not think its argument through, however, given that the son-in-law of the party President, Robert Vadra, was embroiled in a land acquisition scandal in the state of Haryana. Between making allegations against each other and trying to fend off counter-allegations, the political parties appear to have lost sight of the fact that strong, efficient and sustainable policies are required to prevent farmers from dying.
The BJP Government must develop policies that will see land acquired fairly and in accordance with the terms set out in the 2013 Land Act, that ensure that farmers have recourse to fair and equitable sources of credit and, arguably most importantly, ensuring that these policies are adhered to in a manner that is fully transparent and open at all times. This will enable it to acquire land for the nuclear plants to be built and to achieve its fundamental goals.
Lindsay Hughes Research Analyst Indian Ocean Research Programme
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Mauritius: Former Foreign Minister Wants to Take Reins of Opposition
If his bid to become leader of the Labour Party is successful, Arvin Boolell may find that rebuilding public confidence in the party after its record electoral defeat and the arrest of former Prime Minister Navin Ramgoolam may prove to be his greatest challenge.
Background
Former Foreign Minister Arvin Boolell has called on the leader of the Mauritian Labour Party (French: Parti Travailliste) to step down, speaking of his wish to revive the party’s fortunes and rebuild public trust in it. Former Prime Minister Navin Ramgoolam still technically heads the party after its unceremonious drubbing at the December 2014 snap election. Mr Boolell was appointed as the Official Spokesperson for the Labour Party – ostensibly an interim position – after Mr Ramgoolam was arrested on 6 February on suspicion of conspiracy, making false statements to the police and money laundering. The continuing uncertainty surrounding the leadership after Mr Ramgoolam’s arrest has led Mr Boolell increasingly to speak openly about assuming the leadership of a party that, for all intents and purposes, no longer has an official leader.
Comment
Speaking at a Labour Party meeting in the town of Nouvelle-France on 1 May, Mr Boolell was clear in what he wanted the disgraced former PM to do: ‘Step down, laisse-nous travailler’ [‘Step down, let us work’]. Speaking to leading Mauritian daily, L’Express, Mr Boolell noted that the investigation into Mr Ramgoolam’s alleged actions could be lengthy and that the party ‘cannot wait for years for a leader’.1 As he put it, ‘A spokesman has neither [long-term] moral authority nor political legitimacy.’2
Although the Labour Party was led by Mr Ramgoolam for more than two decades, Mr Boolell would appear to have sound credentials for the leadership role. He is the son of former Labour Party leader and Deputy Prime Minister Sir Satcam Boolell and was Minister of Agriculture from 1995 to 2000 and again from 2005 to 2008. He served as Foreign Minister from that year
1 ‘Arvin Boolell: “On ne peut attendre un leader des années”’ [‘Arvin Boolell: “We cannot wait years for a leader “], L’Express, 3 May 2015.
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until the surprise landslide loss of the Labour Party-led coalition at the 2014 election. Unlike former PM Ramgoolam, Mr Boolell is one of only four Labour MPs in the new Parliament.
Mr Boolell has signalled his intention to call for a party congress to put the matter to a vote. His confidence will no doubt be helped by the fact that he would appear to be the only obvious contender. If – or when – he is installed as Labour Party leader, Mr Boolell will have plenty of time to develop policies and make any changes within the party structure, as the next election is now not due until 2019 (although municipal elections are due to be held shortly).
At this stage, it is hard to know what his policies as party leader or even future Prime Minister might be, but if his term as Foreign Minister is any guide, it would presumably offer a continuation of Mauritius’s successful macroeconomic policies – subject, of course, to any headwinds from the global economy – and an outward-looking approach to the region that have helped to transform the country into an important financial, manufacturing and tourism centre. Although considerably predating Mr Boolell’s tenure as Foreign Minister, the presence in Port Louis of the secretariats of both the Indian Ocean Rim Association (IORA) and the francophone Commission de l’Océan Indien confirms the importance placed by Mauritius on playing a leading role in the multilateral organisations of the Indian Ocean Region.
Leighton G. Luke Research Manager Indian Ocean Research Programme
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Oil and Gas Contractors Expected to Cut Investment in Indonesia
Indonesia will need to make its foreign investment laws more attractive if it is to benefit from the technical knowledge and experience of international operators.
Background
The Indonesian Petroleum Association has estimated that oil and gas contractors will cut their planned capital expenditures by an average of about 20 per cent due to the decline in the oil price. According to the Upstream Oil and Gas Regulatory Special Task Force (SKKMigas), the Indonesian oil and gas regulator responsible for overseeing the activities of foreign oil and gas firms, such a reduction in expenditure would result in a five per cent decline in production in 2015 and 2016.
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Comment
Indonesia set an oil production target of 825,000 barrels of oil per day (bpd) and gas production of 1.221 million barrels of oil equivalent per day (boepd) for 2015. The country failed to meet its 2014 target, with near-depleted oil and gas fields and a low rate of new hydrocarbon findings. In fact, oil output for the year represented a 40 year low. While output is expected to rise, thanks to increased production at the Banyu Urip field, the country will remain a net importer of oil.
Total E&P Indonésie, the Indonesian arm of French oil and gas company Total, which currently operates the Mahakam gas field in conjunction with Japan’s Inpex, plans to cut its budgeted investment in the country by ten to 15 per cent in 2015. The Mahakam block accounts for one-fifth of the country’s gas production and Pertamina, the state-owned oil and gas corporation, is scheduled to take over its running from 2018. Pertamina is a profitable company but it carries large amounts of debt. Running Mahakam requires more than 20,000 employees and will need large investments in the near future, financial commitments that the company might not be in a position to make.
Total and Inpex, on the other hand, have invested close to $US30 billion ($38 billion) over the 50 years that they have run the field. The manner in which the contract negotiations were handled is likely to have a negative impact upon other foreign investors who are considering entering the Indonesian oil and gas sector. In a separate development, Chevron delayed construction of a new deep-water gas project, the first of its kind in Indonesia, in September 2014, citing difficulties in obtaining government permits and licences. Indonesia will need to do more to attract and maintain investment in its oil and gas fields.
Over the next five years, 23 contracts that make up more than 30 per cent of national oil production are set to expire. Uncertainty stemming from the way in which the government handled the Mahakam contract might not bode well for the remaining contracts coming up for renewal. As hydrocarbons are the country’s largest export commodity, accounting for close to 20 per cent of total exports, Indonesia’s balance of trade is also likely to be affected by the availability of these commodities. If Indonesia is to ensure that it can continue to balance its domestic energy demands with exports, it will need to maintain foreign investment in its hydrocarbon fields.
As FDI Associate Stewart Patterson has indicated, there are opportunities for foreign investors in the Indonesian oil and gas industry, particularly as the domestic industry lacks expertise and experience in some of the more technically-challenging fields. Foreign direct investment in the oil and gas sector is curtailed, however, by investment laws that limit the extent of foreign ownership and involvement in the industry. For example, according to the Indonesian negative investment list for new foreign direct investment, new onshore oil and gas drilling is closed to foreign investment and foreign ownership of new offshore oil and gas drilling ventures is limited to 75 per cent. Such policies make foreign firms less willing to become involved in the country.
If Indonesia is to ensure that it has the capability to fully exploit its oil and gas resources and secure the ability to respond to future increases in demand, it will need to allow foreign
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involvement. Foreign firms have the knowledge and experience required to extract the resources that remain in depleted fields but current regulations are likely to make overseas investors reconsider the country. This will only harm Indonesia’s future energy security while limiting its export earnings.
Mervyn Piesse Research Analyst Indian Ocean Research Programme
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What’s Next?
Julius Malema, the leader of South Africa’s Economic Freedom Fighters party, will visit Zimbabwe on 6 May. The Clinton Global Initiative (CGI) is holding the three-day CGI Middle East & Africa Meeting in the Moroccan city of Marrakech until 7 May.
The United Kingdom general election will take place on 7 May.
The South Asia Economic Conclave, co-sponsored by the World Bank, will be held in New Delhi on 7-9 May.
The four-day, high-level Australian business delegations to Singapore and China,
headed by Parliamentary Secretary to the Minister for Foreign Affairs and the
Minister for Trade and Investment, Steven Ciobo, continue until 8 May.
The budget session of India’s lower house of Parliament, the Lok Sabha, will conclude on 8 May. An informal Commonwealth of Independent States summit will be held in Moscow on 8-9 May.
US President Barack Obama will host leaders from the Gulf Co-operation Council at the White House and Camp David from 13-14 May. Representatives from Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates are expected to attend.
The New Zealand Government has begun the public consultation process for its 2015 Defence White Paper. The consultations will run until 22 June.
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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
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