Biden would likely apply the heat on Canberra


Author: James Curran, Sydney University

Occasionally the mask of American officialdom drops to reveal what it really thinks of Australia.

During a discussion in Washington some years ago with Zbigniew Brzezinski, the national security adviser to the former president Jimmy Carter, Brzezinski said the Australians and British were the kinds of alliance partners who, like his native Poland, thrived on the very status of being a US ally: chests puffed out for ceremonies on the White House South Lawn, glorying in ‘access’.

US Vice President Joe Biden reacts during a ceremony in Melbourne, Australia, 17 July 2016 (Photo: Reuters/Tracey Nearmy/Pool).

Brzezinski was talking in the aftermath of the US-led invasion of Iraq in 2003, a war he opposed. He was in no mood for honeyed rhetoric about allies that had encouraged Washington to compound its Middle East folly.

Yet only two years ago a senior staffer to vice president Joe Biden made the pointed remark that Australia was a ‘great ally of the US everywhere in the world, except Asia’.

That reflected growing frustration among some in the Obama administration that Australia was not muscling up to a rising China in the way Washington believed it should. Around the same time, a former senior official in Australia’s Howard government of 1996–2007 lamented that ‘no one in Washington says Australia punches above its weight anymore’.

How times change. In a recent analysis of likely American foreign policy trends after the coming election, the Brookings Institution’s Tom Wright suggests a Biden administration would feel there is much to learn from Canberra when it comes to tackling political interference. Australia’s alliance credibility is likely to become increasingly measured through the prism of its stance on China.

As a Biden presidency becomes more likely, it is worth asking what those around him might expect of Australia and whether the alliance is heading into a new phase in its history.

The common assumption is that a Biden win will represent an American course-correction. Such a view sees Trump as an aberration, a chaotic flirtation with populist demagoguery. This abstract view of how the American people ought to have voted in 2016 holds that the true custodians of America are about to parade in triumph down Pennsylvania Avenue, the banner of Wilsonian liberal internationalism fluttering above the ticker tape.

Biden would restore, in an instant, the dignity of the American presidency.

If he recommits Washington to the Trans-Pacific Partnership and the Paris climate accords, much of the catastrophising over the fate of the rules-based order would quickly fade. Biden’s first task, to convince allies that the US is committed to this order, will have been achieved.

It will be another matter entirely, however, for Biden to sell a global foreign policy to the average American voter. COVID-19 has sapped an American morale already drained after long wars in Iraq and Afghanistan, the global financial crisis and belated recognition in Washington that it has a rival in China unlike any other it has faced before.

Still, American society has, when looking across the broad sweep of the country, kept its balance amid the turmoil unleashed by the forces which brought Trump to power.

Some will point to polls showing a majority of Americans favour continued global engagement. But this ignores the socio-cultural dimension of US foreign policy. Nearly one-third of Americans live in lower-class households. That poses a challenge to the kind of active international posture that a Biden administration will want to reinvigorate.

And this administration, more than most, will hurry to restore American global prestige. Because what allies have taken from Trump is the message of their disposability, a legacy that will complicate the work of American diplomats for some time.

Biden will rush to coordinate allies, whether that be in a mooted ‘summit of democracies’ or on climate change. Some who worked for Biden have in the past talked about his White House firing on all cylinders in Asia. That won’t mean an ideological crusade aimed at containing China. But it may well mean the application of a coherent China policy from the president down — a stark difference to the current administration.

Australia has felt heavy alliance pressure before. But it might be in for a new kind of pressure — dealing with an America on the backfoot but one pulling Canberra in directions that might not always be commensurate with distinctively Australian national interests.

Kurt Campbell, an architect of Obama’s pivot to Asia and likely key player again, once said that Democrats always needed to wear Cold War warriors Harry Truman and John F Kennedy on their ties and not the humility or modesty of theologian Reinhold Niebuhr. He was reflecting the desire of every Democratic administration to prove their toughness on national security.

In this case it is likely to mean any appetite in Washington to reach some kind of geopolitical modus vivendi in the Pacific with China will be distinctly limited. A Biden administration is unlikely to countenance such a process. It rubs against the very grain of American exceptionalism.

The US retains advantages in its strategic competition with China, among them a younger population and access to low-cost energy. Even so, it will continue to be primarily turned inwards, for if the American dream is to be revived the country’s heartland needs to be rebuilt.

Australian governments over the next administration would be wise to grapple more with what a changing America means, especially for this region. The alternative is the hallucinatory delirium that comes from repeated injections of ‘mateship’ into Australia’s strategic bloodstream.

James Curran is Professor of Modern History and non-resident senior fellow of the US Studies Centre at the University of Sydney.

This article originally appeared here on the Australian Financial Review.

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Jokowi joins Indonesia’s dynastic trend


Author: Noory Okthariza, CSIS Indonesia

Indonesia is set to hold its concurrent regional elections on 9 December 2020 amid the country’s battle with COVID-19. These elections will take place in 270 regions, aiming to directly elect 9 governors and 261 district heads and mayors.

Indonesia's President Joko Widodo (2nd L), accompanied by first lady Iriana Widodo (L) and daughter-in-law Selvi Ananda (3rd L), looks at his daughter Kahiyang Ayu's (2nd R) wedding ring as his new son-in-law Bobby Nasution (3rd R) is seen during their wedding ceremony in Solo, Central Java, Indonesia, 8 November, 2017 (Antara Foto/Maulana Surya/ via Reuters).

Two elections are drawing special attention from the public. The first is the mayoral election in Solo, a medium-sized city in Central Java, where Gibran Rakabuming Raka — the eldest son of President Joko ‘Jokowi’ Widodo — will vie against an independent candidate. The second is in Medan in North Sumatra, where Jokowi’s son-in-law Bobby Nasution will compete against the incumbent mayor. Despite having no prior experience in politics or genuine interest in taking a role in public office, both Gibran and Bobby easily won nomination from the ruling PDI-P party.

The nomination of Gibran has received particularly critical scrutiny. Throughout his father’s presidency, Gibran insisted that he had no interest in getting into politics and opted to concentrate on his culinary business instead. But in September 2019 — in an event intensely covered by the press — Gibran showed up at PDI-P’s Central Java provincial office to register himself as a party cadre and declare his interest in running in the mayoral election in Solo.

Initially, neither Gibran nor Bobby got support from local PDI-P leaders in the two cities whose mayoralties they are contesting, with local branches initially supporting incumbents with backgrounds in the party. Yet these decisions were unilaterally annulled by the PDI-P chairwoman, former president Megawati Sukarnoputri.

In addition to Gibran and Bobby, a number of other family members of national political elites are running in December’s elections. The daughter of Vice President Ma’ruf Amin, Siti Nur Azizah, is running as vice mayor of South Tangerang, Banten. She will compete against Rahayu Saraswati Djojohadikusumo, who is running for the same position with the support of her uncle, Defence Minister Prabowo Subianto. In Karawang, West Java, Vice President Ma’ruf’s grandson, Adly Fairuz, is competing to become the deputy district head, and Hanindhito Pramono, the son of Cabinet Secretary Pramono Anung, is running unopposed to become the district head in Kediri, Central Java.

These developments on their own would be indicative of a growing political dynasticism in Indonesia. Yet the data show that those names are just a small part of a bigger story. the political scientist Yoes Kenawas counts 202 dynastic candidates who ran in elections from 2015 to 2018 — 117 of whom were elected. In the 2020 elections, there are at least 146 members of dynasties who have shown their intent to run for regional office, a sharp surge from the 52 who competed in the same jurisdictions when they last went to the polls in 2015.

Many Indonesians outside Jakarta understand how widespread the practice of relegating or expanding power from officeholders to their families is. Indonesians also know that regional head elections are not the sole channels for the dynastic members to maintain power — they can run in parliamentary elections at both national and local levels.

But what struck people most this time was perhaps Jokowi’s direct interference in the democratic system. By allowing inexperienced family members to run for office, Jokowi scrambled the bottom-up nomination processes run by his party, PDI-P. He has not made any public comment on this matter. (Jokowi’s brother-in-law, Wahyu Purwanto, almost ran for the district head in Gunungkidul, Yogyakarta, though pulled out at the president’s request).

This phenomenon is in stark contrast to Jokowi’s early image. He came to prominence as a figure who emerged from outside any old established dynasty. Jokowi’s behaviour suggests he is currently organising the ‘post-Jokowi’ era — given that according to electoral law the next round of concurrent elections will happen nationally in 2024, when he reaches the end of his second term.

The instances of dynasty-building in the 2020 concurrent regional elections might just be a symptom of an institutional problem which the current electoral rules are inadequate. But another possible factor is the need on the part of political families to maintain existing networks formed from formal and informal relationships between financiers, enforcers, activists and individual political leaders — as the patterns of dynasty formation in other countries such as Bangladesh have shown.

This might be applicable to Indonesia, particularly in many regions outside Java where kinship networks are more prevalent in politics. The election, apart from ensuring elite turnover at the local level, could also be used to reinforce these networks.

Noory Okthariza is a researcher at the Centre for Strategic and International Studies Indonesia.

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Political sclerosis? Suga’s stability backed by LDP gerontocracy


Authors: Yuma Osaki and Ben Ascione, ANU

After seven years and eight months in power, the abrupt resignation of Shinzo Abe due to health issues saw Yoshihide Suga installed as Japan’s prime minister on 16 September. After serving as chief cabinet secretary and Abe’s right-hand man throughout the previous government, Suga won the race to be the president of the ruling Liberal Democratic Party (LDP) and prime minister by positioning himself as a self-made man and the ‘continuity’ candidate.

Japan's Prime Minister Yoshihide Suga (C) leads his cabinet ministers as they prepare for a photo session at Suga's official residence in Tokyo, Japan, 16 September 2020. (Photo: Reuters/Issei Kato).

This theme of continuity resonated with the LDP’s key powerbrokers. As they looked ahead to the next general election, which must be held by October 2021, they sought to ward off party infighting and avoid a return to the pre-Abe merry-go-round prime ministership. Suga was seen as the person who could most credibly claim to represent stability amid the COVID-19 crisis. He was also seen as the best man to carry the torch on Abe’s economics policy package, Abenomics, which was a key factor in the LDP’s six national election victories in a row since 2012.

Yet Suga’s victory might never have been without the support of Toshihiro Nikai. An octogenarian LDP stalwart from Wakayama and a former minister of economy, trade and industry in the Koizumi and Fukuda governments, Nikai recently became the LDP’s longest serving secretary general (kanjicho).

Nikai has long played the role of kingmaker. Nikai ensured the longevity of the Abe government by changing LDP party rules in 2017, which allowed Abe to become Japan’s longest serving prime minister. After Abe decided to resign, Nikai moved quickly — with the help of the 75-year old Hiroshi Moriyama, the longest serving chairperson of the Diet Affairs Committee — to guarantee Suga’s victory. Nikai first persuaded the leaders of the LDP’s three biggest factions (the Hosoda, Aso and Takeshita factions) that Suga was the right man for the job.

Nikai then used his powers as LDP kanjicho to limit the vote for the new LDP president to sitting LDP MPs plus three party representatives from each of the 47 prefectures. This cut the LDP’s one million rank-and-file members out of the process and snuffed out the chances of Fumio Kishida and trenchant Abe critic Shigeru Ishiba.

It is unusual that Nikai has such political clout in the LDP given he left the party between 1993–2003. Nikai even survived a behind-the-scenes challenge from Kishida for LDP kanjicho during the 2019 cabinet reshuffle.

The continued influence of Nikai as a key party backroom fixer has three key implications.

First, the LDP continues to be controlled by familiar old-guard figures. Suga became the first non-faction and non-dynasty LDP leader. But given his own lack of a factional base, Suga has prioritised the factional balance of power in his cabinet and risks undercutting transformative policymaking. The Suga cabinet (including only two female ministers) has failed to incorporate fresh faces that look capable of respond to contemporary policy challenges. The key quartet now in control of the LDP have an average age of 71.5 years. The LDP’s retirement age of 73 for MPs only applies to politicians winning their seat through proportional list votes — not those elected from single-member districts.

Assuming Suga intends to stay in power beyond September 2021 when LDP rules require a regular full-scale leadership election, he is likely to look for a victory to extoll on his declared agenda, such as digitalisation and mobile phone price-cuts. Suga would then rely on Nikai and Moriyama to help smooth over internal LDP opposition before calling a snap election to position himself ahead of other challengers.

Second, as the Suga government determines how it will balance COVID-19 infection prevention measures and economic revitalisation, including the controversial ‘Go To’ travel campaign to promote domestic tourism, Nikai might be tapped to play a bridging role between Suga and Tokyo Governor Yuriko Koike.

Frosty relations between Suga and Koike worsened after Suga criticised Tokyo’s mismanagement of COVID-19 for jeopardising the ‘Go To’ campaign, and Koike responded by raising Tokyo’s COVID-19 alert to the highest level, leading to the temporary exclusion of Tokyo from the program. Despite Nikai’s support for the ‘Go To’ campaign due to his role as the chair of the All Nippon Travel Agents Association, he is thought to maintain goodwill with Koike thanks to his role in moving the LDP’s Tokyo chapter to support Koike’s gubernatorial re-election campaign in July.

What sort of balance Nikai might seek to strike remains uncertain. He seems to place priority on national resilience and preventing and mitigating national disasters, a line of thought which stems from his late political mentor Kakuei Tanaka. With a continuing pandemic and Japan’s exposure to natural disasters, political stability between central and local governments matters, especially in preparation for the postponed Tokyo Olympic Games.

Third, with Nikai a well-known proponent of Sino-Japanese engagement, the Suga administration may continue Abe’s path of steadily and cautiously repairing relations with China. Nikai has continued to show a pro-engagement posture despite the passage of the Hong Kong national security law by China’s National People’s Congress. While the LDP’s foreign policy committees sought to use the new law to cancel Chinese President Xi Jinping’s state visit to Japan, which was scheduled for April 2020 but postponed due to COVID-19, Nikai intervened and instructed LDP lawmakers to soften their objections. Nikai also recently revealed that a fifth political document that defines the current relationship between China and Japan could be signed if the state visit is realised.

As long as Nikai exercises influence as a critical fulcrum in managing internal LDP disputes, Japan looks likely to witness a high degree of continuity in party control and policymaking in the post-Abe era. The prospect of injecting fresh thinking into Japanese politics seems a way off yet.

Yuma Osaki is a doctoral candidate at the Crawford School of Public Policy, The Australian National University.

Ben Ascione is a research associate at the Crawford School of Public Policy, The Australian National University.

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Making supply chains great again


Author: Editorial Board, ANU

When the ‘factory of the world’ shut down in February as Wuhan and then soon after much of China went into lockdown from COVID-19, manufacturing supply chains were affected globally. For many, this demonstrated the vulnerabilities in supply chains and the danger of so many of them going through one country. It was a reminder of how interconnected economies are and how disruptions can spread rapidly to other countries through complex production systems.

A worker inspects and arranges production for elevator signal system at a factory of Jiangsu WELM Technology Co., Ltd. in Hai'an city, east China's Jiangsu province, 24 August 2020 (Photo: Reuters).

China’s manufacturing purchasing managers index (PMI) fell from 50 in January to 35.7 in February. A number below 50 signals a contraction and it had never fallen so low since the index was inaugurated in 2004.

The inability to secure imports of personal protective equipment and medical supplies from China in those early months of the pandemic exacerbated the health panic many countries faced. Governments raced to find solutions and many are now deploying policies to ensure those sorts of disruptions don’t occur again, both in essential healthcare and in manufacturing more broadly.

Japan, and later South Korea, introduced subsidies to onshore manufacturing and to expand supply chains in Southeast Asia. Those subsidies have become known as China-exit subsidies although Japan has been careful not to officially name China as their target. Japan’s subsidies of US$2 billion to onshore manufacturing and $US200 million to expand supply chains to Southeast Asia (and now South Asia) are over-subscribed.

Other countries are contemplating various measures to achieve supply chain diversification (away from China).

But just how vulnerable are supply chains and what should governments be doing to reduce supply chain risk? Were the many companies that relied on complex supply chains that cross numerous borders and jurisdictions ignorant of the risks? Did they collectively put all their eggs in the one China basket, thereby creating systemic risk?

Governments need to be clear on what the problems that they are trying to fix before they start intervening with subsidies and other regulations.

It’s important to recognise what businesses want and how resilient the supply chains have been.

In this week’s lead essay John Denton and Damien Bruckard from the International Chamber of Commerce argue that ‘“supply chain fragility” has been disingenuously invoked or hyped-up to cover for governmental failures. Inadequate stockpiles of masks, medicines and ventilators cannot reasonably be described as failures of corporate supply chains — they were failures of government planning’.

It’s not clear that supply chains were vulnerable nor that they now need reinvention. Resilience is the ability to bounce back and the evidence points to remarkable supply chain resilience in the face of a once-in-a-lifetime crisis.

The market worked and businesses responded to supply shortages. ‘Alcohol companies produced hand sanitiser, textiles manufacturers made masks and hotels become quarantine centres’, Denton and Bruckard explain. ‘Delivery services ensured door-to-door supply of essential goods such as medical equipment, medicine and food at the height of the crisis’. That this was achieved ‘during the greatest economic shock in a century suggests more robustness than fragility’, they argue.

China’s PMI rebounded to 52.0 by March from its low of 35.7 in February as much of the rest of the world went into lockdown to fight the spread of the pandemic. It is now at a decade high of 53.1.

Supply chains have contributed to the rapid expansion of production at lower cost, with companies able to achieve fragmented, task-based specialisation in the name of just-in-time production. That has enabled more small and medium-sized companies and their workers to join international production networks. Requiring companies to hold reserves of inventory for just-in-case delivery is throwing sand in the gears of efficient global manufacturing.

Forces of comparative advantage and specialisation that fragment production across different locations and forces of agglomeration and economies of scale that concentrate them help to shape supply chains. Businesses diversify as a form of insurance and there’s a cost to that. They weigh and manage risk and their viability and profitability depend on making the right decisions.

Poor policy prescriptions threaten business dynamism and investment and the world is going to need both to recover from the COVID-19 crisis and reduce unemployment.

Denton and Bruckard warn that ‘nativist policies aimed at concentrating industries in one place — “reshoring” or “regionalising” supply chains — will likely undercut competitiveness, raise consumer prices and render entire industries more vulnerable to smaller, localised and more frequent shocks like floods, blackouts or social upheaval’. Many companies may choose to shorten supply chains but governments should be careful about implementing policies that encourage that as it concentrates risk.

Many Japanese multinationals have been reorganising their supply chains in Asia regardless of the ‘China-exit’ subsidy. Japanese companies have been restructuring their supply chains in Asia and investments over time due to rising labour costs in China. The ‘China plus one’ strategy of diversifying investment has been common practice for years. The subsidies may distort decisions and concentrate risk, or simply be a form of corporate welfare or privileging.

Comprehensive supply chain resilience requires a multilayered approach. To reduce supply chain vulnerability governments must commit to avoiding tariffs and export controls — ensuring free trade in goods and services — and facilitate the digital infrastructure that helps manage supply chain risk. Openness to foreign direct investment will help businesses diversify risk. Developing digital infrastructure and creating international regulatory coherence in digital trade protocols will enhance visibility across supply chains beyond immediate tier-one suppliers and help identify vulnerabilities. Regional data privacy standards, tax and other incentives to share data will encourage the use of digital supply networks.

That’s a much bigger and more complex policy agenda than subsidies or inventory requirements that requires cooperation between countries. The reality is supply chains will continue to go through China and cross multiple borders — the job of government policy is to help improve the infrastructure for those operations between countries and to improve the broader business environment.

The EAF Editorial Board is located in the Crawford School of Public Policy, College of Asia and the Pacific, The Australian National University.

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Resilient supply chains can inoculate against vaccine nationalism


Authors: John WH Denton and Damien Bruckard, International Chamber of Commerce

COVID-19 has disrupted supply chains around the world. But despite the unprecedented economic shock, supply chains have proved remarkably robust, providing a vital lifeline of medical supplies, food and other essentials. As governments focus on making supply chains more resilient, they would be wise to neither overstate the problem nor understate the private sector’s response. Critically, they must ensure a global, fair and functional vaccine supply chain.

Swissport staff members take care of cargo of masks imported by the Chinese-Swiss Chamber of Congress and the Geneva Chamber of Commerce at Cointrin airport in Geneva, 6 April 2020 (Photo: Reuters/Denis Balibouse).

The pandemic has had devastating effects on the health, well-being and livelihoods of millions of people. Over 36 million cases have been recorded, over one million people have died and 90 per cent of healthcare systems have been disrupted. The global economy could contract by US$7 trillion in 2020, with the equivalent of around 480 million jobs lost and millions of businesses threatened with insolvency. Creating greater resilience to pandemics and other systemic risks should be a first-order priority.

The call for greater resilience has focused on global supply chains. In the early days of the pandemic, shortages were real and painful. Supply chains depending on single sources or locations for medical equipment, parts and raw materials suddenly appeared more fragile than efficient. Many companies faced fluctuating supply and demand dynamics, rapidly changing purchasing patterns and a flurry of uncoordinated government measures.

But public debate on supply chain resilience has largely focused on one side of the ledger. COVID-19 indeed exposed serious vulnerabilities, but that should not automatically lead to the conclusion that global supply chains are systemically fragile or that vulnerabilities require correction by governments.

Policymakers should recognise that many companies quickly pivoted to provide essential goods and services in support of public health efforts. Most notably, alcohol companies produced hand sanitiser, textiles manufacturers made masks and hotels become quarantine centres. Express delivery services ensured door-to-door supply of essential goods such as medical equipment, medicine and food at the height of the crisis. That they did this while working from home during the greatest economic shock in a century suggests more robustness than fragility.

Largely acting in their own self-interest, companies all over the world have also created greater resilience by seeking greater visibility of the whole supply chain, diversifying sources of supply, rebalancing stock levels and adopting strategies that respond to shifting consumer demand. Achieving systemic resilience can only occur if businesses are given the freedom to respond to the new situation and thoughtfully manage their own risks.

‘Supply chain fragility’ has been occasionally disingenuously invoked or hyped-up to cover for governmental failures. Inadequate stockpiles of masks, medicines and ventilators cannot reasonably be described as failures of corporate supply chains — they were failures of government planning. Similarly, citizens being unable to buy medicines or food from abroad because of export restrictions can only plausibly be attributed to government policymaking. Such misdiagnoses will only lead to poor policy prescriptions.

Policymakers must consider the potential negative side effects of any interventions. This is no easy task. For instance, the average automobile contains around 30,000 parts, with some parts crossing multiple borders and continents before assembly. The complexity of global supply chains makes it difficult to determine how government interventions would affect businesses, workers and consumers.

Far from creating resilience, nativist policies aimed at concentrating industries in one place — ‘reshoring’ or ‘regionalising’ supply chains — would likely undercut competitiveness, raise consumer prices and render entire industries more vulnerable to smaller, localised and more frequent shocks like floods, blackouts or social upheaval. For many companies, the greatest threat to their supply chains now comes not from COVID-19 but from traditional protectionism.

Looking ahead, governments must work hand-in-hand with the private sector to pre-emptively deal with the challenges for vaccine supply chains in what will be an immensely complex logistical operation. Ensuring access worldwide will be complicated owing to shrinking capacity on container ships and cargo aircraft, potentially insufficient amounts of equipment like vials and syringes, and the need to continually refrigerate vaccines throughout the entire cold chain. The logistical challenges increase when delivering to remote communities and countries with poor infrastructure.

Governments must not exacerbate the challenges by interfering with supply chains or adopting nation-first approaches. Imposing export restrictions on vaccines, their chemical components and medical devices, or buying up stocks to inoculate domestic populations would only prolong the pandemic and amplify the economic shock.

While many governments are entering into advance purchase agreements with vaccine producers, they must ensure that such bilateral deals do not skew distribution or undermine critical multilateral efforts to vaccinate the broader global population. Prioritising quickly and exclusively vaccinating one’s own population misses the point that no country will be safe and prosperous until the pandemic is under control everywhere, and would prompt hostility, resentment and possibly retaliation.

Governments should adopt a broader view of their national interests and give their full political and financial commitment to the COVAX Facility. This vaccine pooling mechanism, if fully funded, would ensure vaccines are distributed to healthcare workers and the most vulnerable populations by the end of 2021. Only such international cooperation can ensure the global, rational and fair distribution of vaccines required to take the sting out of the pandemic and drive an economic recovery.

John WH Denton AO is Secretary General of the International Chamber of Commerce (ICC), Paris.

Damien Bruckard is Deputy Director (Trade and Investment) at the ICC.

This article is part of an EAF special feature series on the novel coronavirus crisis and its impact.

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Can ASEAN centrality weather the US–China storm?


Author: Mark J Valencia, National Institute for South China Sea Studies

The US–China contest for regional domination was front and centre at the September round of ASEAN-hosted talks. In the run up to and at the meetings, China and the United States sharply criticised each other and appealed to Southeast Asian countries for support. In response, the ASEAN Regional Forum Chair bravely reaffirmed ASEAN’s centrality in regional security affairs.

Lightning flashes over the aircraft carrier USS Nimitz (CVN 68) as it transits the South China Sea, 4 July, 2020. (Reuters/John Philip Wagner, Jr.).

But to some, this was whistling by the graveyard of high aspirations. Without unity, ASEAN is unlikely to achieve centrality — particularly in the face of burgeoning US–China confrontation in the South China Sea.

ASEAN ‘centrality’ in the maintainence of peace and stability between great powers in its region has always been aspirational. Its failures to manage intraregional conflict during the Cold War as well as out-of-control situations in Cambodia, Myanmar and now the South China Sea have demonstrated as much. As for maintaining unity, it is already split. Cambodia supports its economic benefactor China and others are similarly linked economically and leaning that direction. The United States has a military alliance with the Philippines and Thailand. They and Singapore and Malaysia facilitate US military operations including intelligence probes on China. Besides, ASEAN’s consensus-driven and non-confrontational culture limit its agency.

But ASEAN members do not want to choose between the two. They want to ‘remain the masters of their own destiny’. They do not want to become puppets or surrogates and risk great power interference in their domestic affairs, as during the Cold War.

A choice is also difficult because of competing individual national interests. While many may be more ideologically aligned with the United States and prefer its security protection, there are longer term economic and geopolitical reasons to avoid confrontation with China. Most states want to be neutral and benefit from both.

But the situation is dire and the opportunities for ASEAN to influence it are limited. The United States believes that it and China are engaged in ‘a geopolitical competition between free and repressive visions of world order’ in the Indo–Pacific. It has even framed their conflict in existential terms, saying ‘the world cannot be safe until China changes’.

China believes that the United States wants to contain its rightful rise to maintain regional hegemony. For China, the South China Sea is a ‘natural shield for its national security’. It hosts vital sea lanes of communication that China believes the United States could and would disrupt in any conflict. Even more importantly, it provides relative ‘sanctuary’ for its second-strike nuclear submarines. These are China’s insurance against a potential first strike — something the United States, unlike China, has not disavowed.

The ASEAN states recognise the situation may be beyond their control. Malaysia’s Foreign Minister Hishammuddin Hussein is particularly concerned that the China–US struggle could split ASEAN. Indonesia’s Foreign Minister Retno Marsudi urged her fellow ASEAN foreign ministers to remain ‘steadfastly neutral and united’.

But the recent ramped-up pressure is only a prelude of what is to come. So far China and the United States have been playing relatively ‘nice’. But this contest for regional domination may get nastier and more overt — especially in the run-up to the US presidential election. US Secretary of State Mike Pompeo’s statement on 13 June confronting China and its increasing military presence in the South China Sea are indicators of that.

The United States expected that its political, social and economic systems, and — more importantly — its values, will be enough to keep much of Asia in its camp. This is proving to be a false hope. So the United States is falling back on its tried and true advantage — military power and the threat of its use. With the mounting tension between the two big powers, it is not likely that ASEAN unity and centrality regarding the US–China contest to dominate the South China Sea will survive or be effective unless it changes its approach.

The ASEAN foreign ministers responded to Pompeo’s statement by repeating their oft-expressed intent to maintain Southeast Asia as ‘a region of peace, security, neutrality and stability’.But ASEAN can and must do more to prevent an adverse outcome. It could increase the tone, tenor and volume of its ‘unified’ voice urging China and the United States to show diplomatic restraint and cease their military posturing. Some pundits are suggesting that ASEAN states should appeal to third parties to assist them in this task. But a third party would have to be acceptable to both China and the United States, lest they be seen by one as a surrogate for the other. That leaves few, if any, acceptable candidates.

To achieve centrality in this situation, ASEAN must act with uncharacteristic dispatch, gusto and bluntness. It needs to find common ground and tell both the United States and China what it wants them to do and not to do. It should unequivocally state that it opposes the military posturing of both in the South China Sea, and — if necessary — appeal to the international community for assistance in restraining the two. But this is not ‘the ASEAN way’.

Perhaps it could encourage China’s rival claimants to form an ASEAN committee to deal with China while it fends off the United States.

Whatever it does, ASEAN needs to change its ‘culture’ or the situation will worsen and spiral beyond its control. Where it goes from there will be up to China and the United States — not it.

Mark J Valencia is an adjunct senior scholar at the National Institute for South China Sea Studies, Haikou, China.

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Short-term nuclear stability on the Korean Peninsula


Author: Liang Tuang Nah, RSIS

In the short term, North Korea is unlikely to resume nuclear warhead or long-range missile tests. Three of the more salient reasons for Pyongyang’s restraint are the effectiveness of sanctions, societal and political realities in the North and the preservation of bargaining prospects.


Military vehicles carry missiles with characters reading 'Pukkuksong' during a military parade marking the 105th birth anniversary of North Korea's founding father, Kim Il Sung, in Pyongyang, North Korea, 15 April 2017 (Phopto: Reuters/Sue-Lin Wong).


Notwithstanding the reality that North Korean leader Kim Jong-un has authorised more serious tests than both his father and grandfather combined, a fair case can be made that the Korean Peninsula will see strategic stability in the short term, with no nuclear or long-range missile tests. Grim predictions have been made that North Korea will test a seventh nuclear warhead or a longrange nuclear missile at the end of 2020. The months ahead may still pass without either of these destabilising acts of nuclear aggrandisement.

United Nations Security Council (UNSC) resolutions passed in 2016 and 2017 placed embargoes on North Korean exports of precious ores. They also embargoed other revenue earning commodities, including copper, nickel, zinc, coal, iron, lead and seafood.

These have resulted in a loss of billions of US dollars when coupled with restrictions on the import of oil and petroleum, the prohibition of North Korean textile exports and the compulsory repatriation of all North Koreans working overseas by December 2019, from whom Pyongyang earned many hundreds of millions in remittances annually. The sanctions have imposed a truly substantial economic toll, seriously affecting Pyongyang’s nuclear and missile endeavours. Kim has not authorised a nuclear detonation or long-range missile test since 2017, suggesting that the sanctions have indeed had a dissuasive effect.

Despite North Korea’s attempts to evade sanctions through methods such as transfers of prohibited goods at sea or even cybercrime against other sovereign states, the fact remains that such measures only marginally alleviate the financial deprivation. The Kim regime is desperate to avoid pushing the permanent members of the UNSC any further.

Kim realises that even Russia and China subscribe to global nuclear non-proliferation norms and will have no choice but to tighten sanctions in response to further offences. Unlike the surgically targeted sanctions before 2016, aimed only at the North’s weapons programs, the next rung of sanctions pressure risks jeopardising North Korea’s viability. With the 75th anniversary of the Worker’s Party of Korea on 10 October and the Party Congress in January 2021, Kim would likely prefer reporting to his elite progress rather than further sanctions in the months ahead.


Kim Jong-un can afford to be patient; the pressure the nation is currently under is harsh but does not force him to act. North Korea’s societal resilience and political realities mitigate the chance of the predicted weapons tests. From the end of the Cold War, the cessation of Russian and Chinese aid and, most recently, comprehensive sanctions, North Korea has found itself languishing in stagnation. Estimates from the Bank of Korea indicate that from 2010–2019, North Korean GDP either contracted or expanded at lacklustre rates.

But in the broader context of societal suffering endured during the nationwide famine from 1994–1998 — where up to 3.5 million people could have died — it can be safely inferred that North Korea’s population is resilient. Despite widespread damage to housing and farmland from a series of devastating typhoons in September, the North Korean psyche appears quickly able to shrug off the hardship.

Welfare deprivation might be more readily tolerated by North Korean society than populations elsewhere. With North Korea’s people facing serious hurdles to revolt despite substantial material duress, Kim Jong-un may have the confidence to display strategic patience, waiting out the uncertainties currently preoccupying the rest of the world.

Arguably the greatest threat to national security from Pyongyang’s perspective is the United States. Despite Pyongyang’s ongoing hostile rhetoric towards Washington, the Kim regime knows that it is in its best interests to maintain diplomatic engagement around denuclearisation at this stage. Kim appears to trust that the United States will not initiate conflict while negotiations are in progress, and the three meetings between Kim and Trump are still recent memory.

It is unlikely that Kim will abandon diplomatic bargaining by initiating a destabilising phase with provocative missile tests or a nuclear detonation. With Trump preoccupied with his re-election campaign — and the uncertainty around the outcome — it is logical for Kim to adopt a wait-and-see approach until after the US elections. If short-term restraint avoids further punitive sanctions, it gives Kim the opportunity to quietly progress weapons programs, potentially giving him more bargaining chips once talks with Washington resume.

Although a preference for short-term maintenance of the status quo can be logically inferred, it does not stand up to unpredictable ‘black swan’ events, such as the incapacitation of Kim Jong-un.

It was widely reported that he recently underwent heart surgery, fuelling rumours that aggravated fears of instability on the Korean Peninsula. It was only with Kim’s much later reappearance that the rumours were quashed and anxiety over political upheaval in the North subsided. If any serious external shock or domestic incident occurred, short-term stability could be rendered moot.

Liang Tuang Nah is a research fellow in the Institute of Defence and Strategic Studies at the S Rajaratnam School of International Studies (RSIS), Nanyang Technological University, Singapore.

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Taiwan’s economic challenges beyond COVID-19


Author: Min-Hua Chiang, NUS East Asian Institute

Taiwan’s economy has held up relatively well thanks to a quick and effective response to COVID-19. The latest official figures showed that Taiwan’s GDP in the first half of the year grew by 0.78 per cent, year-on-year. Domestic demand contributed 0.51 per cent and net exports made up 0.27 per cent. Apart from the lingering impact of the global pandemic, Taiwan’s economy is also challenged by the uncertainty of US–China relations.

Taiwanese president Tsai Ing-Wen listens to a presentation at a non woven filter fabric factory, where the fabric is used to make surgical face masks, in Taoyuan, Taiwan, 30 March, 2020 (Reuters/Ann Wang).

Exports of electronic components registered especially high growth, yet the exports of other manufacturing products deteriorated. Taiwan Semiconductor Manufacturing Company (TSMC) has been the main contributor to export growth. Huawei’s surging orders from TSMC before the US September ban was the key driver of strong sales.

Taiwan’s private consumption dwindled. Concerns of potential COVID-19 spread discouraged people from outdoor shopping. Growing unemployment likely affected the willingness of consumers to spend. Employment statistics showed lay-offs totalling 56,000 during the January–May period, and in May 18,840 workers were classified under ‘non-paid leave’.

Taiwan’s tourism industry suffered the most from COVID-19. Transportation, food and accommodation services contributed negatively to economic growth in the first half of the year. Yet, given tourism’s relatively small weight in Taiwan’s GDP figures, the impact of an ailing tourism industry on Taiwan’s overall economy is not as devastating as the rest of Asia.

Taiwan’s economic performance in the second quarter was worse than in the first quarter. Even with the resumption of industrial production in China, the impact of the global economic slump remains huge. The absence of a medical solution to COVID-19 suggest that a global economic rebound remains elusive in the near-term.

Taiwan’s government sought to boost short-term domestic consumption through a stimulus package of NT$1.05 trillion (US$35 billion), constituting about 5.5 per cent of current GDP. But fiscal stimulus is not a sustainable solution if the crisis prolongs. Taiwan’s government is already burdened by considerable national healthcare expenditure.

The growing US–China rivalry adds another dimension of uncertainty to Taiwan’s economic future. If US President Donald Trump wins the November presidential election, further US–China confrontation and economic decoupling is likely. Taiwan’s economic growth model would have to change. It has long relied on exporting intermediate goods to China for transformation into final goods which are then exported to the United States. If US Democratic Party nominee Joe Biden wins, decoupling is more likely to come off the US government agenda.

Taiwan must adapt to a new model of economic growth regardless of US–China tensions. Taiwan’s investment in China has declined due to China’s increasingly higher wages. The US–China trade war has accelerated this investment shift away from China. China’s importance in Taiwan’s total outward investment decreased from 84 per cent in 2010 to 38 per cent this year. The weight of Taiwanese manufacturing investment in China also declined from over 90 per cent before 2004 to 61 per cent this year.

Manufacturing investment has mostly shifted to developing Southeast Asian countries. This investment relocation is not only related to Taiwan’s New Southbound Policy. The policy would not succeed if the external environment did not favour an investment shift such as this. Since 2019 there has also been a huge amount of investment into Taiwan’s manufacturing industry from China-based Taiwanese firms. Taiwan’s encouragement of investment repatriation fits with current business needs to relocate factories back to Taiwan.

Despite decreasing Taiwanese investment in China, China remains the largest export destination for Taiwan. Taiwan is dependent on exporting to China for its growth. Exports having shifted from exporting to Taiwanese firms invested in China to local Chinese firms explains Taiwan’s consistently large exports to China despite decreasing investment.

Growing investment in countries other than China will provide Taiwan more production flexibility. With US–Taiwan relations warming, Taiwan should prepare for greater economic liberalisation, as there could be an opportunity to engage in more bilateral and multilateral free trade agreements.

Taiwan’s long trade reliance on China suggests that Taiwan–China decoupling is going to be a prolonged process with many uncertainties. US trade retaliation against Chinese products, for example, is considered a violation of global trade rules by the World Trade Organization. The outcome of the US election might also determine whether the United States will continue to be tough on China. Even with a Trump victory, the United States may not ramp up support for Taiwan if an economic deal can be reached with China.

Taiwan has been able to maintain most of its domestic economic activities without implementing any lockdown measures. Its strength in manufacturing and production flexibility have allowed it to benefit from the booming global demand for information and communications technology goods. But uncertain US–China relations pose greater challenges to Taiwan’s economic prospects down the track.

It is important for Taiwan to retain the ability to be responsive to the dynamic global economy. Securing emerging opportunities in new production alliances with leading global firms will also be key for economic prosperity in the post-COVID-19 era.

Min-Hua Chiang is a research fellow at the East Asian Institute (EAI), National University of Singapore.

This article is part of an EAF special feature series on the novel coronavirus crisis and its impact.

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Asian voice: Wang Gungwu


Author: Richard Rigby, ANU

The citation awarding 2020’s prestigious Taipei-based Tang Prize in Sinology to Professor Wang Gungwu records his ‘ground-breaking research on the Chinese world order, Chinese overseas, and Chinese migratory experience’.

Image source: NUS Facebook profile

As the leading historian on Sino–Southeast Asian relations, he has developed a unique approach to understanding China by scrutinising its long and complex relations with its southern neighbours. ‘His erudition and insight have significantly enriched the explanation of the Chinese people’s changing place in the world’, bringing a new perspective to a field once dominated either by a traditional internally-focused Chinese view or by China as seen through Western eyes.

The word ‘unique’ is entirely appropriate. It reflects Wang Gungwu’s background and upbringing. While he was born in Indonesia and grew up in Malaya (colonial and Japanese-occupied), Wang Gungwu was educated at home as an insider in China’s ‘great tradition’ by his Jiangsu scholar-gentry father sent by the then Chinese government to Southeast Asia as a teacher.

Simultaneously, he became an insider in the British school system through his higher education at the University of Malaya, SOAS in London and the Central University in Nanjing during the crucial years 1947–1948. While fully identifying as Chinese, at least in the cultural sense, he was equally part of both the English-speaking West and Southeast Asia.

With this background, his own experience and his enquiring mind, it is not surprising that he originally hoped to devote himself to the study of modern Chinese history. Having personally witnessed China in turmoil and on the cusp of change, he was interested in big questions: how did China fall apart at the end of the Qing Dynasty, and what did it take to re-establish order?

But political circumstances at home were not favourable for such endeavours, and he turned his attention to earlier times. His MA thesis at the University of Malaya (1954) examined the history of early Chinese trade in the South China Sea, a topic at that time largely untouched. This thesis, subsequently re-worked as an influential monograph published in 1958 as The Nanhai Trade, established his position as an expert in this area. This was further confirmed by his contribution on Ming Dynasty relations with Southeast Asia to Chinese World Order edited by Fairbank in 1963.

In the intervening period, he did not ignore the issue of dynastic change. His PhD at SOAS on the Five Dynasties, completed in 1957, looked at how the Tang dynasty fell apart and how order was eventually rebuilt. This became the basis of his first major book, The Structure of Power in North China During the Five Dynasties (1963, republished by Stanford in 1967).

This and The Nanhai Trade set the pattern for a life of scholarship covering China and Southeast Asia, the overseas Chinese experience and the big questions of Chinese history. Professor Wang’s opus is huge: a listing of his select publications from 1950 to 2010 covers 45 pages. It includes works in Bahasa and Chinese and translations of his works into these and other languages. As with his background and the scope of his writing, his influence spans not only the Anglosphere but Southeast Asia, the Sinophone world and Japan.

Wang Gungwu writes from no ivory tower: he draws on the rich personal experience of the various worlds in which he has lived. He leans on his engagement with administration as well as scholarship pure and simple, while never losing sight of the true reason for the existence of those bodies over which he has exercised responsibility.

From 1968 to 1986, as professor and head of the Department of Far Eastern History and director of the Research School of Pacific Studies at the Australian National University, he played a major role in helping Australians enhance their understanding of China and Southeast Asia. He trained several generations of scholars and political leaders. As vice-chancellor of the University of Hong Kong from 1986–1995, he helped prepare it for the post-1997 era. As director of the then new East Asia Institute of Singapore from 1997, in the words of Ezra Vogel, ‘he led the Institute in studying the big issues facing China and writing crisp clear reports that inform not only scholars but governmental and business leaders around the world’. He has also given wise counsel to Singapore’s political leaders over many years, while retaining his Australian citizenship.

Such experience helps inform his own research. In the best Confucian tradition, this combines scholarship and administration for the betterment of the world.

In recent years Professor Wang has brought together the various strands of his work to focus once again on the big questions: what is China, how does it relate to the rest of the world and vice-versa? What is the balance between tradition and modernity, continuity and change? He has given lectures and published a number of relatively short, accessible works. These are broad yet deep and rich in scholarship. Two that are particularly worthy of attention are The Chinese Overseas: From Earthbound China to the Quest for Autonomy (2000) and Renewal: The Chinese State and the New Global History (2013).

Much like his answers to questioners from around the world at his Tang Prize award ceremony on 23 September, these works display an open, affirming and positive view of life and learning without ignoring the horrors and stupidity of which mankind is capable.

As we face current challenges, Wang Gungwu’s is a voice we need more than ever.

Richard Rigby is Emeritus Professor at the College of Asia and the Pacific, the Australian National University.

This essay is the first in an EAF series, Asian Voices, celebrating the contribution of great Asian intellectuals and thinkers to the understanding of the region. This essay is the first of two published today on the occasion of Professor Wang Gungwu’s ninetieth birthday.

Wang Gungwu AO CBE is Emeritus Professor at the Australian National University and University Professor at the National University of Singapore. He is a former chairman of the ISEAS-Yusof Ishak Institute, the Lee Kuan Yew School of Public Policy and the NUS East Asian Institute, and former vice chancellor of Hong Kong University. He is a fellow and former president of the Australian Academy of the Humanities, a foreign honorary member of the American Academy of Arts and Science, and an awardee of Singapore’s Distinguished Service Order. Professor Wang’s major works include The Nanhai Trade (1958), Community and Nation: China, Southeast Asia and Australia (1992), The Chinese Overseas: From Earthbound China to the Quest for Autonomy (2000) and Renewal: The Chinese States and the New Global History (2013). Professor Wang is a long-time contributor to East Asia Forum.

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New Caledonia’s second independence referendum is a wake-up call


Author: Denise Fisher, ANU

For the second time in two years, on 4 October, longstanding New Caledonian residents elected to stay with France. But the large and growing indigenous Kanak and Pacific islander support base for independence cannot be ignored.

1 October 2020. Last meeting of the Loyalists for the "NO" in the self-determination referendum of New Caledonia (Photo: Reuters/Theo Rouby/Hans Lucas).


There are strategic implications for France, Australia and the Pacific region, beyond what this second ‘no’ to independence might seem to suggest.

This series of referendums are part of a final self-determination process established under transition agreements that sought to end major disturbances over independence in the 1980s. The latest agreement ends in 2022, risking a return to instability on Australia’s eastern border, particularly if differences over independence intensify.

The process sets up to three votes each two years apart from 2018 to 2022 if the answer to the preceding vote is ‘no’, with each vote triggered by the support of at least one-third of local Congress members. After this second ‘no’ vote, independence leaders — who hold almost half of the seats in Congress — have already said they want a third referendum. Beyond even three ‘no’ votes, the process still calls for discussions about the future.

It is hoped — whether a third vote is held or not — that discussions can start now because differences are bitter. They will only deepen once negotiated provisions confining eligibility to longstanding residents in local votes lapse. This advantages indigenous independence groups, as these provisions currently exclude over 40,000 French newcomers from the vote.

The two years since the first vote in November 2018 have seen disturbing polarisation and strengthened ethnic divide. Support for Kanak independence groups rose to 46.7 per cent, up from 43.3 per cent in 2018. These groups have worked to ensure large voter turnouts (just under 86 per cent, unheard of in France) and appear to have attracted the support of some non-Kanak islander groups (Polynesians and Vanuatuans) who usually vote French loyalist.

Loyalist groups are divided, and the most hardline withdrew from dialogue before the last vote — a particularly divisive move in a Pacific context where discussion is key. From early reactions to the vote, they may now accept the need to talk.

The stakes in retaining New Caledonia are high for France. It has based its role in the Indo-Pacific on its sovereign presence in the two oceans. The loss of New Caledonia would have flow-on effects for its 12 other overseas territories, particularly in the Pacific where French Polynesian independence leaders support independence in New Caledonia.

Australian strategic interests are also in play. For decades Australia has had the luxury of leaving to France the management of the vast French half of the South Pacific, including Australia’s closest eastern island neighbour New Caledonia, French Polynesia at the strategic centre of the Pacific Ocean, and Wallis and Futuna in between. France has proven a useful ally once it stopped nuclear testing in French Polynesia and devolved more autonomy to its Pacific territories. It offers defence and emergency services cooperation and modest aid to the region.

Australia has recognised this role and has looked to strengthen the strategic partnership, based firmly on defence cooperation in the South Pacific. The relationship was consolidated with a AU$53 billion (US$38 billion) submarine construction contract. Australian Foreign Minister Marise Payne’s statement after the second independence vote acknowledges France’s Pacific contribution.

This partnership has become more important as the United States has withdrawn from the South Pacific region and China has increasingly made its presence felt.

It was the loyalist groups who played the China card in New Caledonia’s referendum campaign, suggesting that an independent New Caledonia would become a Chinese colony. Independence voters were clearly not impressed. In his public statement after the vote, French President Emmanuel Macron referred to his Indo-Pacific vision, which he sees as key to balancing China, but this time he did not specifically name China or hegemonic tendencies as he has in the past.

This shows sensitivity to regional dispositions. China is the largest importer of New Caledonia’s vast mineral and other products. Kanak independence leaders who run the territory’s Northern Province — and a multi-billion dollar nickel plant constructed under economic rebalancing measures — have cemented productive ties with China, including a solid market and a joint venture. It is difficult to see a viable economic future for New Caledonia without the Chinese market, whether it chooses independence or otherwise.

The success of the Melanesian Kanak population in boosting independence support will not be lost on Australia’s Melanesian neighbours. The Melanesian Spearhead Group supports independence. Melanesian separatist movements in neighbouring Papua New Guinea and Indonesia’s West Papua will take heart from the independence groups’ success in this second vote.

While the term ‘Melanesian arc of instability’ is out of fashion, New Caledonia’s latest vote suggests at least an ‘arc of uncertainty’ around independence demands in the three Melanesian countries that provide a strategic buffer to Australia’s north and east.

Australia and France need to take note of growing indigenous and islander support for independence in New Caledonia. Australia should urge France to encourage loyalists to join independence leaders in early, genuine dialogue for a more certain future.

Denise Fisher is a visiting fellow at the Centre for European Studies, The Australian National University.

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