Energy prices are high because consumers are paying for useless, profit-boosting infrastructure


Bruce Mountain, Victoria University

The preliminary report on energy prices released last week by the Australian Competition and Consumer Commission (ACCC) suggests that the consumer watchdog is concerned about almost every aspect of Australia’s electricity industry. It quotes customer groups who say electricity is the biggest issue in their surveys, and cites several case studies of outrageous price increases experienced by various customers.

The report is long on sympathy about the plight of Australia’s electricity users. But the true picture is even worse – in reality, the ACCC’s assessment of Australia’s energy prices compared to the rest of the world is absurdly rosy.


Read more: Power bills can fall – but the main attention must be on affordability: ACCC


Australia has internationally high energy prices

The ACCC quotes studies from the Electricity Supply Association and the Australian Energy Markets Commission (AEMC) to compare electricity prices in Australia with those in other OECD countries. But the ACCC’s comparison is based on two-year-old data, and badly underestimates the actual prices consumers are paying.

The AEMC’s analysis assumes all customers are on their retailer’s cheapest available offer. This is an obviously implausible assumption, and gives a favourable impression of the price that customers are paying.

As previously pointed out on The Conversation, the Thwaites review – which looked at customers’ actual bills – found that in February 2017 Victorians were typically paying A35c per kilowatt hour (kWh) – 42% more than the AEMC’s estimate. What’s more, we know that Victoria’s electricity prices are lower on average than those in South Australia, Queensland and New South Wales, and hence below the Australian average.


Read more: Australian household electricity prices may be 25% higher than official reports


A part of this 42% gap – around 15% – is explained by the latest price increases that are not included in the ACCC’s comparison. But this still leaves a 27% gap between what the AEMC assumes and the evidence of actual prices.

This begs the question: why did the ACCC not recognise the widely known flaw in the AEMC’s analysis?

The real problem is overbuilt network infrastructure

The report estimates that rising network charges account for more of the price increase than all other factors put together. There is no doubt that network charges are a real problem at least in parts of Australia, although their significance relative to retailers’ costs is contested territory.

But why would distributors build far more network infrastructure than they need? And why have government-owned distributors built far more infrastructure than private ones, despite having no more demand?

The answer to this perplexing question is to be found in part in Australia’s “competitive neutrality” policy. This is Orwellian doublespeak for an approach that is neither neutral nor competitive.


Read more: Government Inc: time to revisit competitive neutrality


Under this policy, government-owned distributors are regulated as if they are privately financed. This means that when setting regulated prices, the Australian Energy Regulator (AER) allows government distributors to charge their captive consumers for a return on their regulated assets, at the same level as if they were privately financed. That is despite the fact that private financing is much more expensive than government funding.

It’s no surprise that when offered a rate of return that far exceeds the actual cost of finance, government distributors have a powerful incentive to expand their infrastructure for a profit. This “gold-plating” incentive is a well-known in regulatory economics.

Regulators, the industry and their associations have explained higher spending on networks in a variety of ways: higher reliability standards; flawed rules; flawed forecasting of demand growth; and the need to make up for historic underinvestment.

But was there ever historic underinvestment? A 1995 article co-authored by the current AEMC chair concluded that distribution networks had been significantly overbuilt. That was more than two decades ago, government distributor regulated assets are at least three times bigger per customer now.

The chart below – based on data from the AER’s website – examines how the 12 large distributors that cover New South Wales, Victoria, Queensland and South Australia spent their money on infrastructure between 2006 and 2013. This period covers the last five-year price controls established by the state regulators, and the first control established by the AER. It was during this time that expenditure ballooned. The monetary amounts in this chart are normalised by the number of customers per distributor.

Distributor spending on infrastructure between 2006 and 2013.
Author provided

The first five distributors from left to right (and Aurora) were owned by state governments and the others are privately owned. A clear pattern emerges: the government distributors typically built much more infrastructure than the private distributors. And the government distributors focused their spending on substations, which are much easier to build (or expand or replace) than new distribution lines or cables.

We also know that the distributors’ spending on substations far outstripped the increases in the peak demand on their networks. The figure below compares the change in the government and private distributors’ substation capacity (the blue bars) with demand (the red bars) over the period that most of the expenditure occurred. Again, the amounts have been normalised by number of customers.

Substation capacity versus peak demand between 2006 and 2013.
Author provided

The gap in spending between government and private distributors is stark. It is also obvious that in all cases, but particularly for the government distributors, the expansion of substation capacity greatly exceeded demand growth – which hardly changed over this period (and is even lower now, per connection).

To put it in more tangible terms, as an average across the industry, peak demand between 2006 to 2013 increased by the equivalent of the power used by one old-fashioned incandescent light bulb, per customer. But government distributors expanded their substation capacity by more than one 100 light bulbs, per customer. The private distributors did relatively better, but still increased the capacity of their substations by the equivalent of about 30 light bulbs per customer.

My PhD thesis included econometric analysis that shows government ownership in Australia is associated with regulated asset values that are 56% higher than private distributors, and regulated revenues that are 24% higher, leaving all other factors the same.

To some, this evidence supports a “government bad, private good” conclusion. Indeed it was this line of argument that the Baird government in New South Wales used to justify its partial privatisation of two network service providers.

But in international comparisons of government and private distributors in the United States, Europe and New Zealand, no such stark differences are to be found. The huge disparity between government and private distributors is a peculiarly Australian phenomenon.

How we got here

This Australian exception originates in chronic policy and regulatory failure. As far back as 2011, the Australian Energy Market Commission (AEMC) heard a proposal that government distributors should earn a return closer to their actual cost of financing – a suggestion that would have reduced prices significantly and removed the incentive to gold plate.

In response, the AEMC said the regulations were consistent with the “competitive neutrality” policy. But this is not true: in the policy’s own words, it was designed to stop government businesses from crowding out competitors. Distributors are protected monopolies; they do not have competitors.

The AEMC also argued, somewhat bizarrely, that it was good economics for a regulator to assume that government distributors are privately financed.

This represents the triumph of an idealistic “normative” regulatory model in which regulators act on the basis of how the regulated entity should behave rather than how they actually behave.

But it would wrong to blame the AEMC alone for this failure. All of Australia’s key institutions and governments have agreed that government distributors should be regulated as if they are privately financed. For governments that own their distributors, this has been a wonderfully profitable fiction.

Therein lies much of the explanation for what is effectively, if I may call a spade a spade, a racket.

It is an indictment of Australia’s polity and so many of its economists that the 2011 Garnaut Climate Change Review stands alone, in a library of reviews, as stating this problem clearly. In fact, if you review last week’s report from the ACCC, you will not find a single distinction between the impact of government and private distributors.

And if you thought this was yesterday’s war, you would be wrong. Despite the mass of evidence, our regulators persist in the fiction that ownership and regulation should be independent of one another.

It is difficult not to lapse into despair about Australia’s energy policy morass. Despite the valiant attempts by many, a deeply entrenched culture of half-truths, vested interests, ideology and wishful thinking still characterises all too much of what emanates from the political and administrative leadership of this industry.

Some energy consumers – Prime Minister Malcolm Turnbull among them – will buy their way out of this problem through solar panels and batteries. But the poorest households and many business customers will increasingly be left carrying the can.

The ConversationAustralians are angry about electricity. Not unreasonably.

Bruce Mountain, Director, Carbon and Energy Markets., Victoria University

This article was originally published on The Conversation. Read the original article.

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How America can copy Australia’s asset-recycling scheme



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Asset recycling could lead to more US infrastructure spending.
Shutterstock

Caroline Nowacki, Stanford University; Ashby Monk, Stanford University, and Raymond Levitt, Stanford University

US Vice President Mike Pence announced the administration’s desire to emulate the Australian model of infrastructure asset recycling as part of President Trump’s US$1 trillion infrastructure plan. Our research shows that good governance is key to making it work in the United States.

New South Wales (NSW), a state that has had some success in asset recycling, created an independent agency to oversee its program. The agency is staffed by employees with private sector experience. Senior public figures are on the board to ensure independence.

The result has been an asset-recycling program that received high prices for government assets and has prioritised new projects based on cost and impact. Other Australian states have adopted this model, which will be key for the US too.

Recycling directs money to new infrastructure

Under an asset-recycling scheme, governments lease existing infrastructure assets to private companies and invest the proceeds in new infrastructure projects. In 2013, the Australian government started a A$5 billion incentive program giving state governments an additional 15% of the capital recycled from existing assets and reinvested in new infrastructure.

Between 2013 and 2016, NSW leased about A$15 billion of infrastructure assets to private investors, and allocated about A$6 billion to new projects, without raising additional public debt.

Infrastructure asset recycling manages to fund new projects by addressing the mismatch between government infrastructure promises and the goals of private investors.

Governments often lack the capital to invest in infrastructure and are worried about rising public debt. The World Economic Forum estimates the gap between infrastructure demand and investment is around US$1 trillion a year globally.

Meanwhile, private investors prefer to invest in infrastructure that is already built. These investments have lower risk than building something new, and offer the promise of consistent, inflation-adjusted returns over decades.

But the freed-up capital is not really free — governments forgo the future revenues from the leased assets. If the proceeds from privatising the asset are smaller than the future stream of payments forgone, and new projects do not produce revenues, government might need to levy a new tax or cut programs.

This is why good governance is key to ensuring the scheme works. Governments need to get the highest price for their assets and build the best projects for the lowest cost.

Good governance was key to NSW’s success

Between 2013 and 2015, NSW leased two ports, a desalination plant and an electricity distribution network for close to A$15 billion. The process was fast and the lease proceeds were high compared to similar deals. This indicates that the bidding process was effective at tapping into investors’ interest.

A key point is that the NSW legislature did not directly oversee the asset-recycling scheme. In 2011, the government created an independent statutory body, Infrastructure NSW, to identify and prioritise the delivery of critical public infrastructure in NSW.

Infrastructure NSW is made up of specialised units staffed with skilled professionals. One of these manages Restart NSW, the infrastructure fund into which lease proceeds are deposited.

Studying Infrastructure NSW, we see a number of reasons for its success.

While a relatively small agency, Infrastructure NSW is staffed with employees with private sector experience and has representatives of key ministries on its board. The private sector experience means employees are able to monitor and work effectively with private partners, and the knowledge and information gap between the private sector and the government is low.

Its prominent board also means Infrastructure NSW has the power to influence and stand up to the state legislators and administration, with sufficient independence to ensure politicians cannot fund low-priority projects in politically advantageous constituencies. The broad skill set of employees also helps to break down administrative silos and enables an integrated vision of infrastructure.

The importance of these characteristics aligns with results from research on other state-owned investment funds. And the NSW model has been copied.

Infrastructure Victoria, Building Queensland and Infrastructure Tasmania were all created in 2015 with similar characteristics to Infrastructure NSW. These agencies are independent from government, have an integrated vision for infrastructure, and private sector members sit on their boards.

Challenges and opportunities for the US

The use of public-private partnerships in infrastructure service delivery is increasing in the US, but has not reached anywhere near the scale of Australia or Canada. Many US states still lack the legislation, processes and structure to manage it effectively.

Another challenge for the US is identifying new projects with a sustainable source of funding. This is what makes asset recycling appealing for the private sector.

Considerable infrastructure governance and planning efforts are needed at the state level to make a success of asset recycling in the US. A federal initiative along the lines of the Australian government’s incentive program would afford states the opportunity to share their experience and work toward more unified legislation and procurement processes.

The ConversationIn Australia, asset recycling came with the creation of independent agencies and state infrastructure funds. If it wishes to follow Australia down the asset-recycling path, the US should also consider these kinds of governance to equip states with an integrated vision for infrastructure development, and the capabilities to work more effectively with the private sector.

Caroline Nowacki, PhD Candidate, Global Projects Centre, Stanford University; Ashby Monk, Executive and Research Director of the Global Projects Center, Stanford University, and Raymond Levitt, Professor of Civil and Environmental Engineering, Stanford University

This article was originally published on The Conversation. Read the original article.

The NBN: how a national infrastructure dream fell short


Tooran Alizadeh, University of Sydney

Eight years into the Australian government’s National Broadband Network (NBN) project, the nation has an average internet speed50th in the global rankings – that lags well behind many advanced economy countries.

Ongoing secrecy around the NBN, a project that’s likely to cost more than A$50 billion, makes it impossible for the public in most cases to know when and what quality service they will receive. Further, new research shows the NBN rollout was politically motivated and socioeconomically biased from the beginning.

It is perhaps time to remind ourselves of the ups and downs of the project that was once announced as a dream national infrastructure project for the 21st century. This requires a ten-year journey back in time, before we can figure out what needs to be done next.

The ups

In November 2007, after 11 years of Coalition government, Labor was elected on a policy platform that promised a national broadband network.

The NBN company was announced in April 2009 to provide terrestrial fibre network coverage for 93% of Australian premises by the end of 2020. Fixed wireless and satellite coverage would serve the remaining 7%.

Looking back, it’s hard to deny the influence the NBN has had on Australian politics. Perhaps the peak influence was when three independent MPs cited the NBN as one of the key reasons why they supported a Labor government over the Coalition when the 2010 federal election produced a hung parliament.

The final 60 early NBN rollout locations were then announced. The plan was for the first stage of the large-scale rollout to follow, connecting 3.5 million premises in 1,500 communities by mid-2015.

The downs

The early NBN rollout experienced significant delays. This attracted a great deal of “overwhelmingly negative” media coverage. Public opinion polls reflected growing dissatisfaction with the national project.

This dissatisfaction and the September 2013 federal election result changed the fate of the NBN. In 2013, the new Coalition government suspended the first stage of the large-scale fibre-to-premises NBN rollout to reassess the scale of the project.

In 2014, the government announced that the NBN rollout would change from a primarily fibre-to-premises model to a multi-technology-mix model. The technology to be used would be determined on an area-by-area basis.

This change of direction resulted in a prolonged state of uncertainty at the local government level. As it was rolled out, the NBN was widely criticised for being slow, expensive and obsolete.

Current state of play

Delays continue in the construction of the Coalition’s NBN. What can only be described as a downgrade of the original national project is now seriously over budget.

In September 2016, a joint standing committee of parliament was established to inquire into the NBN rollout. The inquiry is continuing.

The bleak status quo only gets worse when the on-the-ground reality of the NBN rollout is considered. While fibre-to-premises rollout is supposed to be limited in the Coalition’s NBN, disturbing examples of misconduct in the NBN installations are highly concerning.

The image below shows one example of many in which heritage-listed buildings (in this case also public housing) are disrespected to the point that suggests an absolute lack of communication between NBN contractors, local government, or heritage agencies.

One heritage-listed house with two NBN installations (Judge Street, Woolloomooloo, NSW).
Author

Who misses out?

In the Coalition’s NBN, the provision of universal high-speed capacity – as envisioned in the original NBN – has been transformed into a patchwork of final speeds and different quality of service. This leads to an important question about equity. It also puts the 60 early rollout locations in the spotlight as these could potentially be the only ones across the nation that enjoy fibre-to-premises NBN.

My new research points to the political motivations in the selection of these lucky 60 sites. Voting patterns in these locations were compared with all electorates in the federal elections from 2007 to 2013. The analysis shows the selections were skewed for potential political gain.

ALP-held seats were the main beneficiaries of the early NBN rollout; safe Coalition-held seats were the least likely to receive the infrastructure.

Tony Windsor, one of the three influential independent MPs in 2010, famously said of the NBN:

Do it once, do it right, and do it with fibre.

He secured priority access for his regional electorate to the early NBN.

Tony Windsor: ‘Do it once, do it right and do it with fibre.’

However, most regional localities were not that lucky. Indeed, research on the sociospatial distribution of the early NBN rollout shows the limited share of regional Australia.

What to do?

It is convenient to blame one political party for the state of chaos that the NBN is in right now. However, politicisation of the project has been part of the problem since day one.

Instead, we call for telecommunication infrastructure to be considered for what it really is: the backbone of the fast-growing digital economy; the foundation for innovation in the age of smart cities and big data; and a key pillar of social equity and spatial justice.

In reality, however, in the age of big data and open data, the lack of transparency around the NBN is shocking. In evidence to the parliamentary committee inquiry in March 2017, the Australian Competition and Consumer Commission expressed concern about the lack of transparency on NBN performance.

The ConversationPolicing the leaks of NBN data is not going to clean up the mess. Quite the opposite: the Australian government needs to share the NBN data, so the exact nature and scale of the problems can be determined. Only then can we talk about finding a way forward in this long journey.

Tooran Alizadeh, Senior Lecturer, Director of Urban Design, University of Sydney

This article was originally published on The Conversation. Read the original article.

The Belt and Road Initiative: China’s vision for globalisation, Beijing-style



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World leaders, led by Chinese President Xi Jinping, meet for the Belt and Road Forum in Beijing.
Reuters

Benjamin Habib, La Trobe University and Viktor Faulknor, La Trobe University

China’s Belt and Road Initiative (BRI) is a multifaceted economic, diplomatic and geopolitical undertaking that has morphed through various iterations, from the “New Silk Road” to “One Belt One Road”. The Conversation

The BRI imagines a US$1.3 trillion Chinese-led investment program creating a web of infrastructure, including roads, railways, telecommunications, energy pipelines, and ports. This would serve to enhance economic interconnectivity and facilitate development across Eurasia, East Africa and more than 60 partner countries.

First proposed in September 2013, it is the signature foreign policy initiative of Chinese President Xi Jinping. It is a project of unprecedented geographical and financial scope.

BRI has two primary components: the overland Silk Road Economic Belt (SREB), and the sea-based 21st-century Maritime Silk Road (MSR). Together, they form the “belt” and “road”.

SREB’s overland infrastructure network encompasses the New Eurasia Land Bridge and five economic corridors: China-Mongolia-Russia; China-Central Asia-West Asia; China-Pakistan; the China-Indochina peninsula; and Bangladesh-China-India-Myanmar. The SREB’s connective sinews will be high-speed rail and hydrocarbon pipeline networks.

The MSR is focused on developing key seaports that connect to land-based transportation routes.

China has been at pains to emphasise the co-operative nature of the initiative and its objective of “win-win outcomes”. In his address to the Belt and Road Forum for International Co-operation in Beijing, Xi framed the BRI in terms of “peace and co-operation”, “openness and inclusiveness”, “mutual learning”, and “mutual benefit”.

Yet behind the rhetoric of harmony and mutuality lies a substantive strategy for growing an emerging China-led operating system for the international economy. This could potentially succeed the US-led Washington Consensus and Bretton Woods system.

What China gets from the BRI

BRI projects are likely to increase China’s economic and political leverage as a creditor.

China has established the multilateral Asian Infrastructure Investment Bank (AIIB) and the $40 billion Silk Road Fund. These are financial vehicles for BRI infrastructure projects, yet the vast bulk of funding to date has come from China’s big state-owned investment banks.

The prospect of access to Chinese financial largesse to fund much-needed infrastructure investments has attracted attention from many prospective partner nations. Many of these appreciate the minimal political conditionalities that come with Chinese finance, in comparison to finance on offer from the International Monetary Fund, the World Bank, and the Asian Development Bank.

The BRI has been viewed as a way for China to productively use its enormous, $3 trillion capital reserves, internationalise the renminbi, and deal with structural issues as its economy navigates the so-called “new normal” of lower growth.

Perhaps foremost among these is the issue of industrial over-capacity. Having maxed out investment-driven growth through a frenzy of domestic infrastructure building following the 2008 global financial crisis, the BRI represents an international stimulus package that will utilise China’s idle industrial capacity and safeguard jobs in key industries such as steel and cement.
This is a significant political dividend for the Chinese government. The Chinese Communist Party’s legitimacy rests on maintaining economic growth and improving people’s standard of living.

In relation to energy security, the BRI will assist China in diversifying its energy sources through greater access to Russian and Iranian oil and gas. This will be achieved by linking with pipeline networks from Russia and Central Asia.

By investing in pipelines from Gwadar, on the coast of Pakistan, to Xinjiang, and from coastal Myanmar to Yunnan, China also can diversify its transportation routes for maritime energy supplies. This reduces its vulnerability to energy supply disruption at maritime choke-points in the Strait of Malacca and the South China Sea.

The establishment of port facilities in the Indian Ocean will also be advantageous to the emerging blue-water capability of the People’s Liberation Army Navy. This would assist in keeping vulnerable critical sea lines of communication open for maritime energy supplies from the Middle East.

Collectively, these measures could reduce the ability of the US Navy to blockade China’s energy supply routes in any future conflict scenario.

Geopolitical implications of the BRI

After more than a decade of conjecture about China’s increasing international assertiveness, the Chinese government has now clearly signalled its intention to assume a more prominent global leadership role through the BRI.

China is aiming to spur a new round of economic globalisation, but in a changed international order that it has a pivotal role in shaping.

The Asian Infrastructure Investment Bank, the BRICS New Development Bank, and the Regional Comprehensive Economic Partnership are the “software of integration” – the financial pillars of trade and investment in this vision.

The BRI is the development vehicle – the “hardware of trade and investment” and the final pillar on which China’s claim to global leadership rests.

Somewhat paradoxically, given the investment focus on hydrocarbon pipelines, the BRI also represents the vehicle through which China is likely to shape the contours of the emerging international post-carbon economy. The Paris Agreement in the UN Framework Convention on Climate Change is a keystone document in this respect.

A combination of the climate emergency and market behaviours are making fossil fuel energy production increasingly uneconomic. This has spurred an accelerating transition away from fossil fuels and toward renewable energy generation.

China is a world leader in green and alternative energy technologies. Through the BIR it is well-placed to be the dominant player in facilitating the transition and roll-out of renewable energy infrastructure across Eurasia. This is especially so since the Trump administration has ceded American influence in international climate politics through its repudiation of proactive climate policies.

Leadership on international climate action is one area in which China can develop significant soft power cache, particularly with developing countries of the global south.

China’s BRI announcement is also reflective of the relative decline of the US as the world’s pre-eminent power. A declaration of intent as bold as that made in Beijing over the weekend at the Belt and Road Forum for International Co-operation would have been inconceivable prior to the 2016 US election.

The Trump administration’s clumsy foreign policy manoeuvrings have damaged US prestige, weakened the integrity of a liberal international order already under duress, and opened a window for China to stake its claim.

The BRI also signals a deepening of the Sino-Russian strategic partnership. This is based on a complementary supplier-consumer energy relationship and a mutual antagonism to the US.

However, not all regional countries see the BRI as a boon. The Indian government has expressed reservations over the BRI’s China-Pakistan Economic Corridor and China’s Indian Ocean ambitions.

The BRI now ups the ante for regional middle powers like Australia that have deftly attempted to hedge between the US and China. Australia’s foreign policymakers must weigh up the case for engaging with the BRI and having a seat at the table as China’s vision takes shape.

Benjamin Habib, Lecturer, School of Social Sciences, La Trobe University and Viktor Faulknor, PhD Candidate in International Relations, La Trobe University

This article was originally published on The Conversation. Read the original article.

Australia risks missing out on China’s One Belt One Road


Alice de Jonge, Monash University

Australia is late to the party in only recently expressing real interest in China’s One-Belt, One-Road initiative (OBOR). And if Australian businesses don’t take advantage of the opportunities available in this project now, there are plenty of regional competitors that will take their place. The Conversation

Australia became an unofficial OBOR partner in 2016, with the launching of a public-private NGO known as the Australia-China OBOR Initiative (ACOBORI), less than a year after the signing of the China-Australia Free Trade Agreement.

Australia has so far declined China’s offer to formally link the Northern Australia Project to OBOR. However, more recently Trade Minister Steve Ciobo, has said he sees merit and opportunities for collaboration (particularly around the northern Australia initiative) arising from OBOR, adding the caveat that decisions about such collaborations would be taken “on the basis of what is Australia’s national interest”.

Following the old silk road

China’s One-Belt, One-Road initiative (OBOR) comprises a land belt and a sea road. The land belt connects China’s underdeveloped hinterland to Europe, traversing 65 countries across the land terrain of the ancient Silk Road land route. The sea leg comprises a network of railways and ports crossing an ocean route that connects Europe with the Middle East, Africa and Southeast Asia.

OBOR has significant backing in China, including from the China-led Asia-Infrastructure Investment Bank (AIIB).

OBOR is backed not just by the AIIB, but also by two other recent development finance initiatives – the Silk Road Infrastructure Fund and the New Development Bank. The infrastructure fund is made up from Chinese foreign exchange reserves and will act like a Chinese sovereign wealth fund. The bank was established by the BRICS nations (Brazil, Russia, India, China and South Africa) in 2014.

For the government, OBOR provides a policy tool for channelling investment from China’s wealthy seaboard provinces to the under-developed central and western regions. It channels China’s investment into projects that will have longer-term benefits, and not just into assets that are vehicles for parking hot money. All at a time when China is seeking to curb the flight of money from the country.

Australian business involvement

There are many risks and challenges to be faced in such a vast initiative as OBOR – with its cross-border projects involving a variety of different countries, each with its own historical baggage and current preoccupations.

An inaugural ACOBORI report identified a number of established and emerging sectors of opportunity for Australian industry arising from OBOR. Both inbound and outbound trade and investment with China can, importantly, pave the way for greater diversification of the Australian economy.

University of Melbourne affiliate, Asialink, identifies opportunities in sectors such as: agriculture, financial and legal services, education, tourism, healthcare, energy, architecture engineering and planning expertise.

The Australian services sector has so far demonstrated the keenest interest in OBOR, especially in finance and law. The list of those already involved include three of the big four banks, law firms King Wood and Mallesons and Minter Ellison, and global engineering consulting firms Worley Parsons, SMEC and Norman Disney & Young.

It’s the smaller firms and those in challenged sectors (particularly manufacturing) that appear less willing to investigate the risks and opportunities. This isn’t helped by the Australian government, which appears to be torn between a fear of Chinese influence and a desire not to miss out on potential opportunities for lucrative involvement in OBOR projects.

There are two key reasons why Australia needs to remain involved in both the AIIB and OBOR. The first is the risk of missing out if Australian businesses don’t take advantage of the opportunities available.

Foreign firms are already taking advantage of the situation. For example, Hutchinson Ports, controlled by CK Hutchison Holdings of Hong Kong’s richest man Li Kashing, already operates ports at 22 locations in 18 countries along the OBOR route. Hutchinson Ports is planning to start operations in another three countries along the route in 2017, and enlarge capacities of existing terminal facilities to ride on growing demand.

At the moment researchers describe the situation surrounding China’s OBOR as “contested multilateralism”. This is where states and businesses use new multilateral institutions to challenge established institutions, rules, practises or missions.

The AIIB has been seen as a challenge to the established institutions of the (US-dominated) World Bank and (Japan-dominated) Asian Development Bank. China’s OBOR initiative can similarly be seen as a challenge to the dominance of US and European investment presence in the region.

In such a world, clever businesses are not seeing any need to choose sides. So far as possible, they are playing the field; taking advantage of opportunities as they arise, all the while keeping careful track of changing risks.

The second reason why Australian businesses need to remain actively engaged, is to ensure that the country is in a position to influence the longer-term future of the region. Australia should be using its influence to emphasise the potential for OBOR initiatives to help achieve the sustainable development goals including reducing hunger, poverty and inequality, to name a few.

Alice de Jonge, Senior Lecturer, International Law; Asian Business Law, Monash University

This article was originally published on The Conversation. Read the original article.

To get the ‘good debt’ tick, infrastructure needs to be fit for the future


Cynthia Mitchell, University of Technology Sydney; David Singleton, Swinburne University of Technology, and Jim Bentley, University of Auckland

In distinguishing between “good” and “bad” debt, federal Treasurer Scott Morrison equates good debt with infrastructure investment. However, not all infrastructure investment announced in the budget is necessarily “good”. The Conversation

We are now in the Anthropocene – a new geological age defined by the global scale of humanity’s impact on the Earth – which places new requirements on our infrastructures. We need to move beyond the AAA ratings mindset, and instead aim for net-positive outcomes in social, economic and ecological terms from the outset.

Infrastructure (such as transport, water, energy, communications) underpins our ability to live in cities and our quality of life. And most infrastructure is very, very long-lived. Therefore, our infrastructure investment decisions matter enormously, especially for tomorrow.

More than half of the world’s people live in cities, and have just one planet’s worth of material resources to share around. This means we must define a new set of expectations and performance criteria for infrastructure.

Rather than settling for doing less bad, such as less environmental destruction or social disruption, we must aim from the outset to do more good. This net-positive approach requires us to restore, regenerate and increase social, cultural, natural and economic capital.

What sort of change is needed?

Examples of this kind of thinking are, as yet, rare or small.

Bishan Park on the Kallang River in Singapore gets close. Formerly a channelled stormwater drain, this collaboration between the national parks and public utility agencies has recreated significant habitat while providing flood protection and an exceptional recreational space. All this has been done in an extremely dense city.

Singapore’s Bishan Park is an example of a new approach to urban infrastructure.

Looking further into the future, in transport, a net-positive motorway might prioritise active transport and make public transport central by design. It might send price signals based on the number of passengers, vehicle type (such as autonomous) and vehicle ownership (shared, for instance).

Net-positive thinking aligns with a groundbreaking speech by Geoff Summerhayes, executive board member of Australia’s Prudential Regulation Authority (APRA), earlier this year. He identified climate change risk as a core fiduciary concern, and therefore central to directors’ duties.

This shift raises significant questions for the financial and operational validity of major infrastructure projects.

For example, in assessing the WestConnex motorway project, Infrastructure Australia queried why a broader set of (potentially less energy-intensive) transport options was not considered. Similar questions arise for the Northern Australia Infrastructure Fund’s support for Adani’s giant Carmichael coal mine and associated water and transport infrastructure.

A core part of the switch to net-positive infrastructure is the realisation that resilience and robustness are different things. Historically, robustness has been central to infrastructure planning. However, robustness relies on assuming that the future is more or less predictable. In the Anthropocene, that assumption no longer holds.

How do we build in resilience?

So, the best we can do is set ourselves up for a resilient future. This is one where our infrastructure is at its core flexible and adaptable.

This could include, for example, phasing infrastructure investment and development over time. Current analysis is biased toward building big projects because we assume our projected demand is correct. Therefore, we expect to reduce the overall cost by building the big project now.

However, in a more uncertain future, investing incrementally reduces risk and builds resilience, while spreading the cost and impact over time. This approach allows us to monitor and amend our planning as appropriate. It has been shown to save water utilities in Melbourne as much as A$2 billion.

Maybe the fact that we can be criticised for not having enough capacity ready in time has influenced our decision-making. We should really be challenged over investing too much, too soon, thereby eliminating the opportunity to adapt our thinking.

Or maybe we are so concerned about the need to build certainty into our planning that we are missing the opportunity to build learning through feedback loops into our strategies.

Surely there is a balance to be struck between providing enough certainty for investment without pretending we know with absolute certainty what we need to invest for the next 30 years.

We need long-term plans alongside learning and adaptation to respond to the imminent challenges facing infrastructure everywhere. These include:

  • major unregulated growth in interdependencies between infrastructures;

  • lack of systems thinking in planning and design;

  • radical shifts in the structure of cities and how we live and work;

  • increasingly fragmented provision;

  • no central governance of infrastructure as a system; and

  • much existing infrastructure approaching or past its end of life.

Regulatory reform is part of what’s required to enable public and private investment in better outcomes. Here too we need to learn our way forward.

Sydney’s emerging, world-leading market in recycled water is an example of a successful niche development that delivers more liveable and productive pockets in our cities through innovative integrated infrastructure.

Ultimately, doing infrastructure differently will also require investment in research on infrastructure. The UK is investing £280 million in this through the Collaboratium for Research on Infrastructure and Cities. But in Australia’s recent draft roadmap for major research investment, infrastructure is largely absent. We overlook infrastructure research at our peril.

Cynthia Mitchell, Professor of Sustainability, Institute for Sustainable Futures, University of Technology Sydney; David Singleton, Chair, Smart Cities Research Institute, Swinburne University of Technology, and Jim Bentley, Honorary Director, Centre for Infrastructure Research, University of Auckland

This article was originally published on The Conversation. Read the original article.

Budget’s ‘good debt’ conversion underpins $70b-plus infrastructure program: experts respond


Phillip O’Neill, Western Sydney University; Beth Webster, Swinburne University of Technology; Marion Terrill, Grattan Institute, and Phil Lewis, University of Canberra

The government is committing to more than A$70 billion in new infrastructure spending to 2020-21. This includes up to A$5.3 billion for the Western Sydney Airport, and A$8.4 billion towards the Melbourne to Brisbane inland rail link. Another A$500 million will be put towards passenger rail in regional Victoria, A$844 million for upgrades to the Bruce Highway in Queensland, and A$1.6 billion for road and rail in Western Australia. The Conversation

A A$1.5 billion Skilling Australians Fund will be created to fund apprenticeships and traineeships. The fund will be supported by a levy on businesses with turnover greater than A$10 million that employ foreign workers.

The $20,000 instant asset write-off for small businesses has been extended to June 30, 2018.

The government has also committed to provide $101.5 million over five years to create an Advanced Manufacturing Fund, to promoted high-technology manufacturing.

To alleviate increasing energy costs, a one-off Energy Assistance payment will be will be given to pensioners and disability support recipients over two years. Single recipients will receive A$75 and couples A$125, at a cost of A$286.9 million. The government will also remove the capital gains tax exemption for foreign and temporary tax residents, and allow prospective first home buyers to make voluntary contributions to superannuation that can be withdrawn for a first home deposit.


The budget won’t fix the cost of living

Phil Lewis, Professor of Economics, University of Canberra

The budget contained several measures supposedly intended to “ease the cost of living”. Notably a one-off “energy assistance” payment to pensioners and those on disability support, and measures to address housing supply and affordability. But these will do little, if anything, to ease the cost of living of most Australians. On other aspects of the cost of living, such as health and education, the budget measures will make the cost of living worse for some groups.

A rise in the cost of living is usually represented by an increase in the Consumer Price Index (CPI) over a quarter, year or decade depending on the issue of interest. The CPI is designed to measure changes in the cost of a “basket of goods and services” that a “typical” Australian household might buy.

Almost half of the current basket is made up of housing, transport and food costs. So movements in these prices have a relatively big impact on the cost of living. But the ability of the federal government to control house prices or the other major component of housing costs – electricity and gas – is very limited. And petrol and food prices are determined by national and international market forces.

Changes in CPI basket.
ABS

The above figure shows how the prices of components of the CPI changed over the year to March. The greatest price increases have been for alcohol and tobacco, which are largely due to government “sin taxes”. One of the easiest ways to ease cost-of-living pressure on the poorest households would be to reverse these tax rises, but this is not on the agenda.

The government also has great potential to influence costs in areas for which it is a major funder such as in health and education. These are also areas where prices have been rising faster than the CPI.

In education, the additional A$18.6 billion over the next decade for schools funding, which is needs-based, should reduce cost of living for more disadvantaged households, although some middle-income households might be worse off.

But the cost of living will rise for university students, as fees rise by 1.82% per year over the next four years. Those with HELP debt on lower incomes will also come under pressure, as the threshold to pay off their loans is reduced to A$42,000 per year.

In health, the re-indexation of the Medicare rebates from this July for regular GP visits, the further reduction in the price of prescription drugs, and scrapping of the 2014 proposal to raise prescription charges by A$5 will all help with the cost of living for those on lower incomes.

Although really a tax increase, the increase in the Medicare levy, by 0.5% from 2019, will nevertheless reduce the standard of living of households on middle to high income.


Big dollars for infrastructure, little transparency

Phillip O’Neill, Director, Centre for Western Sydney, Western Sydney University

Decision-making about infrastructure in Australia reached a new level of incompetence on budget night. Much public money has been committed, and the list of projects is long. Yet the planning and evaluation process for identifying what assets should be built and how their roll-out should be staged remains dreadfully inadequate.

Infrastructure is expensive and imposing. Governments need to select projects well, because when we select a project to build we also decide not to build a competing project. Construction then needs to proceed efficiently and with minimal impact.

Good infrastructure delivers benefits over many decades. Some infrastructure assets – like those for the delivery of water, energy and telecommunications – deliver direct benefits to consumers so they can be funded by user charging, which in turn means some degree of commercialisation of the asset is possible.

Infrastructure also makes our cities more productive and better, safer places to live. These positive externalities are not easily commercialised; but when a project is a good one because there is widespread benefit we are happy for governments to borrow and our taxes to be used to pay down the debt. The presence of good public infrastructure, like good public health and education, marks us as a civilised people.

Getting the right balance of commercial benefits and positive externalities isn’t easy. Infrastructure roll-out needs informed choice and, therefore, engaged public debate. But infrastructure decision-making in Australia lacks both information and debate. The secrecy in Australia surrounding infrastructure – be it for new construction or the sale of brownfields assets – is appalling. Business cases are rarely made public. The claimed benefit-cost ratios are not able to be scrutinised. Project financing and construction schedules are never revealed. Construction contracts are deemed “commercial-in-confidence”, as are the complex sale contracts of existing public assets.

Sadly, the budget gives little hope that any of this will change.

Marion Terrill, Transport Program Director, Grattan Institute

There’s more than a touch of back to the future about this budget: we’ve got so-called nation-building projects and the usual cries of “What about me?” from various state premiers. But in the current world of “good debt” and “bad debt”, the infrastructure choices of Budget 2017 look more defensible than usual.

For a start, there’s plenty to like about the $5.3 billion commitment to Western Sydney airport: the project has bipartisan support; it’s been assessed as having benefits of $1.90 for every dollar it costs; Infrastructure Australia thinks it’s a high priority; and, after 30 years on the drawing board, nobody could say it’s a thought bubble.

Inland Rail may squeak over the line. Despite an equity investment of $8.4 billion, the project has a marginal business case at best, with benefits of just $1.10 for every dollar spent and all the risks on the downside. Indeed, plenty of experts are dubious about the merits of this project.

Don’t listen too much to the political theatre about which states have been dudded in the carve-up of infrastructure dollars. In the end, more than half of what the Commonwealth grants for transport infrastructure is effectively neutralised when the winning states end up with a lower GST share. WA has been singled out for a particularly large $1.6 billion package in this budget, but that will only matter if the Grants Commission is asked to quarantine it from affecting WA’s GST share. New South Wales and Queensland – as usual – get a bigger share of the infrastructure pie than the commission says they need, but their lower GST share in subsequent years unravels more than half of their ostensible advantage.

So, on infrastructure spending, Scott “Good Debt” Morrison’s 2017 budget probably rates a pass.


The lost innovation agenda for industry

Beth Webster, Director, Centre for Transformative Innovation, Swinburne University of Technology

Wealth has to be created before it can be distributed. Unfortunately, this message has not been heeded but the current government.

The budget is high on rhetoric about deficits and the importance of runways, roads and rail but still low on supporting the innovation ecosystem that is needed to transform Australian industry. The government should be playing a role to stimulate the transition to new technologies. It should provide industry with the confidence to launch new products and technologies.

Overall, there has been a reduction in spending on programs dubbed in the budget “Growing Business Investment and Improving Business Capability” by A$93 million. The government has missed the most important form of investment – the networks of people and institutions that drive innovation.

There is funding for Industry Growth Centres (from A$37 million to A$61 million) and the Entrepreneurs’ Programme (A$79 million to A$106 million) but these measures have been matched by cuts. Two measures stand out in these cuts. First is assistance to pivot businesses out of car and clothing to other manufacturing sectors (down by A$84 million) into other sectors. And once again, the budget for Australia’s premier research and development organisation, CSIRO, is down by 4%.

On the plus side, spending on business research, development and commercialisation has increased by 4%. Not large, but it is a win. However all this has come at the expense of programs to inspire Australians to study science and engineering.

Overall, it’s fair to say industry programs have been savaged with programs to support business investment and improving business capability falling by 15%.

Phillip O’Neill, Director, Centre for Western Sydney, Western Sydney University; Beth Webster, Director, Centre for Transformative Innovation, Swinburne University of Technology; Marion Terrill, Transport Program Director, Grattan Institute, and Phil Lewis, Professor of Economics, University of Canberra

This article was originally published on The Conversation. Read the original article.

Stumbling into the future: living with the legacy of the great infrastructure sell-off


Phillip O’Neill, Western Sydney University

This is the fourth article in our series Making Cities Work. It considers the problems of providing critical infrastructure and how we might produce the innovations and reforms needed to meet 21st-century needs and challenges. The Conversation


The privatisation of urban infrastructure in Australia is an ironic story. The vehicles of urban infrastructure – the utilities and the state-owned enterprises – were so central to the life of cities that they became perfect entities for private sell-off. We now live with the consequences of the sell-off.

The utilities flourished in Australia as a nation-building exercise following the second world war. The Bretton Woods agreements entrenched Keynesian fiscal behaviours across the Western world.

The utilities thrived on the willingness of governments to raise capital for public works. They were also central to the development of state capacity and the assembly of a career-based professional public service. As part of the social compact, the public accepted reasonable user pricing for the availability of water, energy, public transport and telecommunications services.

Hence, the utilities and the state-owned enterprises led the roll-out of urban infrastructure in the second half of the 20th century. This roll-out shaped the nature of Australian urban life, its format and flows.

But then fiscal crisis of the state descended in the 1970s and 1980s. The sell-off of public assets was seen worldwide as a solution to state indebtedness. Arguments that private enterprise could deliver infrastructure services more efficiently added impetus.

A wholesale transformation

Few governments resisted the sell-off urge. Australian governments, state and federal, participated in the sell-off, though in a stuttering manner. Through time, however, the change has been substantial.

Abbott and Cohen calculate that the output of state-owned enterprises in Australia in 1989-90 accounted for 7% of GDP, 9% of total employment, and 14% of gross fixed capital expenditure.

By 2011-12, the output of state-owned enterprises had fallen to 1.3% of GDP. Their gross fixed capital expenditure contributed only 1.8% of the nation’s total. The authors estimate that proceeds from privatisations in Australia since 1987 total around A$194 billion (in constant year 2000 dollars).

The sell-off commercialised and privatised a raft of assets: electricity generation and transmission, gas distribution, airports, ports and telecommunication. New assets went straight to private hands: motorways, public transport, renewable energy generation, and freight handling.

The shedding of public responsibility for infrastructure meant public investment in Australia as a share of GDP fell from more than 5% in the mid-1980s to well below 3% by the end of the 1990s.

What’s in it for investors?

There is much to understand about the sell-off. Here I focus only on why private investors are willing to pay extraordinary prices to acquire urban infrastructure assets.

The attraction of investing in an urban infrastructure asset comes from the infrastructure services being embedded in the daily flows of people, water, energy and information throughout a city. The flows of a city are remarkably ordered in terms of volume, direction and timing.

How a city operates is dependent on the co-existence of decisions by infrastructure operators and users. The operators decide how and when services will be available. Households and firms decide what they will be doing across a 24-hour day and therefore how and when they will use the infrastructure services on offer.

Thus, the efficiency of infrastructure provision comes from the predictability of the flows of a city. These in turn come from a historical patterning and sequencing of behaviours by householders and firms as they read off and conform to each other’s movements.

An example is the relatively sympathetic structuring and sequencing of work hours and school hours. This ensures that public transport facilities are utilised more efficiently in peak hours, while the hours that parents and children spend together are made more convenient.

The embeddedness of infrastructure into city life means that revenue streams from user fees for infrastructure services are highly predictable and stable. And because transport, water and energy supply is usually monopolised, the householder has little choice but to continue as a consumer of an infrastructure service.

The books of a utility or state-owned enterprise, then, represent a discrete set of households well trained to pay their monthly bills. This is precisely the type of revenue stream that pension, insurance and sovereign wealth funds seek when faced with the peculiar problem of having surplus cash to lock away for at least the next two decades.

What did we lose in the sell-off?

Perhaps it was clever to have solved a government debt problem in Australia back in the day through a sell-off of assets to a new class of long-term investor. But as a consequence we have lost other things.

Infrastructure as a planning tool to shape our cities is one. Revenue streams to subsidise needy customers or supply to remote locations is another.

And, critically, we have lost the opportunity for the state to revamp energy, water and transport systems to allow for innovative supply and demand formats – such as distributed electricity supply networks – that are more appropriate to a climate-threatened planet.

Long-term privatisation contracts, most of them closed to scrutiny, lock urban infrastructure provision into 20th-century formats.

The difficult task now will be their unlocking.


This article draws on a research paper by the author in a new special issue of the international journal, Urban Policy and Research, on critical urban infrastructure. You can read other published articles in our series here.

Phillip O’Neill, Director, Centre for Western Sydney, Western Sydney University

This article was originally published on The Conversation. Read the original article.

Australian Politics: 17 July 2013


The asylum seeker controversy in Australia is deepening, with four more deaths after another tragedy at sea last night. There is yet another boat in distress right now as well. Compassion would seem to be much in need from where I sit, yet most Australians seem to have very little when it comes to the plight of refugees and/or asylum seekers.

Still, an election can’t be too far away as the various parties begin the usual pledges to spend money on this and that – certainly infrastructure needs are great in this country.

Meanwhile Kevin Rudd has held a community cabinet meeting overnight.

Spike in Anti-Christian Violence Feared before Burma Elections


Attacks on Christians seen as politically expedient in majority-Buddhist nation.

CHIANG MAI, Thailand, January 21 (CDN) — As Burma’s military junta gears up for its first parliamentary election in two decades this year, observers fear attacks on the Christian minority could intensify.

Mungpi Suangtak, assistant editor of a New Delhi-based news agency run by exiled Burmese journalists, the Mizzima News, said the Burmese junta has “one of the world’s worst human rights records” and will “definitely” attack religious and ethnic minorities more forcefully in the run-up to the election.

The military regime, officially known as the State Peace and Development Council (SPDC), pledged to hold the election this year, and analysts believe polls will be held after July in the country, also known as Myanmar.

Suangtak told Compass that the Buddhist nationalist junta would target Christians particularly in Karen state, bordering Thailand, and in Chin State, bordering India and Bangladesh.

Many Christians are part of the Karen National Union and the Chin National Front, armed resistance groups that have been demanding freedom or autonomy for their respective states for decades, and therefore the junta sees the Christian minority as a threat, said Suangtak.

There are over 100,000 Christian Chin refugees in India who have fled the junta’s attacks in the past two decades, according to Human Rights Watch.

Christians in Karen state are not safe. A Karen Christian worker living in the Mae La refugee camp on the Thailand-Burma border told Compass that ethnic Christians were facing human rights abuses by the junta “on a daily basis.” Most recently, Burma army soldiers attacked a church, murdered a local farmer and injured others in Nawng Mi village on Dec. 19, 2009, reported Burma Campaign UK.

Parts of Karen state fall under the “Black Zone” – identified by the Burma army as an area under the control of armed resistance groups where its soldiers are free to open fire on anyone on sight – and the junta has been launching indiscriminate attacks to take control of village after village, said the Karen Christian.

“Those who are not able to flee across the border during such attacks are either killed or forcibly relocated in and confined to temporary camps set up by the junta,” the Christian said. “Since the army litters surrounding areas with landmines, many local people die or get injured while trying to run away from or coming to the camps to look for their relatives.”

Over 150,000 refugees from Karen and neighboring Karenni states of Burma are living along the Thai side of the border, according to the United Nations High Commissioner for Refugees. More than half of them are Christian.

A representative of the Free Burma Rangers (FBR), which trains and sends teams of local people to help victims of the junta’s attacks inside Burma, said youths have been forced to become Buddhists in Chin state, where over 80 percent of the people are Christian.

Printing of Bibles is restricted, and churches are destroyed on a regular basis in the state, the source told Compass on condition of anonymity.

Access for foreign visitors to Chin state is, with some exceptions, prohibited, and the state is widely acknowledged to be the poorest part of the country, said Rogers.

“According to one Chin, the reason Chin state is denied resources, and foreigners are denied access, is specifically because the overwhelming majority of Chins are Christian,” stated a 2009 report by London-based advocacy group Christian Solidarity Worldwide (CSW). “The SPDC has, it is believed, taken a deliberate decision to discriminate against Chin Christians.”

The report cited a Chin Christian man who had served in the Burma army who faced discrimination.

“I had a colleague who was a Chin who became a Buddhist and he was promoted,” the Christian says in the report. “I was told to change my religion if I wanted to get promotion. I refused to convert.”

The report also quoted a Chin Christian as saying that students from a Christian youth fellowship at a university in Kalaymyo, in Chin state’s Sagaing Division, collected funds among their own community to construct a small church.

“However, in 2008 and again in 2009, ‘extremist Buddhists’ destroyed the church building, and when the students reported the incident to the local authorities, the youth fellowship leaders were arrested, detained and then released with a warning,” he said.

Religious Pretext

Suangtak said successive governments in Burma have promoted Buddhism since General Ne Win took power in 1962, leaving Christians insecure.

“There is a general feeling in Burma that the state represents Buddhism, and most Christians, particularly from conservative sections, cannot trust the regime,” said Suangtak.

Benedict Rogers of CSW said the junta doesn’t differentiate between individual Christians involved in armed struggle and ordinary Christians who have not taken up arms.

“And when it attacks villages in conflict zones, churches and pastors are often among the first to be attacked,” Rogers said.

A Christian worker from Burma’s Mandalay city, however, told Compass that thus far he has heard no reports of any major anti-Christian incidents there. He said he was hoping the junta would try to woo people with peace rather than violence.

“But nothing can be said about the unpredictable junta,” he said, adding that it was difficult to receive or send information in Burma. “Even in cities, the information infrastructure is limited and expensive, phones are tapped and e-mails are monitored. And the press is owned by the state.”

Rogers, deputy chairman of the human rights commission for the U.K.’s Conservative Party, said the Buddhist nationalist regime “distorts and perverts Buddhism for political purposes and is intolerant of non-Burman and non-Buddhist ethnic and religious minorities, including Christians and Muslims.”

Of the 56 million people in Burma, around 89 percent are Buddhist, with only 4 percent Christian.

Given that the junta merely uses religion for political power, it doesn’t target Christians alone, Suangtak said.

“The junta has no respect for any religion, be it Christians or Buddhists, and anyone who opposes its rule is dealt with harshly.”

Burma was ruled by military regimes from 1962 to 1990; at that point the National League for Democracy party, led by Nobel Laureate Daw Aung San Suu Kyi, won the parliamentary election. But the regime seized power again by imprisoning members of parliament after the election.

Rogers, who has co-authored a soon-to-be-published biography of SPDC chairman Senior General Than Shwe, said that while the armed groups are not perfect, they are essentially fighting to defend their people against a “brutal regime” and are “not in any way terrorists.”

“The armed groups have sometimes launched pre-emptive attacks on the military, but they have never attacked non-military targets and have never engaged in indiscriminate acts of violence,” he said. “Even the pre-emptive acts are conducted for defensive, rather than offensive, purposes.”

Rogers added that resistance groups were fighting to defend their people.

“Individual Christians who have joined the armed ethnic groups do so out of a perfectly biblical concept of just war, the right to defend your people from gross injustice.”

Added an FBR source, “In Burma, no one protects except the pro-democracy resistance groups, and all relief inside the country is only possible because of them.”

International Disrepute

The 2009 annual report of the United States Commission on International Religious Freedom states that Burma’s military junta had “one of the world’s worst human rights records.”

“Burma’s Christian populations face forced promotion of Buddhism and other hardships in ethnic minority areas where low-intensity conflict has been waged for decades,” the report states. “In addition, a new law passed in early 2009 essentially bans independent ‘house church’ religious venues, many of which operate because permission to build church buildings is regularly denied.”

The report also pointed out that in January 2009, authorities in Rangoon ordered at least 100 churches to stop holding services and forced them to sign pledges to that effect. Burma, which the ruling junta describes as “The Golden Land” on its official website, has been designated as a Country of Particular Concern by the U.S. Department of State since 1999.

Even after the 2010 election, little is expected to change.

The FBR source said the election was not likely to be free and fair, pointing out that the new constitution the junta adopted after an apparently rigged referendum in 2008 virtually enshrined military power.

“However, having an election is better than not having one at all,” the source said.

Report from Compass Direct News