Is Indonesian Society Inching Towards Yet Another 'Social Earthquake?'

Relationships between the different groups within this multi-ethnic and multi-religious social mosaic are not as harmonious, equalitarian, and friendly as one would have expected them to be

Thousands of people participating in a rally in Jakarta on Nov. 20 to show their support for diversity. Indonesia's society is deeply fractured along ethnic, religious and economic lines, and its fragile social cohesion easily cracks when tensions between groups arise, resulting in numerous conflicts, some of them violent. (Reuters Photo/Iqro Rinaldi)

While exploring Indonesia, foreigners are often greeted by the warm hospitality of its people, who will present visitors with friendly smiles and generous help to make the experience of discovering their beloved homeland a memorable one. This archipelago of over 17,000 islands with exuberant nature, high volcanoes, deep jungles, glittering beaches and dark caves has all the attributes to be a wonderful experience. When it comes to its peoples, Indonesia is much like a colorful mosaic of dozens of cultures, religions and ethnic groups that, at first glance, appear to harmoniously cohabitate and share the land and resources.

Once we take a closer look at Indonesia's eclectic society, however, we cannot help but notice that the relationships between the different groups within this multi-ethnic and multi-religious social mosaic are not as harmonious, equalitarian, and friendly as one would have expected them to be. There is a sharp contrast in how Indonesians treat each other depending on whether they belong or not to the same ethnic and/or religious groups. For instance, ethnic Javanese might treat each other in an equalitarian and respectful way, but look down on ethnic Dayaks, who look down on Flores people, who, again, in turn look down on the indigenous peoples of Papua.

These social fractures become deeper and sharper across religious lines. It is not unusual for the relationships between people who share the same ethnicity and land to be significantly undermined if they hold different religious believes. Moreover, these fractures are further widened when two groups are of different ethnicity and religion, such as the case of Acehnese Muslims and Ambonese Protestants. If to these ethnoreligious social fractures, one adds economic success along ethnic lines, such as the case of the Chinese Indonesians, social relations between them and the rest almost vanish. These multiple social divisions result weak social cohesion, leaving numerous pieces of the Indonesian eclectic social mosaic frailly bonded.

Indonesia's society is deeply fractured along ethnic, religious, and economic lines, and its fragile social cohesion easily cracks when tensions between groups arise, resulting in numerous conflicts, some of them violent. If not addressed appropriately, these interethnic and religious clashes will continue to happen and could continue to grow in intensity. While the source of these tensions are complex and might differ from case to case, the historical evidence shows that after a period of incubation, tensions build up and can trigger in recurring local and national violent outbursts, such as the countrywide anti-Chinese riots in 1998 and the interreligious clashes in Poso, Central Sulawesi, in the early 2000s. I use the concept of a social earthquake to describe this type of violent event.

Inspired by my background in earthquake engineering, I define social earthquake as a violent social conflict resulting from the (sudden) release of tensions existing among groups that have been formed by the deep fracturing of a society along ethnic, religious, economic, ideological, or political lines, or a combination thereof. Tectonic social plates are formed when two or more distinct groups of people share a common space, but share little when it comes to values, principles, and objectives. Moreover, given their physical proximity, these groups are often competing for local resources and power, making their coexistence difficult. If the commonalities that unite the groups are reduced below a minimum, these groups might start looking at each other as different, strangers, or even as evil others.

Indonesians are mostly unaware that their society is divided into conflicting social tectonic plates that are fractured along ethnic, religious, and economic faults. The few who are aware of these divisions and tensions seem to have internalized them as the normal state of affairs in the country and do not seem to see a need to worry about them.

More importantly, Indonesians are unwilling to openly discuss their interethnic and interreligious relations despite the numerous violent events occurred in the last two decades that left in their wake thousands of deaths, hundreds of burnt-down places of worship, and dozens of destroyed villages. And when these violent events are discussed in the media, it is in a superficial manner and often blamed on manipulations or misunderstandings, rather than on the deep-rooted interethnic and interreligious tensions that fracture Indonesian society.

By declining to honestly look at the existing tensions and genuinely explore ways to defuse them, conflicts continue linger, hampering the formation of an Indonesian national identity. This refusal is also reflected in Indonesia's education system, which focuses on promoting Indonesian's fundamental ideological concept of Bhineka Tunggal Ika (Unity in Diversity), but ignores to educate students about the interethnic and religious conflicts that undermine it. Thus, the fractures that divide Indonesian society can grow deeper and wider to the point that the different groups become much like social tectonic plates that are struggling against each other. This struggle undermines Indonesia's sociopolitical stability, economic development, and, ultimately, the wellbeing of the Indonesian people.

Indonesia has all the attributes needed to build a prosperous society where its peoples can proudly and warmly welcome foreigners and, more importantly, Indonesians belonging to different religions and ethnicities too. However, if the ethnoreligious and economic tensions are not openly discussed and understood, and addressed in an effective and sustainable manner, tensions will continue to intensify and result in recurring social earthquakes.

Patrik K. Meyer is a visiting professor at Universitas Muhammadiyah Yogyakarta and a New America Security Fellow. He holds a Ph.D. in politics and international studies from the University of Cambridge, an M.P.A. in development from Harvard Kennedy School, an M.S. in structural dynamics from the Massachusetts Institute of Technology and a B.S. in civil engineering from the University of California, Berkeley.

 

Doubt whether ASEAN really does matter to its member countries

Will Najib and Duterte’s tilt to China undermine ASEAN? Trissia Wijaya writes there are signs for optimism.

In the wake of a series of unprecedented statements from Prime Minister Najib Razak and President Rodrigo Duterte, many are casting doubt over whether ASEAN really does matter to its member countries. The tilt of Malaysia and the Philippines towards China have reinforced the perception of China’s expanding influence in the region, stirring fresh concerns that Beijing will erode ASEAN and draw the organisation closer to its orbit. Under Duterte’s administration, Manila’s approach towards China has changed dramatically, from previously fractious to now almost-kowtowing. Only a step behind Duterte, Malaysia has followed in embracing China, with Najib even calling himself a “true friend” of China and inking a naval deal that takes their relationship to “new heights”.

In light of these recent mind-boggling performances, it’s legitimate to ask whether this show of engaging China is the beginning of the end for ASEAN’s legitimacy in the region, particularly since Manila is about to take up the 2017 ASEAN chairmanship.

These changing regional dynamics and relationships set up a future with two foreseeable scenarios for ASEAN.

In the first scenario, ASEAN is imminently faced with a crisis of legitimacy and purpose. Although China’s chequebook diplomacy helps to fund regional infrastructure development, it could come at a price of fundamentally altering the power balance in ASEAN’s engagement with China

In the realm of realpolitik, Malaysia and Philippines’ shifts away from the US towards China may perhaps not be aberrant behaviour, as leaders generally assess the cost and benefits of their decisions. For both Duterte and Najib, the US pivot to Asia has been coupled with increasingly-troubled relationships with the superpower through the 1MDB scandal in Malaysia and the role of the US military presence in the Philippines.

Hence, mending fences with Beijing is less risky than holding onto long-standing maritime disputes against it. China issuing a “no-strings-attached chequebook” would indirectly support Najib in maintaining his grip on power amid the 1MDB crisis, and would allow Duterte to keep fuelling his war on drugs unchecked.

An old Chinese saying talks of “one bed, different dreams”. Throughout the years of ASEAN, despite each nation’s different dreams, members have at least slept in the same bed. Creating a binding Code of Conduct in the South China Sea and engagement with China through the ASEAN Regional Forum (ARF) during the early 1990s are some of ASEAN’s successes in its attempt to guide China to agree to a multilateral framework. When the South China Sea dispute became a principal agenda item for the first time at the 1997 ARF annual meeting, ASEAN’s confidence-building measures thawed China-ASEAN state relations. ASEAN successfully procuring China’s active participation in the ARF eventually resulted in the 2002 Declaration on the Code of Conduct on the South China Sea, which reiterated Beijing’s commitment to prevent further escalation of tensions.

However, during the past few years, the inability of ASEAN to resolve maritime disputes has been challenging the “one bed” concept. The region is potentially about to be drawn closer to China, led on a rope to Beijing’s bed. In such a scenario, ASEAN is powerless, and the regional dynamic would be transformed into something akin to an imperial tributary system.

Nonetheless, with Donald Trump’s US presidential election victory in mind, there remains room for optimism.

In the second foreseeable future for ASEAN, Duterte and Najib’s China lovefest could in fact strengthen ASEAN legitimacy. The pragmatic approach of Duterte could potentially lead to an important thawing of China-ASEAN relations. An ASEAN foreign policy independent from the US, a possible outcome of Trump’s isolationalist approach to the region, would be initially detrimental to balancing China’s assertiveness. However, as the next chair of ASEAN, this frees Manila to potentially bring China back on track – to the “bed of ASEAN” – in a manner similar to the early years of ARF, where ASEAN took the role of “policeman” in monitoring Beijing’s moves in the region.

Duterte and Najib’s engagement approach towards China could put pressure on that country to undertake a more benevolent policy approach to the region. China’s policy-making process has been traditionally reactive to the US’ presence at their doorstep. Despite years of criticism over China’s hostile expansionism, particularly in the case of the South China Sea, China would always defend their policy as a necessary defensive measure against an aggressive US presence. If Duterte and Najib are genuine about opposing US interference in the region, China’s assertive and expansionist policy has no legs to stand on, and ASEAN will understandably expect a shift in China’s policy dynamic.

Trump’s extraordinary victory may soon end the US’s rebalancing policy and downgrade the US presence in the Asian region. Thus, since China is likely to feel less contained, it may become more open to entertaining ASEAN’s dispute settlement mechanisms.

All in all, although ASEAN’s future remains a puzzle, Duterte and Najib’s developing relationships with China need not erode the legitimacy of the regional organisation as long as they play based on rules, where engagement is not “the end”, but the “process” to ensure China is still in the game. ASEAN’s engagement of China must be underscored by confidence that the member states’ tilts towards China are not simply about pursuing ‘interdependence’ at all costs. Instead, these tilts should be seen as ways to create cooperative relations, strengthen a rules-based process, and find new areas of agreement.

Trissia Wijaya is a MEXT¹s scholar at the Graduate School of International Relations at Ritsumeikan University, Kyoto, Japan. Her research interests primarily lie in international relations in the Asia-Pacific and foreign policy.

In Myanmar, genocide looms as the world waits on Suu Kyi

If Syria and Yemen weren’t enough to illustrate the depressing state that global humanitarianism finds itself in today, look no further than Myanmar.

A year after a comprehensive report was published by the London-based International State Crime Initiative, suggesting the nation’s long-oppressed Rohingya “face the final stages of genocide,” and 6 months into human rights icon Aung San Suu Kyi’s de-facto leadership, the minority ethnic group finds itself, yet again, under siege.

Yet beyond harsh words, calls for an independent investigation, and crossed fingers for a convicted Suu Kyi intervention, the international community has been frustratingly helpless—and useless. Human rights observers, humanitarian aid, and journalists have all been barred by the government from entering Rakhine state—where the violence has been taking place—while in May, Suu Kyi asked for “enough space” to address the Rohingya’s plight.

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But the clock is ticking ever faster. Last month, the Burmese army launched a large counter operation in Rakhine after officials accused a militant Rohingya group for the deaths of  nine border guards. And since, satellite images released by Human Rights Watch show that over 1,200 of their homes had been razed, over 100 have been killed, according to activist groups, women have been systematically raped, and thousands more have been displaced. The government denies the severity of the allegations.

The fresh reports of conflict compounds the historic atrocities the Muslim ethnic group have faced. Facing religious persecution, economic exclusion, and unrecognized by successive government’s—including Suu Kyi’s—various attempts to flee have seen hundreds drown at sea, and thousands rendered homeless.

How much more space can be given? It’s clear Suu Kyi’s hands are tied. Acting, or even speaking out, against the injustices pits Myanmar’s state counselor against the military, who she must win-over in their fragile power-share. Meanwhile the electorate, and the nation’s influential Buddhist monk-hood, hold strong nationalist—and anti-Muslim—beliefs. And upsetting Myanmar’s fragile state of politics, risks destabilizing her National League for Democracy (NLD) party’s priority of economic development. Moreover, Suu Kyi has little control over what the military does.

But the Nobel Prize winner’s silent expedience (Suu Kyi considers herself primarily a politician, not an activist) is outrageously Machiavellian, and inexcusable, given the nature of warnings emanating from her country. Surely this wasn’t the vision of democracy she sacrificed decades of her life for?

And what more can be said of a international humanitarian system that vowed ‘never again’ after Rwanda, Bosnia, Syria, and Yemen, particularly in the week a UN refugee agency representative in neighboring Bangladesh—where the Rohingya have been fleeing to—said the Burmese government’s ultimate goal is “the ethnic cleansing of the Muslim minority in Myanmar.”

Diplomatic and political channels are now seemingly blunt, not to mention disproportionate, policy tools for the Rohingya’s increasingly desperate situation. And as the optimistic shine of the NLD’s election victory last year dims in the eye of the human rights community, the UN and national governments must see that the global ‘Responsibility to Protect’ threshold, has been breached, and shows little sign of being addressed, quickly enough, by the Burmese state apparatus.

The humanitarian system is evidently stretched this year—but that just means it must expand its capacity, improve its early warning systems, and sharpen its approaches. And concerning Myanmar, earlier this month, the UN Security Council discussed the violence, and called for a resumption of aid access to Rakhine and an international investigation. Though, crucially, it remains unclear whether the UN or national governments have a red-line, or a coherent strategy, for sending-in peacekeepers without sovereign consent—as has been the case for countless instances of state violence.

What is clear is that the Rohingya are not interested in being part of an arbitrary statistic, nor are they able to wait for business-like evidence cases to be drawn to justify their defense. Enough is already apparent. They’ve suffered for decades under oppressive governments, and it may just be too late to see if Suu Kyi’s will offer them any respite. Words have been too little for them. They need urgent action.

Tej Parikh is a global policy analyst and journalist.

REPOSITIONING INDONESIA IN ASIA-PACIFIC LIBERALIZATION

The 24th Asia-Pacific Economic Cooperation (APEC) Economic Leaders’ Meeting in Lima, Peru, last week discussed several key issues related to the Asia-Pacific region, especially economic growth and human development, climate change, free trade and investment, as well as real and functional connectivity in the region.

Specifically, with respect to investment and free trade, there is one issue that needs special attention. This is the ambitious APEC plan to achieve a mega-regional free trade agreement, or the Free Trade Area of the Asia-Pacific (FTAAP).

It is astonishing that the FTAAP initiative has not captured sufficient Indonesian media coverage and government scrutiny. This article intends to reveal the main things that need to be carefully observed in the FTAAP plans, as well as to provide recommendations in regard to the continuation of the process in the context of APEC.

The exposure to FTAAP is expected not only to be significant to the government, as a forerunner in the process of negotiation, but also to all interested parties, largely business communities who will unswervingly feel the impact of FTAAP.

The FTAAP discourse basically started in 2006. Further emphasis has also been put in place with the issuance of a document entitled “Pathways to FTAAP” in 2010 by APEC Leaders. This document undoubtedly mandated APEC take immediate steps to comprehend the realization of FTAAP. However, since 2014, up to the current 24th APEC Economic Leaders’ Meeting, APEC has taken different approaches to pursuing FTAAP.

The APEC leaders are in agreement that FTAAP will only be comprehensive by relying on the outcomes of other free trade agreements that already exist or are in progress. In particular, the APEC leaders referred to the continuation of the Regional Comprehensive Economic Partnership (RCEP) and the Trans-Pacific Partnership (TPP).

Thus, it is currently clear that FTAAP will depend heavily on the development and conclusion of other mega-regional agreements, namely RCEP and TPP. APEC leaders have agreed that the process of forming FTAAP would be in parallel, outside the formal APEC process, to maintain the non-binding organizational commitment of the organization.

RCEP is well known, it is the proposed free trade agreement between ASEAN member states (AMS) and six countries with which ASEAN has existing free trade agreements (Australia, China, India, Japan, South Korea and New Zealand). Meanwhile, often seen as an alternative to RCEP, TPP is expected to be a megatrade agreement among twelve Pacific Rim countries, excluding China.

If we look at the current stance of APEC leaders toward FTAAP, namely relying on the outcome of other free trade agreements, perhaps one can jump to the conclusion that there should be nothing to worry about as it may just be a type of continuation. However, here lie the real hitches. There are major things that we need to look at more deeply. First, the political bias in FTAAP will depend on the stance of the United States in TPP, or China’s stance, along with other major East Asian countries, in RCEP. It is perhaps not a secret nowadays that the US is actively steering and leads TPP negotiations. Apart from the expected protectionism policy to be adopted by the US after Donald Trump’s victory in the US presidential election, currently the TPP is being coordinated by the US. The outcome of TPP negotiations will heavily depend on US leadership.

Meanwhile, China is the dominant state in RCEP. China has even explicitly reiterated its plan to make RCEP the main basis for the continuation of FTAAP. Indonesia, in turn, must take careful steps to provide its stance on RCEP and TPP, especially if the issues include providing wider market access to foreign goods. This is mainly because Indonesia’s stance on RCEP and TPP will then be carried forward as the basis for its commitment in FTAAP.

It will demonstrate Indonesia’s foreign policy tendencies, as well as its trade-bloc preferences in establishing economic integration with the rest of the world. It is also important to note the current circumstance that Indonesia has been officially involved in RCEP negotiations. Meanwhile, Indonesia is still undetermined and prefers to “wait and see” on the TPP continuation.

Second, by relying on the development and outcome of other free trade agreements, FTAAP is undoubtedly expecting to apply the principles of greater market access from pre-existing commitments, or previous commitments in other free trade agreements.

This means that whatever market access liberalization that Indonesia commits to in RCEP or TPP, it is almost certain that FTAAP will expect more liberalized access.

For instance, the restriction on foreign ownership in the banking industry is currently only 40 percent and, say, this was finally cemented in RCEP or TPP. Then, it is logical to expect FTAAP would put excessive pressure on Indonesia to give a greater commitment of more than 40 percent. This might be a very simple depiction of the real negotiation process that will take place in the future, taking into account that liberalization negotiations will be much more complex and involve sectors in aggregate. Nevertheless, rest assured that there will be sectors that will be harmed in negotiations.

APEC’s strategy in smoothing FTAAP by waiting for the formal development and outcomes of more liberalized negotiations is certainly an outstanding example. From the Indonesian standpoint, we need to look at this cautiously, as do business communities who have the biggest interest in transparent market access.

While FTAAP is currently still at an early stage and has not begun its formal process, all can virtually be negotiated from the outset. Given the active involvement of Indonesia in APEC and the improvements in Indonesia’s diplomacy in various international forums, such as ASEAN and the G20, we expect Indonesia will demonstrate its ability to lead the Asia-Pacific negotiation process for economic integration and liberalization.

 

The writer Chandra Kusuma has been a member of Indonesian delegations for a number of negotiations on trade liberalization agreement frameworks, and is currently a PhD candidate in political science and international Studies at the University of Queensland, Brisbane, Australia.

 

 

t 35 members of a Daesh-linked group have been killed in two days of clashes between the Philippines military and the Maute Group

35 militants now dead in south Philippines clashes

Almost 35 members of a Daesh-linked group have been killed in two days of clashes between the Philippines military and the Maute Group.

The group -- believed to have around 200 members -- seized the building, a high school and mosque Friday, and hung Daesh flags at some nearby buildings and houses. Five months ago, they were flushed out of the area -- now abandoned by many of the town's residents -- in a major military offensive.

Troops are reported to have penetrated the town hall Monday morning and pulled down the black flags.

They then raised the Philippine flag and declared the town liberated.

Last month, authorities arrested three Maute members accused of involvement in a September bombing that left 15 people dead in southern Davao City -- President Rodrigo Duterte’s hometown.

The military has described the group as being linked to the Abu Sayyaf.

The Abu Sayyaf is one of two larger militant groups in the south who have pledged allegiance to Daesh, prompting fears during a stall of a peace process between the government and the country’s one-time largest Moro rebel front that it could make inroads in a region torn by decades of armed conflict.

Anadolu Agency  

The Next Scary Military Acronym You Need to Know: IND (Improvised Nuclear Device)

One of the most terrifying acronyms in the world is IED, or Improvised Explosive Device. First coined by the British in the 1970s, when the IRA demonstrated its expertise in homemade fertilizer bombs, the term IED has come to symbolize a new form of warfare, where death can come at any moment from a device buried in the ground or an innocent-looking car parked at the corner.

But if you thought IEDs were bad, get ready for an even more horrifying acronym: the IND, or Improvised Nuclear Device.

What is an IND? If you’ve seen any movies or books where the terrorists or the super villains build a nuclear bomb and hold the world hostage, then you know what an IND is.

And here is what an IND can do, according to a U.S. Department of Homeland Security hypothetical scenario for a nuclear 9/11. If a terrorist group were to build a ten-kiloton bomb (the Hiroshima bomb was just fifteen kilotons) using nuclear materials smuggled into the United States, and detonate it in a major city, there would be one hundred thousand casualties as well as contamination of as much as three thousand square miles.

Ever since James Bond stopped SPECTRE from stealing nuclear weapons in the 1965 film Thunderball, the world has been waiting for a terrorist nuclear attack. In fact, there have been so many studies, predictions and warnings about INDs that they have become a sort of nonstop fire alarm for what everyone assumes is inevitable. Nonetheless, just this past April, President Obama reminded us that a terrorist nuclear attack would “change our world"

Pointing to chemical weapons used by ISIS in Syria, Obama warned that “there is no doubt that if these mad men ever got their hands on a nuclear bomb or nuclear material they would certainly use it to kill as many people as possible. . . . The single most effective defense against nuclear terrorism is fully securing this material so it doesn’t fall into the wrong hands in the first place.”

The problem is that there is a cornucopia of nuclear materials out there, including former Soviet stockpiles in Russia, and unstable nations like Pakistan. The terrorists might not even have to build or steal a bomb. They just need to purchase one from a rogue, cash-starved state such as North Korea. Isn’t it comforting to know that all that money ISIS got from bootlegged oil and looted ancient artifacts could buy a ready-made bomb, like some kind of takeout meal?

Not that terrorists even need the smarts to trigger a nuclear explosion. Here’s another acronym that’s likely to make the headlines one of these days: RDD, or Radiological Dispersal Device. Merely detonating a “dirty bomb”—an explosive device that spreads radioactive materials—would cause some damage and much more panic.

What’s interesting is how the U.S. government defines an IND. A somewhat convoluted definition appeared this September in the Pentagon’s Joint Publication 3-42: Joint Explosive Ordnance Disposal, which governs explosive ordnance disposal across the U.S. armed forces. JP 3-42 defined an IND as:

a device incorporating fissile materials designed or constructed outside of an official government agency that has, appears to have, or is claimed to be a nuclear weapon that is no longer in the control of a competent authority or custodian or has been modified from its designated firing sequence.

The Federal Emergency Management Agency’s 2008 description of an IND is more straightforward:

An IND is an illicit nuclear weapon bought, stolen, or otherwise originating from a nuclear State, or a weapon fabricated by a terrorist group from illegally obtained fissile nuclear weapons material that produces a nuclear explosion. The nuclear yield achieved by an IND produces extreme heat, powerful shockwaves, and prompt radiation that would be acutely lethal for a significant distance. It also produces radioactive fallout, which may spread and deposit over very large areas. If a nuclear yield is not achieved, the result would likely resemble an RDD in which fissile weapons material was utilized.

Note that according to these definitions, an Improvised Nuclear Device is any nuclear weapon built or acquired by a nongovernmental group, even if the bomb itself was manufactured by a nation like Pakistan or Russia. In other words, what makes an IND “improvised” isn’t that it’s jury-rigged or amateurish, but rather that whoever controls it isn’t an official government agency. One wonders whether the victims of an IND would be comforted by the thought that that bomb was just an improvised one.

If there is any consolation about an IND, it’s this: there won’t be a lot of them. Every day, there is another report of an IED going off in Syria or Afghanistan or Iraq. Rest assured that there won’t be INDs going off every day. If there are, we will have a new acronym: EHS, or Extinct Human Species.

Michael Peck is a frequent contributor to the National Interest and is a regular writer for many outlets like WarIsBoring

China’s great wall of debt

For over three decades, China has experienced a staggering public investment boom. In 2014, China spent US$4.6 trillion on fixed assets, accounting for 24.8 per cent of total worldwide investments and more than double the entire GDP of India. But China’s investment boom has coincided with a rapid build-up of debt. Between 2000 and 2014 China’s total debt grew from US$2.1 trillion to US$28.2 trillion, an increase of US$26.1 trillion — greater than the GDP of the United States, Japan and Germany combined.

China’s investment boom has heaped on a great wall of debt that now threatens the hard-fought prosperity of the country. Unless China shifts to fewer and higher-quality infrastructure investments, the country is headed for an infrastructure-led national financial and economic crisis, which is likely to spread to the international economy.

This reality is illustrated by a new analysis of 95 large Chinese road and rail transport projects and 806 transport projects built in rich democracies. A typical Chinese infrastructure investment suffers cost overruns and benefit shortfalls so large that they destroy economic value. In China actual infrastructure construction costs are on average 30.6 per cent higher than estimated costs, in real terms, measured from the final business case ­— which is in line with global trends. The evidence is overwhelming that costs are systematically biased towards underestimation.

With respect to traffic performance, demand in China represents two extremes. A majority of the routes witness paltry traffic volumes but a few routes are highly congested. Too little and too much traffic of this magnitude indicates significant misallocation of resources.

In our sample, over half the projects had an ex post benefit-to-cost ratio lower than 1.0, meaning that these projects were economically unviable at the outset of their operational lives. Less than a third of our sample could be considered genuinely economically productive.

The pattern of cost overruns and benefit shortfalls in China’s infrastructure investments is linked with China’s growing debt problem. We estimate that cost overruns have equalled approximately one-third of China’s US$28.2 trillion debt pile. China’s debt-to-GDP ratio stands at over 280 per cent, exceeding that of many advanced economies and all developing economies for which data is available.

Our revised calculation of China’s implicit government debt as a proportion of GDP suggests that China’s government is the second-most indebted in the world after Japan. Extraordinary monetary expansion has accompanied China’s piling debts — China’s M2 broad money grew by US$12.9 trillion in 2007–13, greater than the rest of the world combined. The result is increased financial and economic fragility.

Less is more when it comes to infrastructure investments. Infrastructure supports economic development if the investments are productive. This big ‘if’ is all too often ignored in policy debates leading to the predicament in which China now finds itself. Our findings suggest that had China focused on about a third of its most productive investments it would have reaped lasting economic benefits without the debt overhang it is currently suffering.

A puzzling feature of debates regarding the rapid build-up of debt is that many economists condone such profligacy. Noble laureate Paul Krugman has increasingly encouraged countries to take on debt. Similarly, Nicholas Lardy makes little of China’s alarming great wall of debt.

New-Keynesian arguments that see large public debt as benign are misguided. A Keynesian stimulus can be necessary to push the economy forward during a crisis. But the investments still need to be productive to avoid accruing liabilities that do not generate sufficient benefit streams such as end-user fees or tax revenues.

Moreover, to use such stimulus on a more or less continuous basis to drive a high national growth rate is ill-judged. This is especially the case if the stimulus is debt-financed like it is in China. Incurring this level of debt to fund infrastructure is destabilising. Negative macroeconomic impacts include volatile movements in interest, exchange and inflation rates, unpredictable movements in asset prices, adverse growth outcomes, rising unemployment from deleveraging and a lack of capital to finance productive investments. Several of these negative consequences are already materialising in China in 2016.

China’s debts are owed in large proportion to its own thrifty households. The numerous and dispersed creditors thus face state-owned and powerful debtors. Given the authoritarian nature of the government, Chinese state-owned debtors may hesitate little in raiding the savings and pensions of their own population. China may avert a spectacular financial crash, but financial repression of the more insidious variety of its domestic creditors will be unavoidable to liquidate its debts.

China’s total per capita debt now stands at above US$20,000. The multiple of per capita debt to per capita annual income for China is 11.5, far greater than that of the US (7.5) or Brazil (8.1) and in line with that of Greece (11.8). Since 2009, Greece has been in the midst of one of the worst sovereign debt crises of recent memory that has hit poorer households particularly hard. Other countries with similarly large per capita debt-to-income multiples, such as Spain and Japan, are undergoing debt-induced economic stagnation.

China has an ageing population with a relatively low level of wealth. Yet China’s social safety net and pensions system are far less developed than in advanced indebted economies. To prevent a stagnant economy requires China to become more productive with its investments.

China’s scale and an unrestrained approach to the printing of new money have allowed it to service debts that few other economies could shoulder. Developing economies — even large ones such as Nigeria, Pakistan or Brazil — would be imprudent to play with Chinese fireworks.

In China, liabilities can be rolled over for a considerable time, for instance by the central bank’s willingness to provide additional funding to state-owned banks to prevent default. This hides financial fragility for the time being, and as the carousel of credit goes around, observers may interpret the system to be one happy affair. Until the wheels come off.

Atif Ansar is a Fellow of Keble College and Programme Director of the MSc in Major Programme Management (MMPM) at the Saïd Business School, University of Oxford.

Bent Flyvbjerg is the first BT Professor and inaugural Chair of Major Programme Management at Oxford University’s Saïd Business School and a Professorial Fellow of St Anne’s College, University of Oxford.

The conclusions reached in this article are based on analysis by Atif Ansar, Bent Flyvbjerg, Alexander Budzier, and Daniel Lunn in the recent publication Does Infrastructure Investment Lead to Economic Growth or Economic Fragility? Evidence from China (Oxford Review of Economic Policy, 2016).