Uncertainty in the Asia Pacific – a global challenge

By Captain Matt Ort, retired (US Navy)

 Key takeaways:

  • The growth of China over the past five years has been nothing short of extraordinary.
  • Whether any of the activities China took with respect to the COVID outbreak were malign or not, the actions and decisions they made negatively impacted the world.
  • Post-pandemic, the US and its allies must shift supply chains away from China to more trustworthy nations while semi-conductor shortages have driven costs to record highs.
  • How the world chooses to react now will likely determine China’s future actions.

 

The past five years have seen great change in the Asia Pacific.

The growth of China has been nothing short of extraordinary. Most China-watchers had already recognised China as a peer to near-peer, but things changed in November 2018.

The COVID pandemic swept the world. It doesn’t matter whether you believe the virus was engineered in a lab or jumped from an unidentified animal at a wet market.

The cover-up, delayed reaction/notification, and their actions since have significantly altered everyone’s ideas of where and how China would fit into both their own shoes as a potential world power and the conventional western world order.

Freedom of navigation, island building/militarisation in the South China Sea, and Taiwan re-unification is where the attention of most of the US government and its allies in the regions were focused pre-pandemic.

Post-pandemic those items have not changed, however now the US and its allies must contend with supply chain issues that China was able to exacerbate by siphoning goods purchased by countries around the world to their own population once there was a shortage.

Like minded nations will need to shift supply chains away from China to more trustworthy nations.

There will be a cost to this that needs to be paid now, so China can’t disrupt the world again whenever it decides. India and Indonesia are two countries that can benefit from this shift while keeping costs lower than the US, Australia, or their allies.

China continues to dominate the world’s share of critical minerals. Numbers vary based on the mineral, but somewhere between 85-95% of minerals on the US Critical Minerals list are controlled by China.

China has translated this to get around 10% of the world’s semi-conductor market and could almost double that in the next two years. This makes the Taiwan re-unification issue even more important.

Taiwan has 20% of the global industry, but Taiwanese companies account for about 50% of the market. If China were to re-take Taiwan it stands to gain most of the world’s semi-conductor production. This is not something to be taken lightly.

The re-unification of Taiwan has been a priority of Xi Jinping and the Chinese Communist Party (CCP) for many years.

The invasion of Ukraine by Russia has been watched closely by the CCP to help them determine timing, strategy, and possible ramifications of re-taking Taiwan by force.

Allied nations must determine an inclusive policy to discourage Beijing from taking these actions. By aligning themselves with Russia it is obvious to anyone watching that China’s arguments for taking Taiwan will be based off the lessons they learn from Russia’s “re-unification” of Ukraine. Only united can the world deter China.

Whether any of the activities China took with respect to the COVID outbreak were malign or not, the actions and decisions they made negatively impacted the world.

Worldwide 7 million people are dead, hundreds of millions more were negatively impacted health wise or monetarily.

The supply chain has been stood on its head and semi-conductor shortages have driven costs to record highs. How the world chooses to react now will likely determine China’s future actions.

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Food Security in the Indo-Pacific: The Impact of Rising Aquafeed Prices

By Todd Crowley

Key takeaway:

  •  Aquaculture is under pressure from increasing feed costs, with the basket commodity price index rising by about 50% since 2022.

 

Aquaculture has become a vital source of food production in the Indo-Pacific region, with countries like China, India, Vietnam, and Indonesia leading the way in production and value.

While Australia is a relatively minor producer of aquaculture, the industry accounts for 45% of the nation’s seafood production by value and volume. With an increase in Asian migration and aging population, demand for seafood in Australia is expected to outstrip supply.

The global aquaculture market is expected to reach $232.4 billion by 2026, and the industry will need to produce an additional 27 million tonnes of edible product to meet this demand.

The challenge for all aquaculture producers is the global phenomenon of rising commodity prices.

The reliance on common input ingredients such as soybean, corn, fishmeal, fish oil, rice, and wheat for aquafeed production has placed the industry in competition with the animal husbandry sector and direct human consumption for these commodities.

Since 2022, the basket commodity price index (CPI) has risen about 50 percent, with soybean meal, fishmeal, corn, wheat, and major oils used in the aquafeed industry experiencing significant price increases. These global market shocks and volatility are of particular concern for smallholders and rural farmers, who may be more vulnerable to the fallout of rising aquafeed prices.

There is also increasing pressure to intensify aquaculture productivity through the use of commercial feeds over farm-made feeds. This is further exacerbated by urbanisation and the demand for high-value fish species. Intensified aquaculture puts a strain on the availability and affordability of aquafeed, especially fishmeal and fish oil, which are highly favoured for aquafeeds.

The search for alternative protein sources to replace wild-caught proteins in aquafeed manufacturing is crucial for the industry’s sustainability. Soybean meal is currently the primary alternative to fishmeal, which currently trades at usd$3000/tonne. The current price of soybean meal is significantly lower than fishmeal and fish oil, which can make up anywhere between 25 and 45% of fish feed.

Developing countries within Asia, Africa, and Latin America hold the greatest opportunities by value and volume of output for the aquaculture industry. However, the rising prices of aquafeed may impact the industry’s growth and sustainability, particularly for smallholders and rural farmers. Therefore, it is important for the industry to continue to search for sustainable and affordable alternatives to traditional aquafeed ingredients.

Given the major producers of feed are located in the South China Sea, what supply chain pressures will Australia feel in the future should disruption in the region continue?

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Case Study: Facilitating the Quad CT-TTX 22

When Australia hosted the third counterterrorism tabletop exercise in 2022 as part of the nation’s ongoing Quad partnership with India, Japan and the United States, Vaxa was engaged to provide an experienced, subject matter expert to perform the role of planning and Facilitator.

Background:

The Quadrilateral Security Dialogue, commonly known as the Quad, is a strategic security dialogue between Australia, India, Japan, and the United States that is maintained by talks between member countries.

Australia’s Quad partnership with India, Japan and the United States is a key pillar in Australia’s foreign policy and the Department of Foreign Affairs and Trade (DFAT) is the lead Australian Government department for Australia’s commitment to QUAD.

One of the Workstreams in the Quad is counterterrorism. The Group works to support a peaceful and secure Indo-Pacific region through counter-terrorism cooperation. Quad partners convene annually to hold a multi-agency policy dialogue and a counter-terrorism Tabletop Exercise (TTX), designed around current and emerging threats in the region.

The TTX enables Quad partners to share concepts, methods and experience on contemporary and emerging counter-terrorism challenges, issues, and capabilities. The TTX is a key deliverable in the Foreign Ministers’ QUAD responsibilities.

The solution:

Australia hosted the third counterterrorism TTX in Sydney in October 2022 (QUAD CT-TTX 22).

Vaxa was engaged by DFAT’s Office for Counter Terrorism to provide an experienced, subject matter expert to perform the role of planning and Facilitator for the event.

The requirement included advice and input into the development of the TTX exercise papers and associated discussion topics, acting as Master of Ceremonies for the whole event, the principal facilitation role and hosting support to international delegates as required.

The outcome:

Vaxa’s provision of key input and advice into the planning of QUAD CT-TTX 22 and successful conduct of facilitation and the Master of Ceremonies role ensured DFAT’s hosting requirements were met, and Australia’s objectives for the TTX counterterrorism workstream were achieved.

Submarine image courtesy of US Embassy Australia.

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Access a central library of credible information, extensive research and timely intelligence. Hear from our trusted network of the best industry minds, on matters of importance to critical sectors operating in the Indo-Pacific.

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