Chinalco moves closer to doubling its stake in Rio Tinto

Chinalco moved a step closer to doubling its stake in Rio Tinto today when the US foreign investment regulator has given clearance for the planned $US 19.5 billion investment. The two companies released a joint statement today saying they obtained clearance from the Committee on Foreign Investment in the United States (CFIUS) for Rio to issue convertible bonds to Chinalco and also allow the Chinese company indirect minority investment in Rio’s Kennecott Utah Copper Corporation, the world’s largest copper mine. The US approval follows similar approvals from the Australian Competition and Consumer Commission (ACCC) on 25 March and the German Federal Cartel Office on 31 March.

However, two important final hurdles remain: Australian foreign investment approval and approval from Rio shareholders, neither of which can be taken for granted. In March, the Foreign Investment Review Board (FIRB) requested a 90-day extension due to the deal’s complexity of the deal and the number of other applications by Chinese state-owned groups for Australian investments. Meanwhile shareholders are angry Rio is favouring Chinese money over their rights to buy more of the company's shares.

Chinalco (an acronym for the Aluminium Corporation of China Ltd) is already Rio Tinto’s largest shareholder with 9 percent of the company and the proposed deal would double their investment to 18 percent. Founded in 2001, the Chinese government majority owned company has 200,000 employees and has interests in Australia, Peru and Vietnam. On 1 February it made its bid to increase its Rio Tinto share (with US giant Alcoa putting up roughly 10 percent of the money). China watchers say the government put up the money to avoid a BHP takeover of Rio. A merged BHP/Rio would have become the largest single producer of iron ore, aluminium and other resources with immense pricing power over its Chinese customers.

However Chinalco deny this is the reason for the deal and have been keen to stress it is independent from the government. It hired public relations firm FD Third Person to address shareholder concerns about a Chinese state-owned enterprise controlling Australia’s natural resources. Their strategy has been undermined somewhat with the news chief executive Xiao Yaqing has recently taken a role with the Chinese State Council which is the de facto government cabinet.

Nationals Senator Barnaby Joyce has been in the forefront of Australian opposition to the deal. He has been seen on television advertisements in Queensland and the ACT for the last two months in what was initially a one man campaign (though South Australian independent Nick Xenophon has now joined him) against the merger. Joyce’s ads warn against “foreigners” buying "the source of [Australian] wealth" and he exhorts his audience to “stop the Rudd Government from selling Australia”. The adverts were paid for by Perth-based businessman and political activist Ian Melrose who says his motivation was annoyance about China “buying parts of Australia.” Melrose and Joyce have been backed up by an Essential research poll in March which found 57 percent of Australians were wary of Chinese investment in resource companies.

The question is whether the poll feelings are pro-Australian or merely anti-Chinese. Given that Rio Tinto is a multinational company with joint headquarters in London and Melbourne, it is debatable whether it is a truly Australian asset. The company has made fabulous profits throughout the mining boom, but it was undone in 2007 by the questionable $44 billion purchase of Canadian aluminium company Alcan which left it with substantial debts. Rio is now trying to convince investors and regulators that the accord signed in February with Chinalco is the best way to slash the company’s $38.9 billion debt mountain.

The deal is not yet set in stone. Doubts remain over the terms of the convertible bonds, which is currently worth $7.2 billion. With a recent rebound in metal prices, there is speculation Rio would change the bonds issue to make it available to all Rio shareholders (not just Chinalco) or even scrap the deal entirely and bring in another strategic investor such as rival miner BHP Billiton. Chinalco’s position is that the terms of the convertible bonds are negotiable, but the other major element of the deal ($12.3 billion in direct investments in mining assets such as Kennecott) should remain as agreed. Then assuming the shareholders can be mollified, it still needs final political approval. FIRB has until 14 June to make its recommendation on the matter to Treasurer Wayne Swan. The final decision belongs to the Australian Government.

Exit polls give Congress a narrow lead in Indian elections

India’s massive month-long election has finally closed with exit polls suggesting the country is headed for a hung parliament and coalition government. The fifth and final phase ended yesterday and all six polls give the ruling alliance led by the Congress party a slight lead over the main opposition bloc headed by the Hindu nationalist Bharatiya Janata Party (BJP). However these polls should be treated with caution as they proved badly wrong in the last election in 2005. Nevertheless, it looks certain that when the final result is announced on Saturday neither grouping will have anywhere near the 272 seats required to command a parliamentary majority in the Lok Sabha (lower house).

The marathon election began on 16 April with 107.8 million registered voters deciding the fate of 1,432 candidates across seven states and two federally administered territories. The swing southern state of Tamil Nadu was among the last to vote yesterday but will be crucial as it has backed the winner in the last five elections. However the fight for its 39 seats has been complicated by the plight of fellow Tamils in the conflict in neighbouring Sri Lanka. Regional political parties say New Delhi have not done enough to stop the bloodshed and have vowed to protect the interests of ethnic Tamils if voted into power.

According to India’s constitution the new parliament must be in place by 2 June. As a result party dealmakers have arrived in New Delhi to start intensive negotiations with the host of small regional parties that are likely to take seats. There is plenty of cloak and dagger horse-trading such as when the head of the Janata Dal regional party, H.D. Kumaraswamy drove to Congress president Sonia Gandhi's home with his face covered and then left by a different exit. Kumaraswamy had previously indicated he was supporting the Third Front.

Kumaraswamy’s defection will be a major blow to the Third Front which is an umbrella movement of leftist and regional parties. The unwieldy alliance set up in March includes the Communist Party of India (Marxist), the Communist Party of India, the Revolutionary Socialist Party, the All India Anna Dravida Munnetra Kazagham, the Forward Bloc, the Janata Dal (Secular), the Telangana Rashtra Samithi, and the Telugu Desam Party. The Front’s core objective is to present an alternative to alliances led by India's two national-level parties. However despite the opportunities presented by a hung parliament it is unlikely the Third Front will have a chance of forming government. And even if it did, The Economist says it would be “fatally weakened by internecine bickering, policy dissension and leadership clashes.”

So who will Indian president call to form government? Traditionally the largest party is given the first opportunity, BJP president Rajnath Singh remains confident his party will be the largest despite the exit polls. “The BJP will emerge as the single largest party. The BJP-led NDA (National Democratic Alliance) will get a majority or will fall short by a small margin in which case I am confident that other political parties will support us,” Singh said. Singh refused to name which parties would support him if NDA falls short of a majority. “This is a part of our strategy. I will not say anything at all on this issue,” he added.

The results make it more likely that whatever coalition is formed, it is likely to be weak and the government would not last a full term. This feeling was noted by the Mumbai stock exchange with the BSE Sensex trading down 1.3 per cent today amid concerns of a weak coalition having to deal with India’s economic problems. The financial services firm Goldman Sachs noted that India's fiscal deficit ranked among the highest in the world and was likely to exceed 10 per cent of GDP in the current fiscal year.

The Times of India says neither major party have articulated a coherent strategy to dealing with the problem. “Contracting growth and diminishing revenues mean that public expenditure will come under strain,” said the Times. “Neither the Congress nor the BJP have alluded to this inevitability.”

Spinning the Garrett Parrot: NSW Government and News Ltd are exaggerating job losses

The NSW and Victoria National Parks Associations (NPA) say that claims of large job losses in the NSW logging industry are unfounded. Both the NSW Government and News Ltd media have been running hard against Federal Government environment minister Peter Garrett for his stop work decision in NSW Murray wetlands which are the home of the threatened green leek parrot. Their argument is that a thousand jobs are at risk. However NSW NPA cites documents prepared for Forests NSW which show there are at most 120 direct jobs in the River Red Gum logging industry. “[NSW Primary Industry] Minister Macdonald has exaggerated the issue by an order of magnitude" say the NPA.

News Limited media outlets have also used the parrot to undermine the federal government’s claim it is serious about saving Australian jobs. The furore has led to the ludicrous headlines such as “parrot endangers jobs”. The Sydney Daily Telegraph launched its jackboots into the discussion on Monday with an editorial that called the government’s position “sheer lunacy”. It said concerns about the impact of logging in the area are well documented and a “dramatic stopwork” would put a thousand people out of work.

However, besides the exaggeration about the numbers, News Ltd is also ignoring the fact the logging is illegal. The NPA says the NSW government agency Forests NSW is flouting the law. “This is an extraordinary case of the NSW Government itself being caught red-handed, illegally logging our internationally significant Red Gum wetlands,” said NPA spokesperson Georgina Woods. She applauded Garrett for “preventing illegal logging of internationally significant River Red Gum wetlands in south-western NSW”.

Peter Garrett has been cautious in response, well aware of the inflammatory power of the media. He said the issue was the potential for logging to impact on wetlands of international importance.. He said the issue was the subject of discussion between the Commonwealth and the NSW government. Garrett says he expects these discussions to conclude by the end of the month and afterwards logging would still able to go ahead in a large part of the forest. “It was an important question of balance” he said. “Protecting habitat and internationally listed wetlands, with the need to protect jobs in the region.”

However Opposition environment spokesman Greg Hunt was keen to paint the government’s delaying action as “overkill”. Local Liberal federal member for the NSW seat of Farrer, Sussan Ley, brought the matter up in Question Time yesterday. Ley insists that loggers on the ground have been told a stop work order exists ready to be activated by the end of the month. She asked Garrett would he reverse the decision given that the parrot is not endangered but 1000 jobs in her electorate were.

Garrett replied that his department had not issued a stop work order for the NSW Central Murray State Forests area. He said he had spoken to the NSW Primary Industries Minister Ian Macdonald and asked him to hurry up consideration of the matter. Garrett reminded Ley there was national environment legislation (The EPBC Act introduced by the Howard Government) that affected the logging and Australia is subject to international agreements for the protection of biodiversity.

And the wetlands are extremely important from a biodiversity perspective. The NSW Central Murray State Forests and the Ramsar wetlands in Victoria (Barmah and Gunbower forests) form the largest complex of tree-dominated floodplain wetlands in southern Australia. Inside the forests lives the green leek parrot, more commonly known as the “superb parrot” (polytelis swainsonlii). Although not officially endangered, it is considered a threatened species with just a few thousand birds left in the wild. They face dangers from landclearing, loss of hollows, and lack of regeneration of woodland habitat. It also faces competition from the introduced common myna bird.

Because of the parrots vulnerability, it is the subject of a Victorian government “action statement”. The problem that although parrot nest trees with hollows are typically large and old (and therefore of low commercial timber value), adjacent trees are often subject to logging. There is also no similar plan in NSW. The cross-border area is home to the Yorta Yorta people who don’t recognise the difference between the states. Yorta Yorta Nation spokesperson, Neville Atkinson, said he hoped the Red Gum forests would be protected on both sides of the river. "We want to see the whole area managed to protect its environmental values and our heritage,” he said. “We want to ensure that the knowledge of our people, acquired over untold generations, is applied in any future management of the area.

Wayne Swan hands down the recession budget

Wayne Swan has handed down his so-called “horror” second budget in the middle of a global economic crisis that has wiped $210 billion from budget revenues. There is some confusion as to the exact size of the budget deficit as the Treasurer deliberately did not mention in his budget speech to avoid giving the opposition a free sound byte. But whether it is $57.6 billion according to The Australian or $53 billion according to Crikey it is still less than what most analysts predicted. However it is also big enough to mean that Australia will remain in the red until 2016 - at best. The budget itself produced few surprises in the details as almost all of the key announcements were strategically leaked in advance (apart from the surprise announcement to raise the retirement age to 67).

Swan called it a nation building budget for recovery and he set the scene in his economic background statement. Because of the recession, the global economy will contract by 1.5 percent this year and Australia’s will contract by 0.5 percent which will impact the unemployment rate. However, Swan claimed that without the two stimulus packages in December and April, Australia would have faced a 2 percent contraction and an additional 210,000 people on the dole queue.

The centrepiece of the budget is the $22 billion investment in infrastructure. $4.6b will be spent on improvements in the metropolitan rail systems with another $3.4b on roads. The Clean Energy initiative will get $4.5b for carbon capture projects from fossil fuel emissions, $1.5b for solar, and almost half a billion for a new research and development body called Renewables Australia. There will also be $5.8b for health and education infrastructure. This is on top of $5.7b for higher education reforms.

As flagged in advance, the aged pension is increasing by $32 a week at a cost of $14.2 billion over four years. But the pension age will gradually be increased to 67, at a rate of 6 months every two years beginning in 2017. Self-funded retirees will get access to a senior’s supplement. Meanwhile, the $731m paid parental leave scheme comes in 2011 with 18 weeks of paid leave for primary carers who earn less than $150,000. The first home owner’s grant has been extended to October.

On the down side, private health insurance will be more expensive. The rebate will be means tested on a sliding scale cutting out completely at $120,000. The government is also temporarily reducing its superannuation contribution in order to save $1.4 billion. The matching rate to employee contributions will drop from 150 per cent to 100 per cent for the next three years and will revert 125 per cent for 2012 13 and 2013 14 before returning to 150 percent in 2014-2015.

The government is also looking to save $880 million from 11,000 people by closing a loophole that allows people earning over $250,000 to claim back tax on loss making hobby businesses. Another $200 million will be saved by removing inconsistencies in taxing new employee share schemes.

Swan has also ended the exemption on overseas earnings in an attempt to save $675 million. Australians working overseas for over 90 consecutive days are no longer eligible for a general exemption which exempted them from paying any Australian income tax on their foreign employment income. This means that this income will now be taxed twice however Swan defends this on the grounds that “many foreign countries are lower tax jurisdictions”. However aid workers and some government employees (defence and police) will continue to enjoy the exemption.

Predictably the budget did not impress the Opposition. Opposition Treasury spokesman Joe Hockey said the projections for a return to budget surpluses were misleading and called it “casino economics”. Meanwhile the Australian Medical Association were unhappy with the private health rebate changes saying many Australians will pay more for health adding to their anxiety when they are already stressed about job security and the future.

Elsewhere, Annette Sampson at the Sydney Morning Herald says the superannuation tax concessions in the budget will also affect lower income earners. Ben Eltham at New Matilda says the budget is sound but politically risky and calls it "a gamble posing as prudence". Bernard Keane at Crikey called the budget “a flat affair” and says Swan was given an easy ride by the media. The Australian’s Samantha Maiden says the budget documents chart a path to recovery that is more upbeat than international forecasts. Economist John Quiggin also calls it an optimistic scenario. “Although complete collapse now seems unlikely, the prospect of a long period of depressed growth, similar to Japan in the 1990s, cannot yet be dismissed,” he said.

Leaks and lockups: a media anatomy of Federal Budget Day

Treasurer Wayne Swan hands down the long anticipated 2009 Federal Budget in parliament tomorrow night. Part of the ritual of the budget is the ritual of advance “leaks” usually by direct authority of the government to either soften the blow of cutbacks or provide good news on an otherwise slow part of the news cycle. And so despite Swan’s constant mantra about “not speculating” on specific budget measures, he chose Mother’s Day to announce 18 weeks parental leave would be introduced from January 2011 for those earning less that $150,000 a year. Meanwhile there have been a litany of advance warnings that items such as health insurance, health rebates, family payments and superannuation are all set for brutal cuts due to “the revenue hole”.

Apart from the stage-management of leaks, the other strange ritual is the infamous budget lock-up. For six hours tomorrow, the country’s finest journalistic minds will have the umbilical link to their mobile phones cut off so they can be holed up in a parliamentary chamber alongside opposition parliamentarians where they will be forced to read the mountains of budget materials cover to cover. While most journalists describe the lock-up as an expensive waste of time, no self-respecting member of the Canberra Press Gallery will be anywhere else tomorrow. And fringe outlets such as Crikey fought long and hard before finally gaining admittance to the lock-up last year.

In order to be involved in the lock-up, media organisations had to submit the names and positions of those requiring access to the Treasury by Friday 1 May. Treasury directions were that space was limited and media should restrict their own numbers “to a minimum” and they were also required to bear their own costs of participation and attendance. Whether News Ltd is adhering to the numbers is a moot point, as they are sending 90 people inside.

Access to the lock-up area begins tomorrow morning when media organisations are allowed to set up their equipment until 11.30am. An hour later, the journalists are allowed in. Every attendee must provide proof of employment and has signed the sinister sounding Form of Undertaking which is witnessed by a Treasury official. They will then pass through metal detectors to check for mobile telephones, pagers, handsets, computers and personal data assistants (PDAs) which must all be deposited outside the room. The doors are then hammered shut at 1.30pm and the journalists are kept inside for the next six hours.

No one is allowed to contact anyone on the outside until the start of the Treasurer's Budget Speech which doesn’t begin until 7.30pm (although a security guard will apparently escort people to the toilet if needed). The reporters have six hours to make sense of tonnes of budget books, press releases and analytics. No budgetary information is allowed to be made publicly available until it is publicly announced in the speech. Inside the lockup, the temporary prisoners are given access to the entire set of budget information in hard copy and the data is then loaded online at 7.30pm.

Because 7.30pm is late notice for the following morning’s newspapers, Treasury also has the concept of the secure sub-lock-up which applies to the print organisations only. Sub-editors can establish and use secure encrypted landlines located within their own headquarters for sub-editorial purposes. Here production staff, subs, layout designers and editors all re-engineer their Canberra reporters’ copy for the front pages under the watchful eyes of Treasury officials. Curiously, “journalists are not permitted” inside the sub-lock-ups though the edict does not take into account that most sub-editors and editors are also journalists.

Of course none of this expensive secrecy is at all necessary. The primary purpose is to enable the Government gain control of the initial news cycle. Writing in today’s media section of The Australian, Michael Wilkins says it is time to call a halt to the lock-up charade. He calls it an expensive, archaic practice that costs media organisations in excess of a million dollars for little reward. But Wilkins’ call is unlikely to be heeded any time soon. As he himself notes, “The Government rarely has [this] chance to hold the nation's journalistic leaders hostage within its walls, an opportunity during which officials can ply their take on the numbers to a captive audience searching for answers.” And for a government as obsessed as this one is with staying on message, that opportunity is too good to turn down.

Btw, Australia is not alone with this nonsense. Check out this story of the Canadian budget lock-up from January this year.

Pakistan's Swat province on the verge of all out war and a humanitarian crisis

Hundreds of thousands of civilians are fleeing the Swat valley as fighting intensifies between Pakistani government troops and the Taliban. On Friday, the UN Nations High Commissioner for Refugees (UNHCR) warned of a humanitarian crisis as large numbers of people arrive in already overcrowded areas of temporary accommodation. The UN agency said about half a million people have been displaced in the last few days bringing the total amount of Swat refugees arriving in safer areas of North West Frontier Province (NWFP) to a million since August 2008. "The new arrivals are going to place huge additional pressure on resources,” said UNHCR spokesman Ron Redmond.

Al Jazeera's Kamal Hyder said many of these people now fleeing Swat are stranded along the jammed highway between Swat’s largest city Mingora and Mardan. Many had to leave suddenly after a government warning on Thursday the fighting was about to intensify. “Many people who are stuck inside Swat are asking the government why there was no plan [and] why they were not given adequate warning to get out,” he said.

The longstanding curfew in the entire Malakand division had added to the misery of the displaced and a large number of people were trapped in their homes in Mingora and other areas of Swat. Today, the Swat administration announced a temporary relaxation of the curfew around Swat from 6am to 1pm to enable civilians to flee the anti-Taliban offensive. Both Prime Minister Yousuf Raza Gilani and President Asif Ali Zardari promised to minimise civilian casualties and look after those displaced by the conflict. Zardari stated from New York that a billion rupee fund would be announced for the rehabilitation of refugees.

The news came as Pakistan's army launched an offensive on Friday after a government order to eliminate militants from the Islamist stronghold. They attacked Taliban positions with warplanes and helicopter gunships. The helicopters targeted militant hideouts in the district's biggest city of Mingora and killed 15 fighters. Meanwhile mortar fire in the city also resulted in an unknown number of civilian casualties. Militants used houses as bunkers to fight back. Troops also engaged militants in a number of other locations in Swat, including Rama Kandhao ridge in Matta, and destroyed an insurgent headquarters in Loenamal. There have been several hundred casualties to date.

Until recently, the government in Islamabad was virtually oblivious to what was going on in Swat, which is just 130km from the capital Islamabad. The former tourist area has become a no-go area after the Taliban took over defacto control of the province. According to the army, Taliban groups have blown up 165 schools for girls, 80 video shops, 22 barber shops and destroyed 20 bridges. One million local children have missed out on Pakistan’s anti-polio vaccinations after the government deemed it too dangerous to implement the immunisation drive there. Haji Adeel, a senator and senior leader of the NWFP’s ruling Awami National Party, concedes the central government has lost control. “Swat is a part of Pakistan but no governor, chief minister or the prime minister can venture to go there," he said.

Swat’s current problems date back to 2007. While then Pakistani leader Pervez Musharraf was locked in a struggle to keep the presidency, popular Taliban leader and cleric Maulana Fazalullah (pictured) took advantage to launch a “holy war” to take control of the province with his 10,000 strong private army. Fazalullah collects one-tenth of agricultural income in taxes, uses FM radio to pass on his decrees to the local population, and has his own judiciary to hear cases and hands down verdicts.

Although Islamabad sent in 20,000 troops to oppose the Fazalullah, the capital Mingora was under effective Taliban control by January 2009. The Taliban set a deadline of 15 January to close all schools, especially those of girls. When some schools defied the ban, they were blown up. But with a central government and attendant media still occupied with India and the aftermath of the Mumbai bombing, it seemed that Swat would be left to its own devices.

Desperate to save face, the Islamabad government signed a peace accord with the Taliban in February which agreed to the imposition of Sharia Law in the province. While locals were mostly happy the accord would bring peace, US defence officials and NATO were not impressed by what they saw as a surrender to extremists fanning out from the Afghan border. NWFP Information Minister Mian Iftikhar Hussain defended the settlement as necessary to achieve peace. "The need of the hour is to put water on fire, not to fuel it,” he said.

But the ceasefire did not last as mistrust grew on both sides. The agreement began to unravel in April when the Taliban entered the Lower Dir and Buner districts, barely 100 kilometres from Islamabad. US Secretary of State Hillary Clinton called it an “existentialist threat” to Pakistan’s government. And after President Zardari met Obama in Washington this week there was a swift about turn in the government’s position. His position was suddenly unequivocal. He said there were 3,000 “terrorists” in the Swat and his government was going to eliminate them all. When the White House press corps asked him to clarify what "eliminate" means, Zardari said "eliminate means exactly what it means." When asked does it mean: "killing them all", Zardari replied: "That's what it means."

UN asks Australia about Aboriginal custody death

The West Australian has revealed the UN is seeking information about how an Aboriginal elder died from heatstroke in a prison van in remote WA last year. The UN representative on Torture and other Cruel, Inhuman or Degrading Treatment and Punishment is seeking information on the death of “Ribs” Ward, who collapsed while being taken 360km from Laverton to Kalgoorlie in 42C heat in January 2008 to face charges of drink driving. The UN made the enquiry to the Australian federal government last September. The WA Corrective Services department told the paper yesterday that Canberra had passed on the UN enquiry to the WA Government.

The 46 year old Ward (his family does not want his first name published for cultural reasons) was a resident of the remote settlement of Warburton, 1,500km northeast of Perth. He was an interpreter for local police, an advocate and educator for children of the Gibson Desert, and an international ambassador for the Ngaanyatjarra peoples. He called himself “professor of the bush”. On Australia Day, 26 January 2008, Ward was drinking heavily while on a visit to Laverton. Police stopped him in a random traffic check and arrested him for drink-driving after he blew 0.22 (four times the blood alcohol legal limit). He was put in the Laverton lock-up for the night.

Police then gave the job of transporting him to Kalgoorlie to a British private contracting firm, Global Solutions Ltd (GSL). GSL (which has recently changed its name to G4S) is profiting from the increasing privatisation of prison services in Britain, South Africa and Australia. In 2004 the company was fined $500,000 for its mistreatment of asylum-seekers when the company transported five detainees from Melbourne to Baxter Immigration Facility in remote South Australia.

In WA, GSL has a $25 million contract until October for court security and transporting prisoners across the state using Corrective Services facilities. However the facilities used to transport Ward were far from adequate. GSL was forced transport him in the back of a defective police van through the desert in mid-summer. For four hours, the journey passed by with no air conditioning, no checks for well-being and with only one 600ml bottle of water. The air temperature in the back of the van reached temperatures of over 50C and Ward was slowly cooked to death. On arrival in Kalgoorlie, the man was found dead with third-degree burns on his abdomen from contact with the hot metal floor.

The inquest into his death in March 2009 showed incompetence was rife in both GSL and the Corrective Services Department. GSL officers in Kalgoorlie complained constantly about the poor state of the vehicles but did not get a replacement until after Ward's death. And even then the replacement vehicle was substandard. Meanwhile GSL failed to ensure staff were trained to look after prisoners properly. The two guards that drove Ward to his death testified there were no procedures on how many breaks prisoners should have on a journey, how much food and water they should be given, or if the air-conditioning should be checked. A senior GSL employee accused the two of lying and said the pair had not followed company procedures which they were both aware of.

Despite the public internal disagreement GSL did not sack either driver and they are still both transporting prisoners across the state. Freelance journalist Michael Winkler spoke to Ward’s cousin Daisy Ward after the inquest who was stunned to hear the pair were still driving prisoners. “They (GSL) should be really ashamed of themselves,” she said. “What is this company doing to us families? What are they thinking when we have tears in our eyes listening to everything said about my cousin? Were they ashamed of themselves for what they did? Or what?”

At a community meeting held in the wake of the inquest, the Aboriginal Deaths in Custody Watch Committee organised a rally to be held this month to protest Ward’s shameful treatment. At the meeting, Noongar elder Ben Taylor-Ciuermara contrasted the media-manufactured outrage over the March 12 acquittal of three men accused of assaulting police, with the disregard paid by the media and politicians to the deaths in custody of Aboriginal people.

But it should come as little surprise the deaths of Ward and others receive so little attention. Indigenous people are 2 percent of the population of Australia and are among the country’s lowest income earners. In other words, they are not treated as a mainstream media audience worth cultivating. As I heard Aboriginal journalist Kerry Klimm say yesterday, “we don’t rank in the ratings”.

Here’s hoping the UN shames WA into action. Privatising the prison service for profit is badly flawed and morally indefensible. It needs to be taken back inhouse as a matter of urgency. It may not stop incidents such as Ward's but at least will ensure that governments cannot spread the blame when things go wrong. My thanks to Lauredhel's post at Hoyden About Town for alerting me to this important story.

The future looks grim for The Independent

The crisis that is devastating the US newspaper industry is now spreading to the UK. The future of the London titles "The Independent" and "The Independent on Sunday" is looking extremely doubtful with closure likely if a buyer cannot be found in the next few weeks. Irish parent company Independent News and Media (INM) announced in late April it had failed to reach an agreement with lenders over a $270m (US) bond that it must repay by 18 May. This is part of a larger company debt which has now blown out to $1.75 billion.

INM, which announced losses of $216m in 2008, is under increasing pressure from bond holders to dispose of the flagship Independent titles which are understood to lose at least $15m a year. The problem will now become Gavin O’Reilly’s to solve as he takes over as chief executive of INM from his 73 year old father Tony O’Reilly. O’Reilly (junior) also announced this week that the Australian arm APN (which INM owns 39.2 percent) is also likely to face cutbacks as the parent company struggles with its debts.

But it is the British mastheads that are his biggest worry. In 2004, the two Independent titles were valued at $226m but are now worth a fraction of that price. Yet there is no rush of buyers for the loss-making paper. Potential owners are put off by the size of the pension fund deficit, falling circulation, declining advertising revenues and the cost of laying off more staff. O'Reilly is now hoping a cost-saving office-sharing arrangement with the Daily Mail will buy time for the newspapers until the economy improves. The Independent is moving from Docklands to the Kensington headquarters of Associated Newspapers, which owns the Daily Mail and the Mail on Sunday. Journalists at the paper however are unhappy with the move to co-locate with titles that pursue a very different form of journalism to The Independent. And morale is already low among staff. The Independent has suffered two rounds of redundancies in the last two years. The 430 staff that remain have been told they need to work 25 percent longer hours to cope.

Even these sacrifices may not be enough to save the papers. Irish mobile phones billionaire Denis O’Brien has muscled his way into power at INM with 26 per cent of the shares and a seat on the board. He is believed to be supportive of shutting down the Independent titles to help bring the business back into the black. There is also the issue that he may still be nursing a grievance about the paper’s coverage of allegations that he once bribed a minister. In April, he gave a strong signal on his position saying "management needs to remain focused on eliminating loss-making businesses and all stakeholders need to work together to ensure that value is protected.”

The holding company Newspaper Publishing launched The Independent on 7 October 1986 as a broadsheet under the editorship of former Telegraph staffer Andreas Whittam Smith. Within three years it had a circulation of 400,000 and a reputation that lived up to the name of the masthead. Within another year owners launched The Independent on Sunday. The papers then joined the Murdoch-inspired migration to Canary Wharf in 1994. A year later O’Reilly’s INM and Mirror Group Newspapers become controlling shareholders and after another four years O’Reilly bought out the Mirror’s shares. However by then the circulation had dropped to half its 1989 level. It went into so-called “compact” format in 2003 but it did little to lift profits.

Today, its circulation remains the lowest of the London quality dailies and hasn't really moved in a decade selling just over 205,000 copies each day. That compares to 340,000 for The Guardian, 590,000 for The Times and 820,000 for the Telegraph).

One mooted option has been a merger with Alexander Lebedev’s Evening Standard. However Guardian media commentator Roy Greenslade suggests another way out of The Independent’s crisis. He says it could be time for the paper known for its innovations of the compact shape and "the viewspaper" (pictured) to experiment again “by becoming the first serious daily paper to be distributed free of charge in major cities (and paid-for elsewhere).” Greenslade said such a model would prove to be proper competition for giveaways such as Metro and Murdoch’s London Paper. However Greenslade concedes making the Independent free Indy would cause an initial massive hit to revenue “so the risk may be too great for a hard-pressed INM.” But, he concludes, “another owner may well feel differently.”

Bloggers get behind Mir Hussein Mousavi’s Iranian Presidential campaign

One thousand bloggers have announced their support for former Prime Minister Mir Hussein Mousavi’s bid for the Iranian presidency. The bloggers have published their names and websites on www.mirhussein.com (in Farsi) which proclaims itself as a forum created by “a big group of bloggers supporting Mousavi.” The bloggers publicly backing Mousavi come from a wide variety of viewpoints ranging from reformist to fundamentalist.

Mousavi’s appeal across the political boundaries makes him a real threat to unseat President Mahmoud Ahmadinejad in the 12 June election. However it the reformists who have most hopes in Mousavi. His position as the leading challenger firmed in March when he was endorsed by former liberal president Mohammed Khatami who pulled out of the election to avoid splitting reformist supporter votes. Mousavi’s campaign received another boost yesterday when former Vice President Masoumeh Ebtekar also announced she was quitting the race and supporting him. Meanwhile Ahmadinejad's popularity has slumped badly as Iran suffers in the global recession with chronic unemployment and double-digit inflation.

Mousavi has subsequently gone on to label Ahmadinejad as an extremist and attack him for his mismanagement of the economy. Last month the New York Times reported Mousavi wants a more positive relationship with the US although, like his opponent, refuses to back down on Iran’s nuclear program. “Weaponisation and nuclear technology are two separate issues, and we should not let them get mixed up,” he said. Mousavi also said he was in favour of freedom of speech and relaxing media restrictions including changing the law that bans private television stations.

But it is Ahmadinejad’s economic record that remains the focus of Mousavi’s campaign. Addressing his supporters in the town of Qarchak near the capital Tehran, he criticised the government for the “expansion of poverty under the excuse of administering justice” and claimed the government was making promises it was unable to keep.

The 68 year old Mousavi does have good economic credentials. He was admired for his management of the economy when he was Prime Minister under during the difficult days of 1980s war with Iran. The then president Ayatollah Ali Khamenei, now the Islamic Republic's supreme leader, changed the constitution to eliminate the role of Prime Minister when Mousavi resigned in 1989 and he (Mousavi) has not held a government position since then.

Mousavi then kept a self imposed silence until he re-emerged to announce himself as a presidential candidate. His current online support is significant as blogs were one of the few places where Iranians could find public dissent of Ahmadinejad’s recent stand-off with western powers. Some Iranian bloggers have paid a high price for taking a stance against the government and religious hierarchy according to the Committee to Protect Journalists (CPJ). The CPJ labelled Iran as the second worst country in the world (behind Burma) for bloggers who must all register their Web sites with the Ministry of Art and Culture. Hussein Derakhshan has been detained since November 2008 because of comments he allegedly made about a key cleric while another blogger Omidreza Mirsayafi committed suicide in prison in March. Mirsayafi was serving 30 months in prison for insulting Supreme Leader Ayatollah Ali Khamenei and Ayatollah Ruhollah Khomeini.

Mirsayafi was not a political blogger. Most of his articles were about traditional Persian music and culture. His lawyer told Reporters Without Borders that Misayafi’s death was “a sad reminder of the fact that the Iranian regime is one of the harshest in the world for journalists and bloggers”. In the press conference when he announced his candidacy for the president Mousavi told 90 reporters his opposition to the government’s plan ‎to boost moral security, which includes monitoring the behaviour of Iran’s youth. ‎Mousavi said, “if I am elected president, I will put an end to inspections by the morality ‎police.” ‎It was this promise, more than any other, that has probably earned him the support of the country’s bloggers.

Mick Keelty resigns as Australian Federal Police boss

Australian Federal Police (AFP) chief Mick Keelty announced his resignation this morning after eight years in the job. Keelty had two years left on his contract but will finish up on 2 September which will mark 35 years in his police career. Keelty’s term in office has been dotted with controversy and he refused to comment publicly today. However, Prime Minister Kevin Rudd chose to praise Keelty’s contribution to public service including his work on the Bali bombings and the Jakarta Australian embassy bombing. "What I'd like to say to Mick on behalf of a grateful nation is, 'Well done', and the nation owes you a debt of gratitude for the service you have rendered," he said.

Not everyone senses that debt of gratitude. In 2005, the father of one of the Bali Nine drug mules sharply criticised Keelty for knowingly allowing Indonesian police to arrest the nine, rather than allowing them to fly to Australia and arresting them in Sydney upon their return. Bob Lawrence, father of Renae Lawrence said at the time, "as far as I'm concerned, and excuse the expression, [Keelty] is an arsehole. These kids were forced into this...they should have been either arrested at the airport here or followed to get the big guys. I don't know how [the Australian police] can sleep at night.”

The bungled case of Indian doctor Mohamed Haneef also seriously damaged Keelty’s reputation. The AFP did everything in their power to get a conviction related to the Glasgow bombing including leaking biased and misleading material about the prosecution. The Commonwealth was eventually forced to drop the case after admitting errors in evidence. Keelty refused to admit responsibility and continued its investigation into Haneef well into 2008. As Bernard Keane wrote today in Crikey, “Keelty persisted with the fiction that somehow Haneef might yet turn out to be a terrorist [and] even when the AFP finally called a halt to its $8m persecution of the man, it insisted ‘that some long standing overseas inquiries are yet to be fully resolved.’.”

Former head of the National Crime Authority QC Peter Faris told SBS World News tonight that although Keelty’s reign had started well, the Haneef affair “left a bad taste in the mouth”. He also told the ABC today that his resignation was linked to the Haneef case and he was merely waiting for a reasonable time after the inquiry into the matter before resigning. Not surprisingly, the government have rejected this analysis (or at least rejecting the suggestion he was pushed) with Federal Attorney-General Robert McClelland saying the decision was "entirely the decision of the Commissioner".

Keelty leaves behind a 6,500 strong federal police organisation that celebrates its 30th anniversary a month after his farewell. The favourites to replace him are the two deputy commissioners, Andrew Colvin (head of national security) and Tony Negus (head of operations). Either will have big shoes to fill as the AFP has wide-ranging powers to deal with matters such as counter-terrorism, human trafficking and sexual slavery, cyber-crime, peace operations, protection and other transnational crimes.

But while Keelty has expanded the organisation, critics say he has done so at a high cost of transparency. On ABC’s 4 Corners in November last year, Sally Neighbour charted how a “once lionised” AFP was now “ridiculed for apparent bungling, excessive secrecy and cosying up to political masters.” Neighbour says the Haneef affair was just a symptom of deeper problems that beset the AFP. Keelty’s high profile leadership style and politicisation of the organisation caused a damaging split within the organisation. One former officer told Neighbour that “the AFP's major objective has been to look good whilst at the same time avoiding public scrutiny and accountability.”

Keelty had earlier outlined what he had in mind by way of media scrutiny when he made a speech at the Sydney Institute in January 2008. Keelty said that there should be no public comment made about terrorism investigations until each matter has been finalised in court. He also called for a limitation of criticism of the AFP and other government agencies. "I understand it can be difficult to wait for the chance to freely express ourselves but I do believe to best serve the public interest and to attain the full enjoyment of all our rights we must sometimes delay that expression," he said.

However the former journalist at The Australian who exposed the AFP’s wrongdoing (much to the then Howard Government's embarassment) in the Haneef affair did not agree. Hedley Thomas (who is now head of PR for Queensland Gas) won a Walkley award for his coverage of the affair. Thomas was sharply critical of Keelty’s Sydney Institute speech: "On the one hand he was saying that defendants and suspects deserve a much better go in the court of public opinion and that the media should treat them more kindly," he said. "But the facts are that in the Mohamed Haneef case and others, it's been the police and security agencies and the politicians using police information that have smeared the character of the suspects before they've even been charged." With Keelty gone, the AFP can now begin rebuilding trust in its competence and resume a more guarded approach to using its vast and under-scrutinised powers.

Nepal Prime Minister Prachanda quits

Nepal's Prime Minister Pushpa Kamal Dahal resigned yesterday following a confrontation with the president over the dismissal of the army chief. The Prime Minister and former rebel Maoist leader, who is more commonly known as Prachanda, announced his resignation in a televised address after just nine months in the job. "I am announcing my resignation from the council of minister,” he told the nation. "I have resigned from the post of prime minister from today for the protection of democracy and peace.”

The crisis started a day earlier when Prachanda sacked army chief Rookmangud Katawal for disobeying instructions about the enlistment of former rebels into army ranks. However his decision was overruled by President Ram Baran Yadav. The president directed Katawal to continue in office, saying his dismissal by the cabinet does not "meet the constitutional requirements and due process." Prachanda hit back calling the decision “an attack on this infant democracy and the peace process.”

But as the constitution is still being worked out, Prachanda did not have the right to overrule Yadav’s decision. The secretariat of the Unified Communist Party of Nepal (Maoist) quickly met after his resignation and decided to “intensify struggle in the parliament and the street” until the President withdraws his “unconstitutional” move. Secretariat member Barsaman Pun said, “Since the president’s move is a constitutional coup, we will continue protesting against the move.”

Prachanda became Prime Minister in August last year as part of an agreement to end the longstanding Nepalese civil war. 13,000 people died in the ten year struggle and Prachanda emerged from hiding after three years of negotiation to take power. He has long wanted to sack the army chief who fought against him during the rebel insurgency. Matters came to a head over the issue of integrating the former guerrillas into the national army. Prachanda faced strong protests from Katawal and his supporters against the idea of integrating a “politically indoctrinated guerillas” into the army.

Since the end of the conflict, the Maoist fighters have been staying in camps monitored by the United Nations Mission in Nepal (UNMIN). UNMIN itself has tried to stay impartial but has been accused of siding with the Maoists. There is a danger of mutiny inside the Nepal Army if their former sworn enemies are integrated. Meanwhile Army Chief Katwal has constantly reiterated his policy of accepting only those “deemed fit through free competition,” much to Prachanda’’s annoyance.

But Prachanda’s position has been significantly weakened recently. While the Maoists remain the largest party, his government has now been reduced to a minority. Key ally The Communist Party of Nepal-Unified Marxist Leninist (UML) announced their withdrawal of support due their refusal to support Katawal’s sacking. The UML immediately started negotiations with other political parties to create an alternative ruling coalition and are widely tipped to head the new government. They look certain to get the support of the Nepal Congress, the main non-communist party. Nepal Congress leader Shekhar Koirala said they haven’t yet decided whether to support a new government yet from inside or outside a coalition. But of one thing he was certain: “We will not lead the government. We want the UML to lead.”

The question now is whether Prachanda and his Maoists accept these outcomes as part of the grubby business of democracy. Although senior Maoist leader Baburam Bhattarai has said that his party would hit the streets now demanding resignation of the President, there has been no sign of violence so far. But whatever happens, as Nepalese expert Neil Horning points out at Neil’s Nepal, it is likely the Maoists have some contingency plan. “They didn’t survive 10 years underground while building an army of 30,000 piece by piece through incompetence,” said Horning.

Buffett consigns newspapers to the waste bin

Speaking in front of 35,000 investors at the annual Berkshire Hathaway shareholders meeting, billionaire Warren Buffett joined the growing litany of voices charting the decline of the newspaper industry. The 78 year old cult investor known as “The Sage of Omaha” is an avid lifelong newspaper. However he said newspapers had lost their relevance to the Internet and were no longer an attractive investment option. He told his Omaha audience on the weekend he would not buy newspapers “at any price” because of the possibility of “going to just unending losses”. Buffett’s comments come as The Boston Globe looks like becoming the latest high profile American newspaper to go under.

Despite his grim tidings, Buffett said he would not sell out his existing newspaper interests. Buffett’s company Berkshire Hathaway is the largest shareholder in The Washington Post Company (Buffett is a board member) and also owns the Buffalo News. The Washington Post Company posted a $18.7 million quarterly loss last week as its flagship paper reported a 33 per cent slump in print advertising sales. Buffett continued to show faith as he said the Post had an attractive business model with its cable interests. But he added it "does not have answers to the problems of the newspaper business."

Berkshire Hathaway is not immune from the global crisis with operating profit down about 12 percent from a year earlier to $1.7 billion. Company stock has fallen 39 percent since December 2007. Buffett was asked at the shareholders’ meeting whether there was a good price to invest in today’s newspaper business. His full answer was instructive:

The current environment is accentuating problem in newspapers -but it’s not the basic cause. Charlie [Munger] and I read 5 a day. We’ll never give them up. We would not buy them at any price. They have the possibility of going to unending losses. They were essential to the public 20 years ago. Their pricing power was essential with customer. They lost the essential nature. The erosion has accelerated dramatically. They were only essential to advertiser as long as essential to reader. No one liked buying ads in the paper - it’s just that they worked. I don’t see anything on the horizon that causes that erosion to end.”

Writing in Slate, Jack Shafer said Buffett predicted the death of newspapers as far back as 1992. He quotes a letter Buffett sent to Berkshire Hathaway shareholders that year that said newspaper, television, and magazines were losing their status as mass profit-making franchises. Their previous success was based on product need, the lack of a substitute, and the lack of price regulation. Newspapers had survived despite often being an inferior product because of what Buffett called their “bulletin board” value. But with the rise of cable and satellite broadcasting and Internet, newspapers no longer sold "as if they were indestructible slot machines".

Jeff Jarvis agrees and says the prognosis “keeps getting clearer and clearer”. He says it is making less sense to try to preserve and protect the failing newspaper model. “Every day that papers keep printing is a day that they haven’t reinvented themselves for a new reality,” he said. Jarvis says he is not being a doomsayer, but merely observing inexorable events in the economy. “The insane response to this change is to resist it and mourn it,” he said. “The sane response is to find the opportunity in it.”

Locally, this is also the view of the Australian Newsagency Blog. It believes the crisis has been delayed here by the large home delivery industry because “small business newsagents carry the more of the high cost of distribution than delivery contractors in the US.” However, the writer "Mark" is not naïve enough to believe that that can stave off disaster. “[Newsagents] cannot rely on newspaper generated traffic to our businesses forever, not even for five years,” said the blog. “We need to build new traffic urgently.”

The crisis that now envelops journalism is also starting to impact book publishing. Ian Jack in The Guardian says royalties are tumbling, staff are being cut, and publishers are taken fewer risks. Jack explains that the reasons are similar to newspapers’ demise: “generations are now growing up with the idea that words should be read electronically for free - a new human right - which has grave consequences for the people paid to compose and edit them.”

While no one seems sure how this “new human right” will be paid for, only one country has gone down the path of government bailout. In January French President Nicolas Sarkozy announced a €600m ($800m) emergency aid package for his country's troubled newspaper industry. The French press is among Europe’s least profitable with a rapidly declining readership. The most high profile of Sarkozy’s rescue plans was the announcement that every French 18-year-old would get a year's free subscription to the paper of their choice to boost reading habits. He also relaxed foreign ownership rules, extended tax breaks for investors in online journalism and doubled the state’s advertising in print and online papers.

However there is a legitimate question about whether the package compromises press freedom. The concern is that French journalists will not be capable of biting the hand that now feeds them. But it is also arguable this problem is no different than the one that exists currently in the purely commercial sphere. In the book “Last Rights”, a group of academics from the University of Illinois claim freedom of the press used to be defined as a political matter. However the communication system in capitalistic societies is primarily economic. To have a truly free press, say the authors, there would not only be no state intervention, there would also be a lack of market forces, ownership ties and other material bonds. Clearly no such beast exists in any profitable or influential form. Some form of economic intervention is almost always required to make it work. Sarkozy’s plan may not save newspapers, but might yet provide a reasonable transition path for journalism to cross from print into the digital realm without permanently damaging the public service it provides.

Force 2030: Massive Australian military spending for the Asia Pacific century

The federal government released its long awaited twenty year defence plan yesterday which calls for a possible $100 billion in spending to boost the nation’s military capability. The government says the new long term strategic blueprint, called Force 2030, will give Australia the ability to meet its own defence requirements as well as meet a range of regional contingencies. The plan will be partially funded by reform within the department but will require additional budget funding. Treasurer Wayne Swan refused today to outline exactly how much funding that would be, with the federal budget just one week away.

The 137 page defence white paper is available in pdf format here. In his introduction to the document, Defence Minister Joel Fitzgibbon says defence is the greatest responsibility for a national government and this is the first white paper to address strategic outlook in the last ten years. So it attempts to address threats posed by events such as 9/11, the wars in Afghanistan and Iraq, the terrorist bombings in London, Madrid, Bali and elsewhere, the possibility of cyber-attacks, a nuclear North Korea, and above all, the rise of China and the emergence of India as geo-political players. Fitzgibbon acknowledged the document was coming out in the middle of a global recession but said the timing showed “the premium it puts on our national security by not allowing the financial impact…affect its commitment to our Defence needs.”

The paper outlined the sliding scale of importance of four Australian defence objectives over the next two decades. Firstly and most importantly, is the defence of the nation against attacks both by states and by non-state actors such as terrorism groups. Secondly, there is the security of the air and sea approaches in the “immediate neighbourhood” which the paper defined as Indonesia, Papua New Guinea, East Timor, New Zealand and the South Pacific island states. Thirdly, there are the challenges of the Asia-Pacific region and the maintenance of a regional security environment to resolve internal issues and manage the rise of emerging players. Finally there is the worldwide strategic interest in “preserving an international order” to restrain aggression and manage risks and threats.

Key to the policy is the principle of self-reliance allied to the ability to do more to support strategic interests if required. This means having the capacity to act independently, lead military coalitions, and making what it called “tailored contributions” to wider interests. Consistent with the four-scale objectives, the paper defined the tasks for the ADF as in order of importance as deterring and defeating attacks on Australia, contributing to stability and security in the South Pacific (including humanitarian and disaster relief operations), contribute to military contingencies in Asia-Pacific, and finally contributing to military contingencies in the rest of the world.

It then goes on to chart the rise of China, a point studiously ignored by Chinese news agency Xinhua’s report on the white paper. Australia still expects the US to remain the pre-eminent world power in 2030 though China will be the strongest Asian power by a considerable margin. Therefore the US and China form the “crucial relationship in the region”. The paper identifies Taiwan as a potential flashpoint while it re-affirms Australia’s “one China” policy. China will also exert economic and soft power in South East Asia which is relatively peaceful apart from the “serious challenge” of Burma. The report is also positive about Indonesia which has “managed a successful transition to multiparty democracy, embarked on the long journey of economic reform, and proven to be a strong partner in the fight against terrorism.”

Looking further afield, the paper anticipates no real progress in the Middle East with Iran’s nuclear ambitions further complicating matters. Pakistan is called “a pivotally important state” with its nuclear weapons, terrorist networks, and links to Afghanistan all presenting a risk of a “radical Islamic capture of the state”. Afghanistan itself will continue to need support for “the next decade or more” and will require sustained Australian engagement for as long as it takes. Iraq, meanwhile, is not seriously addressed (mentioned just six times in the document compared to Afghanistan’s 44) and it can be assumed will take an increasingly less important focus for Australia in the coming decades.

The navy will be the clear winners from the overall strategy. The plan calls for the replacement of the troubled fleet of six Collins-class submarines with 12 “Future Submarines”, acquiring three destroyers, replacing the Anzac class frigates, as well as enhancing “offshore maritime warfare, border protection and mine countermeasures.” The army will also benefit from 46 MRH-90 helicopters to be shared as a pooled fleet with the Navy while the Air Force will be expanded to a fleet of 100 combat aircraft.

But given that report itself acknowledges there is no major military threat to Australia at the moment, the news cycle questions are predominately about how exactly the government will fund the package. Today, Opposition leader Malcolm Turnbull was quick today to criticise the paper for not giving enough funding detail. The report calls for 3 percent growth in the budget to 2018, and 2.2 percent beyond that date. There will also be a 2.5 per cent fixed indexation for the entire period. However that will not be sufficient to pay for the expensive measures in the program, so the government is also proposing what it calls a “Strategic Reform Program” to overhaul the department to save $20 billion in the areas of accountability, planning, and productivity.

Speaking on Insiders this morning, defence analyst Hugh White called the department “wasteful” and said there was probably $20 billion to be saved, but added “it's going to be really hard and the choices that have to be made to save that money will not be politically easy.” White says that means changing the way defence does fundamental aspects of its business. “That's a challenge for ministers, for politicians, for the Cabinet as to whether they're prepared to take quite hard and often quite unpopular choices,” he said.

Elsewhere. Lowy Institute’s The Interpreter suggests Japan and Korea will be happy with the plan to counter China’s power; Trevor Cook is deeply unimpressed with what he calls an unaffordable, electorally cynical, stupid strategy; and Andrew Elder skewers Greg Sheridan’s incoherent addition to the debate in The Australian.

No sign of freedom for the Merauke Five

An article in yesterday’s Jakarta Post has confirmed that five Australians held in the Indonesian province of Papua will be detained until a Supreme Court verdict is handed down. The so-called “Merauke Five” have been detained since arriving in September last year and have been banned from leaving Papua province. The Post quoted the Head of Merauke Prosecutors' Office, Sudiro Husodo, who said the ban was issued by the Attorney General's Office (AGO) on April 2. The five remain stranded at Merauke’s airport where they have been staying since they were stopped from returning home seven weeks ago.

The five are William and Vera Scott-Bloxam, Keith Mortimer, Karen Burke and Hubert Hofer, all aged between 51 and 64. They are businesspeople involved in the tourist industry and live in Horn Island off the coast of far north Queensland. On 12 September last year they flew across the Torres Strait in a twin-piston P-68 aircraft piloted by William Scott-Bloxam. Their destination was Mopah airport one hour away in Merauke on Papua’s south coast. The plan was to stay for a long weekend under the mistaken belief they could get a visa on arrival.

The holiday quickly turned sour when the five were charged with illegally entering Indonesian territory. It didn’t help that Merauke is the centre of an insurgency of rebels who (unlike the Australian Government) have never accepted Indonesian’s illegal take over of West Papua in the 1960s. The five were initially accused of being spies and held at a community detention centre.

On 15 January the Merauke district court handed down its sentence. Pilot William Scott-Bloxam was sentenced to three years and fined 50 million rupiah (about $6,000 AUD) for flying a plane into Indonesia without security clearance. His four passengers were sentence to two years and fined 25 million rupiah. They appealed on the basis the court had ignored evidence which suggested the air crew had received verbal clearance to land. On 2 March, the five were released from prison on "humanitarian grounds" while lawyers prepared the appeal, but were still banned from leaving Merauke.

The appeal was heard by the Papuan High Court in Jayapura. This court overturned the sentences in March much to the disappointment of the Papua High Prosecution Office. The High Court ordered the five leave the country immediately by the same plane in which they arrived. However, the prosecution requested an appeal and called for a ban on the five leaving the country until the case is settled. The military then impounded their plane so that the High Court order could not be carried out. And because the case is now before the Indonesian Supreme Court, the five remain stuck indefinitely at the airport in Merauke.

According to Torres News publisher Mark Bousen, the affair has nothing to do with visa offences. Bousen has been in regular touch with the five since their detention. Writing in New Matilda in January, he said people are normally deported for visa offences not jailed. Bousen believed that the Indonesians are probably using the five either as trade bargaining chips or in revenge for the protection visas Australia issued to 43 West Papuan separatists in 2006. Bousen called it “a diplomatic power game between a paranoid, oppressive Indonesian Government and the latest in a succession of gutless Australian governments who, since 1963, have been afraid to take a stand against the brutality of our neighbours.”

Bousen said that at the start of the trial last year, the five were told they could expect a fine of about $4000 and to be sent home. One family member told Bousen that this outcome was agreed by prosecution, defence and judges alike. Then just before Christmas, authorities in Jakarta ordered the prosecution to seek the three-year jail term. Bousen berated the Department of Foreign Affairs for their “gutless” dealings with Indonesia on the matter. Bousen’s point seems valid. In February, the matter was raised in federal parliament and Foreign Affairs Minister Stephen Smith washed his hands of the matter saying “When an Australian citizen, an Australian national, comes into contact with the legal system of another country, there is a limit to what Australia can do.”

Smith made it clear in March just how limited his actions would be when he appeared on ABC’s Lateline. Smith claimed the five were not prisoners and said their status was now "city detention". According to Smith, this meant they could remain in Merauke pending the outcome of the Supreme Court appeal. “So they effectively have what is described as a licence to the city, but we are giving them consular assistance,” he said. This is craven. As Tony Jones said, at worst the five are guilty of stupidity and Australia should be doing more to get them home. Mark Bousen nails the problem well: “The Australian Government's seemingly endless lack of courage is compounded by an ineffectual Department of Foreign Affairs and the blatant lack of independence of the Indonesian judiciary.”