Russia-ASEAN Relations: New Directions 9789812307378

Table of contents :
Contents
Foreword
The Contributors
The Editors
PART I. Overview of ASEAN-Russia Relations
1 Russia, ASEAN and East Asia
2 Non-Economic Approach in Russia–ASEAN Relations: Changes in Asia, Changes in Russia
3 Current State of Russia–ASEAN Trade and Economic Relations
PART II. East Asian Community
4 Prospects of East Asian Community and the Role of China
5 ASEAN AND CHINA East Asia Community Building and Prospects for the Future
6 China’s Peace Offensive in Southeast Asia and Russia’s Regional Imperatives
7 Expanding Singapore’s Economic Space: Building Highways, Forging Links
8 ASEAN’s Leading Role in East Asian Multilateral Dialogue on Security Matters: Rhetoric versus Reality
9 Towards the East Asian Community
PART III. Energy
10 Energy Inter-dependence in East Asia: Russia’s Contribution to Energy/Gas Cooperation in East Asia
11 Energy Security in East Asia: Challenges and Responses
Index

Citation preview

Russia-ASEAN Relations New Directions

Russia-ASEAN_half title&title.in1 1

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IMEMO is the Russian abbreviation for the Institute of World Economy and International Relations. It was established in Moscow in 1956 to study contemporary problems of global political and economic relations. It is a major think-tank within the Russian Academy of Sciences working initially for the Soviet and now for the Russian Government. The Institute of Southeast Asian Studies (ISEAS) was established as an autonomous organization in 1968. It is a regional centre dedicated to the study of socio-political, security and economic trends and developments in Southeast Asia and its wider geostrategic and economic environment. The Institute’s research programmes are the Regional Economic Studies (RES, including ASEAN and APEC), Regional Strategic and Political Studies (RSPS), and Regional Social and Cultural Studies (RSCS). ISEAS Publishing, an established academic press, has issued almost 2,000 books and journals. It is the largest scholarly publisher of research about Southeast Asia from within the region. ISEAS Publishing works with many other academic and trade publishers and distributors to disseminate important research and analyses from and about Southeast Asia to the rest of the world. ii

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Russia-Asean Relations New Directions Edited by

Gennady Chufrin and Mark Hong

Institute of Southeast Asian Studies Singapore

Institute of World Economy & International Relations Russian Federation

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First published in Singapore in 2007 by ISEAS Publishing Institute of Southeast Asian Studies 30 Heng Mui Keng Terrace Pasir Panjang Singapore 119614 E-mail: [email protected] Website: http://bookshop.iseas.edu.sg All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior permission of the Institute of Southeast Asian Studies. © 2007 Institute of Southeast Asian Studies, Singapore The responsibility for facts and opinions in this publication rests exclusively with the authors and their interpretations do not necessarily reflect the views or the policy of the publisher or its supporters. ISEAS Library Cataloguing-in-Publication Data Russian-ASEAN relations : new directors / edited by Gennady Chufrin and Mark Hong. Papers originally presented at the second IMEMO-ISEAS ASEAN-Russia Relations Conference held in Moscow, Russia from 3 to 4 October 2006. 1. ASEAN—Congresses. 2. Southeast Asia—Foreign relations—Russia—Congresses. 3. Russia—Foreign relations—Southeast Asia—Congresses. 4. Regionalism—East Asia—Congresses. 5. Southeast Asia—Foreign economic relations—Russia—Congresses. 6. Russia—Foreign economic relations—Southeast Asia—Congresses. 7. National security—East Asia—Congresses. 8. Energy policy—East Asia—Congresses. I. Chufrin, Gennadi_Illarionovich. II. Hong, Mark. III. Institut mirovo_ _konomiki i mezhdunarodnykh otnosheni_ (Akademii a nauk SSSR) IV. Institute of Southeast Asian Studies. V. ASEAN-Russia Relations Conference (2nd : 2006 : Moscow, Russia) DS525.9 R9A84 2006 2007 ISBN 978-981-230-736-1 (hard cover) ISBN 978-981-230-737-8 (PDF) Typeset by Superskill Graphics Pte Ltd Printed in Singapore by Utopia Press Pte Ltd iv

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Contents Foreword by K. Kesavapany and Gennady Chufrin

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The Contributors

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PART I: OVERVIEW OF ASEAN–RUSSIA RELATIONS 1. Russia, ASEAN and East Asia Rodolfo C. Severino 2.

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Non-economic Approach in Russia–ASEAN Relations: Changes in Asia, Changes in Russia Igor Podberezsky Current State of Russia–ASEAN Trade and Economic Relations Vyacheslav Amirov

PART II: EAST ASIAN COMMUNITY 4. Prospects of East Asian Community and the Role of China Vasily Mikheev 5.

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ASEAN and China: East Asia Community Building and Prospects for the Future Ho Khai Leong

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China’s Peace Offensive in Southeast Asia and Russia’s Regional Imperatives Victor Sumsky

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7.

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Expanding Singapore’s Economic Space: Building Highways, Forging Links Minn Naing Oo

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ASEAN’s Leading Role in East Asian Multilateral Dialogue on Security Matters: Rhetoric versus Reality Evgeny Kanaev

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Towards the East Asian Community Vyacheslav F. Urlyapov

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PART III: ENERGY 10. Energy Inter-dependence in East Asia: Russia’s Contribution to Energy/Gas Cooperation in East Asia Maxim Potapov

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11. Energy Security in East Asia: Challenges and Responses Christopher Len

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Index

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Foreword This book based on the IMEMO-ISEAS Moscow Conference of October 2006 is the second in the series. At the Moscow conference, one of the major themes discussed was the rise of China and its impact upon the Asia-Pacific economies, politics and security. The other major theme was the economic rise of Asia, as manifest in the increasing number of Free Trade Agreements, but which has not as yet involved the Russian Federation. These themes are discussed in detail in the conference papers published in this book. Russia has steadily stabilized under the firm rule of President Putin over the past seven years. Buoyed by rising energy exports and high oil and gas prices, Russia has enjoyed steady and high economic growth for the past three years. ASEAN on its part, has regained economic growth and stability ever since the Asian financial crisis of 1997–98. This has been due to the financial reforms put into place to prevent a recurrence of the crisis and also partly due to the economic growth and momentum of China’s stellar growth, which has acted as an economic locomotive on the neighbouring economies. With both sides of the dialogue enjoying steady growth, Russia and ASEAN are now rediscovering each other in various ways. For instance, some ASEAN countries that had postponed arms purchases from Russia were now able to place their orders once again. Visits by ASEAN leaders, like Malaysian Prime Minister A. Badawi and Singapore’s Minister Mentor Lee Kuan Yew to Moscow in mid-2007 have taken place, whilst Russian ministers have also visited ASEAN countries. Indeed, there has been a noticeable increase in the number of Singaporean interactions with Russia in 2006–07, ranging from helping to set up two Special Economic Zones (SEZs) in Russia, increased investments and trade, Singapore Airlines (SIA) flights to Moscow, helping to upgrade airports, etc. Singapore has taken note of the increasing Russian vii

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prosperity, and has seized the opportunity to expand its economic space with Russia, just as it has done in the Middle East. The same trends could be observed in the other ASEAN countries. Myanmar has started a collaboration programme with Russia in nuclear energy. Malaysia will send its astronaut into space on board a Russian space vessel. Another good sign is the longoverdue start of the Russia–ASEAN Cooperation Fund. The regional strategic situation is fast evolving. Faced with a fast rising China, the United States has prepared to strengthen its security and political ties with Japan, India and Australia. China, on its part has not remained passive, but has also moved to strengthen ties with Russia and India and with other Shanghai Cooperation Organization (SCO) members, as well as with ASEAN. The revival of Japan has been noticed, but equally the rise of Russia should also be heeded. In 2007, Moscow under the strong leadership of President Putin, has flexed its muscle over energy issues and exports to Ukraine, Georgia, Belarus, with consequent knock-on effects upon European Union (EU) energy security. In mid-2007, Moscow has demonstrated its unhappiness over the emplacement of U.S. missile defences in Poland and the Czech Republic. Over in the Asia-Pacific region, Russia’s defence exercises with China in 2005 and with India in 2007 demonstrated that Russia is back as a strategic actor in regional security. It is thus timely and useful for the IMEMO-ISEAS dialogue to continue, and for the conference papers to be published in order to keep regional policy-makers informed about trends and views. Russia has a deep and legitimate role and interest in regional affairs, whether it is in economics, politics, regional security or regional architecture building. Its role in the SixParty Talks over the North Korea nuclear issues has been helpful: witness the intermediary role a Russian bank played in transferring the blocked North Korean funds from a Macau bank back to Pyongyang. The revival of the Russian Pacific fleet activities in the Asia-Pacific Indian Ocean strategic theatre is a sign of the resumed Russian profile in the region. As the ASEAN states sit astride the vital straits and choke-points connecting the Indian and Pacific Oceans, such maritime activities are of immediate and profound interest in ASEAN capitals. One scholar at an ISEAS lecture in June 2007, has spoken of a possible conflict occurring in the Asia-Pacific region after 2010, which is only three years ahead. How valid is this concern? How would such a potential conflict be triggered? Obviously, there is much to be discussed. We hope that this book and subsequent volumes will add to increase knowledge about a seldom studied area of international relations, namely ASEAN–Russia relations. Whilst much attention has been paid to ASEAN’s viii

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relations with the United States, China, Japan, India, Australia and others, its relations with Russia has not received as much attention. Recent developments in the Asia-Pacific, including Russia and ASEAN merit scholarly research on a sustained basis. Ambassador K. Kesavapany Director Institute of Southeast Asian Studies Singapore

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Foreword RUSSIA–ASEAN SUMMIT: Approaching Its First Anniversary The first Russia–ASEAN Summit held in Kuala Lumpur in December 2005 adopted, along with a joint Political Declaration, a Comprehensive Programme of Action to Promote Cooperation in political, economic, cultural and other areas of Russia–ASEAN inter-relationship. These two major documents set a framework of Russia–ASEAN relationship for the period 2005–15. It would be, of course, premature to try to make a final judgement on the progress of this programme less than a year after the summit. But on the other hand, it would be only expedient to offer analytical comments regarding the general atmosphere that prevailed in the relations over this period as well as to single out dominating tendencies in these relations. For a start, I would suggest that relations, especially political ones, between Russia and individual ASEAN countries, as well as ASEAN as a group, developed during this time in the spirit of cooperation and mutal respect and did not suffer any setbacks of any kind. Both parties continued a constructive dialogue on a wide range of issues of mutual interest, both of international and of bilateral significance. Although there has not been any major breakthrough achieved in this relationship so far, both sides undoubtedly continued painstakingly to build up the basis needed for a noticeable progress or even for a breakthrough in these relations in the future. I would also maintain that this positive though unspectacular development is not a minor matter in our relationship that may be overlooked or disregarded while characterizing their record over the last year. It is particularly important if analysed against the background of a rather unstable global situation full of numerous deep contradictions and conflicts, ranging from the unending confrontation between the Western and Islamic worlds, to the continuing xi

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threats to global and regional peace and stability from the forces of international terrorism, religious extremism and separatism and to the economic upheavals because of instability of international raw materials and energy prices. Having said this, I would nevertheless side up with those critics of the present state of Russia–ASEAN relations who are dissatisfied with the absence of a notable progress in our business relations in general and in our mutual trade in particular. Yet I would maintain that there have been new and rather encouraging developments on the economic front that may serve as a prologue to the overall improvement in this situation. My Russian colleagues at this seminar will later address the state of Russia–ASEAN economic relations at length and offer their own opinion on the possibilities of their progress. Meanwhile I would like to raise a few points of my own in this context. The first among them is related to the changes in the Russian economic strategy made recently and connected with major investment plans in large energy projects in Siberia and the Russian Far East or in the development of transport infrastructure on the Kuril Islands. Also it was reported in the press that a Malaysian investment company, Kedah Wafer Emas, negotiated the construction of a large enterprise for production of microchips in Russia. If these negotiations succeed, investments in the project may reach US$1.2 billion and the production process will begin at the end of 2008. Even though realization of these development projects are first of all aimed to benefit the Russian domestic economy it creates at the same time necessary economic preconditions for the integration of Russia, especially of its regions lying to the east of the Ural Mountains, into the Asia-Pacific economy. Admittedly one cannot expect early and dramatic achievements in this regard. In fact, the mere magnitude of the announced Russian investment policy requires some time for its implementation. Secondly, what should be noted however, is that Russia, its federal government and regional authorities, as well as the Russian private business, are moving resolutely from declaration of their intentions to link the Russian economy to the Asia-Pacific one, to their actual implementation. To illustrate these developments I would like to mention that following the First Russia–ASEAN Summit, Mikhail Nikolaev, former President of the Sakha (Yakutia) Republic and now Deputy Chairman of the Federation Council, the upper chamber of the Russian parliament, put forward an initiative which he named “Eastern Dimension”. It is aimed at stimulating economic and trade relations with the ASEAN countries in such areas as machine building, production of ferrous and non-ferrous metals, electronics and power production, as well as tourism. In particular, the “Eastern Dimension” plans to use Siberian and Far Eastern transport facilities, xii

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including railways and seaports, not only for promoting trade between Russia and ASEAN countries but also for servicing commodity flows between European and East Asian countries. This initiative was supported by a number of Russian regional leaders in Siberia and the Far East. Addressing the ASEAN ministerial conference in Kuala Lumpur in July 2006, Sergei Lavrov, Foreign Minister of Russia, told his colleagues that the Russian government also extended its support to “Eastern Dimension” initiatives since they may actively contribute to promoting not only economic relations and trade, but in fact — manifold relations between Russia and ASEAN member states. Lavrov also stated that starting from January 2007, the financial fund of the Russia–ASEAN dialogue partnership will begin functioning. These steps and initiatives are aimed not only at promoting and expanding Russia’s relations with ASEAN member states but also serve a wider goal of integrating Russia, especially its eastern regions which constitute the area sometimes called Pacific Russia, into the East Asian economy. In the English-language edition of IMEMO’s book, East Asia: Between Regionalism and Globalism, published this year as a cooperation project between our two institutes, IMEMO and ISEAS, I wrote that: Russia has serious, in fact vital, economic interests in East Asia. To realize them, it needs to develop bilateral as well as multilevel economic cooperation with its regional neighbours. Such cooperation may include joint development of Russia’s abundant energy and raw materials resources. It may also focus on mutually beneficial cooperation in high-tech industries. As a basis for such regional cooperation, Russia is in the position to offer: a) its rich oil and gas deposits in Siberia and the Russian Far East; b) its resources of fish and sea products in its Far Eastern maritime economic zone; c) its sufficiently well-developed railway transport infrastructure that may facilitate transcontinental commodity flows from East Asia to Europe; d) its substantial industrial and scientific potential in the eastern part of the Russian Federation; e) its large pool of highly-skilled and relatively cheap labour force.

I would maintain that these factors constitute a solid basis for mutually beneficial economic links with Russia’s East Asian partners in general and with ASEAN member states in particular. Also taking into account the earlier-mentioned Russian investment plans, I strongly believe that already in the foreseeable future, we shall see a progressive development of Russia– ASEAN economic ties. Also, next year, as part of cooperation in space programmes developing between Russia and Malaysia, a Malaysian citizen will be sent into outer space onboard a Russian spacecraft. Another welcomed development between Russia and ASEAN countries was a recent visit of the xiii

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defence minister of Singapore to Russia. During this visit, the Russian and Singaporean defence ministers discussed concrete issues of cooperation between our countries in fighting against international terrorism, extremism and piracy in East Asia. They also decided to explore prospects of Russian arms sales to Singapore. For this purpose a Russian team of experts is expected to visit Singapore soon. I believe that it would be wrong to reduce our relationship to economic links alone, even though they are unquestionably very important. Thus one should take into account the existing potential of cooperation developing between Russia and ASEAN member states on human development issues, such as education or tourism. Finally one should not forget about the importance of promoting cooperation between Russia and ASEAN, as well as between the Shanghai Cooperation Organization (SCO) of which Russia is a prominent member, on issues of regional and international security. Let me remind in this regard that the first contacts between the SCO and ASEAN were already established several years ago at about the same time as when the SCO began taking part in the work of the counter-terrorist committee of the UN Security Council. Favourable prospects of the SCO-ASEAN cooperation invite even more attention now as the SCO has become more mature and is rapidly increasing its capability to make an important contribution to strengthening regional peace and stability. The previous IMEMO-ISEAS seminar was held last year on the eve of the First Russia–ASEAN Summit and our common intention was not only to engage in an academic exercise and exchange of opinions but also to bring the results of our discussions and recommendations to the notice of our respective governments. The proceedings and the results of that seminar were reflected in the joint publication titled, ASEAN–Russian Relations, and according to the information I possess, the ideas that were contained in this book indeed inspired interest in government circles of our countries. I am sure that this second IMEMO-ISEAS seminar will further our common effort undertaken a year ago and will make another contribution to building a strong and mutually beneficial relationship between Russia and Singapore as well as between Russia and ASEAN. Professor Gennady Chufrin Deputy Director Institute of World Economy and International Relations (IMEMO) Russia xiv

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The Contributors Vyacheslav AMIROV is currently Senior Research Fellow, Center for Asia Pacific Studies, IMEMO. He graduated from the Economics Faculty, Moscow State University in 1971, and joined IMEMO in 1971 where he received his Ph.D. in Economics in 1975. He has written numerous articles about Russia’s role and relations in the Asia-Pacific region. His professional interests include Russia’s relations with Asia-Pacific countries, economic integration in East Asia, and the roles of Japan and the United States in the region. HO Khai Leong is Associate Professor at the School of Humanities and Social Sciences, Nanyang Technological University, Singapore, and Visiting Fellow at the Institute of Southeast Asian Studies, Singapore. He obtained his Ph.D. in Political Science from the Ohio State University, U.S.A. His current research interests include Malaysian and Singapore politics, China–ASEAN relations, corporate governance and administrative reforms. He is the author/ editor of three books. Evgeny KANAEV is Research Fellow, Moscow State Pedagogical University. He is currently a Visiting Research Fellow at the Center for Asia Pacific Studies, IMEMO. His area of research includes current trends in ASEAN relations with its dialogue partners and multilateral cooperation on security matters in East Asia. Christopher LEN is Coordinator for the Energy and Cooperation Project as well as the Conflict Management in Northeast Asia Project at the Institute for Security and Development Policy based in Stockholm, Sweden . He is also Assistant Editor of the China and Eurasia Forum Quarterly, as well as Visiting Associate at the Institute of Southeast Asian Studies (ISEAS) in Singapore. xv

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Vasily MIKHEEV graduated from Moscow State Institute of International Relations (MGIMO) in 1976. In 1976–81 and then again in 1984–93, he was a Research Fellow, Institute of World Socialist Economy, Russian Academy of Sciences. In 1981–84, he served as First Secretary, Russian Embassy to North Korea. In 1993–96, he was the Counsellor, Head of Political Section, Russian Embassy to Lithuania. In 1996–2005, he was Senior Research Fellow and then Deputy Director, Institute for Far Eastern Studies, Russian Academy of Sciences. In 2003–05, he was the Director of Asia Security Program, Carnegie Moscow Center. From 2005 to date, he is the Head, China and Japan Studies Section, IMEMO. In 1978 he received a Ph.D. in Economics; and in 1992, he obtained a Professor’s degree in international economy. In 2003, he was elected as Associate Member, Russian Academy of Sciences. He is the author of several monographs and more than 250 articles published in Russia, the United States, EU, China, Japan, South Korea. MINN Naing Oo graduated with an LL.B. (second Upper Honours) from the National University of Singapore in 1996. He subsequently obtained a Masters of Law (Harlan Fiske Stone Scholar) from Columbia University School of Law, New York in 2001. He is currently the Director of WTO and International Trade Negotiations Directorate, Trade Division in the Ministry of Trade and Industry. His key role is to oversee the Directorate that handles the negotiation of Singapore’s international trade agreements, such as the WTO agreements and Free Trade Agreements (FTAs), as well as the implementation and reviews of these agreements. Prior to his joining the ministry, Minn was a lawyer in private practice from 1997 to 2002. Igor PODBEREZSKY is currently Leading Research Fellow, IMEMO. In 1962 he graduated from Moscow State Institute of International Relations (MGIMO), majoring in Philippine Studies. From 1965–78, he was an Associate Professor in this institute, teaching Tagalog language. In 1970– 71, he studied at the University of the Philippines. In 1978–98, he worked at the Institute of Oriental Studies, Russian Academy of Sciences, first as Senior Research Fellow and then as Head of Section of History and Political Problems of Southeast Asia, Department of Southeast Asia. In 1984, he defended his Ph.D. thesis in Literature, “Evolution of Rizal’s Creativity”. From 1998 to date, he works at IMEMO. He is a Member of the Writers’ Union of Moscow. His fields of interest include: theory of civilizations, intercultural studies, religion. He is the author of ten monographs and more than 150 articles. xvi

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Maxim POTAPOV is the Head of Division for International Organizations, International Business Department, joint-stock company, Gazprom. He graduated from Moscow State Institute of International Relations (MGIMO) in 1991. In 1988–89, he studied at the second Institute for Foreign Languages in Beijing. Prior to his work in Gazprom in 2001, he served for ten years at the Russian Ministry of Foreign Affairs. From 1994 till 1998, he served at the Russian Embassy in China as Attaché, Third Secretary and Second Secretary. In 1998–2001, he was Second Secretary, and then First Secretary at the Division for ECOSOC, Department of International Organizations, Russian Ministry of Foreign Affairs. In 2000, he received a Ph.D. (Econ.) at the Institute for Far Eastern Studies of the Russian Academy of Sciences. He is Associate Member of the Russian Academy of Technological Sciences since 2003. He has published in Russian and English over seventy articles and research papers. Besides Russian, he speaks English and Chinese, and actively cooperates with IMEMO, acting as Chief Research Fellow at the Asia-Pacific Research Studies Center. He has also authored several monographs on China’s external economic affairs as well as on Asia-Pacific economies and international economic relations. Rodolfo C. SEVERINO is Visiting Senior Research Fellow at the Institute of Southeast Asian Studies in Singapore and a frequent speaker at international conferences in Asia and Europe. Having been Secretary-General of the Association of Southeast Asian Nations from 1998 to 2002, he has written a book, entitled Southeast Asia in Search of an ASEAN Community, published by ISEAS. Before assuming the position of ASEAN Secretary-General, he was Undersecretary of Foreign Affairs of the Philippines. In the Philippine Foreign Service, he was Ambassador to Malaysia from 1989 to 1992, Chargé d’affaires at the Philippine Embassy in Beijing from 1975 to 1978, Consul General in Houston, Texas, and an officer at the Philippines Embassy in Washington, D.C. Between overseas postings, he held senior positions at the Philippines Department of Foreign Affairs, and twice served as ASEAN Senior Official for the Philippines. He has a Bachelor of Arts degree in the Humanities from the Ateneo de Manila and a Master of Arts degree in International Relations from the Johns Hopkins University School of Advanced International Studies. Viktor SUMSKY is Head of Section, Center for Development and Modernization Studies, IMEMO, Russian Academy of Sciences. He has written three monographs and has co-authored/contributed to twelve books. Sumsky graduated from the Moscow State Institute of International Relations (MGIMO) in 1975, and received a Ph.D. from the Institute of Oriental xvii

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Studies, USSR Academy of Sciences in 1983. Apart from his native Russian, he speaks English and Indonesian, and has worked in the Soviet Foreign Ministry, Institute of Oriental Studies and is currently at IMEMO. His overseas working experience includes the University of the Philippines, London School of Economics, and the University of Washington. His areas of professional interests include the political development of ASEAN countries, and security and international relations in the Asia-Pacific region. Vyacheslav F. URLYAPOV is Senior Research Fellow at the Institute of Oriental Studies, Russian Academy of Sciences. He publishes extensively on political and security developments in Southeast Asia. His current area of interest covers analysis of the prospects of East Asia Community-building.

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The Editors Gennady CHUFRIN is Deputy Director, Institute of World Economy and International Relations (IMEMO), Russian Academy of Sciences, Moscow. He is author/co-author of fifteen monographs and over 120 articles published both in Russia and abroad, in Russian, English, French, Chinese, Japanese and Korean, on international security, Russian foreign policy issues as well as the Asia-Pacific region. He graduated from the Leningrad State University in 1958 and received a Ph.D. in International Economics in 1965 from the same university. In 1981, he received a Professor’s degree in International Economics from the Institute of Oriental Studies, USSR Academy of Sciences. In 1994, he was elected as Associate Member of the Russian Academy of Sciences; in 1996 he became Distinguished Fellow at CSIS, Jakarta; and in 2007 — Distinguished Fellow at the Kazakhstan Institute of Strategic Studies, Almaty. He has worked in various capacities as diplomat, official and academic in Indonesia, India, Pakistan and Sweden (SIPRI) before assuming his present post in 2002. Mark HONG Tat Soon was awarded the President of the Republic of Singapore’s Scholarship in 1965. He obtained a B.A. in Economics from Cambridge University in 1969 and an M.Sc. in International Relations from Georgetown University in Washington, D.C. in 1982 on a Fulbright Scholarship. He joined the Ministry of Foreign Affairs in 1969. He served at the Singapore foreign missions in Phnom Penh, Hong Kong, Paris, and at the Singapore Permanent Mission to the UN in New York. His last foreign posting was as Singapore Ambassador to Russia and Ukraine from November 1995 to March 2002. He has since been attached to the Institute of Defence and Strategic Studies, Nanyang Technological University, Singapore, as a visiting senior fellow. He is currently a Vice-Chairman of the International xix

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Committee of the Singapore Business Federation, an International Advisor to the Port of Singapore Authority, and a Visiting Research Fellow at ISEAS. He has delivered over a hundred conference papers and lectures to various international seminars and conferences.

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Russia, ASEAN and East Asia

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PART I Overview of ASEAN-Russia Relations

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Rodolfo C. Severino

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Russia, ASEAN and East Asia

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Russia, ASEAN and East Asia Rodolfo C. Severino

On 13 December 2005, on the occasion of the series of summit meetings of the Association of Southeast Asian Nations (ASEAN) in Kuala Lumpur, President Vladimir V. Putin took part in the first-ever meeting between the leaders of ASEAN as a group and the president of the Russian Federation. The next day, the inaugural meeting of the East Asia Summit (EAS) took place. The ten member states of ASEAN, Australia, China, India, Japan, the Republic of Korea, and New Zealand participated in the first EAS — but not Russia. Russia had agreed to go to Kuala Lumpur for the ASEAN–Russia Summit with the clear desire to take part also in the EAS, the same desire that animated Australia, India and New Zealand. However, ASEAN, which had assumed the “driver’s seat” of the EAS, could not achieve consensus on Russia’s participation. In Kuala Lumpur, therefore, ASEAN, particularly the Malaysian hosts, faced an awkward situation: President Putin would be attending the first ASEAN–Russia Summit but would not be a regular participant in the first East Asia Summit the next day despite his evident eagerness to take part. In its usual creative way, ASEAN resolved its awkward dilemma by offering a compromise in which the Russian president would address the EAS as the guest of Malaysia but not take part in its deliberations. In his speech, Putin made clear that Russia was “submitting its application to take part in the organization’s (the EAS’) activities” and hoping that the “EAS’ founding

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members … will also create incentives for new partners to join”. He then stressed Russia’s qualifications. Russia is “an integral part of the Asia-Pacific region” on the basis of “equal partnership and mutual benefits”. It has a wide range of long-term interests in the region. Russia has been a dialogue partner of ASEAN for almost ten years and has signed the Treaty of Amity and Cooperation in Southeast Asia. Putin enumerated joint declarations, agreements and cooperative activities between ASEAN and Russia as examples of the increasingly “dynamic and substantial” character of ASEAN–Russia relations. He held out the potential for mutually beneficial cooperation in East Asia to which Russia could contribute significantly, particularly in the spheres of energy and disaster relief.1 Before the January 2007 ASEAN Summit in Cebu, in the Philippines, the question arose: Will President Putin be there for another ASEAN– Russia Summit and to take part in the East Asia Summit? The Philippines, as host, was reportedly eager to have the Russian president in Cebu whatever the nature of Moscow’s role. However, ASEAN failed to arrive at a consensus on either issue. The joint declaration of the First ASEAN– Russia Summit had referred to ASEAN and Russia’s agreement to hold “regular” summits, but did not say whether they would take place every year. In fact, according to the chairman’s statement of that meeting, the suggestion for an annual ASEAN–Russia Summit would only be “considered”. As for the EAS, the lack of an ASEAN consensus is reflected in the Chairman’s Statement of the First East Asia Summit of 14 December 2005, which stated, “(W)e welcomed the Russian Federation’s expression of interest to participate in the East Asia Summit and agreed to consider its participation in future East Asia Summits based on the criteria established by ASEAN.” For their part, the Russians have since taken the posture that what matters is the substantive integration of Russia and East Asia rather than Russian participation in the EAS. ASEAN consensus on the issue of participation in the EAS, as well as on a second ASEAN–Russia Summit, is crucial. The Kuala Lumpur Declaration on the East Asia Summit affirmed, “Participation in the East Asia Summit will be based on the criteria for participation established by ASEAN.” The EAS Chairman’s Statement cited in the previous paragraph applied this principle to the question of Russian participation. And what are the ASEAN criteria? They are: • • •

Status of full ASEAN Dialogue Partner; Accession to the Treaty of Amity and Cooperation in Southeast Asia; and “Substantive relations with ASEAN”.

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The ASEAN foreign ministers adopted the criteria at their “retreat” in Cebu on 11 April 2005 in order to have some rational basis for determining which countries could take part in the East Asia Summit. In November 2004, the ASEAN leaders had decided, with the subsequent support of China, Japan and Korea in the ASEAN+3 context, to convene the EAS the next year. The criteria were laid down in the light of evident disagreements in ASEAN and in ASEAN+3 over the question of EAS participation. Some had preferred such participation to be limited to ASEAN+3; others had wanted to involve a larger group to include, initially, Australia, India and New Zealand. But on what grounds? And on what basis should additional participants be admitted in the future? The ASEAN foreign ministers agreed on the three criteria as the answer to these questions. All three, it must be noted, have to do with the state of a prospective EAS participant’s relationship with ASEAN. It might be useful at this point, before we examine the specific question of Russia’s relationship with ASEAN, to trace the evolution of the EAS. One might say that the EAS had its origins in the proposal in 1990 by Dr Mahathir Mohamad, then prime minister of Malaysia, for the establishment of an East Asia Economic Group, or EAEG. Mahathir made the proposal at a dinner in honour of China’s Premier Li Peng in Kuala Lumpur in December 1990, arguing: Unfortunately there is an unhealthy trend in that there is a tendency to establish economic blocs. Besides the unification of the European market, the United States has formed a joint market with Canada and now with Mexico as well. The United States is now making efforts to attract the Central and Latin American States so that there will evolve a stronger economic link for North and South America. Apart from the reunification of Germany, there is a possibility that the East European countries may join the European Economic Community. On the other hand, as countries in the East are seen by the West to achieve the status of developed nations, various measures are taken by the West to frustrate them. Malaysia disagrees with the formation of economic blocs. But the fact is that many developed countries in the West have formed economic blocs and are using their economic strength to obstruct fair and free trade. In such a situation, Malaysia has reexamined her stand and is of the view that for the world to achieve a balanced economic development, the countries of the Asia Pacific region should strengthen further their economic and market ties so that eventually an economic bloc would be formed to countervail the other economic blocs.

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Ten months later, Mahathir elaborated on his proposal: If ASEAN is to have a bigger say in trade negotiation internationally, then it must work together with the East Asian countries. The East Asia Economic Group or EAEG will be sufficiently strong to gain the respect of both the EC and the NAFTA. Even presently the countries of South East and East Asia together form a formidable market. But the potential for growth of the EAEG is far greater than that of the EC and NAFTA. This fact will also increase the clout of the EAEG…. It is important that the EAEG should not be a trade bloc. All the countries of the group should be free to trade with anyone under GATT rules. But when it comes to negotiation to maintain a free trading system for the world then the group should meet to discuss issues and take a common stand. It would be very difficult for the trading blocs of Europe and America to ignore the common stand of the EAEG. Since the EAEG stands for free trade, its strong influence in the GATT rounds is likely to yield positive results…. Unless we have this group, ASEAN and everyone will be at the mercy of the trade blocs of Europe and America. There will be so many conditionalities and linkages with non-trade issues that the growth of ASEAN countries will be retarded. We will all remain developing countries forever.2

In my recently published book, Southeast Asia in Search of an ASEAN Community, I recount: Because the other ASEAN members had not been consulted, it took a while for the idea to take hold. Some ASEAN member-states, particularly Indonesia, were concerned about the lack of previous intra-ASEAN consultations. Others had misgivings about the anti-Western tone of the proposal. In the course of further discussions, the concept was watered down to an “East Asia Economic Caucus”. Some, rather disingenuously, presented this as meaning an East Asian caucus within APEC, a pretense that was quickly abandoned. Wags had tagged it acerbically as “a caucus without Caucasians”. Finally, in December 1997, Malaysia, as host of the ASEAN “informal” summit, invited the leaders of China, Japan and South Korea to meet with those of ASEAN together and individually. Since then, the East Asian leaders have been meeting every year in the same format on the occasion of the annual ASEAN Summit. The forum became known as ASEAN Plus Three in order to emphasize the centrality of ASEAN’s role, the forum’s character as process rather than as institution, and its open nature. For some ASEAN members, it would also dissociate the process from the EAEG concept.3

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The process has branched out to many sectors — sixteen formal forums in 2005 — political and security, trade and investment, finance, agriculture, fisheries and forestry, energy, the environment, tourism, transnational crime, health, labour, culture and the arts, science and technology, information and communications technology, social welfare, youth, and rural development — most of them at the ministerial level. At their July 2006 meeting, the ASEAN+3 foreign ministers “welcomed the establishment of cooperation in four new sectors” — rural development and poverty eradication, women issues, disaster risk management and emergency response, and minerals.4 The ASEAN+3 Summit of January 2007 “noted the recent expansion of APT cooperation”, referring to the four new areas.5 The most prominent of ASEAN+3’s undertakings is the Chiang Mai Initiative (CMI) for financial cooperation, which is intended to help prevent a recurrence of the 1997–98 East Asian financial crisis. Supported by the Asian Development Bank, as well as the ASEAN Secretariat, the CMI has three principal components. The first is a mechanism for conducting collective surveillance of the regional economy, something like an early warning system. The second is the expansion of the ASEAN Swap Arrangement, which now includes all ten ASEAN members and has increased in value to US$2 billion. The third is an ASEAN+3 network of bilateral currency swap and repurchase agreements under which each party would make available foreign exchange to the other party should the latter find itself in balance of payments difficulties. As of this year, the total amount involved in sixteen bilateral arrangements has hit around US$80 billion. The system has been increasingly multilateralized so as to allow all participants in the initiative to pitch in with “liquidity support” to any participant that gets into an “emergency”.6 ASEAN+3 has also launched the Asian Bond Market Initiative and is exploring ways of coordinating exchange rates. Beyond these practical areas of cooperation, the ASEAN+3 process has a number of strategic purposes. Both through meetings at the very top and through practical cooperation at the ministerial, officials and “working” levels, ASEAN+3 has served as a forum for building confidence among the countries of East Asia. It provides a highly visible political framework for strengthening the linkages between the complementary economies of Southeast and Northeast Asia. It aims to promote the development of a measure of East Asian identity. It should be noted that ASEAN+3 constitutes the Asian side of the Asia Europe Meeting. All of ASEAN+3, except, for political reasons, Cambodia, Laos and Myanmar, take part in APEC. The ASEAN+3 finance ministers invariably meet among themselves in preparation for the annual meetings of the

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IMF/World Bank and of the Asian Development Bank. Not least, ASEAN+3 offers an additional venue for informal contacts among the Northeast Asian countries, thus helping to smooth the rough edges in the relations among China, Japan and Korea. In all these ways, ASEAN+3 contributes to the stability of the East Asian region. Very early in the ASEAN+3 process, at its second summit in 1998, President Kim Dae Jung of the Republic of Korea proposed the establishment of an East Asia Vision Group (EAVG) of “eminent intellectuals” who would, in President Kim’s words at the 1999 ASEAN+3 Summit, recommend “concrete ways to nurture East Asia into a single community”.7 The 2000 ASEAN+3 Summit appointed an East Asia Study Group (EASG) of senior officials and the ASEAN Secretary-General to assess the EAVG recommendations. On the basis of the EAVG report, the EASG drew up its own report, which was delivered by Korean Prime Minister Kim Suk Soo to the 2002 summit. The report lined up the recommendations into seventeen short-term and nine long-term goals.8 Among the long-term recommendations was the proposal for an East Asia Summit. However, neither the EAVG nor the EASG envisioned the convening of the EAS anytime soon. The EAVG referred to the “evolution” of the ASEAN+3 Summit into an East Asia Summit, while the EASG stressed that the evolution should take place “in a gradual and balanced way” as a “long-term objective”. The EASG posed questions about the envisioned EAS’ nature and about the issue of participation in it. The ASEAN+3 leaders themselves, at their 2001 and 2002 summits, indicated that they were in no hurry to go into the EAS. At the 2004 ASEAN Summit, however, the Southeast Asian leaders decided to convene the East Asia Summit in 2005 in Malaysia, host of that year’s ASEAN and ASEAN+3 Summits, as well as the first ASEAN–Russia Summit. The ASEAN+3 leaders quickly endorsed the ASEAN decision. Obviously, before the EAS could meet, the question of participation had to be settled, even if all other issues were left to the EAS itself to thresh out. The basic question was whether to limit EAS participation to ASEAN+3 or expand it to include other powers. Answering a question after his Singapore Lecture in February 2005, President Susilo Bambang Yudhoyono explicitly stated Indonesia’s desire for the inclusion of Australia, India and New Zealand in the EAS. Singapore had indicated a similar preference. Although the EAEG was originally conceived by then Prime Minister Mahathir as consisting of what is now ASEAN+3, his successor, Abdullah Badawi, expressed his partiality to “inclusiveness”.

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It is clear that, even before the criteria for participation in the EAS were adopted, certain objectives had animated the move to link India and Australia and New Zealand to East Asia further through the EAS. No ASEAN state has categorically defined these objectives in public. However, one might hazard the guess that one of them is to signal the region’s openness to closer linkages with East Asia’s “near abroad” or with “outsiders” in general. Another might be to ensure that the East Asia enterprise is not dominated by Northeast Asian tensions and concerns. Still another might be to bring in India and Australia as counterweights to the Northeast Asian powers. There is also the recognition of the growing involvement, de facto, of Australia, India and New Zealand in East Asia, particularly in its economic affairs, and of the fact that some transnational problems could be dealt with more effectively by the sixteen than by the thirteen alone. At the same time, participation in the EAS would accommodate the growing aspirations of India and of Australia and New Zealand to take part in the East Asian consensus as well as to strengthen economic linkages with the region. To provide a rationale for ASEAN’s choice of EAS participants and to lay the ground for the possible inclusion of others in the future, the ASEAN foreign ministers laid down the three criteria for participation. Two — dialogue partner status and accession to the Treaty of Amity and Cooperation — are straightforward and objective enough. Australia and New Zealand have been ASEAN dialogue partners since 1974 and 1975, respectively, and India since 1996. India signed the treaty in October 2003. New Zealand had no problem in doing so in July 2005. Australia, on the other hand, had publicly denigrated the treaty, but, faced with exclusion from the EAS, had to do a policy turnaround and acceded to it in Kuala Lumpur, four days before the first EAS. The third criterion — whether a prospective EAS participant has “substantive” relations with ASEAN — is more subjective. Whereas the other two criteria are matters of fact, the third is a matter of judgement and, therefore, of political decision. If, for political reasons, an ASEAN member wished a dialogue partner and treaty party to participate in the EAS, it could argue that that country’s relations with ASEAN are “substantive”. On the other hand, if another ASEAN member had an interest in blocking that dialogue partner’s participation, it could claim that the latter’s relations with ASEAN are not “substantive” enough. In other words, as is usual in diplomacy, the political decision determines the public argument rather than the other way around.

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What about Russia? Russia became an ASEAN dialogue partner in 1996, at the same time as China and India. It signed the Treaty of Amity and Cooperation in Southeast Asia in November 2004. The remaining question, formally speaking, is this: Are Russia’s relations with ASEAN sufficiently “substantive”? Those who support Russia’s participation in the EAS could invoke Russia’s strategic importance to the region. Much of Russia’s territory lies in Asia, abutting East Asia and extending to the Pacific. In some forums, it is regarded as an Asian, or at least a Pacific, country. Moscow has been taking part in APEC since 1998. It has been accepted in the Asian Cooperation Dialogue. It is linked to China through the Shanghai Cooperation Organization and strengthening bilateral ties. By virtue of the location of much of its territory and its historic involvement in East Asian affairs, Russia needs to take part in shaping the East Asian consensus. It is on these grounds that Russia is a participant in the Six-Party Talks on the nuclear problem in North Korea. At the other end of the Asian continent, Russia is a member of the Quartet dealing with the Israel–Palestine peace process. More broadly, although somewhat diminished, Russia remains a major power in terms of global political influence and military might. It has an extensive military presence in the Pacific. It is a leading nuclear power and a permanent member of the United Nations Security Council. It possesses the world’s largest store of energy resources, with the technology to match. It is far advanced in several areas of science and technology. After a shaky period, its economy is surging. These were evidently the principal factors behind Russia’s admission into the Group of Eight (G8) leading industrial nations. They were also the main considerations in ASEAN’s engagement of Russia as a dialogue partner. On the other hand, those who oppose Russia’s presence in the EAS could point to what might be considered as the largely insubstantial nature of Russia’s relations with ASEAN. In a paper that this author presented at a conference in Singapore jointly organized in March 2005 by Singapore’s Institute of Southeast Asian Studies and the Institute of World Economy and International Relations (IMEMO) of the Russian Academy of Sciences, it was noted that “ASEAN–Russia trade in 2003 amounted to less than US$4 billion, a paltry sum in comparison to ASEAN–China trade, which was valued at US$78.2 billion in the same year.”9 In 2005, ASEAN–Russia trade had a value of less than US$4.7 billion, as against ASEAN–China trade, which had soared to US$113.4 billion. This is not to mention the value of ASEAN’s trade with its leading trading partners — Japan, the United States and the European Union. Investment flows between ASEAN

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and Russia are too small to figure in most statistical tables. The total number of visitors to ASEAN from the Russia-led Commonwealth of Independent States is dwarfed by the number of those from individual countries in Western Europe or East Asia. When Russia became an ASEAN dialogue partner in 1996, it undertook, like the other new entrants into the ASEAN dialogue system, to put up a fund for cooperative activities. However, for one reason or another, it took almost ten years for the fund to be established. As a result, Russia has had no official development assistance programme for ASEAN as an association. On the occasion of the 2005 ASEAN–Russia Summit, the two sides set up the ASEAN–Russian Federation Dialogue Partnership Financial Fund. However, unlike the other new dialogue partners, Russia did not indicate a specific amount as its contribution to the fund. It was only recently that the fund seemed to near realization. In the end, the decision on further participation in the EAS, including Russia’s, lies in the political judgement of individual ASEAN member states. The state of bilateral relations may figure in this judgement, although not necessarily. While these political calculations are being made, it is useful to keep in mind that, as the Russians have emphasized, more important than formal participation in the EAS is the substance of Russia’s integration with East Asia. Whether Russia is in the EAS or not, it would be good for both sides to strengthen that integration. Russia’s political influence on the state of affairs in the Korean Peninsula and on the overall strategic situation in East Asia is quite manifest. However, much work needs to be done in the other areas of potential linkage between Russia and East Asia. Clearly, one of these areas is energy. Russia sits on top of the world’s largest deposits of fossil fuel; but it is not enough to assure East Asian countries of access to those deposits, including the infrastructure to transport the fuel. It is encouraging to learn that, in Kuala Lumpur in December 2005, President Putin, in referring to energy cooperation between Russia and East Asia, talked not only about oil and gas — supply security, prospecting, exploration, and pipeline construction — but also about “non-traditional energy sources” and “energy-saving technology”. With respect specifically to ASEAN–Russia relations, something must be done about the information gap — the information chasm — that is, in large measure, responsible for the shockingly meagre state of trade, investment and tourism between Russia and ASEAN. In general, the level of knowledge about each other, quite low at this point, should be elevated by every means at the disposal of both sides, in as many sectors as possible, involving as many people as possible — academic interaction, cultural and journalistic

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exchanges, mutual official visits at many levels, starting at the top, as well as business networking. The First ASEAN–Russia Summit in December 2005 issued a barrage of intended areas of cooperation and proposed cooperative activities through a Joint Declaration and a chairman’s statement on the summit, an Agreement on Economic and Development Cooperation, and a Comprehensive Programme of Action to Promote Cooperation (2005–15). If only half of those are actually carried out, ASEAN–Russia relations will have moved quite far from where they are today. Through all this, ASEAN should not forget that, by any measure, Russia is a great power in terms of military strength, political heft, advances in science and technology, and strategic importance, with critical influence on most issues involving East Asia. For its part, Russia should push its case as a global and an Asian power with ASEAN, highlighting the value of its potential contribution to the East Asian consensus. It ought to offer to ASEAN concrete programmes of cooperation in science and technology that lie in the areas of its strength, including energy. There has been much talk about Russian advances in certain sectors of science and technology, from which ASEAN could benefit. It is now time to remove the bottlenecks from the actual conduct of scientific and technological exchanges. Not least, Russia should make good on its commitment to the ASEAN–Russia fund, which was supposed to have started operating at the beginning of 2007. On both sides, ASEAN and Russia ought to initiate negotiations on a free trade agreement or agreements that cover trade in goods, services and investments, similar to those that ASEAN is conducting with China, India and South Korea. The process of negotiation should at the very least serve to identify both the current and potential opportunities for trade and investments between ASEAN and Russia and the obstacles that prevent that trade and those investments from rising above the nadir at which they are currently stuck. NOTES 1. 2. 3. 4.

Press release issued by the Information and Press Department, Ministry of Foreign Affairs of the Russian Federation. Address at the Meeting of the ASEAN Economic Ministers, Kuala Lumpur, 7 October 1991. Rodolfo C. Severino, Southeast Asia in Search of an ASEAN Community (Singapore: Institute of Southeast Asian Studies, 2006), p. 266. Chairman’s Press Statement for the Seventh ASEAN+3 Foreign Ministers’

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Meeting, Kuala Lumpur, 26 July 2006, para. 19 . Chairman’s Statement of the Tenth ASEAN+3 Summit, Cebu, Philippines, 14 January 2007, para. 5 . The Joint Ministerial Statement of the 9th ASEAN+3 Finance Ministers’ Meeting, Hyderabad, India, 4 May 2006. Speech of H.E. President Kim Dae-Jung of the Republic of Korea at the ASEAN+3 Summit, Manila, 28 November 1999. Final Report of the East Asia Study Group, Phnom Penh, 4 November 2002 . Rodolfo C. Severino, “ASEAN Engages Russia”, in ASEAN–Russia Relations, edited by Gennady Chufrin, Mark Hong and Teo Kah Beng, p. 5 (Singapore: Institute of Southeast Asian Studies, 2006).

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Non-Economic Approach in Russia–ASEAN Relations: Changes in Asia, Changes in Russia Igor Podberezsky

Great changes are taking place in the post-Cold War Asia where new economic giants are emerging, as well as new security configurations. So the question of what is the place of Russia in this changing region preoccupies the minds of many analysts. We believe Russia can integrate peacefully into these configurations. Russia has certainly gone through hard times. It has not lost its significance but its role in global affairs has changed. It was a superpower and suddenly this status has gone and it received too many signs that the country is not as important in world affairs as it used to be. And Russians are very sensitive, even over-sensitive, to the idea of status. The disintegration of the Soviet Union was not taken easily by Russians. Many took what happened as a personal tragedy and feel humiliated. Unfortunately sometimes these feelings find its outlet in inadequate statements

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and actions. Xenophobia is growing, racism raises its ugly head. Attacks on people of Asian origin happen in some Russian cities including Moscow. Southeast Asians sometimes become victims too. All this is very sad and certainly does not improve the image of Russia in Southeast Asia. This is deeply regrettable and it is hoped that this spell of ill-placed feelings which some people in Russia claim to be patriotic will be over and the situation will return to normal. The changes which have taken place are irreversible. Russia is not just the former Soviet Union minus something. It is quite a new state of political democracy and market economy. It is a new entity with a different political system and political philosophy, with new aims and goals, and even new frontiers. Yet there are many people in Russia who have not realized this yet and continue to think, write, talk and act as if nothing has happened, as if Russia is a direct continuation of the former Soviet Union. At the same time, one cannot say that there is no linkage with what was before. A political thinker once said that certain things in Russia are always done the same way irrespective of who is in the Kremlin — whether Romanov or Ulyanov, meaning the Tsars (whose family name was Romanovs) or the Communists (Ulyanov is the family name of Lenin). Russia’s governing elite is quite capable to access new realities in a proper way although at the time of Yeltsyn, some of his actions were seen as controversial. Russia’s domestic and foreign policy has now become more rational and pragmatic than it was before. It can be said that there is more stability in Russia under Putin although some observers claim that this stability is rather unstable. There are clear indications that Russia has started to pursue a kind of “Look East policy” while previously, its foreign policy was oriented almost entirely to the West. Some analysts claim that this re-orientation took place because Russia shares more values with the East than with the West and its political culture is more like that of some Asian countries especially when it comes to the question of human rights. They say that Russia cannot decide where it belongs: to the East or to the West. Many times Russian leaders (starting from Empress Katherine the Great) said that Russia is a European power but its actions often belie this assertion. Nevertheless, Russian elite and Russian middle and upper middle classes have made their choice: they undoubtedly prefer the West with its capitalistic ways although they clearly see that the West does not always accept and treat them as equals. Russians at home like to talk about the decline of the West, seeing proof of it in the economic achievements of India and China. Still,

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many people do not believe that the power of the West has gone: all key positions in the modern world are still in the hands of Western powers where the innovation economy, or “knowledge-based economy” originated and flourishes now. The economic successes of the Asian Tigers in recent decades are not enough to change the world leadership. Many of Russia’s politicians believe that the West does not create many problems for Russia and it is not as disappointed with the Russian version of “managed” or “sovereign democracy” as it tries to show. But Russia certainly started to pay more attention to the East and the proof of it is in the emergence of the Shanghai Cooperation Organization, Russia’s participation in the Asia-Pacific Economic Cooperation forum as well as in some other actions. Russia simply cannot ignore the region with half of the world population and with emerging giants whose role in global affairs grows very impressively. However, it does not mean that Russia will develop its relations with East Asia at the expense of the West. SOUTHEAST ASIAN DIRECTION OF RUSSIAN FOREIGN POLICY A Southeast Asian direction of Russia’s foreign policy is relatively new. It was perceived as a separate direction only in the 1960s. Some of us participating in this conference know it well from the very beginning and have contributed personally to its formulation. Russia is still a country with a global reach and ASEAN is seen in Russia as an important centre of influence in the AsiaPacific region where integration processes evolve. And Russia is interested in rediscovering its place in the multilateral interaction in the region through developing the spirit of trust. Many changes have also occurred in Russia’s relations with Southeast Asia (SEA). This sub-region of East Asia is no longer divided into two blocks like it was before and Russian presence here is not as manifest as it used to be. Some Southeast Asian countries were worried with the role that the USSR used to play helping the underground Communist movement. The Indochina War strengthened ties between Russia and Vietnam and raised suspicions among ASEAN members about the motivations and intentions of the USSR in Southeast Asia. Now these worries are gone and practically all countries of the region are members of ASEAN. Russia is not a threat to the association and is one of its dialogue partners. It does not support illegal activities in Southeast Asia and uses only diplomatic and political means in its foreign policy. Sometimes it seems that some circles in the region even lament the withdrawal of the USSR

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from Southeast Asia when confrontation between two superpowers — USA and USSR — gave them more room for manoeuvre and threats were more obvious. New threats like terrorism are more dangerous and more difficult to deal with. But ASEAN and Russia perceive these threats in a similar way. They have often supported each other on many international issues of mutual concern and this positive experience is rather promising. Russia believes that despite some doubts in Southeast Asia about its intentions, there is a substantial reservoir of goodwill towards Russia, and there are many people who are sincerely interested in cooperation between Russia and the countries of SEA. Unfortunately now even Russia’s good relations with Vietnam are actually deteriorating. Something should be done about it. The situation can and should be changed for the better. There have been many exchange of visits recently between Russia and ASEAN countries at the high level. Mechanisms of regular political consultations have been created and proved to be very useful. On 13–14 December 2005, President Putin participated in the first Russia–ASEAN Summit and was present at the opening of the first East-Asian Summit (EAS). He held negotiations with leaders of some Asian countries and stated that Russia is ready not only to join organizations, which unite the countries of the region, but also be an active participant in all positive processes there. NON-ECONOMIC COOPERATION Despite some pessimism about the future of Russia–SEA relations, there are many promising fields of cooperation like science, technology, tourism, education and culture, including academic contacts between scholars of our countries. Academic communities used to play a very important role in the normalization of relations between the USSR and ASEAN. The two sides used to meet regularly, exchanged opinions and produced analytical papers in which views were presented. Decision-makers on both sides paid attention to them and regarded them positively. Now it is rather difficult to find a prominent public or political figure who would read such a paper. It may be partly the academics’ own fault since scholars on both sides evidently lost mutual interest. It is really a pity that such an asset is being wasted. Cooperation and joint efforts of scholars from Russia and Singapore can help to improve, or rather, revive academic cooperation of both sides. Certainly we cannot solve economic and political problems but we can help to create an atmosphere favourable for solving all kinds of problems. There is great interest in Russia on Singapore and things Singaporean. For many Russian intellectuals, Singapore is an example of masterly domestic

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policy and of an effective developmental strategy. Former Prime Minister Lee Kuan Yew of Singapore is very popular in Russia and if you read analytical articles in the Russian press, you can easily note that his name is regularly mentioned and he is quoted much more often than any other Asian leader. Singapore’s political culture is of special interest to the Russian political elite so a joint monograph by two authors titled “The Political Culture of Singapore as seen by a Russian Scholar” and “The Political Culture of Russia as seen by a Singaporean Scholar” would no doubt be in high demand. Hopefully, it will not be too difficult to find a sponsor for such a joint undertaking. Despite all the difficulties, Russian science is still highly respected in the world especially in such sophisticated areas as nuclear technology or space research. After the collapse of the Soviet Union, many of our scientists have emigrated abroad and made brilliant academic careers there. But the Russian research base is still effective, its professorial staff remains highly skilled and many excellent scientists teach and do research in Russia. The proof of it is in recent successes of young Russian mathematicians who participated in and won an international competition. Evidently scientists in Singapore understand this since students from the National University of Singapore study mathematics at the Moscow State University. Scientists of Russia and Southeast Asia can cooperate in other areas like basic sciences, applied technology, tsunami warning, prevention of natural disasters and dealing with their consequences, the use of geothermal and other alternative sources of energy, volcanology, commercial space exploration. In all these areas, Russian scholars have achieved good results and joint efforts can multiply them. On its part, Russia needs advanced technologies for the development of Siberia and the Russian Far East. Achievements of Southeast Asian countries in electronics or in biomedicine are known and attract attention in Russia where Southeast Asian companies will be welcomed. There is also good potential for academic cooperation in the social and political sciences as well as the humanities. Exchanges of fellows with the Institute of Southeast Asian Studies (ISEAS) and similar institutions in other ASEAN countries in the past that proved to be very useful. This author knows it well since his stay there as a visiting fellow in 1989 contributed greatly to his understanding of the region. It helped not only to deepen his academic knowledge of the region and to feel better its pulse. The resumption of such exchanges of students and scholars will be very useful, and should go both ways — from Southeast Asia to Russia and vice versa. Special mention should be made of Islamic Studies. Several millions of Muslims live in Russia, some of whom receive religious education abroad and as a result, sometimes these students become too radical. That worries Russia’s

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authorities and these worries are justified. On the other hand, Malaysia is proud of its reputation as the country of moderate Islam and evidently it deserves such a reputation, although Mahathir Mohamad said recently in Astana that there is no such thing as a moderate Muslim. As many young Muslims in Russia dream of studying abroad, they could go to Malaysian religious educational institutions and Russian authorities would be glad to send them there. Despite all Russia’s recent troubles, Russian art is still something to be admired. The development of culture of any region in the world is actually impossible without getting acquainted with the Russian cultural heritage, especially in such sophisticated arts like ballet and music, as well as in painting, sculpture, architecture, etc. Its famous artistic companies like the Moscow State Symphony Orchestra, St. Petersburg Philharmonic Orchestra, and Alexandrov Army Dance Ensemble performed in some ASEAN countries including Singapore. Literature is the most reliable way to the heart of Russians, the best way to understand Russian psyche, its sympathies and idiosyncrasies. Russians are very proud of its great literary tradition, and sometimes define themselves as the nation of Tolstoy and Dostoevsky. There is a good saying about Dostoevsky, who authored the novel Crime and Punishment, which goes like this: not to read Dostoevsky is a crime but to read Dostoevsky is a punishment. Russians are always interested in the literature of other nations and are inclined to judge other peoples by their literature. Publication of something like an anthology of short stories from Southeast Asia can do more to awaken the interest of Russians in the region than any expensive project. Russians know practically nothing about the film industry in Southeast Asia although a Filipino film won a prestigious prize in a Moscow festival last summer. Russian movie-goers are known for their broadmindedness; they like unknown paths and are very grateful viewers. So acquaintance with the film production of the Southeast Asian region might bring good results. It is not very difficult to revive mutual interest especially if we take into consideration new means of communication, first of all, the Internet. Before, it was rather difficult to find those who have common interests. Now all of them are in the World Web and all, let us say, Singapore-philes can easily and informally communicate in the Web, exchange views and ideas. There is a website called “Eastern hemisphere” in Runet where all those who love things Oriental meet and discuss problems which interest them. And a cultural attaché of any ASEAN country can come to this server and give information about his country, offer some topic for discussion and find a generous audience.

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What is needed is political will and understanding that economy is not the only basis for development of relations between nations and not only metals and oil, electronics and video players are of interest to nations. WHY BOTHER? So there are many ways and means to intensify cultural exchanges between Russia and Southeast Asia. The only question is: why bother if economic ties are so weak and ASEAN–Russia trade is only a few billion U.S. dollars compared with about US$100 billion with China? Russian and ASEAN markets are not very familiar to each other. Both sides are on the periphery of what is perceived as national interests. Ignorance about each other is not an advantage and can never be. Many businessmen in Southeast Asia complain about unclear regulations, arbitrary decisions and corrupt officials in Russia. They have reasonable grounds for this but this situation is being corrected, perhaps slowly but irreversibly. Political role of a nation is not always directly proportional to its gross domestic product (GDP) or the volume of trade. Preponderance of economy should not be absolute. After all, man should live not by bread alone and not everything is determined by economy. Economic approach is not the only one and economics may not command everything. Non-economic factors also can play an important role in improving relations. Economic benefit is not and should not be the only determinant in relations between countries. Cultural exchange and knowledge of each other are good in themselves. As the sages of both East and West taught us, if some good can be done, it should be done irrespective of immediate economic gains. The reward for doing good is good in itself. Pushkin, our greatest poet, once accused the Russians of being lazy and not curious. Sometimes we feel that Russians are not alone here and other nations suffer from the same disease. In culture, some seemingly insignificant things can play rather an important role. For example, among our folk songs there is one about “Singapore of bananas and lemons” and this makes your city state much more attractive for many Russians and helps tourism to your country. And this is true in relations with other countries of Southeast Asia too. More than forty years ago, the song about Indonesia with “palm trees on its shores” was so popular in Russia that it was even called “the second national anthem”. For those who heard and sang it at that time, Indonesia is still a country to be visited first in Southeast Asia now. So some cultural phenomena may have an unexpected economic effect. If we look around we can find many reserves for improvement of mutual relations beyond economic reasons but economically

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significant. For example, mutual relations can gain a lot from the interest of many Russians in Oriental philosophy, wisdom and mysticism. Besides, there are purely economic reasons for development of our relations. As Russia’s President Putin said at the East Asian Summit, Russia is the only country with huge hydrocarbon resources in the Asia-Pacific region which can guarantee their supply to the region. Recently, he said that by 2020, 30 per cent of Russia’s oil exports would go to Asia compared with the current 3 per cent. Russia has a well developed network of gas and oil pipelines only in Europe but not in the East so there is much to be discussed. Serious talks with Russia started at the East Asian Summit, a brainchild of Malaysian former Prime Minister Mahathir Mohamad. Russia does not meet one criterion for membership in the EAS: its cooperation with the members of this family is not yet “substantive” but this can be changed. As Russian Foreign Minister Sergei Lavrov said: “The process of globalization is beginning to have an Asian look about it. This makes the fastdeveloping Asia-Pacific region a top priority for us.” If we take into account that Russia is somewhat disillusioned with its role of an outsider in the European integration, one can easily understand why Russia is keen to participate in a similar process in Asia. Many serious analysts say that Russia has recently taken several major steps toward establishing ties with the world’s most promising region. It is time to reverse the process of deterioration of Russia–ASEAN relations. Finally, about the book that was published after the first ISEAS-IMEMO conference, the book cover looks rather pessimistic. It is symbolically loaded — we see an Arctic or an Antarctic landscape, some areas covered with snow; meaning evidently that the Russia–ASEAN relations are ice-cold. But certainly they must not be always that way; Russia can become a good and reliable partner of ASEAN. To achieve this, effective efforts are needed. Indeed the information gap between our countries, our societies is simply shocking and to a large degree, this is the fault of scholars. We must promote people-to-people contacts, strengthen cultural and scientific ties. Cooperative initiatives will certainly benefit both sides and will promote good and more cordial relations between Russia and Southeast Asia.

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3

Current State of Russia–ASEAN Trade and Economic Relations Vyacheslav Amirov

GENERAL ATMOSPHERE OF RELATIONS Since the first seminar on ASEAN–Russia relations in Singapore in March 2005, we have seen some new political developments: the First ASEAN– Russia Summit was held in December 2005, the Comprehensive Programme of Action to Promote Cooperation between the ASEAN and the Russian Federation in 2005–15 and the Agreement on Economic and Development Cooperation were signed in Malaysia in December 2005.1 In 2006 a ten-year anniversary of Russia–ASEAN dialogue was celebrated as well as a thirty-year anniversary of Russia/Soviet Union diplomatic relations with the Republic of Philippines — the country-in-charge of the ASEAN– Russia dialogue this year.2 According to the statement made by Foreign Minister Lavrov of the Russian Federation in Malaysia in July 2006, both sides are working for an implementation of the Agreement on Economic and Development Cooperation between Russia and ASEAN. The question is whether all those agreements by themselves can influence greatly or will boost development of bilateral economic and trade ties? As the First ASEAN–Russia Summit of 2005 has shown, it is easier to improve further a rather developed political dialogue than to achieve a real breakthrough in economic cooperation, particularly when there is not much

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history in Russia–ASEAN economic relations, except for Russia–Vietnam relations during the Soviet times and, to some extent, Russia/Soviet Union– Singapore bilateral economic ties. Russia–ASEAN economic ties are still not big news in media coverage both in Russia and ASEAN member-countries. On the other hand, Russia’s eagerness to be part of East Asia economically cannot be achieved without development of comprehensive economic ties with ASEAN as a group as well as with its major individual members (ASEAN-6). In general, Russia’s economic relations with ASEAN represent primarily a part of Russia’s involvement into a forming united East Asia economy under the process of regional economic integration, but not a separate issue. That is why Russia’s economic relations with ASEAN as a group are still waiting for self-establishment. It is clear that much has to be done before Russia–ASEAN economic ties will accumulate its own value for both sides and eventually become well established. DEVELOPMENT OF BILATERAL TRADE BETWEEN RUSSIA AND ASEAN-6 It is quite natural that countries of ASEAN-6 are the main trade partners of Russia among ASEAN members, and trade between them and Russia is continuing to grow. Russia’s trade with Thailand is the most balanced (the country occupies second place both in Russia’s exports and imports) among other major ASEAN members, and that is why it has become the biggest trading partner of Russia in ASEAN. Vietnam has started to regain its place in Russia’s trade after more than a decade of decline or stagnation. In 2000–05, overall trade between Russia and ASEAN-6 increased almost three times. Despite that, the volume of their bilateral trade is relatively small (see Table 3.1). It is interesting to compare the Russian and New Zealand trade volumes with major ASEAN countries, as New Zealand is the smallest non-Asian participant in the East Asian Summit. A turnover of New Zealand trade with ASEAN-5 is more or less the same that Russia has with ASEAN-6 (2005), but New Zealand trade with the outside world was (in 2005) seven times less compared to that of Russia’s. It means that ASEAN’s share in New Zealand’s overall trade is seven times higher than ASEAN’s share in Russia’s trade with the outside world. Serious constraint for trade development between Russia and ASEAN members is represented by the fact that their two-way trade is still limited to only a few commodities:

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Table 3.1 Russia’s Trade with ASEAN-6, US$ Million Countries

2000

2001

2002

2003

2004

2005

Exports Vietnam Thailand Singapore Indonesia Philippines Malaysia

168 80 477 37 50 301

163 71 574 31 46 269

321 96 522 31 98 348

356 130 158 236 184 425

707 372 190 145 217 114

739 547 309 203 198 150

1,113

1,154

1,416

1,489

1,745

2,146

103,100

99,696

106,712

133,656

181,600

241,200

87 90 71 44 37 8

162 107 96 109 80 22

230 227 162 88 81 31

300 301 183 90 77 38

423 355 221 162 101 50

673 451 348 317 175 73

337

576

819

989

1,312

2,037

33,900

41,881

46,174

57,346

75,569

98,577

170 205 388 521 108 58

178 243 431 683 127 68

323 402 578 610 193 127

431 433 725 248 419 222

727 808 537 352 366 267

998 914 823 626 551 271

1,450

1,730

2,233

2,478

3,057

4,183

137,000

141,577

152,886

191,002

257,169

339,777

Total-6 Total Imports Malaysia Thailand Indonesia Singapore Vietnam Philippines

Total-6 Total Turnover Thailand Vietnam Malaysia Singapore Indonesia Philippines

Total-6 Total

Source: The Russian Federation Custom Statistics of Foreign Trade.

Russia–Vietnam: main items of exports — ferrous metals, mineral fuels, machinery and equipment. Main items of imports — agricultural products, footwear. Russia–Indonesia: main items of exports — fertilizers, chemical products, grain. Main items of imports — natural oils and related products, coffee. Russia–Malaysia: main items of exports — fertilizers, ferrous metals and metal products. Main items of imports — electronic durable goods, other

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machinery and equipment, natural oils and related products, cacao. A distinctive feature of trade between the two is the fact that their trade is rather diversified as compared to Russia’s trade with other ASEAN majors. Russia–Singapore: main items of exports — mineral fuels, ferrous metals and products, machinery and equipment. Main items of imports — electronic durable goods, machinery and equipment, food. Russia–Thailand: main items of exports — ferrous metals, primary aluminum and products, mineral fuels. Main items of imports — electronic durable goods, machinery and equipment, transport equipment, plastics, agricultural products. At the same time China, Japan and South Korea — partners of ASEAN in the so-called ASEAN+3 process — are among Russia’s top ten sources of imports (see Table 3.2). China is a major trading partner of Russia. Japan is coming back as a substantial trading partner of Russia and in recent years its volumes of trade with Russia exceeded trade volumes achieved in trade with the Soviet Union. EMERGING NEW FORMS OF ECONOMIC INTERACTION Nevertheless, it is encouraging that in addition to trade, more and more areas of economic interaction have a good prospect to emerge.

Table 3.2 Russia’s Major Trading Partners (2005 — US$ billion) Exports Netherlands Germany Italy PR of China Ukraine Turkey Switzerland Belarus Poland U.K.

Total

Imports 24.6 19.7 19.1 13.0 12.4 10.9 10.5 10.1 8.6 8.3

241.2

Turnover

Germany Ukraine PR of China Japan Belarus USA Italy South Korea France Kazakhstan

13.3 7.8 7.3 5.8 5.7 4.6 4.4 4.0 3.7 3.2

Germany Netherlands Italy PR of China Ukraine Belarus Turkey Switzerland Poland U.K.

Total

98.6

Total

Source: Russian Federation Customs Statistics of Foreign Trade.

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33.0 26.5 23.5 20.3 20.2 15.8 12.6 11.4 11.3 11.1

339.8

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Table 3.3 New Zealand Trade with ASEAN (US$ million) 2004

2005

Exports Total ASEAN (5)

20,342 1,437

21,736 1,554

Imports Total ASEAN (5)

23,188 1,985

26,200 2,685

Turnover Total ASEAN (5)

43,530 3,422

47,936 4,239

Source: Monthly Statistics of International Trade, OECD, July 2006, pp. 68–69.

Some Recent Developments •

•

•

•

Changi-Sheremetievo-1. As joint venture was set up in August 2006 between Changi Airport International and Sheremetievo-1 Airport for Changi to be an operator of Sheremetievo-1 (a new airport there is scheduled to come on-stream in 2007). If this agreement is fully realized there is great hope (taking into account Changi Airport’s experience over the last few decades) that it will help to transform Sheremetievo-1 into an airport meeting international standards in the near future. To some extent, it contradicts Singapore Airlines’ decision to choose Domodedovo Airport for servicing its flights between Singapore and Moscow. But under current circumstances the choice is quite understandable. The Malaysian state energy group Petronas invested US$1.1 billion in the Initial Public Offer (IPO) of Rosneft (July 2006), more than BP (US$1.0 billion) or China’s CNPC (US$0.5 billion). Another Malaysian company, Kedah Wafer Emas (KWE), is currently considering the possibility of building a microchip plant in one of the biggest cities and industrial centres of Russia — Nizhny Novgorod — by 2009 (estimated investments — US$1.3 billion). At present a KWE subsidiary operates in Russia using microchips imported from Malaysia.3 There is a renewed interest on the part of the Russian companies to invest in Vietnam. For example, EVRAZ (a big company in ferrous metallurgy in Russia) plans to invest in the Vietnam mining industry.

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MILITARY COOPERATION In addition to civilian areas of economic cooperation, one should mention a military field of cooperation. Despite facing some economic and political difficulties military-industrial cooperation between Russia and many ASEAN members also looks promising in a mid-term perspective. Among those countries are Vietnam, Indonesia, Malaysia, and even Thailand, though in the last case Russia will face opposition from the United States. A FACTOR OF PACIFIC RUSSIA DEVELOPMENT The federal government demonstrated recently a renewed interest in encouraging the development of Pacific Russia. That will help to provide a more solid base for this part of Russia to get engaged in the East Asian economy, using for this purpose its energy and other natural resources, tourist attractions, transport routes, etc. It remains to be seen whether it can have a great impact on promoting the economic development of Pacific Russia. But at least a process has started gathering momentum. IMPLEMENTATION OF REACHED AGREEMENTS: A MECHANISM TO BE DEVELOPED Along with finding prospective areas of cooperation, there is the issue of creating institutional support for such cooperation. No doubt the Russian bureaucratic mechanism is progressing. Yet in some aspects it is so far still less effective than in the best days of the Soviet Union. That is why it is difficult to implement in good time decisions or agreements reached at the higher government levels. But there are some examples of improvement in the mechanism of cooperation. One of them could be a good practical step to improve the situation gradually — a recent Memorandum of Cooperation signed (October 2005) between the Singapore authorities and the Russian Agency for Managing Special Economic Zones. Both sides agreed to share information on the development of such zones and to cooperate in order to promote technology-innovation parks in Russia. Some Singaporean companies can be involved in the process, for example, Temasek Holdings. It is particularly important for Russia because Singapore has a lot of experience in establishing technology or industrial parks in different countries (China, Indonesia, Vietnam, etc.). Unfortunately among special innovative zones approved at the first stage of Special Economic Zone (SEZ) development, only one is in Western Siberia (city of Tomsk) and none

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in either Eastern Siberia or Pacific Russia (the Russian Far East). It is hoped that there would be further stages in industrial parks development that would also embrace areas in Pacific Russia. FREE TRADE AGREEMENTS OPTION There is another issue that is raised from time to time. Is there any sense under the current level of economic interaction between Russia and ASEAN to initiate negotiations to conclude a Free Trade Agreement (FTA) between Russia and any ASEAN member or ASEAN as a group? All proposals for FTAs in Northeast Asia and Southeast Asia exclude Russia as if it is not part of Northeast Asia or of East Asia. This issue also has to be addressed. PROSPECTS FOR FUTURE DEVELOPMENT OF RUSSIA–ASEAN ECONOMIC TIES Stephen Blank (who was then a professor at the Strategic Studies Institute of the U.S. Army War College) published an article in the Journal of East Asian Affairs (Spring/Summer 1999) with the title: “Is There any Future for Russian Relations with South East Asia?” The question was raised because the pace of development of those relations after the end of the Cold War was quite slow. My answer to that question is yes, but it will take some more time to be realized rather substantially in the economic field. One of the main problems is that information gap still persists. Many experts in Southeast Asia say that Russia is not a big issue in the minds of think-tanks in Southeast Asia, and vice versa. Thailand continues to be a popular destination for the Russian tourists. Singapore Airlines has started since March 2006 its flights between Singapore and Moscow. Not much, but things are changing slowly but steadily. NOTES 1.

Kuala Lumpur, 10 December, Kyodo. Foreign ministers from Russia and the ten-member Association of Southeast Asian Nations signed Saturday an economic and development cooperation agreement setting out programmes to deepen ties over the coming decade. Russian Foreign Minister Sergei Lavrov told reporters after the signing, “Together with our political declaration signed in the previous year, this economic declaration will form the basis of comprehensive cooperation between Russia and ASEAN in 2005–2015.”

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The agreement covers bilateral cooperation in the areas of small and medium enterprises, science and technology, energy, minerals, transport, finance, agriculture, technical cooperation, tourism, information and communication technologies, environment protection and disaster management. Russia had lobbied hard to be accepted as a participant in the inaugural East Asia Summit but failed. Russia had fulfilled two of the three membership conditions set by ASEAN for a country to participate in the East Asia Summit — that a country must have the status of an ASEAN “dialogue partner” and that it must have acceded to a nonaggression act known as the Treaty of Amity and Cooperation in Southeast Asia.

2.

But ASEAN’s members — Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam — have been unable to reach a consensus on whether Russia’s ties with ASEAN could be considered “‘substantive”, which is the third condition for participation. . Rossiiskaya Gazeta. 28 July 2006. According to Co-Chairs Press Release of the Fourth Russia–ASEAN Joint Planning and Management Committee Meeting, Moscow, 22 June 2006: The meeting served as reaffirmation of the intention of Russia and ASEAN to develop and deepen their dialogue partnership. The status and dynamics of cooperation was analyzed after the first ASEAN– Russia Summit in Kuala Lumpur on 13 December 2005. The meeting discussed a wide range of cooperation issues between Russia and ASEAN. Particular attention was paid to the realization of joint projects under the Comprehensive Program of Action to Promote Cooperation between the ASEAN and the Russian Federation in 2005– 2015 and the Agreement on Economic and Development Cooperation signed in Malaysia. Presentations were made and the meeting agreed to recommend projects to the ASEAN–Russia Joint Cooperation Committee (ARJCC) for approval after further review. The meeting endorsed draft Terms of References for the Joint Cooperation Committee and the Dialogue Partnership Financial Fund that would oversee Russia–ASEAN cooperation and agreed to recommend the two Terms of References to the ARJCC for approval. The meeting reviewed the list of celebration activities on the occasion of the 10th Anniversary of the Russia–ASEAN dialogue partnership and approved the decision to hold in Moscow on 5 July 2006 the Commemorative Meeting of the Russian government and nongovernment representatives as well as the ambassadors of ASEAN

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member countries in Russia, to organize the Russian and ASEAN Cuisine Festivals respectively in Kuala Lumpur and Moscow, and to launch the ASEAN–Russia Commemorative Magazine at the Post Ministerial Conference+1 meeting with Russia in July in Kuala Lumpur. Among the participants in the JPMC meeting were the representatives of ASEAN member countries, the Ministry of Foreign Affairs of the Russian Federation, the Ministry of Economic Development of the Russian Federation, the Ministry of Finance of the Russian Federation and other ministries and agencies concerned as well as the ‘Oriental Dimension’, Russian public movement, and the Russia–ASEAN Cooperation Foundation. According to the statement made by Mr Lavrov, Foreign Minister of the Russian Federation in Malaysia in July 2006, both sides are working for an implementation of the Agreement on Economic and Development Cooperation between Russia and ASEAN. The question is whether all those agreements by themselves can influence greatly or will boost development of bilateral economic and trade ties?

3.

It was agreed that the Fifth JPMC meeting will take place in the Philippines in 2007. Vedomosti, 27 September 2006.

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PART II East Asian Community

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4

Prospects of East Asian Community and the Role of China Vasily Mikheev

The prospects of the East Asian Community depend upon the general development of economic, political and security situation in East Asia. In the coming years, factors of stabilization of general situation in East Asia will prevail over factors of destabilization. Competition among the main players in East Asia will escalate. However interests in cooperation in economy, energy, antiterrorism war, fighting pandemic and ecological threats will balance the competition tendencies. Growing economic and security inter-dependence between China and the United States, and between China and Japan will draw up “limitation lines” of possible deterioration of China–U.S. and China– Japan relationship, which all the three countries will not cross under any conflict situation. China will remain the most dynamic element in the development of East Asia’s economic, political and security situation. The growth of China’s economy will make its leaders look for a new global and regional political positioning of the country. China’s capital export overseas, started in 2005, will be a decisive motive for the activation of security diplomacy by Beijing. East Asia, objectively, will be most interested in uniting the economic resources

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of Japan, China, South Korea and ASEAN in order to maintain high economic growth and strengthen East Asian positions on the global markets against the growing influence of the American economy and European integration. Marketization and globalization of the Chinese economy, for the first time in history, will plant roots for real, wide-ranging regional integration in East Asia. However, an imbalance of military power in East Asia creates impediments to regional cooperation. The other impediment is the perception of China by the West as, economically, “a market friend”, even though a serious competitor, but politically, “a Communist foe” — meaning monopoly of the Communist Party of China (CPC) on political power. As long as this dual perception of China remains, it will be difficult to expect any real breakthrough in the creation of a multilateral security system in East Asia. The main threats and challenges to East Asia’s security are linked to the main factors of stability in the region. 1. THE NORTH KOREAN NUCLEAR PROBLEM After stalling the Six-Party Talks in 2004, China revised its policy towards North Korea: It is now ready to pay for North Korea’s social-economic stability and the latter’s participation in the six-party process. The following three main interests determine China’s motivation. First, China is afraid that social unrest in North Korea, as a result of economic collapse, will create a “demographic-refugees threat” to northeastern China, the region where Chinese leader Hu Jintao initiated his own “restructuring plan” for the old industrial base — in addition to the “development plan of Western China” initiated by Hu’s political predecessors. So, North Korea’s social situation is a focus of personal interest to the top Chinese leaders. Second, China is exchanging its active policy aimed at bringing North Korea to the Six-Party Talks, which is what the United States wants, for an American firm stance against Taiwan independence. China’s logic towards the United States is: “We help you with the North Koreans, you help us with blocking Chen Shuibian’s pro-independence moves.” Third, China is afraid that if North Korea succeeds in its nuclear weapons programme, it could be perceived by the Taiwanese as a signal that Taiwan, as well, can become a nuclear state. And if Taiwan possesses nuclear weapons, it will change the balance of power in the Taiwan Strait not in Beijing’s, but in Taipei’s favour. That is why China is interested in the socio-economic stability of North Korea and in North Koreans’ participation in the Six-Party Talks and tries to

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use the summit-level diplomacy to push Kim Jong Il into continuing the sixparty process, which, once again, was stalled last November — just after Hu’s trip to North Korea a month earlier. China’s tactics in realizing the above interests includes the following: •

•

•

In 2004–05, it provided around US$1 billion aid to North Korea in the form of trade credits (that means aid, because the Chinese clearly understand that North Korea will not pay these credits back) and direct aid. Hu Jintao promised almost the same amount of money for the year 2006 during his last visit to North Korea in October 2005. It wants to persuade Kim Jong Il to start real market reforms and a policy of openness, and tries to demonstrate to Kim that the reforms would bring him more economic benefits rather than nuclear brinkmanship and a policy of blackmailing. That is why the Chinese showed to Kim the most open and developed area of southern China during his visit to China in January 2006. According to the Chinese, who accompanied Kim on that trip, the North Korean leader “was shocked with what he saw”. However, the Chinese are not sure that it would be enough to push Kim towards reforms. Intensify its policy of “engagement” of North Korean party officials, scholars, bureaucrats, by spending more money for their trips to China where, as the Chinese think, the North Koreans will see with their own eyes the success of China’s “reform and openness” policy.

China was not satisfied with Kim Jong Il’s response to its attempts to persuade him to start market reforms and to bring him back to the Six-Party Talks. The Chinese leaders are becoming more and more frustrated with Kim who, despite all their attempts and spent money, is reluctant to continue constructive talks in the six-party framework and to start economic reforms. This frustration has forced the Chinese leaders to revise China’s current policy towards North Korea, a process which started at the beginning of 2006. It is reflected in two ways. First, China has demonstrated its readiness to discuss the North Korean issue with foreign experts and diplomatic partners more openly than ever before. In the past China’s policy towards North Korea was a strictly closed-door issue discussed secretly only within China’s Communist Party departments. Second, during such discussions, Chinese experts have demonstrated a wide range of views on North Korea, from traditional support of North Korea as a “socialist ally”, to criticism of Pyongyang for being responsible

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for the current nuclear crisis; and to possibilities that China should be more tough towards Kim Jong Il. Representatives from the CPC apparatus appears to be more conservative and orthodox along with old military generals, while scholars, especially those who studied in the United States, seem more progressive and anti-North Korea, with Chinese diplomats somewhere in the middle. Missile tests conducted by North Korea in July 2006 for a short period changed the security situation around the nuclear issue. Pyongyang did not expect the other five participants of the Six-Party Talks would be united in condemning North Korea and in adopting the UN resolution against it. However, the five lost momentum by not developing a single approach on what to do further with Pyongyang. It helped North Korea to gain time and to use a new variant of the old tactics of playing on contradictions in approaches towards North Korea among the five, in order to prepare for the conducting of a nuclear test.1 2. TERRITORIAL DISPUTES INVOLVING CHINA, JAPAN, RUSSIA, SOUTH KOREA, ASEAN COUNTRIES The situation will remain unsolved. However, bilateral talks on this issue, in parallel with developing regional economic integration and joint exploration of resources of the disputed areas, could minimize the threat of turning territorial disputes into a military confrontation. 3. THE TAIWAN ISSUE The possibility of tensions escalating in the Taiwan Straits appears to be high. Under such a situation, it seems that China’s anti-secession law, adopted last year, plays a stabilizing role. I cannot agree with those who say that the law presents China with the right to start a war against Taiwan in the event that Taiwan declares independence. The point is that China has always reserved such an option. However, after adoption of the anti-secession law, the issue of using military force moved from a “political-decision sphere” to a “juridical one”. 4. ENERGY SECURITY In East Asia there exists an opportunity for developing strategic multilateral cooperation in energy among Russia, Japan, China and South Korea. Moreover, this energy cooperation could turn into a basis for Russia’s participation in

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developing economic, financial, cultural integration among NEA-3 (Japan, China and South Korea). By 2020, NEA-3’s annual oil import will be 800–50 million tonnes, and gas import (by 2010) 170–75 billion cubic metres. China’s dependence on oil imports will increase from 20 per cent at the end of the 1990s up to 70 per cent in 2020; Japan’s and South Korean dependence on oil imports will remain near the 100 per cent level. Even if Japan and South Korea succeed in developing their own oil fields, their import dependence will be reduced only slightly. Russia–China negotiations on the oil pipeline project issue started twelve years ago, in 1994. Since that, three inter-governmental agreements on the issue were concluded. In May 2003, Russian and Chinese presidents, Vladimir Putin and Hu Jintao, signed a joint declaration where it was agreed that the “oil pipeline project should become a cornerstone of Russia– China energy cooperation”. At the end of 2003, after all negotiation attempts to get the oil pipeline from Russia failed, China worked out special measures to increase political pressure on Russia. They included propagandistic pressure: The Chinese raised the pipeline issue at all levels of contacts with Russians — from governmental, to tourist and student levels. It also raised its demands at Russia–China talks on the issue of Russia’s entrance to the WTO, increased its diplomatic activity in Central Asia, giving trade credits to Shanghai Cooperation Organization members from Central Asia, “teasing” and irritating Russia by this, etc. The problem is that, as mentioned above, the new Chinese leaders, led by President Hu, made a strategic stake to renovate an old industrial area in northeastern China — as opposed to the development of northwestern China initiated by their political predecessors who are still continuing to fight for influence in China’s politics. In regard to the northeastern China industrial renovation project, the Russia–China oil pipeline, in the Chinese economic strategy, was to play the role of the supplier of energy resources to this region. Thus, the failure of the Angarsk-Daqin pipeline project jeopardized Hu’s personal economic development plan and domestic political prestige of the new Chinese leadership. That made the pipeline issue very pressing to the Chinese. In the middle of 2004, China, seeing that pressure on Russia brought no results and being afraid that further pressure could spoil bilateral relationship, eased off the pressure while continuing to hope to get the pipeline, if not in the coming few years, at least in the future.

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In working out its policy towards the pipeline issue, China tried to understand the reasons for the change in the Russian position, which it described as Russia’s withdrawal from Russia’s official obligations. First, China thought that it was an American plot against China and that it was the United States, which did not want to open access to Russian oil resources to China. Then, China tried to explain the situation by the growth of antiChinese feelings among governors and politicians of Russian Far Eastern areas who were afraid of China’s “human expansionism”. Later on China started to think that it was Japan’s plot not to allow China to import Russian oil and to re-direct Russian oil export from northeastern China to Nakhodka and Japan. That was partly true because Russian bureaucrats after receiving a Japanese offer to invest in the Nakhodka pipeline, started to play China against Japan in order to gain more from Japan–China competition for Russian oil. Finally China came to the conclusion that the main reason for the failure of the pipeline project was connected not with the Russian foreign policy priorities but with the Russian domestic situation, and eased pressure on Moscow. At the same time China continues its efforts to get access to Russian oil reserves, along with a policy of diversifying its sources of imports of gas and oil. Instability on the global oil markets will push the East Asian countries to intensify competition over access to energy resources in different parts of the world, including Russia, Central Asia, and Africa. On the other hand, global energy instability could help East Asian countries to unite their resources in order to defend regional economies from global energy shocks. In Chinese and Russian analytical circles, the idea of creating new East Asian oil and LNG markets is under active discussion. 5. NEW NON-TRADITIONAL THREATS, INCLUDING TERRORISM, PIRACY, DRUG-TRAFFICKING, PANDEMICS, HURRICANES, ETC. Such threats create real risks of social and political destabilization in East Asian countries. On the other hand, this pushes regional countries for closer cooperation against such threats. Despite all the problems in the China–U.S. and China–Japan relationship, the three countries were united in providing aid to the victims of Southeast Asia’s tsunami. The ASEAN Regional Forum, despite its complicated character, could reach the greatest progress in security connected not with traditional security issues, where positions of countries remain mostly unchanged, but in nontraditional security.

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6. CHINA’S AND JAPAN’S COMPETITION FOR LEADERSHIP IN SOUTHEAST ASIA On the one hand, it impedes integration trends in the ASEAN+3 format. But on the other hand, it accelerated FTA talks between China and ASEAN and between Japan and individual ASEAN countries. South Korea, in its turn, tries not to be late and has started South Korea–ASEAN FTA negotiations. 7. CHINA–U.S. AND CHINA–JAPAN RELATIONSHIPS IN EAST ASIAN GEO-POLITICAL AND GEO-ECONOMIC SPHERES A China–U.S. relationship of “cooperation-and-competition” against the background of its difficulties, will have more chances to move in the direction of a stronger China–U.S. cooperation on the basis on common security concerns and strategic economic interests. The China–Japan relationship looked more complicated until recently. However, Japan’s new Prime Minister Abe’s visit to China on 8 October 2006 could help to strengthen the significance of the “cooperation” element against the “competition” element in the China–Japan “cooperation-andcompetition” relationship. 8. AN INDIA ISSUE India aspires to be a new player in East Asia’s geo-politics and geo-economics. India will try to strengthen its leading position in the Indian Ocean through developing cooperation with Southeast Asia and, on this basis, with East Asia, in general. Until now Indian influence in East Asia does not look very strong. But in the future India will try to turn into an important regional power by improving relations with China and its other neighbours, with the United States and with regional groupings like ASEAN. Against the background of existing security and economic problems and tendencies in East Asia, prospects of the East Asia Community do not look bright. Politically, China is against widening the number of EAC members on the idea that the EAC should be a political roof for an economic integration in the ASEAN+3 format. Japan sees in a wider range of EAC an opportunity to limit growing Chinese influence. Economically, the level of integration among East Asian nations is far from one that could be considered as a real basis for political integration.

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In this author’s view, an East Asia economic integration is the most important pre-condition for the creation of EAC. However, it would have to go through a few stages before reaching a level when talks about political institutions would be fruitful. The first stage is the normalization of China–Japan relations. Without this all talks about real East Asia economic integration seem to be fruitless. The second stage is the creation of an FTA zone, then joint economic zone with the participation of the three biggest economies of East Asia –– Japan, China and South Korea. These three countries control over 90 per cent of East Asia’s joint economic power. The third stage is the integration processes, including the creation of FTA, on the ASEAN geo-economic field. The fourth stage is the ASEAN+3 integration. The last one is the incorporation of India, Australia and New Zealand economies in the East Asian economic space. It appears that economic integration in East Asia will develop in a different way from Europe. In East Asia it is very hard to open and liberalize traditional sectors of the economy, like agriculture or metallurgy. However, the knowledge-based economy and financial sectors, being globalized in nature, open new ways for economic cooperation in East Asia. The “swap agreements” amongst ASEAN+3 countries demonstrate the potential of the East Asian integration model. THE RUSSIAN FACTOR The political situation in East Asia in general will be favourable for Russia’s engagement in East Asia cooperation processes. On the other hand, China’s participation as a new regional player will change the configuration of the relationships in the Russia–China–United States triangle. The most serious risk to Russia is to appear “politically and economically further” from the United States than China. The factor that the West still perceives China as “politically a foe” gives Russia time to adjust its policy in East Asia to new trends imposed by a globalizing China. However, this time will shrink as China–U.S. security and economic cooperation deepens. In conclusion, I would like to stress that the dynamics of East Asian security and economic situation, along with China’s positioning as an “active and responsible global and regional shareholder”, creates new challenges and new chances for cooperation between Russia, East Asia and China that should be responded to in a positive way.

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A new approach to the formulation of national security and development interests in the prism of globalization is the key to use these chances and to respond to the challenges from China, meaning that all our countries should be able to see national security and economic interests in the context of regional and global interests, regional and global risks and opportunities. That would raise the common prospects of the East Asian Community over nationalistic sentiments. NOTE 1.

The North Korean nuclear test carried out in October 2006 created a new challenge to China’s diplomacy towards North Korea, and its ability to lead the six-party process. China’s reaction was tough and anti-North Korean as never before. It supported UNSC sanctions against North Korea, suspended banking operations with the DPRK, increased military deployments along the border with North Korea, started to inspect North Korean ships and trucks and, in general, toughened political pressure on Pyongyang. Yet China still opposes military action against North Korea — because it may lead to regime collapse there and create chaos with a major risk that millions of North Korean refugees will rush to the northeastern provinces of China. Nevertheless, China’s position for the first time during the North Korean nuclear crisis became closer to the position of the United States and Japan compared to the positions of Seoul and Moscow. And for the first time in the history of East Asia China, the United States, Japan, Russia and South Korea shared at least one common point — North Korea should not have nuclear weapons.

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ASEAN AND CHINA East Asia Community Building and Prospects for the Future Ho Khai Leong

INTRODUCTION Regional integration in Asia has been on the move, and free trade agreements, a strategy by which integration can be achieved, has a prominent feature in the Asian political economy in the last decade. Indeed, rising regionalism is not just an Asian phenomenon, but a global one. Asian states — big and small, authoritarian or democratic — have only a few alternatives to respond to global challenges and developments brought about rapid changes in the international environment. The idea of the East Asia Community (EAC) — made up of three East Asian countries (Japan, China, South Korea and the 10 members of the Association of Southeast Asian Nations [ASEAN]) — is such a response. In the last decade, efforts to achieve such an integrated community have been going on at an unexpectedly fast pace, pushing the Asian economic and political agenda forward.1 The East Asia Summit in Kuala Lumpur, Malaysia, in 2005, of the leaders of 13 East Asian nations in effect set in motion a historic process of a Pan-East Asian community.

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The first significant step forward towards making East Asian Community no doubt has been taken. An official proclamation issued in the declaration that followed the summit meeting of Japan and the 10 ASEAN members held in Tokyo in December 2004 indicated serious commitment from the various parties. Commentators were quick to observe that it was the first time that all of the ASEAN leaders had gathered outside the region, which reflected the growing significance of the organization, and the attention given to it by neighbouring big powers. The declaration put the East Asia Community’s creation on an official agenda. Now, China and Japan have become two of the more vocal and enthusiastic advocates.2 This paper argues that China, given its phenomenal rise, is slated to play an accelerated role in building the future of East Asian Community, and ASEAN–China FTA would be one of the cornerstones in such as a process. It will examine the relationship between China and the EAC, ASEAN and the EAC, and the problems and challenges of the EAC. CHINA–ASEAN RELATIONS3 International politics underwent a fundamental transformation at the end of the Cold War. The demise of the Soviet Union in the late 1980s and the dominance of United States, Japan and NATO prior to the September 11, 2001 terrorist attack shaped an international system best described as a multipolarity, where powers are distributed in different geographical entities. But the September 11 incident ushered in an international system where the United States exercised its military might indiscriminately in the name of national interest in its crackdown on terrorism. In the face of this ongoing conflict between the United States and the terrorist networks, the Asia-Pacific with its many Islamic countries (such as Indonesia, and to a lesser extent, Malaysia) has become entangled in the increasing tensions between its Muslim populations and United States’ determined effort in its war on terror. Most ASEAN states, with the exception of Singapore and the Philippines called for opposition to uni-polarity and unilateralism, i.e., dominance of United States in world affairs. How does this new paradigm shift apply to China’s role in the Southeast Asian region? As far as security arrangement is concerned, China–ASEAN relations have indeed made major strides. Relations between ASEAN and China have reached a stage of development of “nascent security community”. Recent policy developments certainly reinforced this trend. In 19 August 2003 in Wuyishan, Fujian province, Chinese senior officials and officials of

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the 10 ASEAN countries signed the 1976 Treaty of Amity and Cooperation (TAC).4 ASEAN Secretary General Ong Keng Yong hailed this as a “trailblazing step” in confidence building between China and ASEAN.5 Rapid transformations are also simultaneously occurring on the political and economic fronts. During this period, Beijing sees China’s promotion of its economic relations with the ASEAN states as a means to serving China’s economic interests because Southeast Asia provides important export outlets and sources of foreign capital and raw materials. In providing China with the capital and market, Beijing deems Southeast Asia instrumental in China’s drive towards economic modernization. China’s initial opening in the 1980s and liberalization in the 1990s have resulted in its rapid export growth. The impact was less significant then as ASEAN was also experiencing rapid growth. By the end of 1990s, however, things were different. ASEAN economies were weakened by the Asian financial crisis, and China turned increasingly to the regional and global markets as oversupply mounted and domestic prices nose dived. It was in this context that China expressed keen interest in joining AFTA. Almost all parties involved agreed that the potentials for further development of China-ASEAN economic relations are great. A China-ASEAN free trade area would the largest in the world, with a combined market of 1.7 billion people and a GDP of US$2 trillion and total trade estimated at US$1.23 trillion. China’s entry into WTO almost certainly stimulated the growth of bilateral trade between the two regions, thus proving that the opportunities for trade and investment as well as other areas of cooperation are enormous.6 These developments, however, were met with some apprehension in the ASEAN states. Philippines Trade and Industry Secretary, Manuel A. Roxas II, for example, was one of the more sceptical ASEAN policy-makers expressing reservations about China’s presence in AFTA as it was difficult to weigh the pros and cons in light of the fact that China was only accepted into the WTO recently in 2001. It remains to be seen how China will comply with its commitments under a free trade regime.7 CHINA–ASEAN FTA On 4 November 2002, the “Framework Agreement on Comprehensive Economic Cooperation between the Association of Southeast Asian Nations and the People’s Republic of China” was signed in Phnom Penh, a year after China introduced the idea. It happened so quickly that it seemed China is

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more ready than ASEAN to do whatever it could to realize the goal of regional integration. In spite of its initial suspicions, ASEAN acceded to China’s proposal hastily. Reasons for the speedy agreements were not difficult to find. Firstly, realist politics dictates that, given the increasing economic interests on both sides, ASEAN would naturally want to view the effort as a positive-sum game. Secondly, ASEAN is mindful that the strategic competition of the United States and Japan has propelled China’s intense diplomatic offensive in the region. The spill over effects of these superpowers cannot be discounted. For example, United States had proposed the Enterprise for ASEAN Initiative (EAI) to enable the ASEAN states to establish FTA along the lines of the USA–Singapore FTA. Japan, too, unwilling to stand at the sidelines, announced the “Joint Declaration of the Leaders of ASEAN and Japan on the Comprehensive Economic Partnership” on 5 November 2002, in Phnom Penh. Analysts however noticed cautions in the implementation of the proposal. A quick marriage after a short period of courtship, but its “consummation” was slow in making. The China–ASEAN FTA framework main target was to have zero tariffs with ASEAN-6 and the rest of ASEAN for “normal track” products by 2010, and 2015 respectively. Apparently, both sides adopted a gradual approach as to achieve their objectives, to the dismay of a few ASEAN members who were a little impatient. While expectation was high, it was not clear how negotiations would bring forth a faster pace of progress. Many analysts expected that some ASEAN states would put some sectors on the “sensitive track” to gain additional advantages in negotiations with China. China responded by implementing the “Early Harvest Programme” (EHP) in 2002. The three-year programme is largely a Chinese concession dispensing early benefits to the ASEAN states through tariff reductions on a host of agricultural and manufactured goods before the actual implementation of the FTA on 1 January 2005. Agricultural communities are generally uneconomical in scale and technologically backward. In essence, they are small estates in need of government assistance. Products covered are live animals, meat and edible meat offal, fish, dairy produce, other animal products, live trees, edible vegetables and edible fruits and nuts. The ASEAN states reciprocated by giving China tariff concessions under a so-called tariff harmonized system for agricultural products like meat, fish, fruit, vegetables and milk. Countries such as Malaysia, Thailand and the Philippines whose economies have some comparative advantage in agriculture were pleased to be part of this scheme. For example, under the auspices of this programme, Malaysia has gained

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substantial benefits for it managed to reach an agreement with China exempting a package of 590 products, including unprocessed agricultural products as well as vegetable oils, cocoa products, detergents and glass envelopes from tariff elimination. The predominantly agricultural Philippines, however, is more troubled by the agreement than the other ASEAN states. It fears that lowering the agricultural tariffs would damage the Philippines agricultural sector because it would open the way for a flood of cheap Chinese food products. There are reports indicating that the so-called “gray market” food imports from China into northern Luzon are already having negative consequences, which the Philippines government did not want to see in the first place.8 While many agree that this programme is an economic confidence measure of some sort, the political and diplomacy dimensions are not missed. China’s proposal puts it across as an economic leader and as such, it is able to stand out from the other economic powers and replace Japan’s role as the leader in regional cooperation. This hypothesis is supported by analysts’ observations that Japan is unlikely to offer something similar, as it is extremely protective of its own domestic agricultural market. Many are optimistic about the outcome of the ASEAN–China FTA. By 2010, the average duty within the ASEAN–China FTA, if realized, will vary between zero and 5 per cent, and internal trade and investment barriers will be eliminated. The free trade area will then control 40 per cent of the world’s foreign exchange reserves and more than US$2 trillion in gross domestic product, 10 per cent of the world’s total. Such an outcome would certainly make ASEAN and China as one of the most important success stories of regional FTAs. CHINA AND EAC: “GOING REGIONAL” vs “GOING GLOBAL” China’s admittance to the World Trade Organization (WTO) on 11 December 2001, was an important event for both western countries and its Asian neighbours. It implied many changes for its trading partners. ASEAN’s economic landscape has been transformed due to China’s diplomatic offensive in the 2000s, especially its aggressive push in signing the Free Trade Area (FTA); thus making it the first Northeast Asian nation to join the ASEAN plus Three along with Japan and Korea. Some analysts argued that China is attempting to consolidate its “insider” role in the region, against United State’s military and economic presence in the Asia-Pacific region. The China– ASEAN FTA includes the promotion of trade and investment, the realization of free trade within a decade (by 2010) and the development of the Mekong

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sub-region (which involves Yunnan, Myanmar, Laos, Thailand, Cambodia and Vietnam). Accordingly to some analysts, China’s economic reform has entered a new phase of development. The “Going Global” strategy is being actively pursued by Chinese policy-makers. The International Herald Tribune reported in 2005 that “China’s leaders have been quietly encouraging Chinese companies for years to set up overseas operations, acquire foreign assets and transform themselves into multinational corporations: in other words, to make themselves more competitive in a world increasingly dominated by Wal-Mart, Microsoft and Coca-Cola”.9 There are various reasons for China to do so. To Chinese policy-makers, Chinese capitals should “go global” now as the strategy is conducive to solving China’s problem of economic overheating. It could also be an instrument to carrying out the policy of “bringing harmony, security and prosperity” to neighbours.10 More importantly, to make more Chinese companies to compete in the international economy, the “go global” strategy makes sense. In 2005, Chinese companies had invested in more than 160 countries.11 It must be pointed, however, Chinese companies still lack experiences in launching trans-regional investment and the total investment of Chinese companies in the global market is still relatively low. It is not clear at the moment whether China’s “going global” strategy will conflict with its “going regional” strategy in Asia-Pacific. ASEAN undoubtedly will remain an attraction for Chinese companies to invest their resources but only if it offers enough incentives for these companies to do so. ASEAN may have to recognize that attracting Chinese investments to assist in achieving its sustainable economic growth requires a rethinking of foreign investment laws and regulations beyond the present model. PROBLEMS AND CHALLENGES OF EAC The EAC, despite all the optimism, however, is not without any problems. There are several issues to be considered. Firstly, the historical standoff and contemporary hostility in Sino-Japan relations have many in the Asian region worried about how the soured relationship between the two economic powers will eventually affect community building in the region. Undoubtedly, such a long-standing antagonist relationship has produced harmful effects on the East Asian Community building process. Many have suggested that China and Japan should draw lessons from the experience of Europe in improving the bilateral relations. Take the case of France and Germany — they had had a hostile relationship for one thousand years or so. However after World War Two, the

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two countries eventually became reconciled through a series of efforts including bilateral cooperation and multilateral mechanisms. The second problem is the mutual suspicions within the community itself. While they communicate, it is not sure if the leaders talk in the same frequency as far as priorities and interest of their respective countries are concerned. An economic power like Japan, and a politically ambitious country like Indonesia, apparently fear that China may assert its tremendous influence and might dominate the community-building process. It must be said that East Asian Community building is a long-term project in confidence building. If suspicions between participants persists and each continue to view each other with doubts, then it is unlikely that the objective of integration can be achieved. Thirdly, leadership issue within the community is still largely unresolved. With ambitions for regional leadership, China and Malaysia think that the ASEAN plus Three Framework should play such a role. Japan and Indonesia prefer a pan-East Asia community, which also includes India, Australia and New Zealand in addition to the ASEAN plus Three nations. There is little consensus in this regard. At the moment, this issue has been left aside, and is unlikely to be resolved in the near future. Fourthly, the so-called “China’s Peaceful Rise” may not be as “peaceful” as the Chinese would envision it. China’s rise does create fear and suspicions. As Singapore’s Minister Mentor Lee Kuan Yew once remarked about China’s rise, “Any rise will be spectacular, and will raise suspicions.” The idea of “peaceful rise” was first raised at 2003 Boao Forum by former Vice President of Central Party School Zheng Bijian.12 Zheng, who is a close advisor to Hu Jintao. The doctrine is aimed at reassuring world that China is a new form of rising power — China’s rise will be marked by peace, not turbulence or ambitions, by new era of economic co-operation and opportunities, not military confrontation. With a white paper entitled China’s Peaceful Development Road issued in December 2005, the doctrine has been changed to “peaceful development”. The change in words, however, is unlikely to alter the perception that China’s rise will continue to dominate the political economy of the region. CONCLUSIONS There is a positive perception among ASEAN policy-makers that China, peaceful rise or otherwise, will be playing a significant role in the building of the East Asian Community. China’s involvement will add speed as well as urgency to the process, which already has started in earnest. ASEAN is in a

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hurry and it needs all the help it can get; it has completed negotiating its goods liberalization package and schedule for the future ASEAN–China Free Trade Agreement (FTA) in 2005. It is expected that both ASEAN and China will be able to complete the signing of the FTA by 2010. At present there is a tremendous amount of goodwill among the ASEAN states toward China, and China is likely to ride on this friendliness to advance its diplomatic as well as political objectives in the region. For the present, ASEAN’s most important goal (and China as well) is to consider proposals with the potential to enhance its economic security and promote its growth in the short to medium term. Proposals for an integrated economic community in ASEAN (in the form of AFTA) and in Asia (the Asia Economic Community) are but means to achieve these goals. Simply put, regionalism is a means to for countries to sustain their economic development, and it should not be regarded as an end in itself. As for China’s role in the region, the overall perception has been quite encouraging, amidst caution and vigilance. For now, China is perceived as a benign power, and its political and military ambitions in the region are closely watched. Singapore’s Minister Mentor Lee Kuan Yew once noted that a rapidly developing China is both a “promised land” and “turbulent sea” for it is both a competitor and a partner to the ASEAN economies.13 Such an analysis may also be applied to the immediate future role of China in the building of the EAC. NOTES 1. Mark Beeson, “ASEAN Plus Three and the Rise of Reactionary Regionalism”, Contemporary Southeast Asia 25, no. 2 (2003); Richard Stubbs, “ASEAN Plus Three: Emerging East Asian Regionalism?” Asian Survey 42, no. 3 (May–June 2002): 440–55. 2. See, for example, Haruhiko Kuroda, “New Dynamics, New Opportunities: Towards Deeper Asian Economic Integration”, http://www.adb.org/Documents/ Speeches/2005/ms2005084.asp. The author is the President of Asian Development Bank. 3. This segment is partially taken from Ho Khai Leong, “ASEAN+1 or China+1? Regionalism and Regime Interests in ASEAN-China Relations”, in China and Southeast Asia: Global Changes and Regional Challenges, edited by Ho Khai Leong and Samuel Ku (Singapore: Institute of Southeast Asian Studies, 2005). 4. TAC is a general framework that commits the parties to respect the independence, sovereignty, and territorial integrity of the parties, not to interfere in their affairs, to settle dispute peacefully, and to renounce the threat or use of force. ASEAN opened the treaty to outside accession in 1998. The other country that has joined is Papua New Guinea.

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5. Lyall Breckon, “On the Inside Track”, Comparative Connections, 3rd Quarter, 2003. . 6. Thitapha Wattanapruttipaisan, “ASEAN-China Free Trade Area: Advantages, Challenges, and Implications for Newer ASEAN Member Countries”, ASEAN Economic Bulletin 20, no. 1 (2003). 7. “Philippines: Study China Entry into AFTA”, Inquirer News Service, 3 February 2002. . 8. Lyall Breckon, “On the Inside Track”, Comparative Connections, 3rd Quarter, 2003. . 9. “China seeks known brands to go global”, International Herald Tribune, 30 June 2005. 10. See “Interview with Wu Jianmin, President of China Foreign Affairs University (CFAU)”, People’s Daily, 14 October 2004. . 11. “China to continue to encourage companies to go global”, People’s Daily, 29 April 2005. 12. Zheng Bijian, “China Peaceful Rise”, . 13. “China will be competitor and partner for ASEAN”, 1 August 2002. . REFERENCES Allen, Kenneth W. “China’s Foreign Military Relations in the Asia-Pacific region”. In PRC and the Asia-Pacific Region. Evolving Interactions and Emerging Trends, edited by Chen Wen-chun. Taiwan: National Sun Yat-sen University, 2001. Beeson, Mark. “ASEAN Plus Three and the Rise of Reactionary Regionalism”. Contemporary Southeast Asia 25, no. 2 (2003). Brantly Womack. “China and Southeast Asia: Asymmetry, Leadership and Normalcy”. Pacific Affairs 76, no. 4 (2003–2004): 529–48. Brzezinski, Zbigniew and John Mearsheimer, “Can China Rise Peacefully? A Debate”. Foreign Policy (January/February 2005). Cai, Peng Hong. “Non-traditional Security and China-ASEAN Relations: Cooperation, Commitments and Challenges”. In China and Southeast Asia: Global Changes and Regional Challenges, edited by Ho Khai Leong and Samuel Ku. Singapore: Institute of Southeast Asian Studies, 2005. Deng, Yong. “The Chinese Conception of National Interests in International Relations”. China Quarterly 145 (June 1998): 308–29. Goldstein, Avery. “Great Expectations: Interpreting China’s Arrival”. In The Rise of China, edited by Michael Brown et al. Cambridge: The MIT Press, 2000. Johnston, Alastair Iain. “Is China a Status Quo Power?” International Security 27, no. 4 (Spring 2003): 5–12, 25–49.

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Haacke, Jurgen. “The Significance of Beijing’s Bilateral Relations: Looking Below the Regional Level in China-ASEAN Ties”. In China and Southeast Asia: Global Changes and Regional Challenges, edited by Ho Khai Leong and Samuel Ku. Singapore: Institute of Southeast Asian Studies, 2005. He, Shengda and Sheng Lijun. “Yunnan’s Greater Mekong Sub-Region Strategy”. In ASEAN-China Relations: Realities and Prospects, edited by Saw Swee-Hock, Sheng Lijun, and Chin Kin Wah. Singapore: Institute of Southeast Asian Studies, 2005. Ho, Khai Leong. “Rituals, Risks and Rivalries: China and ASEAN in the Coming Decades”. Journal of Contemporary China 10, no. 29 (November 2001): 683–95. ———. “ASEAN+1 or China+1? Regionalism and Regime Interests in ASEANChina Relations”. In China and Southeast Asia. Global Changes and Regional Challenges, edited by Ho Khai Leong and Samuel Ku. Singapore: Institute of Southeast Asian Studies, 2005. Lampton, David M. “A Growing China in a Shrinking World: Beijing and the Global Order”. In Living with China: US-China Relations in the Twenty-First Century, edited by Ezra Vogel, pp. 120–40. New York: W.W. Norton & Company, 1997. Lee Hamrin, Carol. “Elite Politics and the Development of China’s Foreign Relations”. In Chinese Foreign Policy: Theory and Practice, edited by Thomas W. Robinson and David Shambaugh, pp. 70–114. Oxford: Clarendon Press, 1994. Kao, Kim Hourn and Sisowath Doung Chanto. “ASEAN-China Cooperation for Greater Mekong Sub-Region Development”. In ASEAN-China Relations: Realities and Prospects, edited by Saw Swee-Hock, Sheng Lijun, and Chin Kin Wah. Singapore: Institute of Southeast Asian Studies, 2005. Kuik, Cheng-Chwee. “Multilateralism in China’s ASEAN Policy: Its Evolution, Characteristics, and Aspiration”. Contemporary Southeast Asia 27, no. 1 (2005): 102–22. Levine, Steven I. “Perception and Ideology in Chinese Foreign Policy”. In Chinese Foreign Policy: Theory and Practice, edited by Thomas W. Robinson and David Shambaugh, pp. 30–47. Oxford: Clarendon Press, 1994. Liu, Xuecheng. “Strengthening ASEAN-China Cooperation in the ASEAN Regional Forum”. In ASEAN-China Relations: Realities and Prospects, edited by Saw SweeHock, Sheng Lijun, and Chin Kin Wah. Singapore: Institute of Southeast Asian Studies, 2005. Mohamed Jawhar Hassan. “Strengthening Cooperation in the ASEAN Regional Forum: An ASEAN View”. In ASEAN-China Relations: Realities and Prospects, edited by Saw Swee-Hock, Sheng Lijun, and Chin Kin Wah. Singapore: Institute of Southeast Asian Studies, 2005. Mochizuki, Mike M. “Terms of Engagement: The US-Japan Alliance and the Rise of China”. In Beyond Bilateralism, edited by Krauss and Pempel, pp. 87–114. Stanford UP, 2004. Ong, Keng Yong. “Securing a Win-Win Partnership for ASEAN and China”. In

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ASEAN-China Relations: Realities and Prospects, edited by Saw Swee-Hock, Sheng Lijun, and Chin Kin Wah. Singapore: Institute of Southeast Asian Studies, 2005. Saw, Swee-Hock, Sheng Lijun, Chin Kin Wah, eds. ASEAN-China Relations: Realities and Prospects. Singapore: Institute of Southeast Asian Studies, 2005. Stubbs, Richard. “ASEAN Plus Three: Emerging East Asian Regionalism?” Asian Survey 42, no. 3 (May–June 2002): 440–55. Suryadinata, Leo. “ASEAN Relations with China: Ethnicity, Security or Expediency?”. In China and the ASEAN States: The Ethnic Chinese Dimension. Singapore: Marshall Cavendish, 2005. Teo, Eric. “New Challenges For Building An East Asian Community”. China Brief 5, no. 2 (18 January 2005). Thitapha Wattanapruttipaisan. “ASEAN-China Free Trade Area: Advantages, Challenges, and Implications for Newer ASEAN Member Countries”. ASEAN Economic Bulletin 20, no. 1 (2003): 31–48. Vatikiotis, Michael. “Catching the Dragon’s Tail: China and Southeast Asia in the 21st Century”. Contemporary Southeast Asia 25, no. 1 (April 2003): 65–78. Wang, Gungwu. “Song-Yuan-Ming Relations with Southeast Asia: Some Comparisons”. In China and the Chinese Overseas. Singapore: Eastern Universities Press, 2003. White, Lynn T. “SARS, Anti-Populism, and Elite Lies: Temporary Disorders in China”. In The New Global Threat: Severe Acute Respiratory Syndrome and Its Impacts, edited by Tommy Koh et al. Singapore: World Scientific, 2003. Yahuda, Michael. “China and Regional Co-operation”. In China’s Place in Global Geopolitics, edited by Kjeld Erik Brodsgaard and Bertel Heurlin. London: RoutledgeCurzon, 2002.

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China’s Peace Offensive in Southeast Asia and Russia’s Regional Imperatives Victor Sumsky

A STATE OF THE ART EXERCISE A totality of China’s activities in Southeast Asia at the dawn of the new millenium is often defined as charm or peace offensive, and there is no affectation in these definitions. Although in fact it got started somewhat earlier, many analysts tend to associate its full-scale launching with the Sixteenth Congress of the Communist Party of China. In November 2002, less than a week before the opening of the Congress, ten members of the Association of Southeast Asian Nations (ASEAN) signed The Framework Agreement on Economic Cooperation with the People’s Republic of China, making a pledge to establish a Free Trade Area (FTA) in ten years. The parties also signed joint declarations on cooperation in the struggle with nontraditional security threats and on conduct in the South China Sea area. The second document, not solving the famous territorial disputes in this part of the world, seemed especially valuable for Beijing’s partners as a sign of its readiness to work together on issues of discontent with other claimants to the South China Sea islands and with ASEAN as a whole.

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In less than a year, as the PRC acceded to the Balinese Treaty of Amity and Cooperation in Southeast Asia, China and ASEAN announced the establishment of a “strategic partnership for peace and prosperity” (October 2003). From that time on, the process of formalizing strategic partnerships has continued at bilateral levels between China and individual ASEAN members. One of the last agreements of this type was signed with Indonesia in April 2005. The dynamic of trade and economic relations corresponds with the intensity of diplomatic contacts and the cheerful tonality of joint statements. If in the mid-1990s China’s annual total trade with ASEAN was around US$15 billion, in 2002 it exceeded US$50 billion, in 2003 came close to US$70 billion and in 2004, according to the statement by the PRC Chairman Hu Jintao made during a visit to the Philippines (April 2005), reached US$105.9 billion. Quoting these numbers, he expressed confidence that by 2010 China and its Southeast Asian neighbours would be able to increase their trade up to US$200 billion due to the FTA arrangements.1 It should be mentioned that both Hu Jintao and the PRC State Council Premier Wen Jiabao (whose rise to the top positions in the party and state hierarchies was also formalized at the Sixteenth Congress) have made a very good showing as skilful diplomats and promoters of Chinese interests in the region, often visiting the ASEAN capitals, welcoming the ASEAN leaders at home and enjoying their confidence. All this combined eventually contributed to the convening of the First East Asian Summit (Kuala Lumpur, December 2005). Notwithstanding all the scepticism about its results and meaning, this meeting is still seen as a first step towards the creation of a new integration grouping, where, in the absense of the United States, China will occupy a central position. The fact that China’s peace offensive (hereafter referred to as CPO) is not unanimously applauded, is hardly a surprise. What is remarkable, however, is that the mastery displayed in the process of this operation is admired even by observers from the less than friendly camp. One of them, Professor Marvin C. Ott of the U.S. Defense College, has described the Chinese policy vis-à-vis Indonesia as “a thing of beauty”. On another occasion he spoke about China’s “beautifully conceived and operationally sophisticated strategy” on a regional scale.2 Understanding very well what prompted Ott to express his opinions in these words, the author would like to specify the aspects of CPO that make it look convincing and consequent, balanced, flexible, well-composed and therefore beautiful.

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ASPECTS OF CPO’S BEAUTY First, at the heart of this policy are vital national interests, so obvious and substantial that even a Sinophobe cannot negate them in a sweeping manner. Continued economic growth upon which the fate of mainland China depends so much, requires uninterrupted supplies of energy and a variety of raw materials. Many of these inputs could be provided by China’s closest Southeastern neighbours. With their dynamic, mutually opening economies and a combined population approximating half a billion people, these countries are also a natural and capacious market for China’s manufactured goods, an attractive ground for business projects initiated by Chinese investors and local companies. Apart from that, major transportation routes for China’s exports and imports are passing through this area. Not just the state of China’s economy but the level of its national security is determined by the accessibility of these routes, making Beijing’s interest in Southeast Asian affairs even more justified. Second, capitalizing on the fact that China’s relations with Southeast Asia are deeply rooted in history, CPO is not reviving but rather suppressing bad memories about Chinese behaviour — at least so far. Time-wise, China’s interactions with the countries of the Southern Seas are measured not by centuries, but by millenniums. One highly visible result of these contacts is the presence of enterprising Chinese diasporas all across the region. A petty retailer, a moneylender, a workshop keeper — such was the instantly recognizable and omnipresent type of an overseas Chinese dealer just half a century ago. A truly big entrepreneur operating across the national borders on a legal and stable basis was more of an exception than the rule. Since that time the Chinese regional communities have given birth to several generations of industrial tycoons, bankers and network traders with enormous assets (not to mention much more numerous representatives of modern middle class). Their role in the economic rise of Southeast Asia cannot be denied. And now these people explore the business opportunities that open up in the land of their ancestors. Bringing to the mainland their money and managerial expertise, they are establishing linkages without which China’s own producers (and, by implication, the PRC government) might find it not so easy to deal with the region. But has not the prosperity of Southeast Asian Chinese been a perennial irritant to the poorer indigenous dwellers? Apart from that, recorded history contains enough material to picture the land of their origin as a subversive

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imperialist power — be it ancient accounts of the Middle Kingdom’s attempts to subdue its neighbours or evidence of Mao’s support for insurgencies in the region. At the end of the twentieth century a series of incidents in the South China Sea confirmed that shows of force were never alien to Chinese political culture. The landing of the PLA troops on the Mischief Reef claimed by the Philippines was so shocking, that Philippine President Joseph Estrada uttered: “China wants to grab Asia.”3 Nevertheless, in the regional environment of the last five years or so, mutual propensity for cooperation has proven to be stronger than animosities and fears, be they old and new. Having replaced Estrada in the presidential seat, Gloria Macapagal Arroyo started to speak of China as a factor of peace and stability in Asia; paid a visit to Beijing, marked by discussions about possible military cooperation (September 2004); warmly welcomed Hu Jingtao in Manila; and, finally, blessed a trilateral agreement on joint oil explorations in the South China Sea (March 2005).4 Remarkably, this accord is signed not just by the oil companies of the Philippines and the PRC, but by Petro-Vietnam as well. Have the leaders of Vietnam forgotten about the 1979 borderline war or the South China Sea navy clashes of 1988 and 1992? Not at all. But they also have to care about the urgent needs of their long-suffering nation. This has already induced them not just to normalize relations with Beijing, but to expand bilateral trade from US$32 million in 1991 to US$7.2 billion in 2004, and to create two trading corridors linking the Vietnam’s north with the southern provinces of China.5 Likewise, the memories of September 1965 no longer block the PRC–Indonesia ties, just like the memories of the Khmer Rouge atrocities do not prevent Phnom Penh from working with Beijing, and the memories of China-inspired rebellions in Burma (now Myanmar) do not impede the lively interactions between its present rulers and their Chinese counterparts. Where is the source of this common generosity towards the former adversary? Maybe, in the common feeling that once Beijing starts to act in line with the worst historic precedents, its efforts to pursue the interests outlined above will be doomed? As for the Chinese, they seem to understand it just as clearly as their regional partners. Third, CPO is not carried out under sudden inspiration. On the contrary, it is a well-prepared effort, with a tricky switch from a posture of interested wait-and-see to ever more active but not disturbingly pushy moves that create the paradoxical impression of “offensive peacefulness”. Until mid-1990s, China was allowing ASEAN to get it drawn into economic cooperation and political dialogue rather than energetically seeking regional prominence. This was the time when the Southeast Asians, encouraged by their economic successes, the end of the Cambodian conflict, the enlargement of their association, the launching of the ASEAN Regional Forum (ARF, 1994) and

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the Asia-Europe Meeting (ASEM, 1996) were talking to China with some sense of their own importance. In the meantime, Beijing was doing its homework and quietly mastering the rules of the regional game. By the time of the Asian financial crisis of 1997–98 it managed to convince the neighbours of being a basically accommodating partner in almost all areas of cooperation (minus the South China Sea). A definite proof came in the midst of the crisis: by refraining from devaluing the renminbi, China had shown itself to be a responsible participant in regional affairs. At the same time and with the help of the same means the PRC had not only brought the ASEAN+3 concept (where the “3” stands for China, Japan and South Korea) to a stage of implementation, but obtained a key position in this scheme. Since that moment it has become the player involving others in the common project, if not the political trendsetter of East Asia. Extra-regional actors are, in fact, emulating China when, seeking a greater or more legitimate presence in Southeast Asia, they accede to the Balinese Treaty (like Japan, India, Pakistan and Russia), or open negotiations on free trade with the ASEAN countries, or try to arrange strategic partnerships with them. Fourth, Southeast Asia is the region where China is successfully combining its efforts to develop bilateral ties with sophisticated multilateral diplomacy and participation in multilateral projects. All this is happening in spite of the fact that non-belonging to alliances and emphasis on independence in world affairs had been (and, to a degree, remains) a typical feature of Chinese international behaviour. With seemingly limited knowledge about the techniques of multilateral interactions the PRC leaders have not only managed to quickly adjust themselves to the procedures of official ASEAN dialogues, but have displayed a capacity for joint design and construction of new multilateral entities, such as ASEAN+3, the East Asian Summit and the China–ASEAN FTA. One major project where China joins forces with ASEAN is the Mekong Basin Development scheme. Incidentally, there are scholars who tend to see the role of China in this particular case as somewhat dubious. “Potentially this undertaking is very dangerous for the unity of ASEAN, because China is acting here not as a partner of ASEAN as a whole but rather as a partner of separate countries — Laos, Cambodia, Myanmar and, to a lesser extent, Vietnam,” believes Dmitry Mosyakov from the Moscow Institute of Oriental Studies.6 However, it might be reminded that the Mekong Basin effort is incorporated into a plan known as the “Initiative for ASEAN Integration”. Aimed at narrowing the economic gaps between the new and the old members of the association, it has been approved — just like China’s participation in it — by all the ASEAN countries. Are they aware of the dangers to which the Russian expert points? Most probably, yes. But

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today, as it seems, they have more reasons to perceive China as a constructive force capable of helping to speed up the progress of the less developed ASEAN members. To the extent that it really does it, it will contribute to the greater homogeneity of the association and augment rather than diminish the basis of its unity. In fact, Beijing’s own multilateral diplomacy is a kind of guarantee that, by and large, splitting ASEAN is not in the Chinese interest: would not a trend towards ASEAN’s disintegration devalue these efforts? Fifth, China’s presense in Southeast Asia is comprehensive and multidimensional. Practically all the CPO’s aspects and directions are closely interconnected. Against the background of academic debates about what comes first on the list of Beijing’s regional priorities — politics or commercial gain — the Chinese are doing it in such a way that economic cooperation increases their political leverage, while political initiatives create new grounds for headways in trade and economy. With all the pragmatism of this approach, the importance of cultural presentations, exchanges in the fields of art, research and education to consolidate the positive image of China are never under-estimated. Sooner or later the fabric of partnerships becomes so thick, that the sensitive realms of defence, intelligence and security open up for cooperation even with those with whom it seemed least likely (as in the cases of Indonesia and the Philippines). And all of the above is taking place in socio-cultural spaces where men and women of Chinese origin with their business and residential quarters, ancestor worship and cooking, festivals and funerals are a familiar part of the landscape. The result is the overall impression that China’s regional presence is legitimate — an indication of the CPO success and a sign that it will continue. THE REGION RESPONDS No matter how skilful the CPO makers are, they would have never been able to run this campaign so efficiently in the absence of a basically positive attitude in the region. Assuming it is there, where does it come from? Describing the way the PRC is viewed today in the “world community of market democracies”, Russia’s top China watcher Vasily Mikheev argues that it is quite ambivalent: from the economic point of view China is “in”, but politically it is “out”. Therefore, dealing with this country on the basis of mutual benefits, “market democracies” are pressing for freedom and human rights in China whenever they need to oppose it as a market competitor. Is this the attitude shared by Indonesia, Malaysia, the Philippines, Thailand and Singapore — in other words, the original ASEAN five that

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are closer to the “world community of market democracies” than most nonWestern nations? Not at all, and not just because their democratic systems are relatively young, unstable or limited. The major reason is the fact that the Chinese model of modernization, launched in the late 1970s and operating since then in the evolutionary mode, is basically similar to the one that emerged somewhat earlier in the ASEAN zone. In the framework of that model, authoritarian regimes had to secure political stability as a prerequisite of accelerated development. A working combination of market freedoms and state regulation would be at the core of economic policies, while moderate official nationalism was to justify modernization programmes without repulsing foreign capital.7 Probably, no one has managed to appreciate the turn from Mao’s revolutionarism to Deng’s reformism as deeply and astutely as the staunchly anti-Communist ASEAN leaders. Watching People’s China moving further and further away from the leftist orthodoxy to “normal” nationalism, seeing all the accompanying economic achievements and the transformation of totalitarianism into authoritarianism, they have been coming closer and closer to viewing China as being “in” (or at least potentially “in”) by a full set of political, economic and socio-cultural criteria. Had it been otherwise, we would not have seen the enlargement of ASEAN through the accession of Vietnam, Laos and Cambodia. It had taken no less than the Chinese experience of modernization to convince the ASEAN founders that a productive way out of the Communist system into their own development mode was a realistic possibility. The Indochinese states were admitted into the association as soon as it became clear that they are following the Chinese example. With this in mind, does one need to explain why the elites of the new ASEAN countries are even further away, than the elites of the old-timers, from the typically Western perceptions of China? Since the Asian crisis, China has been often referred to as the “engine of growth” that Southeast Asians need to energize their economies. But let us not forget that due to a series of highly successful reforms, the PRC leadership has created a wide impression of itself as being politically reasonable. A wisely behaving China is no less important for the region’s security and prosperity than an economically powerful one. And if today Southeast Asians are treating China with respect, they do so largely because they appreciate the wisdom of its leaders and hope that they continue to behave accordingly. Having said this, one must mention right away that living next door to the huge and quickly changing People’s Republic without any fears, complaints or angry remarks about it would have been almost unnatural. The number of

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cases in the ASEAN area that illustrate this point is quite impressive. Diverse as they are, they are often related to one of the three or four basic concerns that make the Southeast Asians of today insecure about China. With their partly congruent economic interests the ASEAN countries and China are either already competing or seem bound to compete for direct foreign investments and markets to sell their manufactured goods. An unquestionable defeat in such a competition might be twice as bad for Southeast Asians: the other side of a lost economic momentum is greater political vulnerability in relations with a winner. Turning to the South China Sea disputes, one may note that though they look not as tense as a while ago, Beijing’s long-term plans in this part of the world continue to nurture suspicions. More than that, there is a school of thought asserting that China with its growing appetite for hydrocarbons (in which the South China Sea shelf is supposed to be so rich) would never abandon its claim to sovereignty over this whole water area. Thus, sometime in future these territorial disputes will resume with unprecedented sharpness, to the point of growing into an open conflict with unclear (and therefore even more frightening) consequences. Already in the 1990s the disputes over the Spratlys revealed something more disturbing, from an ASEAN point of view, than the parties’ inability to bury their differences. We are talking about ASEAN’s own reluctance to take a unified, coordinated stand in the face of China. Today, with China’s newly acquired weight in world affairs, this reluctance is even more visible, and as such is a separate source of worry in the ASEAN capitals. Beyond all this, the last decades of Southeast Asian history have been marked by the dominance of the United States and Japan. Justified as it might be in terms of China’s interests, CPO inevitably challenges the positions of these “old established forces” (as Indonesian president Sukarno could have put it). These players’ reactions to CPO are a special source of regional security concerns — especially since in both cases (and first of all in the case of the United States) these reactions are anything but complacent. U.S. REACTIONS To many American observers, CPO’s comprehensive character is a sure sign that China wants to transform Southeast Asia into its zone of exclusive influence. But even those, who like to trace this hypothetical choice to ineradicable imperial instincts, dreams of reviving the ancient glory and other “sentimental reasons”, often acknowledge that China is driven by a set of rational, purely down-to-earth considerations.

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They note, for instance, that the importance of external trade for China’s economic growth obliges its leaders to focus like never before on the security of the sea lanes of communication (SLOCs). A top priority in this sense is the Straits of Malacca, through which the PRC, just like Japan and the United States, gets its major portion of the Middle Eastern oil. According to some American interpretations, Beijing is trying to create a “string of pearls” — a line of friendly states on the eastern and western approaches to the Straits of Malacca, stretching all the way to the Persian Gulf. Seeking closer cooperation with them (to the point of establishing military bases on their territories), China, they say, is worried not so much by the SLOCs’ considerable length or by piracy in the straits, as by the U.S. Navy patrols along the international maritime routes and the fact that these activities are not counter-balanced properly. After all, where are the guarantees that next time the U.S.–China relations come under strain (for instance, because of Taiwan), the former would not threaten the latter with the blockade of SLOCs, with all the unhappy consequences for the Chinese economy? To avoid such threats, the PRC leaders are building up their navy; cultivate military and intelligence ties with the coastal states of Indochina, especially Myanmar; talk to them about the development of land-based, alternative routes of oil and gas transportation; discuss the option of bypassing the straits by constructing a Kra Isthmus canal, etc.8 In the light of these and similar observations, China’s activities in the region start to look not as an aim in itself but as a part of a broader geopolitical programme. But even if one abstracts from the themes outlined above, it still appears that CPO has an inherently global dimension: is it not a way of quickly getting on a par with “the only superpower” and its strongest Asian ally — and in that sense a shortcut to China’s global power status? Obviously, the Bush Administration is looking at it through the prism of its National Security Strategy released in 2002 and stating that a fully independent global role is the privilege of the United States.9 All attempts to disprove this doctrine are interpreted as national security threats of the highest order, and there is every reason to conclude that CPO has been blacklisted as such from the very beginning. As long as ASEAN and some of its members in particular are helping China to pursue its “wrong” objectives, Washington can play against Beijing indirectly, by putting under pressure (or, alternatively, trying to woo to its side) selected Southeast Asian nations and their common organization. These measures include a campaign to discredit Myanmar, officially classified in 2005 as an “outpost of tyranny”; an offer of “special relations” to Vietnam, with an implicit idea of building it up as a local counterweight

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to the northern neighbour; manoeuvres aimed at drawing Jakarta closer to Washington in order to avert a stronger Indonesia–China partnership; more interactions in the military sphere with such traditional allies as Thailand and the Philippines, plus Singapore. Systematically urging ASEAN to jump on the anti-Myanmar bandwagon, Washington knows too well that its calls are provoking disputes inside the association that shatter it from inside. While the U.S. Secretary of State Condoleezza Rice is silently but still openly questioning ASEAN’s importance by not attending its annual post-ministerial conference (Vientiane, 2005), American think-tanks are drawing up plans of re-organizing ASEAN to make it less China-friendly and more compliant with the United States. For example, the neo-conservative Heritage Foundation not just takes the view that Myanmar must be expelled from the regional body, but believes that an ASEAN membership card should be given to Australia (whose role in the association, if it ever happens, might be not unlike that of Poland in the enlarged European Union).10 Another American idea worth mentioning is a plan to put the naval cooperation in Asia between the United States, Japan, India and Australia on a regular basis. The group is supposed to jointly help the victims of natural disasters, ensure the security of SLOCs, and so on. As a testimony on the subject of who is “in” and who is “out” (to the point of being not entrusted with the mission of SLOCs protection), this list of participants is quite revealing. Can it be that, observing the dynamics of the ASEAN–China relations, as well as relations between the latter and individual members of the association, a section of the ruling American elite is coming to a conclusion that ASEAN no longer fits the U.S. strategic designs the way it used to, and therefore should be treated accordingly? In this scheme of things, it is only natural to react to ASEAN’s growing partnership with China by applying the classical “divide and rule” methods to split the regional grouping internally and eventually marginalize it as a player in Asian and global politics. If this impression is not false, then serious violations of the regional status quo are not a distant and questionable possibility. To the extent that this scenario has started to unfold, its primary cause is not the clumsiness or impatience of the rising power (which are hardly the qualities demonstrated by China, at least at the top governmental level) but the exasperation of the present hegemon. Suspecting that the evolutionary development of today’s trends will lead to the progressive diminishing of its influence, it seems to have opted for the pre-emptive revision of the existing order.

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TORN BETWEEN THE UNITED STATES AND CHINA The Cold War era left a lasting mark in the mentality of ASEAN elites: they got accustomed to viewing America as indispensable for any kind of stability and harmony in Southeast Asia. For no less than four decades the United Stated enjoyed the reputation of a “benevolent hegemon” whose resolve prevented first the Chinese and then the Vietnamese Communists from getting the upper hand in the region. Stable access to the U.S. market was an important external pre-condition of accelerated growth in the ASEAN zone. Another such pre-condition was the linkage of the original ASEAN five to Japan — a financial and technological powerhouse as well as a disciplined ally of the United States which fully blessed this connection. No doubt, it is painful to realize that with the end of the bipolar confrontation, ASEAN, no longer needed to contain Communism, looses its former value in the eyes of Uncle Sam. First America’s ambiguous reaction to the Asian crisis (that was rather aggravated than arrested due to IMF contributions), then meddling into the regional affairs after 9/11 under the pretext of opening “the second anti-terrorist front” in Southeast Asia, and now a variety of reprimands to demonstrate the U.S. irritation with CPO take a sobering effect on ASEAN. With popular anti-Americanism spreading all across the region, local statesmen and other influential politicians have no choice but to acknowledge that the customary image of the United States as the anchor of regional stability is outdated. At the same time, they cannot afford to show how really unhappy they are with “the only superpower” — not just because of shyness or differences in political weight, but because by repulsing America too energetically, they may willy-nilly open more ground for CPO than they are comfortable with. Sensing this weakness, Washington acts as if it imposes on ASEAN a rigid choice between itself and Beijing — knowing all too well that the idea of this choice is completely incompatible with its counterparts’ notions of adequate political behaviour. But what about rejecting this choice altogether by cooperating now with China for the sake of greater independence from the United States, and then with the United States for the sake of greater independence from China, thus keeping everybody at least somewhat satisfied? In the author’s opinion, it is no more realistic than having a cake and eating it too, and ASEAN’s leaders, much as they like to talk about “win-win solutions”, hardly nurture any illusions about this whole situation. What should they do then? Should they, for instance, modify the schemes of cooperation with the PRC, above all the ASEAN+3 format, in

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a way that will make them less concerned about becoming too dependent on China and reduce Washington’s irritation with Beijing’s successes in Southeast Asia? From a certain point of view the idea is not bad, especially if one remembers that due to a combination of factors (including an unusually long recession in Japan, Seoul’s preoccupation with the problems of the Korean Peninsula and the unprecedented tempo of Chinese economic growth) China is almost outshining two other Northeast Asian countries as partners of the association, transforming ASEAN+3 into something like ASEAN+1. Trying to curb this trend and to improve the East Asian equation by adding a variable that might stand comparison to China in terms of territory and population, economic potential, cultural heritage and geopolitical ambitions, ASEAN opens a new dialogue platform, where the Association and the Northeast Asian trio is joined by India (2001). But the latter, with all its unquestionable achievements, does not yet have enough economic leverage in the region to properly balance China. Therefore the search for counterweights to it continues. At the First East Asian Summit in Kuala Lumpur (December 2005) the representatives of ten ASEAN members, China, Japan, South Korea and India were sitting at the conference table next to the leaders of Australia and New Zealand. The change was more than just quantitative because of Australia’s reputation as “the deputy sheriff ” of the Asia Pacific. Russia’s potential place in this widening circle was discussed too. In terms of balancing China by other players than the United States (but partly out of the need to please it) this is almost the end road. So what are the results? By inviting Australia to the East Asian Summit, ASEAN failed to appease Washington to the degree that would make it friendlier to this initiative. And Beijing is sending signals that the composition of the December meeting does not reflect its views about the participants in the future East Asian Community — the integration project for which the summit in Kuala Lumpur is supposed to be a prologue. According to the Chinese strategists, this community must be based on the ASEAN+3 formula. Meanwhile, some of the ASEAN members seem to feel that it is time to stop enlarging the East Asian project since this process results in their own diminished importance in that framework. Characteristically, the wisdom of inviting Russia to future East Asian Summits was questioned in Kuala Lumpur not only by John Howard of Australia, but by President Susilo Bambang Yudhoyono of Indonesia. By and large, the members of ASEAN have been dealing with the mindblowing problem of choice between the United States and China in a fairly

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standard way: they have tried, so to speak, to outflank it and leave it somewhere behind, where it will take care of itself. But this impediment on the way to a better future is so formidable that, having done what they could, they now face it again and again. To describe this situation, it is tempting to refer to a mythical fruit named malakamo that stands in Indonesian folklore for a problem with no solutions. If you find malakamo and eat it, the saying goes, your father will die. If you find it and not eat it, your mother will die. Has ASEAN found its malakamo? The question may sound too pathetic, but the association is really coming through the test of its lifetime, and implications will be serious and lasting. PRELIMINARY RESULTS OF COUNTERACTING CHINA Assessing the correlation of the United States and Chinese forces in Southeast Asia on the basis of the current volumes of trade, investment flows, military presence and so on, Washington does not have much to worry about. In so many of these areas it retains a leading position, and quite often it leads impressively. In terms of purely economic interactions with the region, Japan is still ahead of China too.11 But as far as recent political achievements are concerned, the position of the Americans (not to mention the Japanese) is not so brilliant. After almost two decades of Myanmar bashing, its regime looks even more entrenched than before: having moved its capital to the town of Pyinmana, situated deep in the interior and not as easy to reach as the coastal Rangoon in case of a “humanitarian intervention”, the military rulers not just continue to cooperate with China, but little by little are diversifying their external links. Not a single member of ASEAN with whom the United States has been flirting to involve them in opposing CPO — be it Vietman with its traditional unwillingness to yield to China, or temporarily weakened Indonesia, or Thailand awarded the title of a “major non-NATO ally” by Bush, or the former U.S. colony the Philippines, or even Singapore that constructed a special pier for the U.S. aircraft carriers cruising between the Pacific and Indian Oceans — has taken the American side with some kind of determination. In fact, these very countries never miss a chance to show how interested they are in good relations with Beijing. Can one conclude that at present America’s material might is not translated as effectively as in the recent past, into constructive cooperation with the region? Probably, yes. But why is it so? A partial answer may lie in the fact that in the post-Cold War period the United States have been themselves destroying — and have largely destroyed — their own image of a “benevolent hegemon”,

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whereas China with its beautiful peace offensive has started to acquire a similar image. There is still a lot to be done to catch up with America in any real sense. But in this race, at least as far as Southeast Asia is concerned, China now has the advantage of political initiative, and unless it stumbles over something by itself, it will not be easy to grab this trump card back. Will the United States accept this turn of things without annoyance and aggressive opposition? It would have been so unlike the Americans as they have been known during the whole span of their history or, at the very least, in the early twenty-first century, that one may safely expect an escalation of struggle for Southeast Asia between them and the Chinese. What kind of impact will it have on ASEAN? Most probably, there will be more projections of the U.S.–Chinese rivalry inside the association, with attempts by each of the rivals to win the loyalty of as many members as possible and more internal disagreements as a result. And all this — in a moment when the ASEAN members, understanding that only a unification of their potentials will give them a chance to survive in the increasingly competitive, globalizing world, are thinking of speeding up their integration. A search for new partners, new joint projects, new forms of cooperation that would promote, not endanger the internal cohesion becomes the order of the day. In this connection ASEAN’s interest in a livelier relationship with Russia does not look strange or sporadic. RUSSIAN OBJECTIVES IN THE CPO CONTEXT There are enough reasons to believe that the interest is mutual. The Russian leadership is clearly opting for a bigger and more diversified presence in the region. Plans to construct pipelines securing the supply of Siberian oil and gas to Asia-Pacific consumers (including the ones from ASEAN) have entered the implementation stage. Russian hi-tech designers and producers are seeking ways to promote their products and do more business in Southeast Asia. The First Russia–ASEAN Summit (Kuala Lumpur, December 2005) adopted a comprehensive programme to increase and develop interaction between the parties. With all this going on, is it not time for Russian policy-makers and academics to pay a bit more attention to the CPO phenomenon, especially since China with all of its newly acquired influence in Southeast Asian affairs is Russia’s major global partner? Let me contribute to this much needed effort by raising three questions of key importance and offering some brief, preliminary answers.

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1. How does CPO relate to Russia’s long-term objectives? Among the Russians who have asked themselves about it and found an answer is Alexander Dugin, chairman of the Center for Geopolitical Expertise and leader of the International Eurasian Movement. “China’s ‘spurt to the South’ is advantageous to Russia”, he wrote in 2003, elaborating that over there, unlike to the north of its borders, the PRC is becoming involved in such “geo-economic, demographic, military-political and diplomatic games that would not touch upon Russia’s Eurasian interests at all”. According to Dugin, China’s activism in Southeast Asia “is the only thing that can make it our full-fledged partner and ally. This matter should be viewed as a major constituent of Russo–Chinese geopolitical moves and one of the key issues to be discussed at informal talks”.12 Opinions of this kind seem somewhat justified — in case there is a clear understanding that China’s focus on Southeast Asia does not imply an automatic giving up of its activities in the post-Soviet space. These activities are constantly reminding the Russians about the need to develop Siberia and the Far East in a dignified response to China’s challenge, as well as about the need to cooperate for this very purpose with a wider circle of Asian partners. Paradoxically, while Russia approves of China’s Southeast Asian spurt, it should be moving in the same direction for China-related reasons (but obviously and, one might say, happily enough without either intentions or capabilities of competing for influence with China in this part of the world). 2. Should Moscow react (and if yes, then how) to the U.S.–China rivalry that is gathering momentum in Southeast Asia? Some might say that this is not a problem of Russia’s making and its solution is none of Russia’s business. But what if Southeast Asia, with all it can offer in terms of cooperation with Russia, becomes a hostage to the U.S.–China confrontation? While the U.S.–Soviet Cold War had unexpectedly resulted in developments conducive to political stabilization and economic growth of the ASEAN members, a new Cold War starring America and China is likely to have the opposite effect. In order to do what it can to avoid this, Russia might practise a diplomacy that, looking utterly neutralistic, would be essentially directed against the rocking of the status quo boat as something ruinous to the prosperity of the region and, accordingly, not good for its external partners.

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3. How should Moscow view its relations with ASEAN in the CPO context? Support for centripetal trends within ASEAN should be a major aspect of the course outlined above. Significantly, it is a point where the interests of Russia fully coincide with those of China and ASEAN itself. ASEAN’s half-decay (not to speak of a total collapse) would be a major defeat of constructive regionalism in a clash with the forces representing the darker, destructive side of globalization. Neither China as a co-promotor of East Asian Community, nor Russia with its intention to integrate the post-Soviet space, nor both of them as pillars of the Shanghai Organization of Cooperation should be passive about anything like that. One way to support ASEAN is to develop closer bilateral linkages with each member of the association. Compared to the United States, Japan and China, Russia’s achievements in this sense still look unimpressive, but changes for the better are obvious — just like the fact that there is a base for Russia’s greater cooperation with all of these countries. NOTES 1. “Deepening Good-Neighborly Relations and Mutual Trust for Common Development” (Speech by President Hu Jintao of China at the Joint Session of the Congress of the Philippines, 27 April 2005), Manila Bulletin, 28 April 2005. 2. Bettinger K.A., “US Edged out as China Woos Indonesia”, 13 December 2003 ; Ott M.C., “China’s Strategic Reach into Southeast Asia: Presentation to the U.S.–China Commission”, 22 July 2005 . 3. Quoted in Lamb D., “China Works to Improve Relations with Southeast Asian Neighbours”, Los Angeles Times, 15 December 2000. 4. Dalangin-Fernandez L., “Arroyo Forges Trade, Security Pacts with China after Visit”, Philippine Daily Inquirer (Makati), 4 September 2004; “China, Philippines, Vietnam Sign Joint South China Sea Oil Search Accord” . 5. “China, Vietnam Find Love”, 21 July 2005 . 6. Mosyakov D.V., “Nekotoriye Aspekty Kitayskoy Sovremennoy Politiki v YugoVostochnoy Azii” [Some Aspects of Contemporary Chinese Policy in Southeast Asia] Yugo-Vostochnaya Aziya v 2003 g. Aktualniye Problemy Razvitiya [Southeast Asia in 2003: Urgent Problems of Development] (in Russian) (Moscow: 2004), p. 15. 7. For a more elaborate treatment of the ASEAN model of modernization, see Sumsky V.V., “Yugo-Vostochnaya Aziya v kholodnoy voyne i

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9. 10.

11. 12.

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globaliziruyushchemsya mire” [Southeast Asia in the Cold War and in the Globalizing World], Mirovaya Ekonomika i Mezhdunarodniye Otnoshenuya [World Economy and International Relations] (in Russian) (Moscow 2005, no. 4), pp. 61–62. Volodin D.A., “SSheA, Kitay i novoye voyenno-strategicheskoye uravneniye v ATR” [The United States, China and the New Strategic-military Equation in the Asia-Pacific Region] Mirovaya Ekonomika i Mezhdunarodniye Otnoshenuya [World Economy and International Relations] (in Russian) (Moscow 2006, no. 2), p. 77; Gertz B., “China Builds up Strategic Sea Lanes”, Washington Times, 18 January 2005. The National Security Strategy of the United States, New York Times, 20 September 2002. Dillon D.R., Tkacik, Jr., J.J., “China and ASEAN: Endangered American Primacy in Southeast Asia” . See for example, Economy, E., “China’s Rise in Southeast Asia: Implications for Japan and the United States” . Dugin A., “Rossii Vygoden ‘Brosok’ Kitaya na Yug” [China’s ‘Spurt’ to the South is Advantageous to Russia] Izvestiya (in Russian) (Moscow 3 July 2003).

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7

Expanding Singapore’s Economic Space: Building Highways, Forging Links Minn Naing Oo

INTRODUCTION Trade and Singapore have long been synonymous. In the nineteenth century, poised at the tip of the Malay Peninsula and strategically sited at the crossroads of the China–India spice route, Singapore was a booming port-of-call for entrepôt trade. Today, as a small and open economy dependent on external demand, Singapore has pursued a proactive trade policy in order to make it a strategic hub and key interlocutor in global trade flows. Given its small size, expansion of its economic space is an issue that Singapore has to grapple with as it develops. This chapter examines how Singapore has done this through its bilateral trade agreements. It also examines new ways in which Singapore is forging links with its economic partners, such as through sharing of public sector expertise and private-public partnerships which manifest in Special Economic Zones (SEZs). The cornerstone of Singapore’s trade policy has always been the World Trade Organization’s (WTO) multilateral, rules-based system. In addition, Singapore is active in efforts undertaken at regional fora such as Asia-Pacific Economic Cooperation (APEC), Asia-Europe Meeting (ASEM) and

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Association of Southeast Asian Nations (ASEAN), as well as in bilateral Free Trade Agreements (FTAs). It believes that these efforts can accelerate the momentum of trade liberalization and in the process, also strengthen the multilateral trading system. This chapter postulates how an arterial network of FTAs, if WTO-consistent and WTO-plus, can be beneficial to all levels of trade flows. To better understand Singapore’s delicate position that necessitated an active trade strategy, one must first trace the kinetics of world affairs. The turn of the century ushered in a phase of globalization. This meant an exponential increase in the inter-connectedness of global sectors and industries, and a simultaneous rise in gains made from free trade. More importantly, the past two decades have witnessed the two Asian giants — China and India. With a strong foundation of engineering capabilities built through its network of educational institutions, and honed through undertaking outsourcing contracts for multinational corporations (MNCs), India has emerge as a global IT powerhouse. Bangalore has emerged as possibly the next “centre of universe” for computer software development and IT-enabled services. China, shaking off decades of being a planned economy, has posted meteoric growth, and is now the premier location for foreign direct investment (FDI). Indeed, it is generally agreed that today, the economic ascendancy of China forms a powerful stimulus for many countries’ trade policies.1 We have also seen that around the world, regional blocs have been widening and deepening as countries seek to enlarge their markets, increase their attractiveness to FDI, present viable competition to economic behemoths like China, India and the EU, and counter the threat of U.S. hegemony. Juxtaposed against this fluid global situation, Singapore has to ensure its continued relevance and pre-eminence in global trade flows. As an island city-state, it is in Singapore’s interest to see bona fide trade liberalization at bilateral, regional and multilateral levels. THE LINK BETWEEN TRADE AND ECONOMIC GROWTH Before delving further into Singapore’s FTA strategy, it might first be essential to outline the channels between trade and economic growth, As Pascal Lamy, director-general of the WTO asserts, “Trade can be a powerful tool for development and has been instrumental in lifting hundreds of millions of people out of poverty in countries like China, India, South Korea and Malaysia.”2 Theoretical literature on the relationship between trade and economic growth has changed drastically in the last two decades. Whilst “import substitution” used to be the accepted model for trade policy for development,

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this is currently not the case. As Krueger (1997)3 points out, “It is now widely accepted that growth prospects for developing countries are greatly enhanced through an outer-oriented trade regime and fairly uniform incentives.”4 The shift in literature can be attributed to the failure of import substitution policies in the 1980s and 1990s which led to the collapse of some economies, for example, Brazil. Juxtaposed against their downfall has been the triumphant four Asian Tigers — Taiwan, South Korea, Hong Kong, and Singapore — where aggressive export-oriented policies have brought in returns. There are two main channels through which it is believed trade fosters economic growth: technology and investment. With regard to the first channel, technology, Grossman and Helpman, Rivera-Batiz and Rohier have reached this conclusion that countries open to free trade benefit for large, international markets that provide higher profits to innovators; the avoidance of replication of research and development effects across countries; economies of scale in the same sector, and technological spillover effects.5 According to Joseph Stiglitz, this channel can be affirmed in the example of Britain. Stiglitz stated that in the eighteenth century, there were many social, political and geographical factors that caused the Industrial Revolution which put Britain on the path to becoming the first truly “modern” economy, but Britain’s trade with its neighbours and colonies played a decisive role in fuelling the new industrial activity and spreading prosperity to other countries.6 Other studies argue that investment is the link between trade and growth. Baldwin and Segezza have presented three main reasons: “the traded sector is more capital intensive than the non-traded sector; the production of investment goods uses imported intermediates; and the competition in machinery and capital equipment lowers the price of capital.”7 Research by the World Bank concurs, highlighting that a complete opening of world; markets could release hundreds of billions of dollars in annual investment gains. A Carnegie study predicts that China, Southeast Asia and India will gain around half a percentage point of gross domestic product annually, and there would also be substantial expansions in Central America and the Caribbean.8 In Singapore’s case, both channels of investment and technology have proven crucial to her continued growth. These twin engines have successfully lured investors and entrepreneurs alike, with Singapore recording an estimated trade surplus of US$36.5 billion in 2005, and FDI inflows registering an average of 12.4 per cent, of GDP for the past five years.9

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SINGAPORE’S TRADE STRATEGY: A NETWORK OF HIGHWAYS To strengthen its status as a trading hub, and to add another draw for FDI, Singapore embarked on a strategy to create a network of highways for enhanced trade liberalization. Using WTO commitments as the basis, this entailed pursuing bilateral FTAs to secure reductions in barriers for services, goods, investment and other areas. Another strand of this strategy involved sharing Singapore’s well-known public sector expertise with partner countries. Thus, the creation of SEZs that facilitated economic growth in host countries were undertaken, with the aim of attracting FDI into these areas and helping Singapore-based companies spread their wings into emerging markets. FREE TRADE AGREEMENTS (FTAS) Singapore has been active in working to secure FTAs with its key trading partners. The most visible instrument at this level of trade flows, these agreements have formed strategic bridges between different regions, and placed Singapore at the foci of inter-connecting networks. This has allowed Singapore to generate positive competitive dynamics and put pressure on trade liberalization at the multilateral level,10 and has also acted as a fallback position if there is a regression in the multilateral process. Jagdish Bhagwati has recognized the latter goal, indicating that bilateral FTAs are particularly useful when the multilateral approach is not working to reduce trade barriers. As he eloquently summarized, “In brief, if the turnpike is not open, take the dirt road.”11 Indeed, FTAs appear to be increasingly regarded by governments around the world as expeditious instruments for achieving trade liberalization among “like-minded” trading partners.12 This marriage between “likeminded” partners is also seen as way to overcome the so-called “convoy problem”, whereby the pace and depth of trade integration is held back by the “least willing member”.13 As legally binding arrangements between willing member countries, FTAs enhance trade and investment flows, provide lower tariffs for export of goods, market access for services, and easier entry for businessmen into other countries.14 Such concessions extracted form a framework and a greenhouse environment for Singapore’s small and medium enterprises (SMEs) to expand regionally or globally.15 They also allow Singapore to learn from developed economies, enabling it to ratchet up standards and benchmarks, as well as lock in domestic reforms on issues ranging from intellectual property rights to services.16

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Singapore’s FTAs are WTO-consistent, in that they meet the WTO requirement to cover “substantially all trade”, as stipulated in GATT’s Article 24. The WTO has interpreted that the “reasonable length of time” criteria in GATT Article 24 to reduce tariffs to zero should not exceed ten years except for special cases. In line with its position to maintain consistency with Article 24, Singapore has sought to adhere to this upper limit of ten years. To date, twelve FTAs have been concluded, including with ASEAN, New Zealand, Korea, Jordan, India, Panama, Japan, the European Free Trade Association, Australia, Chile and the United States. Singapore cut its teeth in FTA negotiations with New Zealand, a like-minded, open, economy. The agreement between New Zealand and Singapore on a Closer Economic Partnership (ANZSCEP), came into effect on 1 January 2001, covering trade in goods and services, to customs procedures, investment, competition and government procurement. Singapore’s FTAs are also WTO-plus, in that they have gone beyond commitments at the WTO. These agreements have also found new and innovative ways to achieve win-win packages that transcend areas covered by the WTO. Indeed, Singapore’s FTAs have set a benchmark in innovation and creativity, and the U.S.–Singapore FTA (USSFTA) for instance, is known as the “gold standard” to be applied to other bilateral FTAs. Other examples abound. In the Japan–Singapore Economic Partnership Agreement (JSEPA), several cooperation agreements ranging from tourism to stock exchanges were concluded under its umbrella, elements which go beyond those subject matters dealt with at the WTO. Likewise, the USSFTA was considered a cutting edge agreement containing provisions on intellectual property rights and e-commerce. Other FTAs, such as the ANZSCEP, boost flows and exchanges of talents through Mutual Recognition Agreements (MRAs) for professionals. Rules of Origin (ROO) determine the nationality of a good, and are aimed at ensuring that only originating goods from territories of FTA parties are granted preferential tariff treatment. Rather than a one-size ROO design for all its FTAs, FDI-dependent Singapore has been creative and flexible, and agreeing to different rules that allow greater flexibility in determining the qualification for Singapore origin. For products which have more than one rule, Singaporean manufacturers can choose the rule which best suits their manufacturing operations. For instance, in the USSFTA, many of the products fall under the Change in Tariff Classification (CTC) rule, but other rules are possible. For JSEPA, additional flexibility is available for 264 products of interest to Singapore, including petrochemicals, plastic and paper products. In the USSFTA, some electrical products are

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also conferred origin if they meet the Value-Added (VA) rule. This gives Singapore manufacturers additional flexibility to qualify for preferential tariff treatment, as is the case also under the EFTA-Smgapore FTA (ESFTA).17 This has resulted in an architecture for Singapore that takes the shape of a “hub” of overlapping arrangements.18 Producers in the hub have cost advantages vis-a-vis producers in the spokes, being able to obtain more of their intermediate goods at lower prices. The ROO provisions also prevent goods for re-exportation from Singapore to the higher tariff country by ensuring that substantial work is done on the product in Singapore.19 With regard to services, significant FTA commitments for services have been played out in agreements such as Singapore–Australia Free Trade Agreement (SAFTA), USSFTA and the India–Singapore Closer Economic Cooperation Agreement (CECA), leading to a greater flow of services as well as goods.20 Liberalization in its services sectors has been usually sought after by developed countries such as the United States, Australia and Switzerland. However, even some developing countries such as India and Panama have sought concessions in this sector from Singapore. For instance, in the USSFTA, Singapore granted the United States unprecedented preferential access to its financial services sector, which in turn could lay key planks — business tieups as well as growth in the financial services industry — to smoothen and enhance trade.21 From the point of view of domestic manufacturers, Mutual Recognition Agreements (MRAs) eliminate duplicative testing and certification for various products. MRAs also enhance Singapore’s attractiveness as a trading hub, as countries in the region increasingly look to the city-state as a convenient certification centre for their exports. Apart from manufactured goods, Singapore has also entered into recognition agreements for professionals with FTA partners, ranging from nursing degrees from India under CECA to accounting degrees under SAFTA. SAFTA also contains unique horticulture and food MRAs, facilitating trade between both countries. Government procurement commitments also level the playing field for Singapore companies competing overseas for government projects, and investment rules help protect Singapore’s investments and provide a mechanism to solve disputes. Indeed, commentators have noted that bilateral FTAs can remove barriers and develop policy innovations in areas such as investment rules and market regulation faster than negotiations in the WTO.22 This, in turn, has helped in the promotion of entrepreneurship domestically, paving the way for the outward expansion of vibrant Singapore companies.

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THE BENEFITS Singapore has one of the most liberal trade and investment regimes in the world, and the near zero tariff rates on most goods imply that the scope for trade diversion23 from Singapore’s vantage point is quite small.24 However, in examining the example of its FTAs with two key partners, the United States and Japan, it becomes evident there still exist many preferential benefits to be reaped from FTAs, both for Singapore and the signing partner. Given continued aggregate trade deficits faced by the United States, protectionist pressures in case of an economic slowdown may emerge. Thus for Singapore, an FTA can serve as an “insurance policy” against the future imposition of U.S. unilateral trade barriers like tariff walls,25 this being especially important given that the United States is one of Singapore’s largest trading partners and leading investor. Similarly, JSEPA provided Singapore with preferential access to the Japanese market.26 Singapore was allowed to export high-tech electronics goods and petrochemical products on preferential terms to Japan’s lucrative market. The deal made Singapore an ideal base from which foreign companies would be able to gain better access to Japan. As Shuijiro Urata, Professor of Economics at Waseda University in Tokyo, noted, “JSEPA will herald a flood of new investments by companies seeking access to Japan’s previously closed markets.” 27 Indeed, Singapore’s bilateral FTAs offer companies like DaimlerChrysler the best of both worlds” — access to the ASEAN FTA, as well as access to developed economies.28 The benefits from FTAs have translated vertically downwards as well — both the MNC investors and SMEs have benefited from the tariff concessions offered by the FTAs. The former, by virtue of their large export volumes, are capable of generating millions in tariff savings on an annual basis. Exports by SMEs under the FTAs have saved costs for their importers too.

Table 7.1 Singapore’s External Trade in 2005

Total Trade Import Export Domestic Export

2004

2005

% Change

$628,952m $293,337m $335,615m $180,200m

$715,722m $333,191m $382,532m $207,448m

13.8 13.6 14.0 15.1

Source: IE Singapore.

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The statistics for the signing partner also affirm the positive aspects of FTAs. One study estimated that U.S. exports would increase by 0.2 per cent as the result of the USSFTA. In the case of Singapore’s FTA with Australia, which was concluded in 2003, this has been primarily beneficial to Australian exporters of services. Indeed, the FTAs have enhanced Singapore’s image as a good place do business, and have lent it a confident stamp of business savviness and visionary leadership. Singapore’s trade with the world totalled US$715.72 billion in 2005, and it is ranked the world’s second freest economy.29 COMPLEMENTING TRADE AGREEMENTS: A HOLISTIC APPROACH Even as efforts are expended to gain better market access through trade agreements, Singapore has also taken steps to help companies find new markets and globalize. The Trade Development Board (TDB) was restructured as International Enterprise Singapore (IES) in April 2002 with a mandate to explore new market niches for Singapore’s exports. This includes aiding local companies take advantage of FTAs — in other words, helping them use the highways that were paved. A number of trade missions to emerging markets covering a wide geographical spread have been made — including Africa, Central Asia, Latin America, Central and Eastern Europe and the Middle East. In addition, IES has thirty-six Overseas Centres around the world, each staffed with experienced Singapore-based and local personnel who are equipped to provide market intelligence and business facilitation services to enterprises. Following the success of Network China and Network India, which fosters connections and business linkages between companies that have an interest in the Chinese and Indian market, Network Indonesia was started in May 2003. Partners Programme was also launched in 2005 to encourage Singapore companies to band together when venturing overseas. SPECIAL ECONOMIC ZONES (SEZS) Another thrust that has emerged in Singapore’s trade strategy is the export of public sector expertise and the partnering of public and private sectors to explore new markets abroad. SEZs are a manifestation of this. They have gained increasing pre-eminence in recent years. SEZs are areas designated by the government which allow companies operating in the area to enjoy import and export tariff concessions as well as additional fiscal, financial and economic development incentives. For Singapore, there is a need to

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explore new geographies and emerging regions previously unexplored, and for host countries of SEZs, there is much to benefit from the exportation of Singapore’s public sector expertise. Capitalizing on Singapore’s unique position as an entrepôt hub connecting the Far East and Southeast Asia, the West and Russia, SEZs are laying the foundation for long-term engagement with key partners like China, India and Russia. For instance in a landmark venture, Singapore and China cooperated to create the Suzhou Industrial Park (SIP). The SIP remains the largest government-to-government collaboration project between China and Singapore. Once labelled by the British Prime Minister Tony Blair as a “bold experiment”,30 the success of the SIP has won much attention from governments and companies around the world. To date, the SIP has attracted some US$16 billion FDI of high quality investments, including fifty projects by Fortune 500 companies.31 More than 250,000 officials from various provinces all over China have also visited the SIP to study its experience and adapt it to their own circumstances. Indeed, given its success, plans have been made to expand SIP by a further ten square kilometres. Another example is the US$210 million Vietnam–Singapore industrial Park (VSIP) in Binh Duong Province in southern Vietnam. The Vietnam Singapore Technical Training Centre (VSTTC), training about 90 per cent of each batch of graduates for work in the VSIP, enhanced Singapore’s role as a foreign direct investor, softening the negative impression of Singaporean investors driven by profit alone.32 In 2002, another technical training course was added at the request of the Vietnamese, demonstrating that Singaporean expertise was valued and successfully transferred. Employment was substantially raised, with investments of about US$180 million from thirteen international companies creating some 1,300 jobs in the area.33 Singapore also works with the Indonesian government on Batam and Bintan islands. PUSHING THE GAINS UPWARDS: THE ‘NEW REGIONALISM’ The next question to be dealt with is how a plethora of arrangements such as FTAs translate into larger benefits for regional and multilateral trade flows. Research suggests that the existence of such regional and bilateral trade agreements are both mutually beneficial as they increase economic, social and political interaction at all levels and enable bilateral trade partners to enter into regional trade. Free trade with the world as a whole is thus facilitated. Out of 300 regional and bilateral FTAs notified to the GATT/WTO as of October 2004, about 130 were established after January 1995.34 As testimony

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to the complementary relationship between regional and multilateral approaches, the pace of regional FTAs picked up since 2001, with the launch of the Doha Development Agenda (DDA) in November 2001, with thirtythree of them being notified to the WTO, over the 2001–03 period.35 Academicians concur, highlighting that the regional system keeps the trade system moving forward, and ensures the Bicycle Theory does not manifest itself.36 The Bicycle Theory, coined by Fred Bergsten, propounds that FTAs are viewed as a means to maintaining forward momentum towards trade and investment liberalization, failing which it feared that there might be a lapse into protectionism.37 The regional approach has kept the bicycle moving during prolonged periods, namely when GATT went into hibernation in the late 1960s, and after the Uruguay Round in 1994. Bilateral FTAs have thus helped to prevent the formation of inward-looking trading blocs.38 On a very basic level, Sager notes that “FTAs could act as a testing ground or pilot project for exploring complex trade issues” and establishing some sort of precedent or benchmark for trade negotiations involving a larger number of countries, including one at the multilateral level.39 Singapore has been very active on the regional front, driving forth negotiations in Asia. It is a founding member of ASEAN, APEC and ASEM, all of which have a clear trade and investment dimension to them, propelling the “New Regionalism” in Asia.40 ASEAN For Singapore’s regional trade agreements, the ASEAN economic agreements provide the most comprehensive and deepest commitments. Asian regionalism was initiated with the formation of AFTA in 1992, calling for deeper economic integration than trade liberalization per se. Since 2003, an FTA in goods has existed between the original six members of ASEAN. These members have also committed to remove National Treatment restrictions to manufacturing by 2003 and services incidental to manufacturing by 2010 for ASEAN investors, and by 2010 for other investors. Singapore places great importance on ASEAN. Accounting for 52.3 per cent of intra-ASEAN trade, Singapore’s future is inevitably tied to ASEAN’s fortunes. ASEAN integration gives Singapore the platform to engage regional powers, that is, China and India. ASEAN is also an avenue for confidencebuilding with Malaysia and Indonesia. As Singapore’s key trading and investment partners, these two countries have strong business links and economic linkages with it. There also have been further pushes for greater ASEAN integration. For instance, there was the signing of the framework

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agreement on economic cooperation on Batam and Bintan in June 2006. Within ASEAN, Singapore has been pushing for faster and leaders had agreed to work towards an ASEAN Economic Community (AEC) as the end-goal of ASEAN economic integration. At the ASEAN Economic Ministers’ Meeting in August 2006, ministers pledged to reduce barriers to integration, bringing forward the deadline of the vision of ASEAN to become a single market and production base, with free flow of goods, services, labour and capital, by 2015 instead of 2020. This will include WTO-plus undertakings covering trade in goods, services and investment, non-tariff barriers, and standards. Eleven priority sectors41 have been identified, with sectoral integration agreements currently under negotiation. Given the overlapping membership of important regional groupings, region-to-region initiatives in economic integration have also blossomed and ASEAN has played a big role in this. For instance, ASEAN is vigorously pursuing trade and investment engagements with its external dialogue partners, and is currently engaged in FTA negotiations with China, India, Japan, and Korea, as well as with Australia and New Zealand. ASEAN has also established cooperation programmes with Australia and New Zealand42 and the EU,43 with the objective of facilitating two-way trade and investment flows. In addition, ASEAN is engaged with the United States through the Enterprise for ASEAN Initiative, which provides a framework for ASEAN countries to engage in bilateral FTAs with the United States. A Trade and Investment Framework Agreement (TIFA) was also signed with the United States in August 2006. Singapore actively supports these developments, as it believes that the long-term economic prospects of Southeast Asia are enhanced by it maintaining open links to all the regions in the world. As one of the most active and forward moving players in FTAs, Singapore has acted as a catalyst for freer trade in the region. Singapore’s FTAs have also provided a reference point and template for regional FTAs involving the same developed economies as partners for ASEAN, and other developing countries.44 For instance, Japanese Prime Minister Junichiro Koizumi offered as much to other ASEAN countries when he signed the JSEPA with Singapore in January 2002.45 Indeed, many of its bilateral FTA partners are extending similar offers to ASEAN countries as a group or bilaterally.46 This “[stirring of ] ASEAN lethargy”,47 especially since the Asian crisis, that is moving faster than the WTO multilateral negotiations, has warranted much attention from the world.48 THE PRE-EMINENCE OF THE MULTILATERAL APPROACH However, it is clear that the multilateral trade environment will always be of paramount importance to Singapore. It secures the interest of a small country

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like Singapore, and underscores a fair, open and predictable multilateral trading environment. There are many gains to be made from multilateral trade. The World Bank and Martin Wolf estimates that “the global gains from radical trade liberalization are nearly US$300 billion a year.”49 The World Bank has also pointed out that eliminating services barriers in developing countries alone would yield them a US$900 billion gain.50 FTAs and the WTO are not substitutes but can be mutually reinforcing “building blocks” to greater regional or multilateral trade liberalization to “competitive liberalization”. For instance, good progress on both fronts was made in the last ten years during which time the Uruguay Round was concluded, the WTO was formed, China joined the WTO, and half of all the 200-plus FTAs in the world were notified to the WTO. Bergsten’s Bicycle Theory is complemented by the theory of “competitive liberalization”, as highlighted by former U.S. Trade Representative Robert Zoellick.51 The latter theory argues that the pursuit of smaller bilateral free trade agreements with lesser economic powers will unlock liberalized agreements at the regional level, like the Americas or the EU, and ultimately, at the worldwide, multilateral levels where economists believe that trade benefits are broadest.52 To that extent, a strategy like Singapore’s FTA strategy will not only help further a country’s own trade interests, but also benefit larger trade flows. CONCLUSION Singapore is entering a transitional period where entrepreneurialism is highly valued. In securing the expansion of emerging Singapore companies, it is imperative to recognize that Singapore’s future will always depend on access to open markets and trade based on rules. Foreign economic policy thus becomes only more relevant to allow Singapore’s transformative capacity to take shape and to hew paths for Singapore’s companies.53 Singapore’s vision is to be a globalized, entrepreneurial, and diversified economy. Juxtaposed against a backdrop of rapid technological advances and intense globalization, and new players like China and India, Singapore’s FTA serves to ensure that it is plugged into global economic and political affairs. To be effective however, this network of highways must be consistent with WTO rules and also WTO-plus. Only then can they truly provide better market access, and catalyse the global trade liberalization process, serving as pathfinders or benchmarks. FTAs are about creating a greenhouse environment for companies to grow, creating the investment framework and soft infrastructure that will allow enterprises of any size to be formed, to expand, to re-organize and re-invent themselves as and when new market

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opportunities arise. This has proven to be increasingly important in providing support for upcoming “hot” sectors like the biomedical sciences, chemicals and so on. However, what is more relevant is to what extent and how far a small, open city-state is really affected by global and technology trends beyond its control. Because of its own unique circumstances as a small, open economy, Singapore cannot afford to pursue bilateral and regional FTAs at the expense of the larger multilateral trading system. To Singapore, the WTO’s rulesbased system is the most advantageous. But as the world arguably suffers from what Bergsten labels as “trade fatigue”.54 NOTES 1. Guy de Jonquieres, “The Challenge for the Multilateral Trade System”, Financial Times, 18 November 2002. 2. Pascal Lamy, “What Now, Trade Ministers?”, International Herald Tribune, 27 July 2006. 3. Anne Krueger, “Trade Policy and Economic Development: How We Learn”, American Economic Review 87, no. 1 (22 June 1997). 4. Athanasios Vamvakidis, “Regional Trade Agreements or Broad Liberalization: Which Path Leads to Faster Growth?”, IMF Staff Papers 46, no. 1 (March 1999). 5. Ibid. 6. Joseph Stiglitz and Andrew Charlton, Fair Trade For All (Oxford University Press, 2006). 7. Vamvakidis, op. cit. 8. Daniel Altman, “Managing Globalization: Why Trade Talks Do Little for Poorer Countries”, International Herald Tribune, 31 July 2006. 9. The Economist Intelligence Unit, Singapore Factsheet. 10. Lael Brainard, “U.S. Shares Blame for Trade Talk Collapse”. , 28 July 2006. 11. Jadish Bhagwati, The Feuds Over Free Trade (Singapore: Institute of Southeast Asian Studies, 1997). 12. Schiff (2000). 13. Ramkishen Rajan, Rahul Sen and Reza Siregar, “Singapore and the New Regionalism: Bilateral Trade Linkages with Japan and the U.S.”, The World Economy 26, no. 9 (2003): 1325–56. 14. “When FTAs Cut across Continents”, Business Times, 25 April 2001. 15. Ibid. 16. Linda Low, “Singapore’s Bilateral Free Trade Agreements: Institutional and Architectural Issues”, mimeograph, National University of Singapore, 2003. 17. Ibid. 18. Rahul Sen, “ ‘New Regionalism’ in Asia: A Comparative Analysis of Emerging

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36. 37. 38. 39. 40.

41.

42. 43. 44.

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Regional and Bilateral Trading Agreements Involving ASEAN, China and India”, Journal of World Trade 40, no. 4 (August 2006). Rajan, Sen and Siregar, op. cit. Daniel Altman, “Managing Globalization: A New Trade Bandwagon — Are Rich-Poor Pacts Fair?”, International Herald Tribune, 8 August 2006. “When FTAs Cut across Continents”, Business Times, 25 April 2001. Guy de Jonquieres, “The Challenge for the Multilateral Trade System”, Financial Times, 18 November 2002. This refers to the replacement of lower cost suppliers from non-member countries. Rajan, Sen and Siregar, op. cit. Ibid. Ibid. Daniel Gay, “The Neighbourhood’s On Fire”, Asiaweek, 4 May 2001. Ibid. The Heritage Foundation/The Wall Street Journal, 2004 Index of Economic Freedom. DPM Wong Kan Seng, Interview in Lianhe Zaobao, 26 May 2004. Then-DPM Lee Hsien Loong’s Speech at SIP 10th Anniversary Gala Dinner. Alan Ang, “Vietnam–Singapore Industrial Park”, National University of Singapore. Ibid. Rajan, Sen and Siregar, op. cit. WTO 2003, from Rahul Sen, “ ‘New Regionalism’ in Asia: A Comparative Analysis of Emerging Regional and Bilateral Trading Agreements involving ASEAN, China and India”, Journal of World Trade 40, no. 4 (August 2006). Fred Bergsten, “Globalizing Free Trade”, Foreign Affairs 75, no. 3 (May/June 1996): 116. Ibid. Rajan, Sen and Siregar, op. cit. Sager (1997), in Rajan, Sen and Siregar. The “New Regionalism” among the Asian economies is a term which has come to resemble the ongoing phenomenon of proliferation of bilateral and regional trading and economic cooperation agreements in the Asia-Pacific region, especially in the aftermath of the regional financial crisis. It has arisen from the need to adjust to the realities of an Asia which needs to manage globalization challenges and enhance its role in world affairs (in Sen, “ ‘New Regionalism’ in Asia: A Comparative Analysis of Emerging Regional and Bilateral Trading Agreements involving ASEAN, China and India”). Agro-based products, air travel, automotive, e-ASEAN (or ICT), electronics, fisheries, health care products, rubber-based products, textiles/apparels, tourism and wood-based products. Under the AFTA-CER Closer Economic Partnership framework. Under the Trans-Regional EU ASEAN Trade Initiative (TREATI) framework. Low, op. cit.

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45. 46. 47. 48. 49. 50. 51. 52. 53. 54.

Ibid. Ibid. Rajan, Sen and Siregar, op. cit. Low, op. cit. Bernard K. Gordon, “Development Vs. Free Trade”. YaleGlobal, 20 July 2006. Robert Zoellick, “Unleashing the Trade Winds”, The Economist, 5 December 2002. Ibid. Lael Brainard, “U.S. Shares Blame for Trade Talk Collapse”. , 28 July 2006. Linda Low, “The Singapore Developmental State in the New Economy and Polity”, Pacific Review 14, no. 3 (2001): 411–41. Fred Bergsten, “Globalizing Free Trade”, Foreign Affairs 75, no. 3 (May/June 1996): 116–17.

REFERENCES Altman, Daniel. “Managing Globalization: A New Trade Bandwagon — Are RichPoor Pacts Fair?”. International Herald Tribune, 8 August 2006. ———. “Managing Globalization: Why Trade Talks Do Little for Poorer Countries”. International Herald Tribune, 31 July 2006. Ang, Alan. “Vietnam–Singapore Industrial Park”. National University of Singapore. Bergsten, Fred. “Globalizing Free Trade”. Foreign Affairs 75, no. 3 ( May/June 1996). Bhagwati, Jagdish. The Feuds Over Free Trade (Singapore: Institute of Southeast Asian Studies, 1997). Brainard, Lael. “U.S. Shares Blame for Trade Talk Collapse”. , 28 July 2006>. de Jonquieres, Guy. “The Challenge for the Multilateral Trade System”. Financial Times, 18 November 2002. Dent, Christopher M. “Networking the Region? The Emergence and Impact of AsiaPacific Bilateral Free Trade Agreement Projects”. Pacific Review 6, no. 1 (2003): 1–28. Gay, Daniel. “The Neighbourhood’s on Fire”. Asiaweek, 4 May 2001. Gordon, Bernard K. “Development vs. Free Trade”. YaleGlobal, 20 July 2006. Krueger, Anne. “Trade Policy and Economic Development: How We Learn”. American Economic Review 87, no. 1 (22 June 1997). Lamy, Pascal. “What Now, Trade Ministers?” International Herald Tribune, 27 July 2006. Low, Linda. “The Limits of a City-State: Or Are There?”. In Singapore in the New Millennium: Challenges Facing the City-State, edited by Derek da Cunha (Singapore: Institute of Southeast Asian Studies, 2002). ———. “Singapore’s Bilateral Free Trade Agreements: Institutional and Architectural Issues”. Mimeographed, National University of Singapore, 2003.

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———. “The Singapore Developmental State in the New Economy and Polity”. Pacific Review 14, no. 3 (2001): 411–41. Rajan, Ramkishen, Rahul Sen and Reza Siregar. “Singapore and the New Regionalism: Bilateral Trade Linkages with Japan and the U.S.”. The World Economy 26, no. 9 (2003): 1325–56. Schiff, et al. Trade Blocs (Washington, D.C.: The World Bank, 2000). Sen, Rahul. “ ‘New Regionalism’ in Asia: A Comparative Analysis of Emerging Regional and Bilateral Trading Agreements involving ASEAN, China and India”. Journal of World Trade 40, no. 4 (August 2006). Stiglitz, Joseph and Andrew Charlton. Fair Trade For All. Oxford University Press, 2006. “When FTAs Cut across Continents”. Business Times, 25 April 2001. Vamvakidis, Athanasios. “Regional Trade Agreements or Broad Liberalization: Which Path Leads to Faster Growth?”. IMF Staff Papers 46, no. 1 (March 1999). Zoellick, Robert. “Unleashing the Trade Winds”. The Economist, 5 December 2002.

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8

ASEAN’s Leading Role in East Asian Multilateral Dialogue on Security Matters: Rhetoric versus Reality Evgeny Kanaev

More than a decade ago the Association of Southeast Asian Nations (ASEAN) took on the mantle of leadership in promoting multilateral security dialogue in East Asia and was expected to remain its primary coordinator for many years to come. But nowadays ASEAN’s “inner resources” to further carry out that diplomatic mission seem to be heavily depleted. Such an outcome is predetermined by recent profound changes in regional “strategic equation” and their far-reaching implications for ASEAN as a political-diplomatic unity. This chapter focuses on the most important prerequisites, as well as the development process and possible consequences, of the afore-mentioned trend. The author hopes his efforts might make a useful contribution to the overall understanding of complicated processes that will determine the shape of the strategic environment in East Asia.

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RATIONALE FOR INITIATING THE PAN-REGIONAL DIALOGUE ON SECURITY MATTERS In the first few years after the end of the Cold War, the balance of power in East Asia was in flux. The factors that directly contributed to the emergence of the above-mentioned trend are outlined below. First, the beginning of the 1990s witnessed profound changes in the U.S. security commitments to its East Asian allies. As it was, Washington intended to substantially reduce its air and naval forces in the region, the first indication of which was suspension of military contacts with the Philippines. In the light of those developments, the leadership of many pro-U.S. countries were of the opinion that East Asia might be losing its rank in Washington’s post-Cold War “order of priority”. Second, the disintegration of the Soviet Union totally upset the previous pattern of international relations, a reality which had significant repercussions for East Asian stability. The primary questions that arose in East Asian capitals in that regard were what countries would be chosen as Russia’s closest “Eastern” allies and by what means Russia would be able to enhance its rapidly declining influence in the region. Third, in the aftermath of the Cold War the political-security cooperation between Japan and the United States entered a phase of transition, the result of which was Tokyo’s growing security ambitions and efforts to acquire an international status commensurate with its economic power. Those developments were of immediate concern to East Asian countries as any expansion of Japan’s military role might rekindle memories of Japanese wartime atrocities and further galvanize the arms race in the region. Fourth and finally, a high degree of instability which arose in the first post-Cold War years suggested that China might be eager to fill the “strategic vacuum” left by the United States and the USSR, a factor which gave rise to the regional countries’ considerable security concerns. Those anxieties were further aggravated by the resurgence of Chinese nationalism and the rapid process of the PLA modernization, each of which was seen as clear evidence of China’s intentions to become a dominant power in East Asia. The immediate consequence of the afore-mentioned developments was the growing realization that in the post-Cold War era, the need to preserve international stability might become much more pressing than before. At that juncture it was member countries of ASEAN who assumed the mantle of leadership to create a “system of strategic checks and balances” in the region, which was aimed at promoting confidence among different states. The most significant factors that galvanized ASEAN into action are outlined below.

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First, ASEAN had already established an “organizational platform” for pan-regional negotiations. That role was played by the annual meetings where ASEAN and its foreign partners held dialogue on a wide range of political and economic issues. Now that the time was ripe for new forms of security cooperation, the agenda of those talks could be “further extended” to include discussions of common security challenges as well. Second, by achieving the “Cambodian breakthrough”, the association had gained invaluable “first-hand” experience in dealing with small and medium-scale conflicts. Moreover, ASEAN cooperative efforts to settle the above-mentioned issue had been generously rewarded with the worldwide recognition of the association’s international respectability. Third, during the Cold War period ASEAN had neither been engaged in American-Soviet-Sino rivalry nor had become a military bloc, though some of its members had established close military ties with the United States. That factor was of profound significance as it provided the association with a good chance to “embrace” within multilateral dialogue, all East Asian countries regardless of their political views and past experiences. Apart from those somewhat “idealistic” motives, ASEAN had a variety of highly pragmatic reasons for taking the helm in initiating pan-regional negotiations on security issues. First, a regionwide multilateral forum might encourage China to “incorporate” its policy into an emerging international order. Second, such a body was likely to facilitate keeping the United States engaged in East Asian affairs. Third, it might turn out useful in defusing a potentially explosive situation in the South China Sea which in the first half of the 1990s was one of the major trouble spots in the region. Finally, fostering a “habit of cooperation” was supposed to be an effective means of encouraging economic development of East Asia and maintaining its “geo-economic” order. It would hardly be correct, however, to assume that ASEAN experts seriously explored possibilities of resolving any of the problems related to Northeast Asia. Though it was a laudable goal, ASEAN, nevertheless, pursued mainly its “narrow” interests — to raise its international status by setting an agenda of pan-regional negotiations and concurrently work towards effective solutions of Southeast Asian problems as the top priority. With those considerations in view ASEAN leapt into action. The first step was taken by research institutes which brought forward a number of concrete and detailed proposals concerning an “operational framework” of such a multilateral venue. That lead was followed by representatives of the “official track”, and in 1993 it was agreed to set up ASEAN Regional Forum

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with responsibilities to discuss political and security issues. Those developments marked a new phase of East Asian multilateralism with far-reaching implications for regional security. THE FIRST YEARS OF ‘DRIVING’ The inception of ASEAN Regional Forum as an unprecedented pan-regional multilateral venue where a wide range of security issues was expected to be discussed was in itself a remarkable success. The fact that negotiations were to be operated on ASEAN principles raised the international status of the association beyond any optimistic expectations. But at the same time, ASEAN was confronted by a number of problems that could undermine ARF efficiency and consequently ASEAN position as its “driving force”. The most serious of those problems are outlined below. First, East Asia — and consequently ASEAN — lacked any examples to follow. In the Cold War period there had not been any multilateral bodies which could have embraced the majority of the regional countries. For that reason in the post Cold War era leaders of all East Asian countries hardly knew what form that cooperation might take and what exactly it would demand of them. Second, China, which was supposed to be one of the central components of any security mechanism, viewed the ARF with apprehension and even suspicion. It was a pressing problem to tackle, and the association alone could not cope with it. Third, great ambiguity surrounded the ARF possible patterns of interaction with APEC, the agenda of which, should the need arise, could also be extended to incorporate security issues. Taking into account all those factors, the association took a highly cautious approach to negotiations under the auspices of the ARF, focusing mainly on the potential gains the forum could bring it. Those gains — and, concurrently, ASEAN goals — could be outlined as “minimalist” and “maximalist”. The former goal centred on preserving the ARF as an ASEAN-led security mechanism. It required coping with two primary tasks — to extend ASEAN norms of cooperation to the whole of East Asia and to obtain regional major powers’ approval for them. To fulfil that purpose, from mid1994 to mid-1997, ASEAN concentrated on establishing the ARF basic “operating framework”. In what became known as a Concept Paper of the ASEAN Regional Forum, it was set out that the association was to undertake

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an obligation to be the ARF driving force, and the forum was to operate on ASEAN norms and principles.1 That “short-term” strategy brought ASEAN success almost immediately as leaders of the United States, Japan and even China highly commended the ARF activities, stressing its importance for maintaining peace and security in the region. The latter goal was aimed at addressing — and concurrently resolving — some of the Southeast Asian countries’ urgent problems in dealing with major powers. The most pressing of those problems were the South China Sea territorial dispute, the possibility of China’s and the United States’ interference in Myanmar’s domestic affairs and the need to obtain the nuclear powers’ consent for establishing a nuclear-weapons free zone in Southeast Asia (SEANWFZ). On this account it seems appropriate to examine the ARF utility in dealing with the above issues. It would hardly be an exaggeration to say that with the end of the Cold War the territorial conflict over the Spratly Islands became one of the principal sources of contention in ASEAN–China relations. The Mischief Reef incident in February–March 1995 created acute anxiety among ASEAN countries whose leaders held the view that China’s maritime policy could seriously threaten stability in Southeast Asia. To compound the problem, the incident was the first direct confrontation over a territorial issue that took place between one of the ASEAN founding countries and an extra-regional power. With that factor in view it was the ARF which the association expected to be the most appropriate, if not ideal, venue for addressing that issue. But bitter reality fell short of those expectations. First, at the second ARF meeting in 1995 Chinese representatives pointed out that the forum lacked “position of authority” to discuss issues relating to China’s sovereignty; and hence the Spratlys solution was not found.2 A year later Beijing ratified the UN Convention of the Law of the Sea, which expanded China’s territorial sea area to three million square kilometres.3 But in spite of those unwelcome developments, neither in 1996 nor in 1997 could the ARF make its participants address that issue and work out a satisfactory solution. The situation in Myanmar was also seen as directly contradictory to ASEAN long-term interests as it ran counter to its intention to create “one Southeast Asia”, that is, to embrace all its states within the association. At the same time admission of Myanmar could severely damage ASEAN relations with both the United States and China. Thus Washington considered Myanmar as a pariah state with weak economy, under-developed civil society and totalitarian regime involved in drug trafficking and brutal repressions against both political activists and ordinary people. Beijing, in

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its turn, tried to strengthen its economic, political and military ties with Yangon to gain important strategic advantages, for instance, to construct naval facilities on the Andaman Coast and expand its influence in both South and Southeast Asia. To break that stalemate in 1996, ASEAN granted Myanmar the status of a new ARF participant, hoping it would help create understanding and settle at least some of the sharp differences between ASEAN, the United States and China on the Myanmar issue. But contrary to ASEAN expectations, the presence of Yangon delegates at the negotiating table shoulder-to shoulder with those of Washington’s and Beijing’s did not harmonize ASEAN relations with either the United States or China. Moreover, Myanmar’s participation in the ARF meetings did not discourage Washington from imposing economic sanctions on Yangon regarding Myanmar as “an anomaly” within ASEAN.4 Equally vain were hopes that negotiations under the auspices of the ARF would prevent Beijing from strengthening political and security cooperation with Myanmar which was continuously increasing in both qualitative and quantitative terms. Also fruitless was ASEAN attempt to use the ARF talks for discussing the issue of establishing SEANWFZ. In fact, though the ARF meetings in 1996 and 1997 approved the SEANWFZ, they did not galvanize the nuclear powers into action — none of them acceded to the treaty. Such an unsatisfactory outcome even made ASEAN point out that it was ready to amend some of the provisions of the treaty in order to make it more acceptable to the nuclear powers. It was a substantial concession, but contrary to ASEAN expectations it did not produce desired results.5 In sum, the period from mid-1994 to mid-1997 demonstrated that the ARF role in enhancing ASEAN status as an influential regional group was of dubious value. On the one hand, advantages that the ARF brought ASEAN were obvious. First, the association was recognized as the mainstay of the new body that was the only security-related multilateral venue in East Asia. Second, ASEAN was able to lay the groundwork for promoting further cooperation on a broad range of issues, including those which were previously considered highly sensitive. Third and finally, the ARF played a decisive role in the change in China’s perception of multilateralism — Beijing not only supported this ASEAN initiative but also made multilateral security talks one of the central components of its foreign policy. The abovementioned factor marked an accomplishment of a very difficult task which ASEAN had to deal with at the beginning of the 1990s — to “socialize”

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China into the international community and make its policy predictable and non-threatening to its neighbours. On the other hand, the ARF value in solving immediate problems of Southeast Asia turned out to be virtually non-existent. The ARF participants avoided conducting any detailed examination of those problems and restricted themselves to making brief and “politically correct” statements commending ASEAN efforts to address them. But the association itself did not consider such results as either unfortunate or discouraging. As it was, ASEAN foreign ministers were of the opinion that while the ARF was still in its infancy, it would be unwise to make it fully responsible for settling crucial security issues. Moreover, that point of view was substantiated by the perception that the ARF’s two primary tasks — to expand ASEAN cooperative norms to the whole East Asia and further promote the grouping’s image as a driving force of that multilateral venue — were being fulfilled fairly effectively, at least without major setbacks. AFTER THE EAST ASIAN FINANCIAL CRISIS The financial crisis of 1997–98 had profound consequences for ASEAN as an international organization as well as for ASEAN-led multilateral dialogue mechanisms discussing controversial security issues. This trend may be elucidated by examining what happened to the association’s “position of authority” in the ARF and what degree of influence it was able to obtain within the first “post-crisis” East Asian multilateral talks — ASEAN+3 (APT). ASEAN AND ARF: HAS THE DRIVER’S SEAT BECOME TOO SHAKY? Since the financial shock of 1997–98 ASEAN’s position as a principal driving force of the ARF became the subject of sharp criticism. That trend emerged due to a number of factors, the most significant of which are outlined below. First, after the financial catastrophe ASEAN faced a serious “credibility problem”. As it was, the association could not formulate any kind of coherent policy in order to “bring order out of chaos”, which not only provoked bitter criticism of ASEAN, but also raised serious doubts about its future. At that juncture many experts began to argue that ASEAN should not be the hub of the pan-regional negotiations on security issues while it was unable to provide security within its own territorial domain. Second, at the end of the 1990s it became absolutely clear that ASEAN’s key principles, which were established during the bipolar era and which

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shaped the negotiation process within the framework of the ARF, ran counter to the realities of the post-Cold War period. It can be confidently said that the principle of non-interference was essential to the internally coherent “ASEAN of the 1970s and 1980s”, with its political elites holding power for many years (F. Marcos, M. Mahathir, Suharto, Lee Kuan Yew), but not to the flimsy “ASEAN of the late-1990s”, the leaders of which were falling from power one after another. The same was true for the ARF, which was regarded as an ASEAN attempt to apply its techniques of diplomacy to a wider region. To substantiate that point it is worth noting that both ASEAN and the ARF turned out to be unable to stop an outbreak of violence in East Timor as it could have been interpreted as a “violation of Indonesian sovereignty”. Furthermore the principle of consensus among ARF participants caused constant irritation to the United States, Japan and Australia which called for immediate actions instead of mere rhetoric on the virtues of confidence-building measures. Third, after the crisis the general trend towards globalization shifted towards that of regionalism. But evolution of the ARF proved to be directly contradictory to those developments. As it is, up to 2006 the ARF membership was granted to twenty-seven countries. As a result the structure of the ARF became unwieldy, and ASEAN capacity to effectively “drive” its activities was substantially reduced. Fourth and finally, in spite of all its efforts, a weakened ASEAN was not in a position to restore its rightful place in the East Asian “strategic equation”. In fact, after the financial crisis the association became rather an object of the great powers’ policies rather than an influential regional actor as it had been before. The above factors were a major contribution to ASEAN losing its influence at the ARF meetings. The problem was further exacerbated by some unwelcome developments taking place in the ARF, which fell short of the previously optimistic expectations. As it was, the ARF turned out to be unable to move from confidence-building measures to preventive diplomacy, as well as clarify in what way the former was to be different from the latter. Moreover, the ARF utility in fostering mutual understanding between major powers and reconciling their differences was low. There arose a number of serious crises in U.S.– China and Japan–China relations in spite of those countries’ participation in the ARF negotiations. Furthermore, in the mid-2000s it became abundantly clear that the ARF was not able to galvanize its participants into action to resolve any of the security issues which were considered of top priority ten years before — arms race, the “socializing” of Myanmar, to say nothing of the

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North Korean nuclear programme. Last but not least, the ARF does not play any important role in fostering cooperation to combat international terrorism — joint exercises go on mostly on a bilateral, rather than multilateral, basis.6 All those trends provided ample grounds for raising the question of how effectively ASEAN is driving the ARF and whether it is in a position to continue doing it. As a consequence, there appeared lots of critical analyses that pointed to the need for immediate and radical reforms of the panregional multilateral dialogue on security matters. Some experts argued that the primary functions of the ARF should be delegated to APEC.7 Others brought forward proposals for a complete transformation of the ARF process, for example, de-linking the ARF chair from the ASEAN chair.8 With those developments in view, there is sufficient evidence to suggest that though the association will continue to occupy the “driver’s seat” of the ARF, its other participants are likely to express growing dissatisfaction over both the “driving skills” and “destination”. ASEAN AND THE ASEAN+3 PROCESS The ASEAN+3 (APT) dialogue mechanism is considered to be a relatively new multilateral venue for discussing crucial regional issues. As it can be seen by its name, that process was developed through the existing ASEAN institutions, and the association, at least formally, again accepted the responsibility for driving those negotiations. But the timing and conditions of APT inception suggested that the de facto role of ASEAN in the new multilateral body was unlikely be central. Four points might be noteworthy in that regard. First, in contrast to the ARF, which was created to discuss solely security problems, the APT was supposed to deal mainly with economic issues, among which trade and financial arrangements occupied central place. And taking into account the bitter reality that ASEAN was heavily — and, more important, emotionally — dependent on the “+3” countries especially China, the association was not in a position to “set out the rules of the game” within the APT framework. Second, the economic turmoil caught ASEAN in the critical period of its expansion, a factor that had tremendous impact on the association’s capacity to pursue a coherent economic policy. As a matter of fact, in the late-1990s ASEAN was in a state of complete disarray as individual countries held different views on what kind of policy should be adopted to bring greater economic stability to Southeast Asia and prevent any such financial setbacks

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in future. Under those circumstances, for the majority of ASEAN countries, the best pattern of economic cooperation with their Northeast Asian counterparts was on a bilateral rather than multilateral basis. Third, at APT meetings the association had very little room for manoeuvre to act as a mediator between the East Asian “big boys” — China and Japan. As it was, due to the absence of the United States, India, Australia, Russia and other major powers, ASEAN states had been thrown back on their own resources to prevent the “+3” countries from setting the APT agenda and getting unfair advantages over their Southeast Asian counterparts. Fourth, after the crisis, despite strong anti-Western sentiments in the region, Northeast Asian “heavyweights” — China and Japan — were far from fostering much-praised East Asian “spiritual values” to the detriment of their direct strategic interests. On the contrary, both Beijing and Tokyo tended not to view ASEAN as an equal partner and regarded the APT as an effective means to enhance their own political influences as well as economic opportunities in Southeast Asia. Fifth and finally, ASEAN itself turned out to be deeply split over the issue of APT “order of priority” — some of its member countries stressed the importance of economic and financial cooperation while others preferred dealing with immediate security problems.9 All those factors pre-determined ASEAN’s “subordinate” or at least, secondary role, to the “+3” countries in the new dialogue mechanism. The ensuing events demonstrated that the afore-mentioned trend remained overwhelmingly dominant within the APT process. The evidence for it is amply provided by a number of remarkable developments in APT negotiations. The “+3” countries were much more active than ASEAN in launching and carrying out major projects, among which swap arrangements, trade liberalization schedules and development cooperation were most prominent. Furthermore, Northeast Asian countries began to exert pressure on ASEAN with an express purpose of institutionalizing APT negotiations, which might go so far as separating the APT from the ASEAN framework. All those trends suggested that the status of the association at APT negotiations was relatively low. In the security realm, the situation was strikingly similar. Discussions within the APT framework were held mostly on non-conventional security issues — terrorism and transnational crimes,10 a fact which downplayed the importance of the APT and concurrently ASEAN as its coordinator. At the same time ASEAN attempts to find a satisfactory solution to the longstanding territorial dispute over South China Sea islands resulted in a

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serious political defeat as the association could not carry out a coherent policy on that issue.11 Trying to cope with that highly alarming situation, some ASEAN countries endorsed initiatives aimed at rejuvenating the association and restoring unity among its members. The most remarkable example in that regard was a move forward to create an ASEAN Community, a pillar of which was the ASEAN Security Community, designed to “bring ASEAN’s political and security cooperation to a higher plane”.12 In practice there appeared obvious contradictions between individual ASEAN countries with regard to the key components and future direction of the undertaking,13 a factor which further militates against ASEAN’s unity within a “wider” negotiation framework, first of all, the APT. In sum, the above-mentioned developments in the APT dialogue process provide overwhelming evidence for concluding that ASEAN’s positions at those negotiations are far from being influential. At that juncture, trying to revive its image as a skilful coordinator of pan-regional multilateral dialogue, the association launched another ambitious project — East Asian Community. WILL ASEAN SUCCEED IN DRIVING THE EAST ASIAN COMMUNITY? An idea to create an East Asian Community (EAC) as a mechanism to discuss a wide range of economic, political and security issues was first expressed by the Malaysian prime minister in December 2004.14 The form and substance of the proposed project very quickly provoked bitter feud between China and Japan, each of which saw it as a perfect means to strengthen its own influence in East Asia and mitigate that of its competitor. In Beijing’s view, EAC presented an excellent opportunity to legitimize China’s status as the “natural leader” of the region. That task could be fulfilled by “steering” the EAC along the lines of the Shanghai Cooperation Organization, where China plays a crucial role. With those considerations in view, during preparation for the East Asian Summit — the first step towards East Asian Community — Chinese diplomats and officials repeatedly pointed out that the new venue should be exclusive and the “core” of it should consist of the APT countries. But when those expectations did not materialize and it became obvious that non-East Asians — India, Australia and New Zealand — would take part in the summit, Beijing made a complete U-turn and called for the inclusiveness of EAC, trying to make it indistinguishable from APEC and the ARF. The purpose of those Chinese manoeuvres was absolutely

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clear — either to gain a dominant position within the new multilateral negotiation process or to undermine its effectiveness from the very beginning. Tokyo, in its turn, saw EAC in a totally different light. First, Japan was seeking ways to cement its ties with ASEAN, which was important as Japan relations with China and South Korea were far from ideal. Second, Japanese diplomats were exploring possibilities to counter-balance China’s influence in East Asia and insisted on the “inclusiveness” of the new community, that is, the participation of other major powers, mainly the U.S. allies. The motives of the “newcomers” — Australia, New Zealand and India — centred mainly on expanding economic and security ties with Northeast Asia and Southeast Asia and “carving strategic niches” as influential powers within the East Asian “geographical footprint”. In the light of those circumstances, an inception of a new multilateral body was about to create many painful problems that could undermine its effectiveness. Nevertheless, ASEAN again assumed the responsibility of “driving” a new multilateral body, which was stated in the Kuala Lumpur declaration.15 But in spite of that ostensibly routine task, ASEAN leaders are sure to realize that to achieve that modest goal would be extremely difficult due to several important factors. First, ASEAN still remains beset with an insuperable “credibility problem”. A representative example in that regard is “the headache of Myanmar”, whose leaders seem to be doing everything possible to complicate ASEAN relations with other countries.16 This factor is highly detrimental to ASEAN’s status as a coordinator of the pan-regional dialogue mechanism given that its “intramural” problems are far from being resolved. Second, there are considerable difficulties in identifying the geographical footprint of the new community, as participants of the East Asian Summit take different views on what East Asia is or what it should be. Here it seems appropriate to quote former Prime Minister of Malaysia Dr Mahathir Mohamad, who argued that countries like Australia are “neither East nor Asian”.17 Taking into consideration that Mahathir remains highly influential in Southeast Asian political, business and intellectual circles, the point of view he expressed might provoke flagrant contradictions within ASEAN. An additional point to be made here is that the association is far from being united on the issue of what countries should constitute the “bedrock” of the expected multilateral forum, a factor that further undermines ASEAN’s ability to “drive” those negotiations. Third, there is a substantial “conceptual discrepancy” between two primary goals stated in the Kuala Lumpur Declaration. The fact is that participants of

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the East Asian Summit announced their intention to build an ASEAN Community along the lines of the East Asian Community.18 But it raises a fundamental and a very delicate question — is ASEAN Community supposed to be a “separate” community within a “larger” community, or an integral part of it? This point requires further elaboration. Fourth, Sino-Japanese mutual antagonism, which is likely to escalate rapidly in the foreseeable future, might paralyse activity of the new multilateral organization and, concurrently, undermine expected ASEAN centrality in it. Fifth and finally, the inclusive nature of the East Asian Community provides convincing evidence for thinking that sooner or later its fate might await that of the ARF where ASEAN’s “position of authority” is a subject of serious doubt. With those factors in view, it is worth pointing out that the scope of security issues within the framework of the EAC remains relatively narrow. As a matter of fact, participants of the first East Asian Summit did not include any completely new components in the list of security priorities of the EAC, which would be missing from the ARF and APT.19 This factor is of much significance as it might also have negative implications for ASEAN’s influence as a coordinator of the new multilateral dialogue mechanism. It would hardly be correct to assert with absolute confidence that the combination of the above-mentioned negative factors will inevitably ruin ASEAN’s policy aimed at “driving” the East Asian Community. But one thing is clear — trying to revive its positive international image, the association has burdened itself with heavy additional responsibilities which are extremely difficult to fulfil. CONCLUSION This brief examination of major trends relating to ASEAN’s “driving” East Asian multilateral cooperation on political and security issues reveals an obvious conclusion — the association turned out to be unable to effectively cope with that task. Otherwise stated, since the beginning of the 1990s, ASEAN’s role as the primary coordinator of pan-regional multilateral negotiations has been limited to providing a platform for dialogue rather than shaping it. This trend is likely — though not certain — to increase substantially in the foreseeable future. In this case ASEAN’s “position of authority” in panregional negotiations will be a subject of much sharper criticism. It should be stressed that pointing to the above-mentioned trend is to indicate just a possible turn of events rather than the most likely scenario. But

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what is definitely clear is that the association is passing through a very difficult stage of its development, a reality which might have significant repercussions for the overall system of multilateral cooperation in East Asia. NOTES 1. The ASEAN Regional Forum: A Concept Paper . 2. De Castro R., “The Controversy in the Spratlys: Exploring the Limits to ASEAN’s Engagement Policy”. Issues and Studies 34, no. 9 (1998): 91–123, 114. 3. “China Expands Jurisdiction over Sea Area: 2.5 million sq km of Additional Territorial Waters Brings Paracel Islands within Its Zone”, Straits Times, 17 May 1996, p. 20. 4. “Myanmar under Fire behind Closed Doors”, Straits Times, 28 July 1997 . 5. For more details, see Acharya A., Ogunbanwo S., “The Nuclear Weapon-Free Zones in Southeast Asia and Africa”, SIPRI Yearbook 1998, pp. 443–55 (Oxford, 1998). 6. A thorough assessment of this trend is undertaken in Capie D., “Between a Hegemon and a Hard Place: the ‘War on Terror’ and Southeast Asian–U.S. Relations”, Pacific Review 17, no. 2 (2004): pp. 223–48. 7. An in-depth analysis of this problem is found in Huisken R., “Asia Pacific Security: Taking Charge Collectively”, Working Paper no. 368, 2002 (Canberra: Strategic and Defence Studies Centre, Australian National University, 2002). 8. For detailed information, see Desker B., “The Worth of the ASEAN Regional Forum” . 9. An in-depth analysis of this problem can be found in Hund M., “ASEAN+3: Towards a New Age of Pan-Asian Regionalism? A Skeptic’s Appraisal”, Pacific Review 16, no. 3 (2003): 282–417. 10. ASEAN+3 Cooperation . 11. It can be seen from analysing provisions of Declaration on the Conduct of Parties in the South China Sea . 12. Declaration of ASEAN Concord II (Bali Concord II) . 13. Lianita Prawindarti, “The First ASEAN Defence Ministers Meeting: An Early Test for the ASEAN Security Community?”, IDSS Commentaries, 34/2006. 14. “Towards an Integrated East Asia Community”, Keynote Address by YAB Dato Seri Abdullah H.J. Ahmad Badawi Prime Minister of Malaysia at the Second East Asian Forum . 15. Kuala Lumpur Declaration on the East Asia Summit, Kuala Lumpur, 14 December 2005 . 16. Phar Kim Beng, “Myanmar: ASEAN’s Thorn in the Flesh”, Asia Times Online, 25 July 2003 .

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17. Bowden R., “Battle Looms over Inaugural East Asia Summit”, 11 December 2005 . 18. Chairman’s Statement of the First East Asia Summit, Kuala Lumpur, 14 December 2005 . 19. See Kuala Lumpur Declaration on the East Asian Summit, Kuala Lumpur, 14 December 2005 ; Chairman’s Statement of the First East Asia Summit, Kuala Lumpur, 14 December 2005 .

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9

Towards the East Asian Community Vyacheslav F. Urlyapov

Early in the 1990s the then Malaysia’s Prime Minister Dr Mahathir Mohamad put forward an initiative called the East Asia Economic Group (EAEG). Introduced during former Chinese Premier Li Peng’s visit to Kuala Lumpur, in December 1990, the EAEG was Malaysia’s response to the emergence of trade blocs in Europe and the Americas, and was an attempt to create a regional economic entity devoid of any role for Western powers, in particular the United States. Highly critical of the evolution of trade blocs in the postCold War era, Mahathir rationalized that in the face of this development, an Asian bloc was required to ensure “even economic development” and “fair trade” for nations of East Asia. As Dr Mahathir observed in a recent interview, “a long time ago we had the East Asian grouping, this was something to balance the grouping of Europe and that of NAFTA. I thought that we needed something to counterbalance that”.1 The EAEG also represented Malaysia’s reaction to the Asia Pacific Economic Cooperation forum, or APEC, which, according to Dr Mahathir, was dominated by the United States and its allies. From the beginning, Mahathir’s idea was opposed by Washington as inconsistent with the development of the world economy. The United States urged Asian countries to embrace instead the APEC. Under U.S. pressure the EAEG was changed

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into the East Asia Economic Caucus (EAEC). Later in 1993, the ASEAN Ministerial Meeting in Singapore endorsed the EAEC as a “caucus within APEC”. Nevertheless, the United States still interpreted the conception as an attempt to create a “caucus without Caucasians”.2 The initiative was badly wounded but not killed. After the Asian financial crisis, the idea of East Asian cooperation received another impulse. Summit meetings in 1997–99 between ASEAN and three Northeast Asian powers have since developed into the format of ASEAN+3 (APT), with future evolution into an ambitious regional community. In 1999 leaders of APT at their summit in Manila issued a Joint Statement on East Asian Cooperation that stressed the importance of promoting regional cooperation over a wide range of issues at various levels. In November 2001, the East Asia Vision Group (EAVG), formed at the Manila summit and which comprised intellectuals of the APT countries, submitted a report which envisioned an East Asian Community and suggested ideas to promote community-building. The EAVG identified four core functions for the community: (1) to collaborate to promote a stable and cooperative security environment based on mutual trust and respect; (2) to promote trade, investment and financial cooperation to foster common prosperity; (3) to be mindful of disparities in socio-economic development, educational attainment and technological advances in the region; and (4) to improve governance, strengthen basic rights and boost quality of life for all. A year later, the East Asia Study Group (EASG), consisting of senior officials of the APT nations, submitted to its leaders a final report with recommendations on seventeen short-term and nine medium- and long-term measures to achieve the goal of community-building. Those developments within the APT framework have provided a practical foundation and political momentum for future efforts. At the ASEAN Summit in Vientiane, Laos, held in November 2004 it was decided that the East Asian Summit (EAS) meeting was to be launched towards the end of 2005. Key among advocates of the new ground in Asian integration and community-building were Malaysia and the Philippines which called for ASEAN to embrace China, Japan, South Korea and India in a larger grouping. Such an economic bloc, according to Philippine President Gloria Arroyo, could then “hold its own” in future negotiations with the United States, Europe or other emerging economic entities. Announcing the EAS, Malaysian Prime Minister Abdullah Ahmad Badawi said that the decision was an ASEAN consensus, reached after Indonesia formally accepted the idea to transform the APT framework into the EAS,

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with possibly additional countries like India, Australia and New Zealand invited to joint the new grouping. The first EAS meeting was held on 14 December 2005 in Kuala Lumpur, Malaysia. The EAS was established as a forum for dialogue on broad strategic, political and economic issues. In accordance with an adopted declaration, the EAS was to be an open, inclusive, transparent and outward-looking forum strived to strengthen global norms and universally recognized values. The EAS would promote community-building in the region and form an integral part of the evolving regional architecture. It had to be consistent with the realization of the ASEAN Community and ASEAN was recognized as a driving force of the new regional architecture-building.3 Discussions on the eve and in the course of the EAS were preoccupied with two questions. First, could the summit which included ASEAN+3 as well Australia, India and New Zealand still be considered to be East Asian? Second, would the emerging East Asia become a vehicle for the projection of increasing Chinese “soft offensive” and even step-by-step realization of Beijing’s “Monroe Doctrine” in the region? But as ASEAN retained its centrality, the apprehensions that the EAS might follow the “Chinese Way” turned out to be mainly premature conclusions. However, to a great extent the wording of the summit declaration reflected Japan’s vision on the creation of a new regional architecture. In order to achieve the East Asian Community, Tokyo proposed a functional approach recalling that the unification of Europe commenced with functional cooperation in such fields as coal, iron, steel and atomic energy. Japan stressed the importance of forming the community in line with universal values and global rules. It also considered that, to promote open regional cooperation, it was important to involve Australia, India and New Zealand. Japan’s attitude was supported by Indonesia. In its turn, China criticized Japan for dragging countries outside the region into the community to serve as a counter-balance to Beijing and rejected any plans to “dish out the human rights issue … to build up U.S., Japan-centred Western dominance in an attempt to weaken Chinese influence in East Asia”. China regarded Japan and India with substantial antipathy, and not just because the two Asian giants were China’s principal competitors. China–Japan relations have worsened due to rival claims to petroleum deposits and islands in the East China Sea, not to mention the then Prime Minister Junichiro Koizumi’s visits to the Yasukuni Shrine commemorating Japan’s war dead.4 Beijing remained leery of India’s pretensions to power and attempts to extend influence in China’s backyard, regarding New Delhi’s “Look East”

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policy as part of a wider “China containment” strategy unveiled by the Washington–Tokyo–New Delhi axis. Beijing sought to confine India to the periphery of a future East Asian Community. The matter of interest was Mahathir’s response to the outcome of the EAS. He commented that establishment of the EAS deviated from the original modality. In his characteristic style, the former prime minister criticized it as an “East Asia–Australasian Summit” for the inclusion of Australia and New Zealand. He said that these countries were not East Asian in terms of cultural identity. He also called Australia “the deputy sheriff of America … Australia’s view would represent not the East but the views reflecting the stand of America”.5 Among the main means of the community-building in East Asia was raised the formation of a Free Trade Area (FTA). The ASEAN SecretaryGeneral Ong Keng Yong predicted that the FTA between ASEAN and its partners in the EAS would be signed within ten years. He explained that the time target for the ASEAN Community was 2015 so the East Asian FTA could be concluded by then.6 But while China was more keen to see the FTA only within the ASEAN+3 membership, Australia, Japan and India were all keen to promote the idea of a pan-Asian FTA involving all sixteen participants of the EAS. The Chinese supported targeting 2010 as a year for the completion of the FTA. In August 2006 Japan proposed to launch regional FTA talks in 2008. A starting point of working out FTAs between ASEAN and China became their summit in 2001. The Framework Agreement on Comprehensive Economic Cooperation, signed in November 2002, was aimed to speed up talks on the bilateral FTA so as to ensure its establishment by 2010. The agreement emphasized that ASEAN’s new members (Cambodia, Laos, Myanmar and Vietnam — CLMV) should effectively participate and benefit from the FTA. It extended five more years for the new members to join future free trade accord. Beijing also accorded most-favoured-nation treatment to three non-WTO ASEAN members, namely, Cambodia, Laos and Vietnam. While negotiations on the FTA were still ongoing, the first set of measures including agricultural and some industrial products as well as a unilateral reduction of customs duties by China on imports from ASEAN area was implemented in January 2004 and is now generally referred to as the “Early Harvest Programme”. On 2 December 2004 ASEAN and China signed the basic FTA with the commodities chapter agreed upon. Negotiations on services and investment were still ongoing, to be completed by 2010. Some commentators suggested

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that the FTA between ASEAN and China was a matter of putting the cart before the horse. In their view, it completely violated the normal procedure whereby the agreement would first be negotiated and only then signed, take effect and be implemented. But since it involved realignment in the region’s integration, it caused a domino effect, with South Korea, Japan and other outside partners moving faster to sign similar accords with ASEAN.7 For China, it was a new “great leap forward”. When the EAS was originally conceived as the APT grouping, China robustly extolled its potential to develop into an integrated East Asian Community. But when the grouping was widened, the Chinese turned sour since it was clear they would no longer be able to dominate it. Beijing now says the EAS should not transform into the East Asian Community, but should simply facilitate dialogue between APT and other nations. As diversified energy supplies were vital to the fast growing Chinese economy, this item was of utmost importance on the agenda of the China– ASEAN partnership. Beijing became increasingly concerned over the congested Malacca/Singapore Straits, endangered by piracy and terrorist attacks. China was trying to find alternative routes for its oil/gas supplies and therefore it was determined not to lose a second route by the Mekong River. With Myanmar, a firm ally by its side, China is now cooperating with Laos and Thailand to secure this energy route. It still remains an experiment because there are physical and ecological constraints that limit the amount of oil that can be filtered to Chinese southern provinces due to the geography of the Mekong. But China is determined to make the experiment succeed. Naturally Beijing is trying to attract Indochinese partners to this venture with promises of mutual benefits. The cooperation framework for the Greater Mekong Sub-region will allow 1,200 tons of oil to be shipped by the river monthly.8 In December 2005, ASEAN reached a FTA accord with South Korea, the second country to do so after China. It called for negotiations on liberalization of trade to be completed by the end of 2006. The agreement was signed by Seoul and nine of ASEAN’s ten members. Thailand stayed out because of South Korea’s insistence on the exclusion of rice from the agreement. The general understanding was that Bangkok needed more time to join its ASEAN partners. The final FTA would involve four other agreements, dealing with goods, services, investments and dispute settlement. After the ASEAN–South Korea accord, Japan remained the last of the three Northeast Asian powers still to finalize an FTA or an Economic Partnership Agreement (EPA). On the sidelines of the APT Summit in Kuala

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Lumpur in December 2005, the Japanese told their ASEAN counterparts that Tokyo was aiming for a “high quality” EPA, and both sides reaffirmed the commitment to have a deal on the table by April 2007. ASEAN–Japan formal negotiations started in April 2005 and were matched by differences on the general vision of a greater Asian regional integration. Japan was pushing ahead a sixteen-nations Pan-Asian FTA. However, ASEAN was lukewarm to the pan-Asian bloc, and urged a step-by-step approach, preferring to first focus on the APT, and then on the creation of the East Asian Community grouping. Besides, Japan’s strategy was first to involve ASEAN nations with the most advanced economies and later move on to an integrated FTA. Such a strategy was viewed suspiciously by ASEAN as its member countries felt that it could break their unity as a negotiation bloc. Japan did not intend to sign bilateral FTAs with the three less-developed ASEAN economies — Cambodia, Laos and Myanmar — but preferred to offer various cooperation measures to them within the multilateral FTA talks framework. Another stumbling block was Japan’s proposed plan to remove trade barriers on more than 90 per cent of goods traded between the two sides. On its part ASEAN proposed a 100-per cent tariff cut on all its goods exported to Japan while seeking some exceptions for Japanese goods. The third obstacle was that ASEAN carrying on FTA talks with China, South Korea, Australia and New Zealand tried to create a tariff-cutting framework in its country-bycountry negotiations. According to these provisions trade partners could unilaterally declare certain number of items to be excluded from trade liberalization. But Japan opposed adopting such a practice and was instead seeking to discuss tariff cuts for each item. To achieve the goal of concluding FTA talks by March 2007, the two parties reached an accord to hold official negotiations every two months. Tokyo also put on the table proposals for cooperation programmes for capacity-building in ASEAN and intellectual rights protection. Early in April 2006 Japan announced an ambitious plan to forge a regional FTA with participants of the first EAS. Trade Minister Toshihiro Nikai revealed that the 2010 FTA was a first step towards establishment of the East Asian Community. To a certain extent Tokyo’s move could be interpreted as an attempt to regain regional leadership lost to China in the current FTA race, especially over ASEAN.9 At the ASEAN–India Summit in December 2005, Prime Minister Manmohan Singh assured ASEAN partners that their bilateral FTA had New Delhi’s full political backing, would be prepared by mid-2006 and come into effect in January 2007. Singapore Prime Minister Lee Hsien Loong and

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fellow ASEAN leaders stressed the importance of high-quality FTA to cement the acceleration of trade and economic ties between the grouping and Asia’s second fastest-growing major economy after China. While welcoming India as an important global economic player, some ASEAN leaders voiced concern that it intended to exclude a substantial portion of trade from tariff concessions. After a year’s delay India handed over to ASEAN a list of 1,414 products to be excluded from the proposed FTA which accounted for 44 per cent of ASEAN’s export to this country, though later the list was narrowed down to 854 items.10 Although both ASEAN and India earlier agreed that a free trade deal would be formed by 1 January 2007, talks stalled. As pointed out by ASEAN Secretary-General Ong Keng Yong, it was now up to India to get back on track. The FTA negotiations with Australia and New Zealand met with some hiccups with the “Down South” neighbours who were insisting on including government procurement, labour, environment and intellectual rights protection. Malaysia openly said that it did not favour the inclusion of government procurement. However both Australia and New Zealand officially stated that they hoped to have an agreement on commodity trade and services by March 2007. During the second term of the Bush Administration, the United States acknowledged that the only way to stay relevant to East Asia was to engage and connect with ASEAN. To do so it had to be willing to accommodate some of the grouping’s peculiar rationale. As Bangkok’s The Nation wrote, “the United States has finally recognized ASEAN as a collective political entity that it has to deal with [in] a more discreet and gentle way. The acknowledgement comes at [a] time when Washington, DC wants to keep up with China”.11 The United States also moved to strengthen its rapport with ASEAN at the annual APEC meetings. In Busan, South Korea, in November 2005, George Bush met leaders of the seven ASEAN members and signed a joint declaration of enhanced partnership. Since then U.S.–ASEAN relations improved markedly as both sides worked on their aspirations. Although formally staying outside a course of convocation of the first EAS, the United States, the only superpower in the world, actually actively participated in sketching out its goals and modalities behind the scenes. According to U.S. experts, Washington was quietly pleased with its outcome. The U.S. apprehensions eased because the EAS was unlikely to develop into a powerful bloc. Unity was broken among key participants, the most pronounced being between heavyweights China and Japan. Because of these strains, the U.S. felt less anxious about being excluded from the EAS. Also

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there was scepticism about the EAS evolving into a regional security body that would exclude Washington.12 In July 2006 in Kuala Lumpur, U.S. Secretary of State Condoleezza Rice signed the Trade and Investment Framework Agreement with ASEAN to bolster Washington’s interests in the region. On the other hand, there was still no institutionalized “ASEAN+1” meeting with the United States. The U.S. FTA negotiations with Asian countries such as Malaysia, Thailand and South Korea were dogged by controversies. There were massive protests against reaching an agreement with the United States in these countries. Talks with Bangkok also hit a wall after the recent military coup. Also, Washington declined a FTA with the Philippines citing a need for greater reforms on the Philippine side. ASEAN free trade negotiations with outside partners overlapped signing of FTAs by its individual members. In this case Singapore attained a leading position while making it a key element of national economic strategy. The Lion City signed FTAs with the United States, Japan, South Korea, New Zealand and Chile. Talks were still being carried on with China and India. Malaysia and other ASEAN countries rushed to follow suit. There were some concerns raised about the proliferation of bilateral agreements and what impact they might have on the integration of ASEAN. To address the issue, ASEAN Secretary-General Ong assured that individual FTAs would not affect the grouping’s unity. “I am not worried about individual FTAs at this moment … we need to nicely fit these individual FTAs with the bigger FTAs and trade ministers of the respective ASEAN countries knew this and hence where possible, we pull things together in one direction”, he said in mid-August 2006.13 The main obstacle towards the East Asian Community remains a political one. As it was said by Malaysian Prime Minister Abdullah Badawi at the Tokyo conference in May 2006, “economics is pushing us in one direction, but politics is pushing in another”. By this he meant relations between Beijing, Seoul and Tokyo and their row over Japan’s wartime history and disputed territories. There also seemed to be a divergence in views regarding the rapid development of China and its “charm offensive” towards Southeast Asia.14 As Mohan Malik, professor at the Asia-Pacific Center for security in Honolulu, boldly evaluated, “with several rising and contending powers, Asia of the 21st century resembles Europe of the early 20th century, and for now, any Asia free-trade zone to rival Europe seems farfetched”.15 Meanwhile there emerged an opinion that competition among major Pacific powers is advantageous for ASEAN as a group. It provided ASEAN

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with a leverage to keep a balance in the region and a central position in sketching out the East Asian Community. At the same time even though some ASEAN countries like Vietnam may look at China as a model for economic progress, they are also wary about China’s expanding influence. This has prompted a closer engagement of Vietnam and other Indochinese states with Washington and Tokyo. A new important breakthrough in ASEAN–China interaction was reached at a Commemorative Summit, held at the end of October 2006 in Nanning, Guangxi Province. It marked fifteen years of dialogue relations between the two sides and coincided with the third ASEAN–China Expo and bilateral Business and Investment Summit. A political significance of the meeting was that it was held outside the ASEAN area. The last time ASEAN held a summit with a dialogue partner outside its territory was in Japan in 2003 when both sides celebrated the thirtieth anniversary of dialogue relations. Whilst the summit attracted a lot of public attention, it was during bilateral meetings between ASEAN and Chinese leaders where the individual strategic priorities, especially in energy sector, were outlined. Indonesian President Susilo Bambang Yudhoyono and Chinese VicePremier Huan Hu attended the signing of a MOU on energy and mining cooperation. Yudhoyono said that energy security is a “key factor in allowing China and Indonesia to achieve peace, stability and development”. Both leaders attended the second Sino-Indonesian energy forum, the first of which was held in 2002. An estimated US$4 billion worth of contracts between Indonesian state oil company, Pertamina, and Chinese firms covering nine energy-related projects were signed at the forum. Earlier this year, Indonesia agreed to supply annually 2.6 million tonnes of liquefied natural gas (LNG) to China’s Fujian Province from 2009 to 2034.16 On the sidelines of the Commemorative Summit, it was also announced that Malaysian national oil company, Petronas, sealed the first deal to supply LNG to China. Petronas will ship 3.03 million tonnes of LNG annually for twenty-five years. CONCLUSION As long as ASEAN possesses an unparalleled institutional experience the association should play a managerial role in community-building in East Asia. Whether ASEAN moves towards a new era of regionalism as suggested by its recent initiatives (Bali Concord II) will have a strong impact on East Asia institutionalism.

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Enhanced regionalism in Southeast Asia combined with an accommodative Chinese policy, removal of strains between Beijing and Seoul, on the one hand, and Tokyo, on another, as well as a constructive U.S. participation, would be the best scenario for the East Asia community-building. The region should also be aware, however, of the consequences of less beneficial scenarios when existing institutions like APEC, ARF, etc. might compete with each other. Russia attended the EAS as a special guest and was trying to be its full member. Though Russia did not become a member of the forum, President Vladimir Putin was given an opportunity to address the EAS. He announced Russia’s readiness for close cooperation with East Asia, especially on energy projects. He named energy as the most promising area of cooperation, with Russia being ready to contribute to energy security of Asian nations. Putin added that cooperation should be based on “long-term stable supplies, joint projects on exploration and development of natural resources deposits, construction of gas and oil pipelines”.17 In 2005 Russia exported around ten million tonnes of oil to China. During his visit to Beijing in March 2006, President Putin announced that in the near future (approximately five years later) Russia would provide China with 60–80 billion cubic metres of natural gas annually from its Western and Eastern Siberia’s deposits.18 At the same time, an immediate participation in the EAS is not an end in itself for Moscow. It is quite content that countries of East Asia have different approaches towards the pace and shape of cooperation with Russia. In general, Russia meets all criteria for participating in the EAS: (1) it has the status of a full ASEAN dialogue partner, (2) it acceded to the Treaty of Amity and Cooperation in Southeast Asia, and (3) established substantive business relations with ASEAN. The first Russia–ASEAN Summit in December 2005 outlined a broad number of intended areas of cooperation in the Joint Declaration, Agreement on Economic and Development Cooperation, and Comprehensive Programme of Action to Promote Cooperation (2005–15). As rightly noted by Rodolfo C. Severino, former secretary-general of ASEAN, in his paper presented at the second IMEMO-ISEAS Seminar held in October 2006 in Moscow, “if only half of those are actually carried out, ASEAN–Russia relations will have moved quite far from where they are today.”19 At present Russia intends to reactivate an all-round cooperation with Vietnam. Energy security, now as in the past, remains at the forefront of their bilateral relations. Russia has the technical know-how to facilitate

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Vietnam’s current exploration and management techniques. Top executives of Russia’s Gazprom, the world’s third-largest corporation, and PetroVietnam, a new Vietnam energy heavyweight, met last September in Moscow to discuss a new bilateral arrangement. After the meeting, Gazprom’s plans to start new drilling in the Gulf of Tonkin were announced. More important, perhaps, is that Russia is expected to share its nuclear-power expertise with Vietnam. Last year Hanoi revealed that by 2025 it aims to generate 11 per cent of its electricity by nuclear power and increase that share to 30 per cent by 2040. Russia may play a key role in assisting Vietnam to realize its ambitious nuclear plans.20 NOTES 1. Interview: Dr Mahathir Mohamad, March 2006. . 2. Malik, Mohan, “The East Asia Summit: More Discord Than Accord”, YaleGlobal Online, 20 December 2005. 3. Kuala Lumpur Declaration on the East Asia Summit, Kuala Lumpur, 14 December 2005. 4. Malik, Mohan, “View: East Asia — More Discord than Accord”, Daily Times — Site Edition, 2 January 2006. 5. First East Asia Summit, European Institute for Asian Studies, 14 December 2005. 6. “A Pan-Asian Free Trade Deal in the Making?”, , August 2006. 7. “ASEAN and China Sign ‘Dirty’ FTA”, , 18 December 2004. 8. “China Begins Oil Route Experiment in Mekong”, , April 2006. 9. “Japan’s 2010 Regional Free Trade Agreement: No Laughing Matter?”, , April 2006. 10. Straits Times, 14 December 2005. 11. The Nation, 24 April 2006. 12. Straits Times, 2 December 2005. 13. “ASEAN Countries Seeking Speedier Regional Integration and Enhanced Subregional Cooperation”, , August 2006. 14. “Japan. The Weakest Link in East Asian Regionalism?”, , May 2006. 15. Malik, Mohan, op. cit. 16. “Different Strategic Priorities of Southeast Asian States Displayed in the Run-up to the ASEAN–China Summit”, , October 2006. 17. “Focus: Russia Wooing ASEAN in Efforts to Expand Asian Ties”, , 15 December 2005. 18. ΒpeMR HOBOCTeII˘⁄ , 22 March 2006.

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19. Severino, Rodolfo C., “Russia, ASEAN and East Asia”, Paper presented at the 2nd IMEMO-ISEAS Seminar Moscow, 3 October 2006. 20. Federico Bordonaro, “Russia’s New Vietnamese Courtship”, Asia Times Online, 30 September 2006.

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PART III Energy

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Energy Inter-dependence in East Asia: Russia’s Contribution to Energy/Gas Cooperation in East Asia Maxim Potapov

At the present stage of its development, the world economy needs energy more and more. Demand is on the rise for all kinds of fuels, especially for natural gas. In the foreseeable future competition for access to energy resources is likely to increase among the three largest gas markets: Europe, the AsiaPacific region and North America. Emerging new economic powers in East Asia demonstrate high rates of industrial growth and a steady increase in demand for oil and gas. The most intensive increase in the demand for oil and gas in East Asia is expected to be from China, Republic of Korea, Japan and Taiwan. These countries meet their needs partly through their own resources but increasingly through imports under long-term contracts from traditional gas and oil producing areas. Recent years have demonstrated growing instability of the global oil market and it forced consumers to search for new potential exporters of organic fuel.

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The share of natural gas in the fuel basket of Asian countries is relatively small so far — around 10 per cent. However in the next fifteen years, the highest rate of growth in the global gas demand is forecasted to be in this part of the world where the projected economic growth rates in Asia would be twice as high as in Europe. Asian countries demonstrate strong economic growth. The OECD-Asia (developed Asia-Pacific countries — Japan, South Korea, Australia and New Zealand) demonstrates an average growth at 2.4 per cent per annum while China’s annual growth is above 6.9 per cent. Predictions that challenges to China’s growth such as its weak banking system, regional disparities, corruption, one-party rule and growing environmental damage will constrain its economic expansion have proven to be unfounded. China has achieved strong economic growth despite these issues. A similar situation is found in Southeast and South Asia. A range of social and economic problems confronts countries across these regions but fails to fundamentally constrain their growth. Strong economic growth has expand at the ranks of Asia’s middle class. Asia has become increasingly urban and wealthy. Asian cities continue to grow in size, and by 2030 will account for 55 per cent of the world’s urban population. A significant increase in disposable income across the region permits major lifestyle changes and consumption patterns. For reasons of social status, due to increasing affordability and demands for mobility, car ownership will expand dramatically across the region. In China the number of cars will swell to 150 million by 2020. Demand for air transport will also expand throughout the region. The rise of Asian powers like China and India brings about not only changes in the global balance of power but significant changes within Asia itself. One of the most significant changes is between the OECD-Asia and the non-OECD-Asia (developing Asian countries: China, India, etc.). In 2005 the OECD-Asia accounted for 60 per cent of Asia’s total GNP, with the non-OECD-Asia taking a 40 per cent share. In 2030 the relative share of these two groupings will be completely reversed: the non-OECD-Asia will hold a 64 per cent share in regional GNP, while the OECD-Asia’s share will be reduced to 36 per cent. These changes could contribute to a shift in the regional balance of power away from Japan to China. Having benefited substantially from export-led growth, countries throughout Asia remain supportive of free trade. However, given its strategic importance, energy remains an exception. Concern over securing access to oil and gas causes Asian governments to turn towards more statist approaches for securing energy supplies as well as towards high-cost national energy-saving projects and programmes. Countries in the region do not embrace Western

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arguments that in order to meet energy needs one should rely solely on market mechanisms. China, India, Japan, and South Korea individually seek out and win high-profile energy projects in Central Asia, Middle East and Africa. This may undermine efforts to coordinate more closely regional infrastructure development and resolve territorial disputes that have linkages to energy resources. A matter of growing concern is the vulnerabilities that Asian economies face at the so-called “choke-points” as well as their increasing dependency on energy imports. The most notable “choke-point” is the Straits of Malacca, a narrow passage through which most of the region’s oil supplies and a significant part of its trade pass. These concerns create a basis for a cooperative dialogue between Japan, South Korea, China and countries of Southeast Asia. It also motivates China to build alternative energy infrastructure in order to reduce this dependency. It includes pipelines to China across Thailand that bypass the Straits of Malacca as well as pipelines from Russia to China. Strong regional economic growth creates robust demand for investment in energy infrastructure and energy resources. Governments throughout the region are forced to devote a growing share of their attention to all aspects of energy policy. With the exception of the OECD-Asia countries which forecast only a very moderate increase in their energy requirements, other governments struggle to keep pace with the growing energy demand. The key focus of their policy is to ensure access to energy resources and stability of their supply. This puts emphasis on balancing imports with domestic alternatives, managing the industrial sector fuel mix, coordinating large supply investments, and keeping prices stable. Government intervention remains significant throughout Asia. Subsidies and cross-subsidies are reduced but not fully eliminated, especially in lower income countries. Varying levels of energy subsidies will remain through the 2020s in China and most of South and Southeast Asia, often targeted to specific constituencies. Conservation and efficiency are often discussed, but governments generally fail to take measures, given concerns about their economic costs, and do no more than to slightly moderate energy demand growth. Strong economic growth throughout Asia causes strong demand for gas. According to existing forecasts, Asia’s share in the global demand for gas will grow from 15 per cent in 2005 to 23 per cent in 2030. In volume terms total regional gas demand will grow from 1.1 billion cubic metres (bcm) per day in 2005 to 3.2 bcm per day in 2030, as Asia becomes the largest gasconsuming region in the world. Increasing gas demand in the industrial sector will more than double from 0.5 bcm per day in 2005 to 1.1 bcm per day in 2030. The industrial

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sector absorbs the largest amount of gas in Asia. In contrast to Europe and North America, gas distribution networks remain under-developed in Asia. As a result, gas makes fewer inroads into residential and commercial sectors. Nevertheless demand for gas in these sectors will climb to 0.5 bcm per day. Regional gas suppliers benefit from the growing gas demand. Big winners include traditional suppliers such as Australia, Indonesia, and Malaysia. However, regional supplies are increasingly insufficient to meet Asia’s growing gas demand. Asia’s gas deficit will grow seven-fold from 90.6 million cubic metres (mcm) per day in 2005 to nearly 650.9 mcm per day in 2030. Imported liquefied natural gas (LNG) becomes an increasingly important channel for meeting this deficit. Japan and Korea continue to be major buyers of LNG, although the incremental LNG growth is relatively modest. New increasing demand is led by China and India, which together will account for over a third of LNG demand by 2030. Asia also turns to pipeline gas to meet its growing demand. After 2010 an expanding network of large gas pipelines will be built which will link China to Russian gas. Historically and geographically out of the total energy resources in Northeast Asia 84 per cent of hydrocarbons and 62 per cent of solid fuel is concentrated in the Far Eastern part of Russia. Besides, Russia possesses considerable resources of non-conventional energy. These resources may contribute to stable socio-economic development of the Russian Far East. Main East Asian countries demonstrate their strong interest in receiving oil and gas from Russia. The Russian gas is the best and mutually beneficial source to satisfy an increasing East Asian demand for energy. A great potential demand for Russian energy exists first of all in China. As a part of the “Russia’s Energy Strategy till 2020” the Russian federal government decided to work out a programme of creating a unified gas production, transportation and supply system in Eastern Siberia and the (Russian) Far East. This system will take into account also the possibility of gas exports to the Asia-Pacific countries. The state company, Gazprom, was entrusted by the Russian government with coordinating all eastern gas projects in Russia. Therefore development of gas fields in Eastern Siberia and the Russian Far East and supplies of Russian gas to Asia-Pacific countries will be an important part of Russia’s long-term energy policy. The programme provides for a comprehensive approach to the development of oil and gas resources of the Russian East; rational sequence and time of development of gas fields; formation of an all-Russia gas supply system from the Baltic Sea up to the Pacific Ocean. Main principles of the programme include unification of the

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existing gas supply system of the European part of Russia and Western Siberia with future gas production and transportation facilities in the east of Russia, and export of all Russian gas by a single exporter. Energy fields in the east of Russia (such as the Kovyktinskoe gas condensate field in Irkutsk region, the Chayandinskoe oil and gas condensate field in the Republic of Sakha (Yakutiya), the Sobinsko-Paiginskoye and YurubchenoTokhomskoye oil and gas condensate field in the Krasnoyarsk region, hydrocarbon fields at the offshore shelf of Sakhalin island etc.) include such characteristics as a sophisticated, complex composition of natural gas; high content of liquid hydrocarbons; and extraordinarily high concentration of helium. The complex composition of natural gas from the Russian East creates an objective basis for organization in the region of helium plants; large gas-chemical export-oriented production plants; production of advanced technology products on the basis of helium use; and cooperation with foreign companies for the above-mentioned activities. Demand for investments necessary to implement the above programme for the period till 2020 will be at least US$35–40 billion. To meet the challenges set out by the programme it is necessary to unify activities of the state companies — natural resources users, and of financial institutions. In order to reduce risks and costs it is necessary to work out: • • •

•

an integrated approach to the development of gas fields; phased formation of a unified gas supply system in the east of Russia; coordination at high level of Russia’s eastern gas programme and national plans of Northeast Asian countries aimed at the development of their gas markets; the organization of export supplies of Russian natural gas on the basis of inter-governmental agreements and long-term contracts.

Speaking of China’s gas market — potentially the most capacious one in East Asia — its company CNPC (China National Petroleum Company) already conducts commercial negotiations with Gazprom, Russia’s largest gas company. The “Protocol on Deliveries of Natural Gas from Russia to the People’s Republic of China” was signed during an official visit of Russian President Vladimir Putin to the People’s Republic of China in 2006. It determined terms, volumes, and routes of gas deliveries together with the basis of a price formation formula. The natural gas will be delivered from Russia to China through the Russian Unified Gas Transportation System via two routes — a western and an eastern ones. The western one starts in the

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traditional Russian gas-extracting areas. The eastern one has its source in the gas fields of Sakhalin. Deliveries will begin in 2011. The volume of gas deliveries by each of these routes will amount to 30–40 billion cubic metres per annum. Priority is given to the western route. Gazprom is currently preparing a feasibility study for investments in this project. The resource base for gas deliveries along the western route will include the West Siberia gas fields, located close to the operational gas infrastructure. It will allow Gazprom to begin gas deliveries in the near future. Deliveries will be carried out by using a single integrated export channel and with prices established on the basis of the crude oil cocktail. New obligations to deliver gas to China will not, however, interfere with the execution of contracts already signed between Gazprom and other countries purchasing Russian gas. Russia’s natural reserves and extracting capacities are sufficient for that. WIN-WIN MODEL It is clear that energy cooperation in East Asia should be implemented as a “win-win” business model, beneficial to all countries in the region. In order to secure stability of the whole regional energy market, existing bilateral arrangements for energy cooperation in the region may be extended to the multilateral level. Multilateral cooperation therefore may be an ideal situation and the desired goal of East Asian energy cooperation. What is needed is to build a multilateral cooperation mechanism But multilateral energy cooperation is still under-developed. Similar to weak progress in multilateral WTO negotiations and a rapid development of bilateral free trade agreements, bilateral negotiations or multilateral negotiations on energy issues with fewer parties are more likely to reach success, while multilateral talks with more parties are subject to more failures. That is why multilateral negotiations on energy cooperation in East Asia often stumble. Russia may become one of the most secure oil and gas supply sources for the countries of East Asia. As a result it will contribute significantly to the growing energy cooperation in the East Asian region.

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Energy Security in East Asia: Challenges and Responses Christopher Len

EAST ASIA’S EMERGING REGIONAL ARCHITECTURE East Asia1 is currently undergoing significant transformation as a result of its economic dynamism and because of the end of the Cold War. We are witnessing growing regional cooperation among a diverse group of economies and political regimes. The region is currently involved in various multilateral initiatives such as ASEAN+3 (APT), the ASEAN Regional Forum (ARF), Asia-Pacific Economic Cooperation (APEC) and more recently, the East Asian Summit (EAS). A regional architecture is emerging although it remains unclear at the moment what the final outcome will be. Nevertheless, it is clear that collaboration among East Asian states is founded on a basis of shared interests and concern especially in the economic, political and social spheres. Not only does such behaviour indicate acknowledgement that growing inter-dependence among states require greater cooperation, it also underscores the growing willingness of governments to assume greater collective responsibility for the security and stability of the region, though it should be added that East Asian regionalism still has a long way to go. While East Asian regionalization has been going on for several decades through Japanese foreign direct investments and the workings of Chinese

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business and financial networks, East Asian regionalism is relatively new. Aside from imperial Japan’s Greater East Asia Co-prosperity Sphere during World War II, reference to East Asia in political lingo only emerged in the early 1990s through then Malaysian Prime Minister Mahathir Mohamad’s proposed East Asian Economic Caucus (EAEC). Until then, East Asia was embedded within the concept of the Asia-Pacific.2 It was not until 1997 that East Asian regionalism formally took root with the establishment of the ASEAN+3 (consisting of China, Japan and South Korea) initiative in Kuala Lumpur. The trend towards East Asian regionalism is in fact an attempt to integrate two sub-regions: Northeast Asia — which at present lacks any form of institutionalized, multilateral mechanism for conflict prevention and management and is one of the most militarized and tense areas in the world — with Southeast Asia — which boasts ASEAN, the most mature and enduring multilateral institution in Asia. At the basic level, there is recognition of economic inter-dependence and complementarities in areas of trade, investments and transfer of technology, as well as understanding of the need to manage risks and challenges confronting the region through cooperation and coordination. One area requiring critical attention is energy security. East Asia’s explosive economic growth has created profound energy insecurities among governments in the region.3 Unfortunately, East Asian governments have been slow to address this issue at a multilateral level. This is not so much due to reasons of neglect but rather, because of the historical complexity of the region, especially in the political and strategic sphere. Multilateral negotiations tend to be slow in process; nevertheless, within the sphere of energy security, multilateral cooperation presents the best solution in the long run although it must be said that there are many obstacles ahead. RISING ENERGY DEMAND IN EAST ASIA Energy has been identified as an important area in which East Asian countries can expand and intensify cooperation. The East Asian Vision Group (EAVG), which was set up as a Track II Group in 1999, presented its report at the 2001 APT Summit in Brunei Darussalam. It was recognized that: East Asia is experiencing a growth in the demand for energy that is outgrowing supply within the region and is thus increasingly vulnerable in energy security. The strengthening of energy security in Asia has, therefore, become a pressing issue, and requires a joint effort involving the whole region.4

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To put things in perspective, East Asia, particularly in the Northeast subregion has a very large energy consumer market. China, Japan and South Korea are the second, third and ninth largest global consumers of oil.5 Japan and South Korea are almost 100 per cent dependent on imported oil. Chinese dependence is also increasing. In 1993, it became a net importer of oil products and by 1996, the country became a net importer of crude oil. By 2005, China imported 56 per cent of its oil.6 The overall demand for energy is set to grow as these economies further develop. For 2006, the United States government’s Energy Information Administration (EIA) data forecasts that China’s increase in oil demand will represent 38 per cent of the world’s total increase in demand. This leads to the question of how China and the other heavy energy consumers are going to find long-term supplies of energy resources to fuel their economies. Already, Japan, which is the world’s largest Liquefied Natural Gas (LNG) consumer has to look for alternative gas sources as fellow East Asian Indonesia, which is the world’s largest LNG exporter, has seen falling reserves cut export to Northeast Asia in the past few years. Southeast Asia’s overall energy consumption is also set to rise in line with its economic growth. With regard to oil consumption and import, Southeast Asia’s net oil dependency was 19 per cent in 2002 and is set to rise to 35 per cent in 2010 and 60 per cent in 2030 according to the Asia Pacific Energy Research Centre (APERC).7 DEFINING ENERGY SECURITY — THE EAST ASIAN CONTEXT Growing Energy Security Vulnerabilities While recognizing that East Asia’s energy consumption is causing increasing energy vulnerabilities in the region, the EAVG also admitted that attempts at energy security cooperation in East Asia would be challenging. Therefore “it will be appropriate and realistic to take a step by step approach, starting with having common understanding on the direction of regional energy cooperation and gradually broadening the areas of cooperation.”8 As it stands today, multilateral cooperation over energy security-related issues is limited and far from ideal. This is because energy security is lodged within the larger framework of inter-state relations. In the case of East Asia, particularly in the Northeast, tensions remain high with inter-state rivalries intensifying (especially between China and Japan), historical animosities ever-present9 and territorial disputes unresolved. In some cases, energy insecurities and rivalries such as North Korea’s nuclear programme (partially

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a result of energy poverty) and the Sino-Japanese offshore dispute in the oil and gas rich East China Sea actually further contribute to instability of the region. Besides restricting the potential for energy security cooperation, such a negative political climate means that private financiers hesitate in engaging the energy sector, which is in dire need of funding for new infrastructural investments. East Asia’s energy security vulnerabilities are in fact multi-faceted. First, countries in the region currently import a significant amount of its oil supplies from the Middle East. However, there is recognition of the need to diversify supplies beyond the Middle East because of the volatility in Middle Eastern politics. Often, the process of searching for new suppliers is a highly politicized affair whereby energy resources are treated not merely as market commodities to be traded within a simple commercial framework but as strategic assets. The acquisition of energy supplies from alternative suppliers, such as Iran, Kazakhstan, Turkmenistan, Myanmar, Venezuela and Russia tend to be tied to a lot of diplomatic manoeuvring and courtship, often with greater strategic implications than most governments would publicly admit to. Thus, in attempting to diversify, East Asian states also face competition and engage in rivalry over access to alternative suppliers and energy sources. Second, there are concerns over the long Sea Lines of Communications (SLOCs) especially along the Straits of Malacca where oil from the Middle East transits. The threats faced at the straits are multi-faceted though they all have to do with the Malacca Straits being a strategic shipping chokepoint. As a result of this, it is susceptible to terrorist attacks, natural or man-made disasters leading to its obstruction, as well as naval blockades during times of war. Some analysts in the security community also worry about China’s “Malacca Straits dilemma” and its “string-of-pearls” maritime strategy. Third, in response to the volatility of the energy market and supply, prices for oil and gas rose sharply, especially during the 2005 and 2006 period. This led to recognition of the urgent need for oil stockpiling and the creation of a collective petroleum reserve in preparation of possible disruption of oil supplies. Fourth, is the issue of the environment. Fossil fuels, especially coal and oil are heavy pollutants, produce global warming gases, and pose a problem for the region. China is a special country of concern as 69 per cent of China’s energy consumption is fed by coal. About 30 per cent of China is afflicted by acid rain, with the ecology of areas surrounding the coal-burning power plants the worst afflicted.10 Sixteen out of the world’s twenty most polluted

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cities are found in China, largely because of the heavy reliance on coal. The problem of pollution is not confined to China alone — pollutants from coal have been reported in neighbouring South Korea, Japan, and as far as the West Coast of the United States. As a step towards addressing energy security and reducing pollution, interest in the use of nuclear energy has been gaining worldwide interest as a cleaner alternative to fossil fuels. The sense of urgency to “decarbonize” electricity — that is, to reduce or even eliminate carbon dioxide (or CO2) emission from the process of generating electricity, due to the threat of climate change, means that nuclear energy has increasingly regained acceptance as a viable source for electricity generation. Japan and South Korea are large consumers of nuclear power generated electricity while China is in the process of building a record number of nuclear power plants to meet its growing energy demand. Meanwhile within Southeast Asia, Indonesia, Vietnam and Thailand have all expressed interest in building nuclear power plants to cater to rising electricity demand at home. However, the use of nuclear energy has it downside. Putting aside concerns about the proliferation of nuclear weapons, there are also questions about adequate governance and safety, as well as the disposal of nuclear wastes, all of which have significant environmental implications. Take Japan, which has fifty-five nuclear power plants and ranked as the third largest in the world nuclear power producer behind the United States and France, generating around 50GW of electricity. It was discovered several years ago that some of the country’s nuclear plant maintenance inspection findings were not properly reported to the authorities, prompting fears about the safety of the nuclear plants.11 South Korea, which is another major nuclear power consumer, is meanwhile faced with the problem of nuclear waste disposal. Realistically, it is unlikely that countries which currently employ nuclear energy technology would give it up. It is also a matter of time before some Southeast Asian countries would embrace nuclear energy. The greater the reliance on nuclear power in East Asia, the greater the environmental challenge, ranging from how to deal with decommissioned nuclear reactors, to the increased risk of an environmental hazard outbreak which would threaten the entire region like the Chernobyl disaster in 1986. Aside from nuclear power, biofuels have also been touted as a viable alternative. While it has been described as a form of “sustainable energy”, it comes with its own set of environmental problems. In Malaysia and Indonesia, vast areas of rainforests are razed to make way for plantations for the production of biofuel cash crops, particularly oil palms. Clearing the land often involve

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slash-and-burn techniques across the forests resulting in heavy smog while the drying of peat land release vast quantities of carbon dioxide into the atmosphere. Thus, both new and old sources of energy have their own advantages and disadvantages and Asian governments need to do more feasibility studies before adopting alternative technologies for electricity generation. In any case, these alternative energy resources can only reduce dependence on fossil fuels but not displace them. Thus, the threat to the environment from the use of fossil fuel, particularly from coal and oil, is set to continue as an ongoing concern while the new alternatives presented have their own set of environmental challenges too. The fifth and final point is the question of finance. Research into alternative forms of renewable energy in response to the overall decline of global hydrocarbon resources is costly and there is a need for greater pooling of resources to attain synergies. There is also the challenge of funding the construction of new energy infrastructures as well as the issue of the Asian Premium whereby an automatic surcharge of between US$1– 2 is automatically levied on Asian importers by Middle Eastern oil producers, particularly Saudi Arabia. An Expanded Definition of Energy Security for the Region Thus, we note that East Asia’s energy security challenges are highly complex and require greater multilateral cooperation if it is ever to be properly addressed. There is need for a new energy security paradigm to take into consideration the entire energy supply chain (upstream-midstream-downstream). The traditional definition of energy security relates to stability of pricing and availability for both import and export countries.12 Such a concept is, however, insufficient since it denotes energy resources as mere commodities and fails to reflect the strategic importance Asian governments attach to energy resources and the growing need for closer multi-level cooperation between importing and exporting states as well as with the countries whose territories the deliveries transit. A broader definition is therefore necessary: energy security within the Asian context should be better understood as having as a stable, cost-effective and sustainable supply and demand of energy, based on an efficient and environmentally-friendly energy supply system, emergency preparedness and international (or multilateral) cooperation. While such a definition reads like an antithesis of East Asia’s present energy security situation, it nevertheless provides a suitable framework for addressing Asia’s regional energy security woes as it underlines the need for greater cooperation in different countries.

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RUSSIA’S ROLE IN RESOLVING EAST ASIA’S ENERGY SECURITY VULNERABILITIES The collapse of the Soviet Union opened a new source of energy resources from the Russian Far East (as well as Central Asia). While consumers stress supply security, Russia and other suppliers on the other hand looks for demand certainty. As a key exporter of energy resources, energy security for Russia translates into consistent and sufficient demand for its supplies abroad, stability of oil and gas prices to ensure a stable income, good infrastructure development to cater to its upstream, midstream and downstream activities including access through transit states for delivery, and finally, having the ability to explore as well as develop new energy fields so as to have sufficient energy reserves to cater to long-term demand. Simply put, the ingredients of energy security for Russia are: consistent demand, stable revenues, good infrastructure for delivery of supplies, and having healthy energy reserves. Russia has also sought to diversify its energy industry to include a strong petrochemicals sector, capitalizing on its advantage of being so closely located to the hydrocarbon sources.13 During the G8 Summit in 2006 hosted by the Russians, President Vladimir Putin placed energy security at the top of the summit’s agenda. As the G8 member countries’ top energy exporter, the Russians sought to impress upon the importance of state company, Gazprom, as a global energy player which could contribute to the stability of the global energy market.14 While Europe is its main export market, Russia is also increasingly focused on new markets in the East as laid out in the Energy Strategy of Russia up to 2020, released in May 2003. It seeks to diversify its customer base away from Europe as its supplies can sell at a more profitable price in Asia. Firstly, it does not need to pay additional transit fees to transport oil to its energy-hungry Northeast Asian neighbours,15 there is a guarantee of constant and long-term demand since Asia’s energy demand is still on an increase, it can also generate more revenue in Asia compared to Europe as it currently sells its oil to Europe at a discount of approximately US$1 a barrel which adds up to billions of lost revenue.16 The Russian Far East also has the ability to sell electricity to its other Northeast Asian neighbours and indeed plans to do so. The share of Russian oil exports to Northeast Asia is expected to grow from 3 per cent to 30 per cent (100 million tonnes) by 2020 and natural gas export to the East is set to increase from 5 per cent to 25 per cent (65 billion cubic metres).17 Sakhalin Island located in the Russian Far East is already being developed in two parts (Sakhalin I/II) to cater to demand in Northeast Asia as well as the United States.18 In late April 2006, Russia began construction of the first

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Pacific-bound oil pipeline outside of Taishet in the Irkutsk region. Thus, not only does Russia have an important role to play in feeding the Northeast Asian Energy market, it is also a willing participant. However, while the Russian Far East is regarded as an energy “treasure house” for feeding Chinese, Japanese and South Korean demand,19 there have been problems too. Both China and Japan have been competing over pipeline routes in the Russian Far East with zero-sum mentalities, having failed to recognize the area’s resources as common assets. China favours the Angarsk/Taishet-Daqing route while Japan has been lobbying hard for the Angarsk/Taishet route to end at Nakhoda by the East China Sea. Russia on its part is holding out in making a final decision and this been a notable factor causing relations between China and Japan to simmer over the past three years.20 Another point of uncertainty lies in the growing role of the Russian government in the country’s energy sector. There was the “Yukos Affair”, and more recently, the Sakhalin-II project saga whereby Gazprom gained a controlling stake over the project through the purchase of 50 per cent plus one shares from Shell, Mitsui and Mitsubishi. Such moves to consolidate the energy sector under government control have undermined the confidence of foreign investors in the Russian energy sector.21 Of course, looking at it from another perspective, the Russian government has its own reasons for doing so since it treats its energy resources as strategic assets and therefore, not to be controlled by foreigners. ENERGY SECURITY COOPERATION AS AN INGREDIENT FOR REGIONAL SECURITY Despite Russia’s interest in the Asian market, East Asia’s energy security predicament is set to worsen unless urgent measures are taken. Identifying the root problem is simple. First, there are insufficient coordination and institutional mechanisms among governments in East Asia in addressing energy security vulnerabilities; second, energy security has often been framed as a zero-sum issue, mired in geopolitiking and at times used as a leveraging tool, particularly in Northeast Asia (and Central Asia). To be fair, there have been efforts made to address the current situation in East Asia. ASEAN initiated, the ASEAN Plan of Action for Energy Cooperation 1999–2004 (APAEC) beginning from 1999 which for the first time involved the regionwide participation of all ten countries in Southeast Asia.22 In the latest APAEC for 2004–09, plans are underway to develop an ASEAN power grid, a Trans-ASEAN gas pipeline while research is also

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undertaken into clean coal technology, energy efficiency and conservation as well as renewable energy.23 ASEAN is also researching for ways to enhance regional energy policy and planning mechanisms. The First ASEAN+3 Oil Stockpiling Forum was held in Bangkok, Thailand in 2003 with the aim of strengthening the oil stockpiles of the ASEAN+3 regions.24 In 2004, the first session of energy ministers of the APT called the AMEM+3 (ASEAN Ministers on Energy Meeting + 3) made a joint declaration to strengthen energy infrastructure building up in the region.25 The Second AMEM+3 held in July 2005 was titled “Promoting Greater Energy Stability, Security and Sustainability through ASEAN+3 Energy Partnership”.26 In December 2005, the first ASEAN–Russian Federation Summit in Kuala Lumpur, Malaysia ended with a joint statement stressing the need to “undertake collective initiatives to ensure stable energy supplies through large scale development of alternative and renewable energy sources, intensifying oil and gas exploration and the promotion of energy conservation and energy efficiency”.27 An institutionalized East Asian energy network should be encouraged as it could help facilitate interaction towards the emergence of a regional architecture in East Asia. Benefits derived from cooperation are highly significant due to the special nature of energy cooperation.28 Overall, such an institution may also help develop relations with East Asia’s other Asian neighbours. For instance, an East and Central Asian tie-up under the framework of an ASEAN-SCO Partnership with energy security cooperation as one of its key platforms is an attractive idea although there is admittedly a long way to go before such cooperation can be actualized.29 To name the key benefits of multilateral cooperation: (1) It promotes the creation of legal norms as government officials have to negotiate complex legal documents; (2) it helps facilitate interaction and confidence-building at all levels — between governments, military, businesses and civil societies — since energy security is linked to wider security concerns such as the environment and trade, while joint defence and policing arrangements to protect energy infrastructure and transport routes can lead to improved ties between the security establishments of various states; (3) synergies can be found in joint research and development leading to greater exchanges among the academic community and promoting a greater sense of togetherness expressed through common research goals; (4) development of preventive and risk management mechanisms to prevent energy shocks and the sharing of energy related information, standardization of data, greater transparency, promote confidence-building and understanding between states; and finally (5) transnational oil and gas pipelines not only facilitate

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greater recognition of the region’s resources as “common resources” to be shared, it can also underpin political trust and the acceptance of interdependence based on common benefit. To be realistic, this is a new challenge and it would be unrealistic to expect all parties to come into agreement quickly. Today, Northeast and Southeast Asian governments are still in the process of socialization as a new regional grouping. What has been set out in this chapter is a relatively new challenge of Asian multilateralism which bears many significance should it succeed: (1) It entails the unprecedented development of an Asian energy security institution that consists of both export and import countries in Asia; (2) the concept of energy security is covered from a holistic perspective on a multilateral basis, ranging from sea lane security, to environmental protection, to transnational boundary managements, to research and development as well as financial investment advocacy; (3) such an institution would not be led by the United States government although the United States would have a role to contribute to the establishment of such a regional entity, as do the Europeans; (4) it is focused mainly on emerging and developing economies; (4) it may not necessarily be based on the global energy markets but state-tostate contracts as well as greater interaction between the various Asian national oil companies; (5) it represents a move from developing individual national energy markets to the eventual creation of a regional energy market which would make the energy sector more attractive to investors; and finally, (6) consolidation of the East Asian energy sector gives the region more leverage in negotiating energy resources prices with global suppliers, not to mention a useful vehicle for initiating cooperation with other regional groupings. CONCLUSION — CHANGING COMMITMENT INTO ACTION This is a very large agenda that has been set out for East Asia. Questions remain as to how one is to respond in practical terms to the challenges ahead of changing political commitment into action as well as in bridging the political gap between states. A point to note is that within East Asia, Northeast Asia’s energy security predicament is much more complex and urgent compared to the Southeast counterpart. The root of the problem is political in nature. ASEAN, which is the anchor for the APT initiative could perhaps take on a more proactive role in addressing the challenges facing its Northeast counterpart. As a start, better confidence-building mechanisms as well as dispute settlement mechanisms are needed, especially in Northeast Asia. As for Russia, its energy supplies located in the Far East are presently targeted towards serving Northeast Asia and America than the

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ASEAN region. However, it could play a bigger role in the ASEAN region by following the examples of Japan and South Korea by assisting ASEAN with the establishment of a joint oil stockpile. It is time East Asian governments sit down seriously and with a sense of urgency to discuss how to manage their inter-dependence and inter-connectedness. NOTES 1. This chapter defines East Asia to consist of countries geographically located in Northeast and Southeast Asia. 2. Takashi Terada,“Constructing an ‘East Asia’ Concept and Growing Regional Identity: From EAEC to ASEAN+3”, Pacific Review 16, no. 2 (2003): 251. 3. Kent E. Calder, Asia’s Deadly Triangle (London: Nicholas Brealey Publishing, 1996), p. 43. 4. Final Report of the East Asian Study Group, ASEAN+3 Summit, 4 November 2002. Paragraph 149. 5. Energy Information Adminstration –– Japan (Updated November 2005); China (Updated August 2006) and Korea (Updated May 2006) ; ; . 6. Energy Information Adminstration — China (Updated August 2006) . 7. APEC Energy Demand and Supply Outlook 2006 — Projections to 2030 Economy Review, Asian Pacific Energy Research Centre, Tokyo, 2006, p. 211. 8. Final Report of the East Asian Study Group, ASEAN+3 Summit, 4 November 2002. Paragraph 149. 9. In particular, Cold War issues — the Korean Peninsula, Taiwan Straits and disputes over the Kurile Islands (Northern Territories) — are serious challenges which have yet to be addressed properly. Kenneth B. Pyle, “Regionalism in Asia: Past and Present”, Cambridge Review of International Affairs 16, no. 1 (2003): 18. 10. Keith Bradser and David Barboza, “The Energy Challenge”, New York Times, 11 June 2006. 11. Energy Information Adminstration –– Japan (Updated December 2006) (last accessed 5 January 2007). 12. For export countries, energy security translates into the certainty of market demand in terms of quantity at predictable prices. For import countries, energy security can be understood as availability of energy at all times, in sufficient quantities and at affordable prices. 13. “A Run on Chemicals”, Kommersant, 16 November 2004 (30 November 2006).

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14. “Russia to Focus on Hydropower and Nuclear Power Generation — Presidential Aide”, Official Website of the Russian G-8 Presidency, 24 December 2006 (30 December 2006). 15. “Russia cuts Ukraine Gas Supplies”, BBC News, 1 January 2006. (last accessed July 01 2006). 16. Vladimir Ivanov, “Russia’s Energy Politics: Focusing on New Markets in Asia“, REITI, 13 October 2005. (Last accessed July 01 2006); “Russia Should Cut Oil to Europe, Cut Discounts on Urals Crude — Transneft”, MosNews, 24 April 2006. (last accessed 1 July 2006). 17. Vladimir Radyuhin, “Russia sees energy as key to unlock Asian doors”, The Hindu, 19 December 2005 (last accessed 1 July 2006). 18. Oil reserves in the area are estimated at around 14 billion barrels, and natural gas reserves at approximately 96 trillion cubic feet. (EIA Sakhalin) . 19. APEC Energy Demand and Supply Outlook 2006 — Projections to 2030 Economy Review, Asian Pacific Energy Research Centre, Tokyo, 2006, p. 43. 20. Emma Chanlett-Avery, “Rising Energy Competition and Energy Security in Northeast Asia: Issues for U.S. Policy”, Congressional Research Service, Updated 20 January 2006. 21. Andrew E. Kramer, “Russian Oil Reversal Stirs Outcry”, New York Times, 19 September 2006 (last accessed 15 November 2006). 22. 17th ASEAN Ministers on Energy Meeting (AMEM) Joint Press Statement, 2 July 1999 (last accessed 1 July 2006). 23. ASEAN Plan of Action for Energy Cooperation 2004–2009 (15 August 2006). 24. Summary Record of the First ASEAN+3 Stockpiling Forum, 14 November 2003, Bangkok, Thailand (last accessed 1 July 2006). (last accessed 1 July 2006). 25. An Fengquan, “Brief Analysis of Cooperation Prospect on Oil and Gas Industry of China, Japan and South Korea”, The Institute of Energy Economic, Japan (IEEJ), October 2005, p. 3. (last accessed 1 July 2006); 22nd Joint Ministerial Statement ASEAN, China, Japan and Korea Energy Ministers Meeting (Manila AMEM+3), 9 June 2004, p. 6 (last accessed 1 July 2006).

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26. Chairman’s Statement of the Second ASEAN, China, Japan and Korea Ministers on Energy Meeting (2nd AMEM+3) Siem Reap, Cambodia, 13 July 2005 (last accessed 1 July 2006). 27. Chairman’s Statement of the First ASEAN–Russian Federation Summit, Kuala Lumpur, 13 December 2005 (last accessed 1 July 2006). 28. Philip Andrews-Speed, “Energy Security in East Asia: A European View”, Presented at the Symposium on Pacific Energy Cooperation 2003, 12–13 February 2003, pp. 6–8. 29. Christopher Len, “Energy Security Cooperation in Asia: An ASEAN-SCO, Energy Partnership?”, in Energy Perspectives on Singapore and the Region (Singapore: Institute of Southeast Asian Studies, 2007, pp. 156–75).

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00 RUS_ASEAN Relations Prelims

10

10/10/07, 12:33 PM

Index

135

Index A Abdullah Badawi, 8, 102, 108 AFTA, 44 Agreement on Economic and Development Cooperation, 12, 22, 110 Alexandrov Army Dance Ensemble, 19 Andaman Coast naval facilities, 91 anti-secession law China and Taiwan, 36 APT meetings, 95 Arroyo, Gloria Macapagal, 56, 102 ASEAN anti-Myanmar bandwagon, 62 credibility problem, 92 disagreement over priorities, 95 driving force, 89 driving force in East Asian multilateral cooperation, 98 foreign ministers, 5 joint oil stockpile, 131 loss of influence, 93 political-diplomatic unity, 86 promotion of security dialogue, 86 Secretary General, 44 system of checks and balances, 87 trade with, 24 trade with New Zealand, 26

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ASEAN Community, 6, 95 ASEAN Economic Community (AEC), 80 ASEAN Economic Ministers’ Meeting, 80 ASEAN formal forums, 7 ASEAN integration, 79 ASEAN Ministerial Meeting, 102 ASEAN Plan of Action for Energy Cooperation (APAEC), 128 ASEAN Plus Three (APT), 5, 6, 46, 57, 64, 92, 102, 103 appointment of East Asia Study Group, 8 dialogue mechanism, 94 format for integration, 39 integration of, 40 integration trends, 39 new areas of cooperation, 7 role of, 48 ASEAN policy-makers positive perception about China, 48 ASEAN Regional Forum (ARF), 38, 56, 88, 89 advantages for ASEAN, 91 influence of ASEAN, 93 membership, 93 primary functions, 94 solving problems of Southeast Asia, 92

10/10/07, 12:31 PM

Index

136

ASEAN Secretariat, 7 ASEAN Security Community, 95 ASEAN Summit (2007), 102 Cebu, 4 ASEAN Swap Arrangement, 7 ASEAN-China Expo, 118 ASEAN-China FTA, 43, 49 optimistic outcome, 46 ASEAN-China interaction, 109 ASEAN-India Summit, 106 ASEAN-Japan formal negotiations, 107 ASEAN-SCO Partnership, 129 ASEAN-South Korea accord, 105 ASEAN-Russia Commemorative Magazine, 30 ASEAN-Russia Federation Dialogue Partnership Financial Fund, 11 ASEAN-Russia fund commitment to, 12 ASEAN-Russia Joint Cooperation Committee (ARJCC), 29 ASEAN-Russia relations, 11 ASEAN-Russia Summit, 3, 4 first, 22 ASEAN-Russia Summit (2005), 11, 12 ASEAN-Russia trade, 20 Asia Economic Community, 49 Asia-Europe Meeting (ASEM), 57, 70 Asia-Pacific as integral part of, 4 Asia Pacific Economic Cooperation (APEC), 16, 70, 101 participation in, 7 Asia Pacific Energy Research Centre (APERC), 123 Asian Bond Market Initiative, 7 Asian Cooperation Dialogue, 10 Asian Development Bank (ADB), 100 support for Chiang Mai Initiative, 7 Asian financial crisis, 57, 92 ASEAN credibility problem, 92 ASEAN in critical period, 94 Asian Tigers, 72 economic successes, 16

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136

Association of Southeast Asian Nations (ASEAN) summit meetings, 3 Australia, 9, 97 ASEAN dialogue partner, 9 FTA negotiations with, 107 incorporation into East Asian economic space, 40 invitation to East Asian Summit, 64 B Bhagwati, Jagdish, 73 Bicycle Theory, 79 bilateral free trade agreements, 71 bilateral trade ASEAN minus 6 and Russia, 23 biomedicine, 18 Blank, Stephen, 28 bureaucratic mechanism, 27 Bush Administration, 61, 107 C capitalism, 15 carbon dioxide reduction, 125 Carnegie study, 72 Center for Geopolitical Expertise, 67 Change in Tariff Classification, 74 Changi Airport International, 26 Chernobyl, 125 Chiang Mai Initiative (CMI), 7 China capital export, 33 central component in security mechanism, 89 Early Harvest Programme, 45 economic growth, 33 engine of growth, 59 entrance to WTO, 46 great leap forward, 105 human expansionism, 38 inter-dependence with United States, 33

10/10/07, 12:31 PM

Index

137

liberalization, 44 maritime policy, 90 model of modernization, 59 oil import, 37 peace offensive in Southeast Asia, 53 presence in Southeast Asia, 58 regional priorities, 58 success in partnership with ASEAN, 64 tariff concessions for, 45 willingness to discuss with North Korea, 35 China National Petroleum Company, 119 China-ASEAN FTA, 44, 45, 57 China-ASEAN relations, 43, 44 China-Japan relations, 33, 39 normalization of, 40 China-U.S. relations, 33 cooperation and competition, 39 China-U.S. security, 40 China’s Peaceful Development Road, 48 China’s peace offensive (CPO), 54, 63 Russia’s response, 66 Chinese economic role in communities, 55 Chinese companies investment overseas, 47 Chinese diasporas, 55 Chinese economy, marketization, 34 Cold War aftermath, 87 end of, 43 Communist Party of China (CPC), 34 communists Vietnamese, 63 Comprehensive Programme of Action to Promote Cooperation, 12 Comprehensive Programme of Action to Promote Cooperation between ASEAN and the Russian Federation, 22 Crime and Punishment, 19

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cross subsidies energy resources, 117 cultural exchange importance of, 20 D DaimlerChrysler, 76 democracy Russia, in, 15 dialogue partner, 4 Doha Development Agenda (DDA), 79 Dugin, Alexander, 67 E Early Harvest Programme (EHP), 45, 104 East Asia economic development, 88 energy interdependence, 115–20 no longer divided into two blocs, 16 regionalization, 121, 122 East Asia Community (EAC), 41, 42, 96, 98, 102, 105, 106 declaration, 43 problems and challenges, 47, 48 prospects of, 33 East Asia Economic Caucus (EAEC), 6, 102, 122 East Asia Economic Group (EAEG), 5, 6, 101 East Asia Summit (EAS), 57, 64 energy demands, 122, 123 first, 54 inaugural meeting, 3 Mahathir’s brainchild, 21 participation in, 5, 9 East Asia Study group (EASG), 8, 102, 103 East Asia Vision Group (EAVG), 8, 102, 122 East Asian Community grouping, 106 East Asian Summit, 102

10/10/07, 12:31 PM

Index

138

East Timor violence in, 93 Eastern hemisphere, website, 19 economic growth link with trade, 71 Economic Partnership Agreement (EPA), 105 EFTA-Singapore FTA (ESFTA), 75 elite class, 15 energy security, 36, 37 expanded definition of, 126, 127 ingredient for regional security, 128 Russia’s role, 127, 128 vulnerabilities, 123, 124 Enterprise for ASEAN Initiative (EAI), 45 Estrada, Joseph, 56 European Community (EC), 6 EVRAZ, 26 F Filipino film winner at Moscow Festival, 19 film industry, 19 foreign direct investment, 71 foreign policy, 15 Southeast Asian direction, 16 Framework Agreement on Comprehensive Economic Cooperation, 104 free trade agreements option for, 28 G GATT Article, 24, 74 gas strong demand for, 117 suppliers, 118 gas and oil pipelines, 21 Gazprom, 120 drilling plans at Gulf of Tonkin, 111, 118

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globalization development interests in, 41 Going Global strategy Chinese policymakers, 47 Greater Mekong Sub-region, 105 gross domestic product (GDP), 20 Group of Eight (G8) admission to, 10 Summit (2006), 127 Gulf of Tonkin drilling plans, 111 H Heritage Foundation, 62 Howard, John, 64 Hu Jintao, 34, 37, 54, 56 hydrocarbon resources, 21 I India, 9, 97 ASEAN dialogue partner, 9 incorporation into East Asian economic space, 40 influence of, 39 role in EAC, 104 India-Singapore Closer Economic Cooperation Agreement (CECA), 75 Indonesia fear of China’s influence, 48 Indonesia-China partnership, 62 Industrial Revolution, 72 Initiative for ASEAN Integration, 57 Institute of Southeast Asian Studies, 10 exchange of fellows, 18 Institute of World Economy and International Relations (IMEMO), 10 intellectuals, 17 International Enterprise Singapore (IES), 77 International Eurasian Movement, 67 international politics transformation after Cold War, 43

10/10/07, 12:31 PM

Index

139

Internet influence of, 19 intra-ASEAN trade, 79 ISEAS-IMEMO conference, 21, 110 Islam, moderate, 19 Islamic Studies, 18 Israel-Palestine peace process, 10 J Japan, 45 Japan-China relations, 93 Japan-Singapore Economic Partnership Agreement (JSEPA), 74, 76 Joint Declaration of the Leader of ASEAN and Japan on the Comprehensive Economic Partnership, 45 Joint Statement on East Asian Cooperation, 102 K Kedah Wafer Emas (KWE), 26 Kim Dae Jung, 8 Kim Jong Il, 35 knowledge-based economy, 16 Koizumi, Junichiro, 80, 103 Korean Peninsula influence in, 11 Kuala Lumpur Declaration, 4, 97 L Laos entry into ASEAN, 59 Lavrov, Sergei, 21, 28 Lee Hsien Loong, 106 Lee Kuan Yew, 19, 48 Li Peng, 5 visit to Kuala Lumpur, 101 liquefied natural gas (LNG), 109 Japan as largest consumer, 123 new markets, 38 Look East policy, 15

12 RUS_ASEAN Relations Index

139

M Mahathir Mohammad, 5, 6, 19, 97 call for East Asia Economic Group, 101 malakamo, 65 Malaysia, 45 moderate Islam, 19 Mao support for insurgencies, 56 mathematicians international awards, 18 Mekong River, 105 middle and upper class, 15 Middle East, 124 Mikheev, Vasily, 58 military cooperation, 27 Mischief Reef, 56, 90 Mohan Malik, 108 Monroe Doctrine, 103 Moscow film festival, 19 Moscow Institute of Oriental Studies, 57 Moscow State Symphony Orchestra, 19 Moscow State University, 18 Mosyakov, Dmitry, 57 multilateral approach, 80 multilateral cooperation in energy, 36 multilateral forum, 88 multinational corporations (MNCs), 71 Muslims in Russia, 18, 19 Mutual Recognition Agreements (MRAs), 74, 75 Myanmar, 65, 90 ARF participant, 91 campaign to discredit, 61 problem with, 97 N NAFTA, 6, 101 National Security Strategy, 61 National Treatment, 79 National University of Singapore, 18

10/10/07, 12:31 PM

Index

140

NEA-3 oil import, 37 Network China, 77 Network India, 77 New Zealand, 9, 97 ASEAN dialogue partner, 9 FTA negotiations with, 107 incorporation into East Asian economic space, 40 non-economic cooperation, 17–20 trade with ASEAN, 26 trade with ASEAN countries, 23 Nikai, Toshihiro, 106 North Korea, 35 missile tests, 36 nuclear problem, 34–36 nuclear test, 41 O OECD-Asian countries, 116 oil exports Asia, to, 21 China, to, 110 Ong Keng Yong, 104, 107 ASEAN Secretary General, 44 Ott, Marvin C., 54 outsourcing contracts, 71 P Pacific Russia development of, 27 Pan-Asian FTA, 106 Pan-East Asian community, 42 pan-regional dialogue security matters, 87, 88 pan-regional negotiations, 88 People’s Liberalization Army (PLA), 56, 87 Persian Gulf, 61 Pertamina, 109 Petro-Vietnam, 56 Petronas, 26 Philippines, 45

12 RUS_ASEAN Relations Index

140

diplomatic relations with, 22 problem relating to agricultural tariffs, 46 Trade and Industry Secretary, 44 post-Cold War period, 65 PRC-Indonesia relations, 56 pro-U.S. countries leadership of, 87 Pushkin, 20 Putin, Vladimir, 3, 11, 15, 17, 37 speech before EAS, 110 Pyinmana, 65 R regional integration, 42 regionalism, 78, 79 renminbi valuation of, 57 Rice, Condoleezza, 108 Rules of Origin (ROO), 74, 75 Russia address at EAS as guest of Malaysia, 3 ASEAN dialogue partner, 10 energy fields, 119 energy strategy, 118 entrance to WTO, 37 literary tradition, 19 new state of political democracy, 15 oil export, 38 Russia-ASEAN Cooperation Foundation, 30 Russia-ASEAN economic relations, 23 Russia-ASEAN relations reversing process of deterioration in, 21 Russia-ASEAN Summit, 17, 66 first, 110 Russia-China oil pipeline project, 37 Russia-China energy cooperation, 37 Russia-Indonesia trade, 24

10/10/07, 12:31 PM

Index

141

Russia-Malaysia trade, 24 Russia-Singapore trade, 25 Russia-Thailand trade, 25 Russia-Vietnam trade, 24 Russia-Vietnam relations, 22 Russian Academy of Sciences, 10 Russian elite, 15 Russian Unified Gas Transportation System, 119 S Sakhalin gas fields, 120 SEANWFZ, 90, 91 St. Petersburg Philharmonic Orchestra, 19 scientists, 18 sea lanes of communications (SLOCS), 61, 62, 124 September 11 impact of, 43 Shanghai Cooperation Organization, 10, 16, 68, 95 Sheremetievo-1, 26 Siberia development of, 18 oil and gas, 66 Singapore attraction for investor, 72 cooperation with, 17 expanding economic space, 70–85 external trade, 76 FDI inflows, 72 FTA strategy, 71 FTAs, 108 FTAs concluded, 74 importance of WTO’s rules-based system, 82 liberal trade regime, 76

12 RUS_ASEAN Relations Index

141

Memorandum of Cooperation with Russian Agency for Managing Special Economic Zones, 27 political culture of, 19 small and medium enterprises, 73 Trade Development Board, 77 trade liberalization, 73 trade strategy, 73–77 trade surplus, 72 Singapore Airlines Singapore-Moscow flights, 28 Singapore FTAs WTO-consistent, 74 Singapore Lecture, 8 Singapore-Australia Free Trade Agreement (SAFTA), 75 Singh, Manmohan, 106 Six-Party Talks, 34 South China Sea disputes, 60 explosive situation, 88 South Korea-ASEAN FTA negotiations, 39 Southeast Asian countries advances in biomedicine, 18 Soviet Union disintegration, 14 Special Economic Zones (SEZs), 70, 77 Russian Agency for managing, 27 Spratlys, 90 Stiglitz, Joseph, 72 Straits of Malacca, 61, 105, 117, 124 subsidies energy resources, 117 Susilo Bambang Yudhoyono, 8, 64, 109 T Taiwan Straits, 36 Temasek Holdings, 27 territorial disputes, 36–38 terrorism, 95 terrorist network conflict with United States, 43

10/10/07, 12:31 PM

Index

142

Thailand, 45 tourist destination for Russians, 28 trade with, 23 trade constraints for, 23 link with economic growth, 71 Trade and Investment Framework Agreement (TIFA), 80 trade liberalization importance of, 71 trading partners, major, 25 transnational crimes, 95 transportation routes, Chinese goods, 55 Treaty of Amity and Cooperation TAC, 4, 44, 54 acceptance by Russia, 10 tsunami aid to victims, 38 U UN Convention of the Law of the Sea, 90 United Nations Security Council member of, 10 United States dominance in world affairs, 43 inter-dependence with China, 33 opposition from, 27 opposition to EAEG, 101 post September, 11, 43 reaction to China’s overtures in Southeast Asia, 60, 61 view on Taiwan’s independence, 34 Uruguay Round, 79 U.S.-ASEAN relations improved, 107 U.S.-China relations, 61, 93 U.S.-China rivalry, 66 Russia’s response, 67, 68

12 RUS_ASEAN Relations Index

142

U.S.-Singapore FTA (USSFTA), 74, 75 U.S. Defence College, 54 U.S. hegemony threat of, 71 U.S. Navy patrols, 61 V Value-Added rule, 75 Vietnam, 61 entry into ASEAN, 59 relationship with, 17 trade with Russia, 23 Vietnam Singapore Technical Training Centre (VSTTC), 78 Vietnam-Singapore Industrial Park, 78 W Wen Jiabao, 54 Western Siberia Special Economic Zone, 27 Wolf, Martin, 81 research, 72 World Bank, 8, 81 World Trade Organization (WTO), 70 China’s entry into, 46 Russia’s entry, 37 X xenophobia growing, 15 Y Yasukuni Shrine, 103 Yeltsyn, 15 Z Zheng Bijian, 48 Zoellick, Robert, 81

10/10/07, 12:31 PM