Suu Kyi Calls on U.S. to Lift Export Ban

WASHINGTON — Myanmar's opposition leader, Aung San Suu Kyi, began her first trip to the U.S. since she was released from house arrest amid hints the Obama administration was preparing to lift a decades-old ban on her country's lucrative exports, which include gems, textiles and oil and gas.

The ban could be eased in coming weeks, said officials briefed on government policy deliberations. Underscoring U.S. efforts to coax Myanmar's reform drive, the administration also planned to remove individuals and companies in Myanmar from a U.S. blacklist.

Ms. Suu Kyi called on the administration to dissolve the import ban Tuesday in her first U.S. appearance. Myanmar's president, Thein Sein, a retired military officer who initiated the Southeast Asian nation's dramatic political reforms last year, plans to attend the United Nations General Assembly meeting next week in New York.

Ms. Suu Kyi's position on the import ban was criticized by some democracy activists, who said the dissolution of U.S. sanctions would deprive Washington of a key diplomatic tool for pressing Myanmar's military leaders to promote political reforms and end its military campaigns against the country's ethnic minorities.

But she said it was time to let the country's internal reforms progress without outside pressure.

"We should not depend on U.S. sanctions to keep up the momentum for democracy. We have got to work at it ourselves," Ms. Suu Kyi said in response to a question about her position on the U.S. export ban. The Nobel Peace Prize laureate appeared with Secretary of State Hillary Clinton at the U.S. Institute of Peace, a congressionally funded think tank in Washington.

Neither Mrs. Clinton nor other U.S. officials on Tuesday confirmed that a move was imminent to lift the U.S. ban on Myanmar's exports. A State Department official said the ban was renewed by Congress in August, but allows the administration to waive its provisions. Officials are consulting with lawmakers and others about the import ban, the official said.

Mrs. Clinton stressed that Washington wanted to work with the leaders of Myanmar, also known as Burma, to continue opening up its economy and political system.

"We've taken steps to exchange ambassadors, ease economic sanctions, and pave the way for American companies to invest in the country in a way that advances rather than undermines continued reforms," Mrs. Clinton said. "And we are in close contact with government and opposition leaders."

Ms. Suu Kyi's 17-day trip to the U.S. is being used to spotlight the historic changes in Myanmar in the past two years, as well as the need for continued reforms. She will be awarded the Congressional Medal of Honor in the Capitol's rotunda Wednesday, due to her decades of work to promote democracy, often while under house arrest.

WSJ

Tourism Surge Presents New Problems for Burma

BANGKOK — Tourism is the latest indicator of change in Burma, with tourist and business arrivals up more than 30 percent. In the first seven months of this year there were about 300,000 arrivals, nearly the same number as for all of 2011.

Visitors from Thailand represented the largest group from Asia, followed by Japan, China and South Korea. European nationals accounted for nearly a quarter of Burma's visitors.

By 2014, when Burma plans to host the annual meetings of the Association of South East Asian Nations, arrivals are forecast to climb to nearly a million.

There are presently 25,000 hotel rooms across Burma - also known as Myanmar - with 8,000 rooms in the commercial capital of Rangoon.

But the rapid growth has led to bottlenecks for tour operators and increasing competition for rooms between tourists and business travelers.

Luzi Matzig, a veteran of the travel industry and chief executive of the Bangkok-based Asian Trails, says the rapid expansion of tourism in Burma has been unprecedented.

“We never had any country with such a rapid growth - an explosion of growth," said Matzig. "Never happen. Our problem now in number of passengers - we can hardly grow because there simply isn’t the capacity there in hotel rooms or transport.”

Matzig says there are complaints by tour operators of escalating hotel room rates and an inability to secure advance contracts for blocks of rooms.

The easing of long standing economic sanctions against Burma due to an improved human rights record has brought a flood of business travelers, he adds. Some companies are block booking rooms that would normally have been occupied by tourists.

Burma’s deputy minister for hotels and tourism, Htay Aung, says while the growth is welcomed it has created new challenges, especially a need to upgrade human resources and infrastructure.

“We need to upgrade the standards, standards of services - very important," Aung said. "The second thing is transportation - domestic transportation - and also upgrade of the hotels, the existing hotels. We have to upgrade the existing tourist sites in the same way, also open up the new tourist sites.”

Burma is now planning for a new international airport close to Rangoon as well as increasing the number of rooms in the city by converting apartments to hotels, adding a further 500 rooms this year.

The Asian Development Bank is preparing a tourism master plan for Burma. Regional air carriers are also increasing services.

ADB economist, Alfredo Perdiguero, says infrastructure and human development are key constraints on the economy.

“The transport, there’s still a lot of obstacles both in the ports and a lot of obstacles across borders, Perdiguero said. "If you look at the capacities you need to have employees. We have certain capacities but due to the deterioration of the vocational training and the university system - both in Myanmar and within the [last] 20 to 30 years - they don’t have that.”

The government says its tourism policy aims to help ease poverty and empower women, with a “steady” growth of arrivals to benefit local communities and the long-term development of Burma.

VOA

Myanmar reform takes familiar road

Looking at Myanmar's reforms, some cheer, some donate, some invest, and some remain skeptical.

The cheerleaders, donors and investors have all optimistically accepted the government’s line that real democratic change is taking root in historically military-run Myanmar. The skeptics, on the other hand believe that the military-cum-civilian government is merely implementing its old "seven-step roadmap" program, which was drawn and implemented by the former military regime.

Among Myanmar’s former military, now civilian, politicians, the roadmap is an open secret, one that the international community either missed or has simply ignored. Previously opposition critics and foreign observers strongly criticized the "seven-step roadmap", including its one-sided constitution, forced national referendum, and rigged general election that gave the junta-backed Union Solidarity and Development Party (USDP) a dominant democratic mandate.

All of this was forgotten after President Thein Sein’s government released pro-democracy leader Aung San Suu Kyi and hundreds of other political prisoners, suspended the controversial, China-backed Myintsone Dam project, and eased some restrictions on media and basic civil liberties.

The “seven-step roadmap” has taken a long, circuitous route. Its first step, a national convention that began in 1993, was suspended for years, restarted in 2003 and finally completed 14 years later in September 2007.

Step two, the implementation of a process to allow the emergence of a "genuine and disciplined democratic system" was completed soon after the first step and quickly followed by the third, the writing a draft constitution, which was completed in October 2007.

In May 2008, despite the widespread devastation, displacement and death caused by the Cyclone Nargis disaster, the military regime forcibly carried out a controversial national referendum, the fourth step on the roadmap. At that time, the military regime initially banned international aid and relief workers from entering Myanmar to assist with humanitarian relief efforts. Nonetheless, the constitution was overwhelmingly adopted through the referendum.

A general election, conducted on November 7, 2010, represented step five. The USDP, the military’s former mass organization which was converted into a political party, won 76.5% of the new parliaments’ seats and elected Thein Sein, the junta’s former prime minister, as president. Independent observers criticized the election as neither free nor fair due to vote buying, ballot cheating and voter intimidation, among other allegations.

The sixth step convened the new elected bodies and the seventh created government organs instituted by the legislative body.

Ex-junta chief Senior General Than Shwe made sure through the seven step plan that he and his family would after his retirement be safe from retribution for his regime’s abuses. Under the 2008 constitution, no legal action may be taken against him and his soldiers who served in the previous ruling junta. Articles 443 and 445 of the constitution say specifically that the former regime cannot be held accountable for its past wrongdoings. Meanwhile, the junta's favored cronies were through the opaque privatization of state assets granted control over most of the state's businesses and other national resources.

Despite all this, some observers and critics have noted that a positive political structure has emerged from the implementation of the "seven step roadmap." They believe the plan created space for pragmatic political players, as well as foreign nongovernmental organizations, to become more involved and assist the move towards a more democratic direction. Ye there is still a long way to go before Myanmar should be considered a functioning democracy.

Myanmar watcher Ashley South, an author of books who closely follows Myanmar’s political developments, has said that the international community should encourage the reforms initiated by Thein Sein’s government. He, however, has warned that serious and widespread human-rights abuses, particularly in areas affected by on-going armed conflicts, must not be ignored. Without addressing the aspirations and grievances of ethnic minorities, social and political problems cannot be solved, he added.

Kyaw Min Yu, a former political prisoner and member of the dissident 88 Generation Students Group, has said he is more interested in reform efforts underway outside of parliament. As the parliament is dominated by junta-backed USDP members and military appointees who legally hold 25% of parliament’s seats, opposition leader Suu Kyi and her National League for Democracy (NLD) party cannot achieve much through the legislative process, said Kyaw Min Yu, who was released from prison in January.

Others see reason for hope in more recent developments. On August 27, Thein Sein undertook a major reshuffle of his cabinet, a move several observers felt would boost Myanmar's reform drive. The move supposedly elevated reform-minded ministers while those considered hardliners or conservatives were removed or sidelined.

Among the most important changes was the removal of Information Minister Kyaw Hsan, who was widely seen as an opponent of reforms. He was symbolically replaced by the conciliatory Aung Kyi, who previously served as a liaison between Suu Kyi and the former ruling junta. The posting of outgoing railways minister Aung Min and industry minister Soe Thein directly to the president's office was also seen as a boost for reform.

Aung Naing Oo deputy director of the Vahu Development Institute, a Thailand-based think tank, recently said, "In a transition in any country, it is a normal practice that those who oppose the reform are removed from their post and replaced by those who support the reform."

In late August, the government removed more than 2,000 people from its notorious blacklist, including leading exiled Burmese dissidents, activists and foreign journalists. Suu Kyi's sons, Alexander Aris and Kim Aris, were among those who were removed from blacklist. Observers noted that this highly lauded move happened outside of parliament.

Skeptics of these moves argue the regime has been motivated more by a desire to win desperately needed political and economic support from the West after decades of isolation than a genuine commitment to democracy. As Western countries move to lift their sanctions, and Myanmar emerges as a leading destination for global leaders, diplomats, businessmen, donors and tourists, the roadmap has come together in image if not in substance.

Saw Yan Naing

5 Things the Pentagon Isn't Telling Us About the Chinese Military

Here's what you won't find in the Defense Department’s latest report on China's military rise.

Think of it like an iceberg: The top lies in plain sight, but a lot more hides beneath the surface.


In its annual appraisal of the Chinese military published last week, the U.S. Department of Defense seems to be describing an object it finds both familiar and mysterious. The report certainly answers many of the important issues concerning China's military, including its attempts to develop an anti-ship ballistic missile and its continuing fixation on Taiwan.

Yet for many crucial aspects of China's strategy, the Pentagon seems like it's just guessing. Here are the five most important questions about Beijing's defense strategy that remain stubbornly unanswered.

1. What are China's long-term defense spending plans?
Although China's official 2012 defense budget is $106 billion, an 11 percent increase over last year and a fourfold increase from a decade ago, the Pentagon places China's total military spending at somewhere between $120 and $180 billion. "Estimating actual PLA military expenditures is difficult because of poor accounting transparency and China's still incomplete transition from a command economy," the report notes, referring to the People's Liberation Army.

There have been no credible estimates of Beijing's long-term defense spending plans. On its current trajectory, China could overtake the United States as the world's biggest military spender in the 2020s or 2030s -- but there are too many unknown variables to accurately predict if this will happen. Is the PLA budget pegged to the growth of the wider economy, or have China's generals been promised double-digit growth even if the country suffers an economic downturn? Will growth slow once certain modernization milestones have been achieved, or are there no plans to close the PLA checkbook? What's clear is that the more funding the PLA receives, the closer it will come to achieving parity with the U.S. military.

2. What is China's nuclear strategy?
The Pentagon concludes that "China's nuclear arsenal currently consists of about 50-75 silo-based, liquid-fueled and road-mobile, solid-fueled ICBMs." The Pentagon doesn't attempt to estimate the total number of nuclear weapons that China possesses, although it's generally assumed to have a much smaller nuclear arsenal than the U.S. cache of over 5,000 nukes. Nonetheless, theories that Beijing possesses or plans to develop a much bigger nuclear weapons stockpile just won't die down. Speculation last year that China may have as many as 3,500 nuclear warheads -- predicated on rumors of a sprawling network of underground tunnels -- has been reliably trashed, but some still argue that Beijing sees a strategic opportunity in building a nuclear arsenal that could match or even exceed that of the United States in the coming decades.

China currently has only two Jin-class Type 094 nuclear-powered ballistic missile submarines (SSBNs) in service, the Pentagon tells us, and the missiles designed to arm the subs are not yet operational (though when they are, they will be nuclear-capable). Two submarines aren't much of a strategic deterrent for an aspiring superpower, but the true scope of the SSBN fleet that China plans to build remains unknown.

3. What is the Chinese navy up to?
American analysts often use the term "string of pearls" to describe Beijing's supposed strategy of establishing a network of foreign naval bases, especially in the Indian Ocean, but the Chinese don't. The latest Pentagon report does not discuss whether China plans to create a U.S.-style network of permanent forward bases for the PLA Navy.

Nonetheless, there is no shortage of speculation that China will eventually deploy military forces to port facilities it has constructed in places like Burma, Pakistan, and Sri Lanka. The Seychelles has invited China to use its ports as resupply points for Chinese ships, but Beijing has insisted that this is not the establishment of a first foreign base, unconvincingly calling it a "re-supply port." The "places or bases" debate has already been running for some years, and it will continue to rumble on while Beijing remains tight-lipped about its long-range ambitions.

The Pentagon report also struggles to shed light on China's future aircraft carrier program, beyond the existence of the single ex-Soviet carrier that is currently undergoing sea trials. "Some components of China's first indigenously produced carrier may already be under construction," it suggests, adding that "China likely will build multiple aircraft carriers and associated support ships over the next decade." That's guesswork. It's unknown whether China envisages merely a couple of working aircraft carriers as floating trophies designed to symbolize the country's arrival as a world power, a handful of combat-capable carriers to drive home its territorial claims in the South China Sea, or a larger number of U.S.-style carrier battle groups with a mission to project force globally.

4. What kind of space capabilities is China developing?
China is becoming increasingly proficient in space. The report mentions that China is assembling its own GPS-style satellite network, blasted the Tiangong-1 spacelab into orbit in 2011, and has developed a ground-launched anti-satellite missile to improve its counter-space capabilities. But the Pentagon neglects to mention one of China's most ambitious space programs: the development of the Shenlong spaceplane and the possible associated development of advanced propulsion systems, whose existence increases the risk of a military space race with the United States.

It is not yet known whether Shenlong is anything more than a hi-tech experiment. But because of Shenlong's military potential, any information about it could allay or exacerbate growing fears within the U.S. military that the PLA Air Force has more than a passing interest in space operations.

5. Paper tiger or fire-breathing dragon?
There are many other imponderables in China's military. Chinese cyber-espionage has been effective in obtaining foreign military secrets, but it's unclear how much of this know-how has been successfully and usefully absorbed into China's own military programs and doctrines. The overhaul of the Chinese defense industry has revolutionized the country's indigenous capabilities, but how close has China really got to ironing out the kinks in its military-industrial structures and processes?

All of the unknowns feed into one larger question: Is the PLA worth the hype? China's military is untested; it hasn't fought a major campaign since a disastrous war with Vietnam in 1979. In the event of conflict, would its performance live up to the nation's expectations, or would disadvantages like corruption and inexperience critically undermine its war-fighting capability? Is the 21st-century PLA even designed to be used, or does it exist to prop up and counterbalance the Communist Party domestically in a world where Beijing calculates that large-scale warfare is increasingly unlikely? Maybe the answers to these questions are buried in some secure vault at the Pentagon, but they're not in its latest report.

Foreign Policy

Study damns Mekong dams

Xayaburi Dam protesters

BANGKOK - Impoverished Laos is unlikely to cancel a Thai project to build a mega-dam across the Mekong River at Xayaburi, despite warnings from the International Union for Conservation of Nature (IUCN) that it could devastate the region's rich biodiversity.

At least 1,780 known freshwater fish species have been identified in the "Indo-Burma biodiversity hotspot', which includes the Mekong and parts of the Chao Phraya River that flows through Thailand, revealed the 158-page report released last week by the IUCN, ahead of its world congress to be held in Jeju, South Korea from September 6-15.

IUCN, which is based in Switzerland and is the world's oldest and largest global environmental network, assists societies throughout the world to conserve the integrity and biodiversity of nature and to ensure that the use of natural resources is equitable and ecologically sustainable.

"The Mekong ranks third (after the Amazon and Congo) or second in the world in terms of diversity of river fish, depending on whether the verified species total or the higher estimate is accepted," notes the IUCN study, "The Status and Distribution of Freshwater Biodiversity in Indo-Burma".

The study has strengthened a growing anti-dam movement that has united campaigners from several countries in the region that are likely to be affected by the 1,260-megawatt hydropower project being built at a cost US$3.8 billion.

"This is an unprecedented scientific contribution for us to know what is in the river between [the Laotian cities of] Luang Prabang and Vientiane," Robert Mather, head of IUCN Southeast Asia, told IPS. "It shows how little we understand the river or the impact of the planned dam."

The report will feed discussions about dams like the Xayaburi at the IUCN gathering at Jeju, which is expected to include more than 1,200 government and non-government organisations (NGOs) from 160 countries.

"This study will help to shape the real questions that need to be asked when doing EIAs [environment impact assessments] before building the dam," Mather said.

Thai communities rallying against the Xayaburi dam this month lodged a petition against the energy ministry and the state-run Electricity Generating Authority of Thailand (EGAT) in the country's administrative courts, charging these bodies with failure to inform the public about the environmental and social impacts of the dam.

Even so, Norkun Sitthiphong, permanent secretary in Thailand's energy ministry, announced on August 24 that construction work for the Xayaburi dam was on track and that electricity production was scheduled to begin by 2019.

"The Xayaburi power plant plays a crucial role in Thailand's power development," the Thai official said, affirming the close link Thailand has as a major investor of this dam, the first of a cascade of 11 dams being planned to harness the lower waters of Southeast Asia's largest river.

Earlier studies by the Mekong River Commission (MRC), an inter-government agency, estimate that the proposed dams could result in agricultural losses worth more than $500 million annually and reduce dietary fish intake of Thai and Lao people by 30%.

It could also result in the creation of reservoirs along the Mekong, studies by the MRC, in which Cambodia, Laos, Thailand and Vietnam are members and Myanmar (or Burma) and China are dialogue partners.

The MRC is yet to clear construction for the dam and announced in December that it would approach international development partners to study the dam's implications before doing so.

Activists believe that it is not too late to stop the Xayaburi dam especially because of a growing movement against it.

"This is the first time local communities have gone to the Thai courts to stop a cross-border hydropower project," said Premrudee Daoroung, co-director of Towards Ecological Recovery and Regional Alliance, a Bangkok-based green lobby.

"They are turning to a clause in the Thai constitution that requires government agencies to conduct public hearings on projects like the Xayaburi dam, which will impact Thai communities and Thailand's biodiversity," she told IPS.

"Their biggest concern is that the dam will devastate fishing in the Mekong, which has been their main livelihood for generations. Their campaign began out of fear that the Xayaburi dam will affect the annual fish migration in the Mekong."

Loss of biodiversity is another concern. "The currency for measuring fish biodiversity is species, not kilograms, dollars or catch per unit of effort," the IUCN report said.

Grassroots communities in Cambodia and Vietnam have expressed similar concerns in their "Save the Mekong" campaign.

The Xayaburi dam could, they say, threaten the livelihoods of some 60 million people living in the lower Mekong, who harvest an estimated $2.2 billion to $3.9 billion worth of fish annually - or about a quarter of the world's annual inland-water catch.

Besides food security, this campaign, which has been endorsed by nearly 60,000 people, has also forged other bonds.

"The outcry has been strong because of the centrality of the river to millions of people, as well as to the region's history and cultural identity," said Carl Middleton, a Mekong River expert who lectures at the International Development Studies Programme at Bangkok's Chulalongkorn University.

"Just as the river is shared between the countries, so the proposed Xayaburi dam has brought many people together in opposition to the project," he told IPS. "The size of the public response opposed to the Xayaburi dam is unprecedented for a hydropower project in the region."

The protests have produced a mixed response from Laos, one of the poorest of the six countries that shares the Mekong, a 4,880 km-long river that flows through southern China, touching Myanmar and Thailand, and through Laos, Cambodia and Vietnam.

Laos has set its sights on becoming the battery to the region by tapping its rivers through large hydropower projects and selling the energy generated to its neighbors, such as Thailand. The foreign exchange, Vientiane argues, can help one-third of the country's 5.8 million population living in poverty.

Laos has assured neighbors, Western donors and an intergovernmental river development body that it would not proceed with the controversial dam till the cross-border environmental and social impacts have been assessed. In July, Vientiane even announced suspension of the project.

Ch Karnchang Plc (CK), one of Thailand's largest infrastructure builders and owner of 50% of the shares of Xayaburi Power, the controversial dam's developer, suggests otherwise.

In mid-August, CK's chief executive, Plew Trivisvavet, confirmed that the dam developer had not skipped a beat in its construction plans. "We're still working on the project, as no one has told us to stop," he told journalists.

Marwaan Macan-Markar

ASEAN struggles to cope with rival claims in the South China Sea

SIEM REAP, CAMBODIA — Thrown off balance by a cacophony of claims in the South China Sea, Southeast Asia is struggling to cope with the “big and heavy” presence of China and the United States in the region and needs to face up to growing security and political challenges, the secretary general of a regional group said in an interview.

Surin Pitsuwan was speaking Monday after the start of a meeting of economic ministers from the Association of Southeast Asian Nations in the Cambodian town of Siem Reap. It was the first major gathering of regional officials since an acrimonious conclave last month that highlighted deep divisions created by China’s increasingly assertive territorial claims in the South China Sea and rhetorical blasts about the waterway from Beijing and Washington.

At the earlier meeting, in the Cambodian capital, Phnom Penh, foreign ministers could not agree on the wording of a final communique for the first time since the regional association’s founding in 1967.
Pitsuwan, Thailand’s former foreign minister and head of ASEAN’s secretariat since 2008, said in an interview that he was surprised by the breakdown in Phnom Penh, where the group’s customary low-key pursuit of compromise gave way to testy deadlock amid complaints of microphones being abruptly disconnected and allegations of backstage meddling by China.

The failure, Pitsuwan said , was “a wake-up call that these [security] issues will occur and we should be prepared to handle them.”

Cambodia, a close friend of China and the current holder of ASEAN’s rotating chairmanship, refused during the July gathering to accept pleas that the final communique include a mention of recent flare-ups in the South China Sea between China and two ASEAN members, the Philippines and Vietnam.

Manila and Hanoi accused Cambodia of putting its allegiance to Beijing ahead of its obligations to its regional partners and of pushing the 10-nation group to its most severe crisis in years. Cambodia, although heavily dependent on Chinese aid and investment, angrily denied acting on instructions from Beijing.

Tensions in the South China Sea, where five ASEAN members have claims that brush up against those of Beijing, are “becoming more and more of a stress on the system,” Pitsuwan said. That, he added, underscores the urgent need to make progress toward a stalled code of conduct for the disputed waters. The key, he said, is to “get around” questions of sovereignty and focus instead on practical measures to curb the risk of maritime clashes. But, he said, “this will take some time, because it is emotionally charged and extremely volatile. Positions are far apart, but eventually, we will get to a practical solution.”

Role as ‘insulation’
ASEAN, which is meeting near the ancient temples of Angkor Wat under the slogan “one community, one destiny,” has traditionally worked to paper over its differences. The risk of conflict in the South China Sea, however, has exposed the shortcomings of that approach at a time when China and the United States are stepping up their military and diplomatic activities in the region.

Washington takes no position on the territorial disputes. But the Obama administration, which has made a foreign policy “pivot” to Asia, has voiced growing concern over the risks of confrontation in the waterway. Th£e United States has stepped up security cooperation with the Philippines, with which it has a 61-year-old mutual defense treaty, and with Vietnam, which looks to America as a counterweight to a rising China.

Jousting over the South China Sea and over disputed islands to the north claimed by both Japan and China has shadowed booming trade and investment ties across East Asia and added to frictions between Beijing and Washington. The State Department this month criticized China for setting up a military garrison on an island in the South China Sea, accusing it of undermining diplomatic efforts to resolve disputes peacefully. China lambasted the U.S. assertions, with the state-run Xinhua News Agency dismissing them as “groundless and irresponsible” and urging Washington to “draw back its meddling hand.”

The feuding has pushed ASEAN into the uncomfortable role of acting as “insulation between China and the U.S.,” said Carlyle A. Thayer, an Australian expert on regional security and the author of a recent study of the group’s troubles over the South China Sea.

Originally set up in response to fears of communist subversion in Southeast Asia during the Vietnam War, ASEAN was long scorned by China as an instrument of the United States but has in recent years been embraced by Beijing as a vehicle to boost economic ties.

At the same time, China has been alarmed by ASEAN’s moves to become more involved in political and security issues, with some Chinese foreign policy experts warning that the association could go the way of the Arab League, a long-somnolent organization that, reinvigorated by the Arab Spring, has been at odds with Beijing in recent months over what to do in Syria and elsewhere.

China rejects any role for ASEAN in resolving territorial disputes and insists that the ownership of islands and reefs in the South China Sea can be addressed only through bilateral talks. But it has expressed some readiness to discuss a code of conduct for the waterway. “China wants ASEAN to be reasonably strong but also compliant,” Thayer said.

Wary of getting bogged down in arcane but highly contentious maritime quarrels, ASEAN ministers meeting this week are focusing on trade and other economic issues and want to stay clear of the South China Sea. “I’m not going to touch it. This is strictly economic,” said Gita Wirjawan, Indonesia’s trade minister.

Wealth gap a threat
In his opening address, Cambodia’s prime minister, Hun Sen, made no mention of the maritime disputes but instead spoke of the debt crisis in Europe, high oil prices and slowing export growth, and he singled out the wealth gap between member states as “a great threat” to the association’s future.

Pitsuwan, the secretary general, said “political hiccups” over the South China Sea will not slow what he described as an irreversible trend toward greater economic integration.

The association, which includes some of the world’s most dynamic economies as well as some of its weaker ones, such as Burma, Laos and Cambodia, is working to establish a single market in 2015, an important step toward regional integration akin to moves in Europe that led to the creation of the European Union. But, Pitsuwan said, ASEAN has no plans to set up a large central bureaucracy similar to the one in Brussels. The association’s administrative headquarters in Jakarta has only about 200 employees, including clerical staff and drivers. The European Commission in Brussels has more than 33,000.

ASEAN, he said, “needs a strong central mechanism so that it can be a driving force, but that has implications for sovereignty” that member states are not ready to accept.

At a time when Europe’s far more advanced drive for integration has been stalled by the continent’s financial turmoil and tensions between the E.U.’s richer and poorer member states, Southeast Asia “has to be extremely careful,” Pitsuwan said. “Europe for us is an inspiration, not a model.”

Andrew Higgins

ASEAN integration: one step forward, two steps back

Going by its "roadmap", ASEAN will by 2015 become an economic community with a US$2 trillion combined market and become a magnet for integration across the whole of East Asia, the world's most dynamic region.

This concept of an ASEAN Economic Community (AEC) was mooted in 1997 - at the height of the Asian financial crisis.

In their bid to keep ASEAN relevant amid the rise of China and India, the region's leaders sought to build the AEC on four planks - a single market and production base; a competitive community; an area of equitable economic development; and a region integrated into the global economy.

Fifteen years on and less than three years away from the 2015 target, however, there is some cause for concern.

Emeritus Senior Minister Goh Chok Tong, speaking at a recent ASEAN conference organised by the Singapore Institute of International Affairs (SIIA), summed up the zeitgeist: to keep the region plugged into the global economy, ASEAN needs to pursue its economic integration "relentlessly", he said, adding that the bloc will need to work on two issues - liberalising the services sector across the region, and non-tariff barriers.

Therein lies the rub. ASEAN officials regularly tout that - according to a "scorecard" studying the progress of the AEC - 66 per cent of measures to achieve a single market and production base have been implemented. That figure, however, represents low-hanging fruit, such as the removal of tariffs.

While the original ASEAN six - Brunei, Indonesia, Malaysia, the Philippines, Singapore and Thailand - boast that 99.65 per cent of tariff lines across the region have been removed, the fact is, non-tariff barriers (NTBs) continue to impede business.

In Malaysia, NTBs can be found in the automotive, oil and gas sectors. In Indonesia there are restrictions on beef imports.

In addition to restrictions on the free flow of goods, freedom of workers' movements is another issue holding up the AEC, says Ms Sanchita Basu Das, a lead economic researcher at the Institute of Southeast Asian Studies and the editor of "Achieving The ASEAN Economic Community 2015", a collection of essays studying the AEC's implementation.

In Thailand, for example, the Alien Employment Act prohibits foreigners from being employed in professions such as civil engineering and legal services.

Says Ms Basu Das: "If you say you have the free movement of labour but have restrictions, you cannot say you enjoy such free movement of labour."

In terms of enhancing physical connectivity, ASEAN has come some way. In 2010, it tabled a Connectivity Masterplan to enhance physical and people-to-people links.

But the enabling ASEAN Infrastructure Fund has initial equity of only $485 million. It has been estimated that ASEAN will need to spend $60 billion a year on infrastructure.

"ASEAN has a lot of connectivity initiatives, but a number of them are impeded by structural weaknesses, low responsiveness to users, organisational inefficiencies, insufficient funding and heavy dependence on overseas development aid," says Pushpanathan Sundram, the managing director of EAS Strategic Advice, a consultancy. He was formerly an ASEAN deputy secretary-general.

More importantly, the members of ASEAN at its current stage of development face the same dilemma that other regional bodies such as the European Union have faced - the surrender of more sovereignty to a regional organisation. Put differently, many ASEAN countries struggle with whether to put ASEAN's interests above their own national interests.

A classic example is that of gas pipelines in Thailand and Malaysia, which are held by monopolies. This would hinder the formation of trans-ASEAN gas pipelines.

"For integration to move ahead, we really need a change in mindsets. ASEAN countries have to think regional and act national to implement locally the grouping's regional economic commitments," says Pushpanathan.

This is not to say that all is lost for the AEC. ASEAN, unlike the EU, started out more as a political body than an economic one. The EU started out as an economic body focused on coal and steel, and then took on political dimensions later. As a result, expectations about the AEC should be moderated.

Moreover, the fact that ASEAN remains externally oriented bodes well. During the Cold War, the bloc sought to avoid being used as a geopolitical pawn by the superpowers, leading to perceptions of a "fortress ASEAN". Today, however, it has sought to be part of the great geopolitical game in Asia, seeking to draw in great powers like China and the US. It has made itself relevant by signing free trade agreements with countries such as Australia and China.

More importantly, ASEAN will not lose out to China in the foreign direct investment stakes if the AEC leverages on the fact that the grouping is made up of countries at different levels of development.

Gautam Banerjee, the executive chairman of PricewaterhouseCoopers Singapore, says ASEAN can entice potential investors by getting them to locate "softer" functions such as logistics, treasury and supply chain management in its more advanced countries, say, Singapore, and get "heavy lifting" manufacturing operations done in Malaysia, Thailand and Indonesia.

"If we can ignite some of this thinking … ASEAN can be a credible challenge to China," said Banerjee at the SIIA conference.

To an extent, this is already happening. The Hong Kong Economic and Trade Office says some Hong Kong firms have decided to invest in ASEAN countries rather than mainland China.

There is a combination of push and pull factors, a spokesman adds. In China, labour costs have risen due to the strengthening yuan. In addition, ASEAN's recent strong economic performance and low labour costs have made the region attractive.

Looking ahead, ASEAN's economic prospects would be much enhanced if the private sector - rather than the bureaucrats - took the lead.

However, the entire AEC enterprise is still very much a top-down endeavour and ASEAN watchers say it receives relatively little input from businessmen, the very people who should be spearheading integration.

The experiences of Thai companies are indicative. According to a survey by the University of the Thai Chamber of Commerce, only 11 per cent of firms polled said they understood what the AEC is about. The rest said they had no idea.

No wonder then that the utilisation of the ASEAN Free Trade Area by ASEAN firms stood at only 23 per cent in 2008.

Granted, a group of business leaders - including the chiefs of CIMB Bank, AirAsia and Ayala Group - has launched the ASEAN Business Club, a private-sector initiative to engage in ASEAN integration. But ASEAN still has its work cut out for it.

"ASEAN businessmen have let their bureaucrats run away with whatever they want to do. They need to speak up for themselves," says Dr Suthad Setboonsarng, senior adviser at BowerGroupAsia, a business advisory firm.

"If it wants ASEAN to be effective, the private sector has to guide governments. So don't complain about ASEAN not working, if the private sector is not working."

ASEAN has been in the news recently for failing to come up with a communique amid differences over its handling of the contentious South China Sea issue, which involves China and ASEAN member states such as Vietnam and the Philippines. The South China Sea issue is important, but it will be a political issue that will continue to test ASEAN's leadership and coherence for years to come.

In the meantime, however, effective economic integration - the bread and butter of ASEAN's existence - should deliver the goods that will make ASEAN relevant.

William Choong

China Pushes on the South China Sea, ASEAN Unity Collapses

For more than two decades Beijing has pursued a consistent policy in the South China Sea composed of two main elements: gradually strengthening the country’s territorial and jurisdictional claims while at the same time endeavoring to assure Southeast Asian countries of its peaceful intentions. Recent moves by China to bolster its maritime claims have brought the first element into sharp relief, while reassurances of benign intent have, however, been in short supply. Indeed, far from assuaging Southeast Asian concerns regarding its assertive behavior, China has fuelled them by brazenly exploiting divisions within the Association of Southeast Asian Nations (ASEAN) to further its own national interests.

China Hardens Its Stance

Commentaries in China’s state-run media analyzing the South China Sea issue have become markedly less conciliatory. Opinion pieces highlight several new themes in China’s official line. One theme is that China’s territory, sovereignty as well as its maritime rights and interests increasingly are being challenged by Southeast Asian nations and Japan in the South and East China Seas. China’s response, it is argued, should be to uphold its claims more vigorously, increase its military presence in contested waters, and, if necessary, be prepared to implement coercive measures against other countries. As one commentary notes “Cooperation must be in good faith, competition must be strong, and confrontation must be resolute” (Caixin, July 13).

Another theme is that, while China has shown restraint, countries such as the Philippines and Vietnam have been pursuing provocative and illegal actions in a bid to “plunder” maritime resources such as hydrocarbons and fisheries which China regards as its own (China Daily, July 30).

A third theme is that Manila and Hanoi continue to encourage U.S. “meddling” in the South China Sea and that the United States uses the dispute as a pretext to “pivot” its military forces toward Asia (Global Times, July 11). To reverse these negative trends, Chinese commentators have urged the government to adopt more resolute measures toward disputed territories and maritime boundaries. Nationalist sentiment, they argue, demands no less.

Recent measures undertaken by the Chinese authorities do indeed suggest a more hard-line position. Ominously, some of the initiatives have included a strong military element, presumably as a warning to the other claimants that China is ready to play hardball.

Perhaps the most noteworthy attempt by China to bolster its jurisdictional claims in the South China Sea was the raising of the administrative status of Sansha from county to prefecture level in June. Sansha originally was established in 2007 as an administrative mechanism to “govern” the Paracel Islands, Macclesfield Bank and the Spratly Islands. Sansha’s elevation was an immediate response to a law passed on June 21  by Vietnam’s national assembly, which reiterated Hanoi’s sovereignty claims to the Paracels and Spratlys. Both Vietnam and China protested the other’s move as a violation of their sovereignty (Bloomberg, June 21). Less than a month later, Sansha’s municipal authorities elected a mayor and three deputy mayors and China’s Central Military Commission authorized the establishment of a garrison for “managing the city’s national defense mobilization, military reserves and carrying out military operations (Xinhua, July 20).

Earlier, in late June, China’s Defense Ministry announced it had begun “combat ready” patrols in the Spratly Islands to “protect national sovereignty and [China’s] security development interests” (Reuters, June 28). Embarrassingly for the People’s Liberation Army (PLA) Navy, however, on July 13, one of its frigates ran aground on Half Moon Shoal, 70 miles west of the Philippine island of Palawan and within the Philippines 200 nautical mile exclusive economic zone (EEZ). The frigate was refloated within 24 hours, suggesting that other PLA Navy vessels were nearby when the incident occurred. These developments provide further evidence of the growing militarization of the dispute.

China also has moved to undercut the claims and commercial activities of the Philippines and Vietnam in the South China Sea in other ways.

In June, the state-run China National Offshore Oil Corporation (CNOOC) invited foreign energy companies to bid for exploration rights in nine blocks in the South China Sea. The blocks lie completely within Vietnam’s EEZ and overlap with those offered for development to foreign energy corporations by state-owned PetroVietnam. Accordingly, Hanoi vigorously protested CNOOC’s tender (Bloomberg, June 27). More importantly the blocks are located at the edge of China’s nine-dash line map and seem to support the argument that Beijing interprets the dashes as representing the outermost limits of its “historic rights” in the South China Sea. Under the 1982 United Nations Convention on the Law of the Sea (UNCLOS), however, coastal states are not entitled to “historic rights” on the high seas. It is therefore unlikely that any of the major energy giants will bid for CNOOC’s blocks—although smaller companies may do so if only to curry favor with Beijing with a view to landing more lucrative contracts down the road. If, however, exploration does move forward in any of the nine blocks, a clash between Vietnamese and Chinese coast guard vessels will become a very real possibility.

On the issue of ownership of Scarborough Shoal, scene of a tense standoff between Chinese and Philippines fishery protection vessels in May-June, China position remains uncompromising. At the annual ASEAN Regional Forum (ARF) in Phnom Penh, Cambodia in July, Chinese Foreign Minister Yang Jiechi restated China’s sovereignty claims to the shoal, rejected the notion that it was disputed and accused Manila of “making trouble” (Xinhua, July 13). According to the Philippine foreign ministry, Chinese trawlers―protected by Chinese paramilitary vessels—continue to fish in waters close to Scarborough Shoal in contravention of a bilateral accord whereby both sides agreed to withdraw their vessels [1].

Following the ARF, China kept up the pressure on the Philippines. In mid-July, it dispatched a flotilla of 30 fishing trawlers to the Spratlys escorted by the 3,000-ton fisheries administration vessel Yuzheng 310 (Xinhua, July 15). The trawlers collected coral and fished near Philippine-controlled Pag-asa Island and Chinese-controlled Mischief and Subi Reefs (Philippine Daily Inquirer, July 27). The Philippine authorities monitored the situation but took no action.

The Phnom Penh Debacle

In the past, after China has undertaken assertive actions in the South China Sea it has tried to calm Southeast Asia’s jangled nerves. At the series of ASEAN-led meetings in Phnom Penh in mid-July, however, Chinese officials offered virtually no reassurances to their Southeast Asian counterparts. Worse still, China seems to have utilized its influence with Cambodia to scupper attempts by ASEAN to address the problem, causing a breakdown in ASEAN unity.

In the final stages of the annual meeting of ASEAN foreign ministers (known as the ASEAN Ministerial Meeting or AMM), the Philippines and Vietnam wanted the final communiqué to reflect their serious concerns regarding the Scarborough Shoal incident and the CNOOC tender. They were supported by Singapore, Indonesia, Malaysia and Thailand who felt that ASEAN should speak with one voice. Cambodia—which holds the rotating chairmanship of ASEAN and has close political and economic ties with China— objected because, in the words of Foreign Minister Hor Namhong, “ASEAN cannot be used as a tribunal for bilateral disputes” (Straits Times, July 22). Attempts by Indonesian Foreign Minister Marty Natalegawa to reach a compromise on the wording were unsuccessful and for the first time in its 45-year history the AMM did not issue a final communiqué.

The fallout from the AMM was immediate and ugly. Natalegawa labelled ASEAN’s failure to reach agreement “irresponsible” and that the organization’s centrality in the building of the regional security architecture had been put at risk (Straits Times, July 16). Singapore’s Foreign Minister, K. Shanmugam described the fiasco as a “sever dent” in ASEAN’s credibility (Straits Times, July 14). Cambodia and the Philippines blamed the failure on each other. Cambodia was pilloried by the regional press for its lack of leadership and for putting its bilateral relationship with China before the overall interests of ASEAN. One analyst alleged  Cambodian officials had consulted with their Chinese counterparts during the final stages of talks to reach an agreement on the communiqué [2]. China’s Global Times characterized the outcome of the AMM as a victory for China, which does not think ASEAN is an appropriate venue to discuss the dispute, and a defeat for the Philippines and Vietnam (Global Times, July 16).

A few days after the AMM, Indonesian President Susilo Bambang Yudhoyono dispatched his foreign minister to five Southeast Asian capitals in an effort to restore ASEAN unity. Natalegawa’s shuttle diplomacy resulted in an ASEAN foreign minister’s statement of July 20 on “ASEAN’s Six-Point Principles on the South China Sea” [3]. The six points, however, broke no new ground and merely reaffirmed ASEAN’s bottom line consensus on the South China Sea. In response to the joint statement, China’s Foreign Ministry said it would work with ASEAN to implement the 2002 Declaration on the Conduct of Parties in the South China Sea (DoC) (Chinese Ministry of Foreign Affairs, July 21).

One of the six points calls for the early conclusion of a code of conduct (CoC) for the South China Sea, but the Phnom Penh debacle has made that target highly doubtful.

Although China agreed to discuss a CoC with ASEAN in November 2011, Beijing always has been lukewarm about such an agreement, preferring instead to focus on implementing the DoC. Undeterred, earlier this year ASEAN began drawing up guiding principles for a code and in June agreed on a set of “proposed elements.” While much of the document is standard boiler plate, there are two aspects worthy of attention.

The first is that ASEAN calls for a “comprehensive and durable” settlement of the dispute, a phrase that seems to repudiate Deng Xiaoping’s proposal that the parties should shelve their sovereignty claims and jointly develop maritime resources. Clearly, the four ASEAN claimants have rejected Deng’s formula as it would be tantamount to recognizing China’s “indisputable sovereignty” over the South China Sea atolls.

The second interesting aspect concerns mechanisms for resolving disputes arising from violations or interpretations of the proposed code. The document suggests that disputing parties turn to the 1976 Treaty of Amity and Cooperation (TAC) or dispute resolution mechanisms in UNCLOS. Neither, however, would be of much utility. While the TAC does provide for a dispute resolution mechanism in the form of an ASEAN High Council, this clause has never been invoked due to the highly politicized nature of the High Council and the fact that it cannot issue binding rulings. Moreover, although China acceded to the TAC in 2003, Beijing almost certainly would oppose discussion of the South China Sea at the High Council because it would be outnumbered 10 to 1.

UNCLOS does provide for binding dispute resolution mechanisms, including the submission of disputes to the International Court of Justice (ICJ) or the International Tribunal on the Law of the Sea (ITLOS). China always has rejected a role for the ICJ in resolving the territorial disputes in the South China Sea and, in 2006, China exercised its right to opt out of ITLOS procedures concerning maritime boundary delimitation and military activities.

On July 9, Vice Foreign Minister Fu Ying had indicated to ASEAN foreign ministers that China was willing to start talks on a CoC in September. Two days later, however, as ASEAN wrangled over their final communiqué, Foreign Minister Yang seemed to rule this out when he stated discussions could only take place “when the time was ripe” (Straits Times, July 11). At present ASEAN and China are not scheduled to hold any meetings on the CoC, though officials currently are discussing joint cooperative projects under the DoC.

If and when the two sides do sit down to discuss the CoC, it is probable that Beijing will demand all reference to dispute resolution be removed on the grounds that the proposed code is designed to manage tensions only and that the dispute can only be resolved between China and each of the other claimants on a one-on-one basis. Taken together, these developments have dimmed seriously the prospect of China and ASEAN reaching agreement on a viable code of conduct for the South China Sea any time soon. As such, the status quo will continue for the foreseeable future.

Ian Storey

Notes:

1. “Why There was no ASEAN Joint Communique,” Philippine Department of Foreign Affairs, July 19, 2012 http://www.dfa.gov.ph/main/index.php/newsroom/dfa-releases/5950-why-there-was-no-asean-joint-communique-.
2. Ernest Bower, “China reveals its hand on ASEAN in Phnom Penh,” Center for Strategic and International Studies, July 20 2012.
3. “Statement of ASEAN Foreign Ministers on ASEAN’s Six-Point Principles on the South China Sea,” Cambodian Ministry of Foreign Affairs, July 20, 2012 http://www.mfaic.gov.kh/mofa/default.aspx?id=3206.

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