Asian Maritime Opportunities and Challenges to Regional Prosperity and Security
Design thinking for regional prosperity
I recently presented a paper at the 2024 RCEP Youth Dialogue on Regional Cooperation in Marine Economy in Haikou, Hainan. The paper focused on digitalisation and associated standards to support accelerating and streamlining trade value flows. This essay touches on some of the issues I discussed at the Forum, but seeks to frame the issues of regional maritime development within a wider a geopolitical frame.
When we think of South East Asia and its oceans, seas and riverine systems, our minds are these days frequently drawn to the tensions and conflicts around the South China Sea and the Taiwan Straits. The geopolitical dynamics of the region are fundamentally maritime in nature. Yet, the region’s oceans are as much a focal point of contention as they are a common resource upon which regional economic development and security can be built.
In recent months, much mainstream media focus has been directed towards the tensions between China and the Philippines concerning the stranded Philippine vessel on the Second Thomas Shoal, or the Ren’ai Reef. This comes on the back of the Philippines and U.S. expanding their military cooperation with four new naval bases announced last April. And now, the U.S., Philippines, Japan and Australia have conducted joint naval exercises in the South China Sea. China has responded with its own patrols.
The situation in the Taiwan Straits has been similarly intense, as the U.S. has now stationed Green Berets on Kinmen and Pingu Islands. A little earlier the U.S. State Department had approved $300m of military sales to Taiwan.
These geopolitical dynamics are one part of the region’s security context, but aren’t the only parts. Indeed, they often overshadow the ongoing collaborations and potential for deepening cooperation amongst nations that face the SCS. Maritime South East Asia has been, and remains, a crucial intersection point for people, commerce and cultures from across the globe. It has been so for millennia. With most countries in the region having significant exposure to the waters of various seas and oceans, understanding the opportunities, challenges and constraints of this geophysical context is critical to how we think about the future economic and security arrangements of the region.
No doubt, the seas, oceans and riverways are risk vectors that could be the loci of instabilities and tensions, just as they are the source of much regional vitality and economic well being. Managing a resources commons inevitably involves multiparty institutions, processes and governance. The media headlines typically amplify the inflection points of the moment; sovereignty and territorial disputes and the militarisation of maritime passageways but little consideration is given to addressing the opportunities for promoting regional peace and prosperity through effective governance and development of the region’s maritime resources.
Regional Commerce
South-East Asia, by which I include the member states of ASEAN, is predominantly a maritime environment. Even those states located on the Asian continent (Vietnam, Cambodia, Thailand and Myanmar) are intimately connected to the oceans through a myriad of river systems. The others are characterised by archipelagos and islands. Only modern-day Laos is landlocked. How the peoples of these states, and others, have interacted historically has been fundamentally conditioned by the waters and waterways.
Trade within the region, and connecting the region to other parts of the world, has been largely ocean-faring. That’s been the case historically as much as it is the case today.
Entrepot cities have acted as pivotal nodes in dynamic networks of commerce, through which goods and services, people, and knowledge have flowed. These entrepots have been stopover and transhipment ports, linking not only the economies of South-East Asia, but also enabling commerce to tie the civilisations of China, India and Persia together in centuries past.
Today, South East Asia is the anchor of the world’s largest free trade agreement: the Regional Comprehensive Economic Partnership (RCEP). Created at the initiation of ASEAN, RCEP came into force in 2021 with 15 signatory countries. In addition to the ten member states of ASEAN, the other RCEP participants are China, Japan, Republic of Korea, New Zealand and Australia.
Maritime Collaboration
The need to promote maritime and blue economy collaboration was the core message emerging from the 2024 RCEP Youth Dialogue on Regional Cooperation in Marine Economy recently held at Haikou, Hainan.
I was fortunate enough to have been invited to participate and present some thoughts.
There, over 220 delegates from across the RCEP member states shared experiences and knowledge as to how such collaboration can be promoted. At the forum, a blue economy partnership was determined to be a key goal of the China-ASEAN Strategic Partnership Vision 2030. Participants reached critical consensus on the following aims:
The need to facilitate further integration of regional blue economy initiatives: optimising resources and functional zones in marine resource utilisation, so as to promote the free and convenient cross-border flow of marine economy-related trade and investment.
Jointly forge a ‘blue engine’ for sustainable development, adhering to the principles of mutual complementarity and mutual benefit, so as to facilitate the green transformation of fisheries, marine tourism, port and shipping industries; and to promote the adoption of renewable energy such as wind power, solar power and tidal energy.
Jointly protect and develop marine resources with a focus on offshore renewable energy, sustainable fisheries, seawater desalination, and marine ecology management and biodiversity protection.
Improve blue economy development capacity, focusing on skills and knowledge transfer from more advanced to developing nations in the region.
Jointly develop and expand people-to-people exchanges in blue economy education and training, as well as the development of scientific and technological exchange programs.
In other words, there was a recognition that effective governance and development of the maritime resources commons is a necessity for ongoing economic and social development of the region’s nations.
The region’s maritime and riverine environments are rich in resources. Developing these in a fair and sustainable manner is one of the key challenges. Effective dialogue can deliver progress in addressing disputes, such as those between Thailand and Cambodia in relation to contested territories in the Gulf of Thailand. There, the two nations have agreed to resolve their outstanding claims and work collaboratively to develop the resources.
Cambodia and China have recently agreed on the development of the Funan Techo Canal, which would enable Cambodia to directly engage in maritime trade without bypassing Vietnam. This $1.7 billion project would see the development of a shipping canal that would reach the deep-sea port at Ker near Sihanoukville on Cambodia’s Gulf of Thailand coast. There also are proposals, presented at the Forum in Haikou, for further development of Cambodia’s riverine ecosystem with electric watercraft linking upstream communities to ports and network of solar power generation installations.
As part of the Belt and Road Initiative, Indonesia and China have in place mechanisms for enhanced bilateral maritime collaboration. China and Indonesian scientists are working together to map Indonesia’s seas, of which only 19% is presently mapped.
These are just some examples of regional collaboration. But the situation is complex.
The Fly in the Ointment
While there was considerable mutual commitment to the five core objectives at the Forum, the development of collaborative approaches to the region’s maritime commons cannot be pursued outside of the context of regional geopolitical realities.
US militarisation of Asia since the end of World War 2 has been normalised. It barely rates a mention in the day-to-day discourse about the securitisation of the region, which in many instances in mainstream western commentary starts with the proposition that we are witnessing the most intensive peacetime military buildup since WW2 being undertaken by China, and it is this that has sparked an implied ‘defensive’ response from the US and its regional resources by way of compliant States - a colony (Philippines); a post-war client state (Japan); and an anxious subimperial power (Australia).
The claims about China’s recent military modernisation are not supported by the evidence, however. It is well known that the US significantly outspends China in defence. Indeed, the US’ defence budget is larger than the next 9 countries’ defence budgets combined. More recent analysis, by Greg Austin from the University of Technology Sydney, suggests that the claim about China’s military development being the largest ever in peacetime is unfounded. The Soviet Union and the USA were responsible for more significant build-ups.
China’s military has developed significantly. There’s no dispute about this. However, this has not taken place without an historic context. The relevant context is defined by what is actually an expansive militarisation of a region since WW2 by what is in effect a power foreign to the region, and the reality that the power in question has demonstrated a penchant for “kinetic diplomacy” first. I am talking, of course, about the USA.
According to the not-for-profit Asia Pacific Research Network, the US has over 240 bases in North East Asia and the Pacific alone, supporting a deployment of over 80,000 troops. David Vine has compiled a thorough database of American military bases across the world, accessible publicly. The US has also a track record of intensive military interventions. According to the historical data analysed by Monica Duffy Toft and Sidita Kushi in their book Dying by the Sword (2022), the US initiated on average 2.4 military interventions per year between 1946 and 1989, and 3.7 between 1990 and 2019. They describe the US as a nation that is “addicted to military interventions”. Indeed, Duffy Toft and Kushi show that the US actually intensified not just quantitatively but qualitatively the interventions in the post-1989 era, which was ostensibly the period of American Unipolarity in which US security was least under threat.
To summarise, the historic behavioural evidence is that the US has been ‘trigger happy’, preferring military interventions rather than non-kinetic diplomatic initiatives to addressing intra-state issues. It could only do this on the basis of a belief in its untrammelled military advantage.
The fundamental issue isn’t China’s military modernisation per se; it’s that the US has come to the conclusion that China is a peer competitor, systemic threat-cum-adversary whose ongoing development cannot be countenanced. Indeed, for some, China’s mere existence is an existential threat.
At a bilateral economic level, the US has sought to throttle China’s economic development through the imposition of trade tariffs and a growing range of export prohibitions in high-technology areas, ostensibly in the name of national security. At the same time, it has judged that it no longer enjoys an asymmetric power balance in its favour, and has been working tirelessly to reassert its military primacy. The concern is that Reagan’s doctrine of ‘peace through strength’ is no longer sustainable due to a whittling away of the pillars of strength.
Therefore, at a regional level, the US game plan is twofold:
First, it pursues a balance of power ‘in its favour’ through intensification of its already expansive military capabilities regionally (that is, to create and expand an imbalance).
Second, it seeks to stoke instabilities and fears across the region, as a ‘divide and conquer’ gambit while marshalling its regional allies to form new allegiance structures. This is what AUKUS and QUAD are about.
America’s pursuit of imbalance in the name of ‘deterrence’ - that is, in other words, a restoration of US Primacy in the region - is anathema to the achievement of sustainable regional peace. The rhetoric of ‘deterrence’ belies a reality that could actually be made more dangerous through the pursuit of actions in the name of deterrence. Deterrence has a high risk of failure, as demonstrated recently in the case of Israel’s overwhelming military preponderance that failed to deter the Hamas attacks, as detailed by Lawrence Freedman. At best, deterrence buys time but it can create the opposite outcome than that originally sought. Rather than ‘deter’ others, the pursuit of ‘deterrence’ could actually spur on a regional arms race as states seek to ‘out escalate’ competitors. Further, the pursuit of ‘deterrence’ can often result in the creation of alternative balancing coalitions that make matters worse.
In the Asian regional context, the US’ pursuit of a power balance in its favour undermines ASEAN Centrality as the region’s organising principle. American regional primacy is incompatible with a political architecture that seeks to ensure the region’s nations are able to act in concert in their own interests and through their own methods. Alliance bodies such as AUKUS and QUAD effectively subordinate ASEAN within the region, pushing to one side the centrality of ASEAN member states, acting through consensus, in the governance of regional matters.
Security and Prosperity are Symbiotic
Yet, ASEAN has played important roles in maintaining regional stability and enabling economic development. Its RCEP trade agreement lays the groundwork for expanded regional economic integration and cooperation. Maritime or blue economy cooperation is one such area, as noted above. This focus also intersects with other less tangible areas of institutional development that must take place at the same time.
The region’s economic development has experienced previous episodes of significant instability. Lessons have been learned and must continue to be learned.
The Asian Financial Crisis (AFC, 1997) and the aftermath of the Global Financial Crisis (GFC, 2008) are two cases in point. The AFC was catalysed by growing foreign currency risks associated with capital inflows into the region. This saw excessive buildup in US dollar and US dollar-denominated credit in the domestic financial sectors of Asia. The US dollar liquidity problems that emerged and then spread across Asia with the AFC gave rise, in the aftermath of the crisis, to the development of regional financial institutions that would go towards innuring the region’s economies from future instabilities such as those of the GFC.
Malaysia proposed the creation of an East Asia Economic Cooperation (EAEC), which would not include the US, Australia or Oceania. This proposal did not proceed but did contribute to the emergence of ASEAN+3 (China, Japan and Korea) and eventually expanded to include India, Australia and New Zealand. This was a precursor to the foundations of RCEP. Strengthening regional financial collaboration and mitigating against risks of excessive exposure to the US dollar regime saw the development of institutions such as Asia Development Bank (pictured above), the Asian Bond Market Initiative (launched in December 2002) and the Chiang Mai Initiative (launched 24 March 2010).
The Asia Bond Market Initiative was promoted by the ASEAN+3 grouping, to develop local currency bond markets as an alternative source of funding to foreign-currency denominated bank loans. The Chiang Mai Initiative is a multilateral currency swap arrangement amongst ASEAN, China, Hong Kong, Japan and Korea. It emerged from a series of bilateral swap arrangements entered into by ASEAN+3 member states in May 2000 so as to better manage short-term liquidity challenges and to avoid excessive reliance on the IMF. The Initiative is grounded on a foreign exchange pool worth around US$240 billion.
More recently, a number of ASEAN nations have begun cross-border payments using national currencies via the convenience of a QR code for consumers. This technical infrastructure presages the development of genuine national central bank digital currencies as mediums of cross border exchange. Initiatives such as mBridge - involving the People’s Bank of China, Hong Kong Monetary Authority, Bank of Thailand, the National Bank of the UAE and the Bank of International Settlements - are also exploring ways of enabling national currency-based trade settlements.
These initiatives are consolidating as technical platforms are tested, and individual nations progress their own digital currency initiatives. Backed by growing intra-regional trade, there is every possibility that the RCEP network can evolve into a genuinely multi-currency ecosystem. At the same time, regional collaboration in data governance and regulatory systems continue to progress. The harmonisation of data systems and governance are the critical counterpart to the development of digital currency settlements systems. Harmonised cross border data governance and technology solutions support trade flows and also reduce the exposure risk of participating nations to the weaponisation of payments systems.
The Asian region needs to be sanctions-proof and protected from risks associated with the exposure to volatilities in USD-denominated markets and the monetary policy proclivities of the Fed.
Technical platforms that are operated regionally, with regional governments and state institutions playing pivotal roles in the integrity of information systems for cross-border commerce are critical to these aims. The building of these systems on the back of new digital standards will also facilitate regional integration, and contribute to the consolidation of regional financial autonomy and sovereignty.
The development of the digital and currency commons runs in parallel with the expansion and integration of the real economies across the region. The governance of the virtual commons supports and reinforces the development of the resources commons, including the seas and riverways that the entire region depends upon. Harnessing the renewable energy possibilities of the oceans and rivers is a key plank of the consensus reached at the Haikou Forum. Development of wind, solar and tidal power systems progressively reduce risk exposure to fossil fuels (that could be intercepted in transit) and supports energy security across the region.
International Relations Realists such as John Mearsheimer argue that prosperity and security are an either / or choice. This a priori can and must be challenged. Instead, we need to see prosperity and security as symbiotic co-dependents; the more of one, the more of the other. Whole-of-region development cooperation in the management and development of the marine commons, and associated institution building in data and payments systems, build on the successes of Asian economic and political institution building since WW2. ASEAN has played a pivotal, if under-appreciated role, in the creation of conditions for regional stability. It has in recent years played an important coordination and advocacy role in the development of financial and trade institutions.
The test of actions is whether they contribute to peace and stability or provoke instability and tensions. The institutional test is whether actions contribute to the development and strengthening of ASEAN Centrality or whether they weaken it.
The doctrines of deterrence ‘buy time’ at best, but can make things worse; much worse. Rather, the core lesson to be learned from Asia’s own experiences is that the public policy aim should be far more ambitions - the design and creation of institutions that sustain security through prosperity and prosperity in security. It’s a question of creating a peace that is worthy of its name.
And so, the people across the region, through their governments and other public institutions, are faced with choices. The main choice is between:
a future in which regional multipolarity is the defining modus operandi, and whose indivisible security and prosperity is anchored by multipolar institutions run by regional states through ASEAN as pivot, or
a future in which regional ‘stability’ is dictated by the actions of an exogenous power, whose regional leverage derives from historic colonial power, thereby exposing the region to risks associated with the interests of others.
A recent survey points to a key shift in opinion across ASEAN and in most of its member states in terms of preferences between China and the U.S. For the first time, if forced to choose, ASEAN respondents opted for China (50.5%) over the U.S. (49.5%). Last year the same survey showed 38.9% opting for China and 61.1% preferring the U.S. Only the Philippines and Vietnam bucked the trend, with attitudes in Singapore remaining unchanged. In the remaining seven member states, survey respondents strongly moved in favour of China. This suggests that regional citizens are increasingly favourable towards a future that sees far less American influence in the region.
The spectre of colonialism casts a long shadow across the region. Decolonialisation has been effective to varying degrees, but it’s far from complete. De jure sovereignty has been diluted by de facto colonialisation via the mechanisms of global finance and US dollar denominated development loans, and the continued presence of American military bases.
China is more than capable of defending itself against American military aggression. The U.S. no longer unilaterally and unquestionably commands the South China Sea. Ongoing developments in material sciences and various technologies, coupled with highly efficient industrial supply chains, ensure an efficient and combat effective array of capabilities. But this isn’t a machismo contest - that’s the folly of the ‘deterrence discourse’. Rather, it’s about an architecture for sustained regional peace and prosperity.
China’s economy contributes 54% of RCEP’s combined GDP. It is the region’s largest trading partner; and ASEAN is China’s largest combined trading partner. China is the largest investor and provider of development finance in the region. China is a regional (and global) leader in the development of applied technologies, which can contribute to better maritime management and sustainable development of maritime resources. The marine and riverine resources of South East Asia are part of a regional commons that provides the means by which nations can find common ground, and also enhance their own autonomy through expanded blue economy development and renewable energy development.
In this sense, China can contribute to the ballast for the consolidation of Asian autonomy, and for aligning and contributing to security and prosperity within the framework of regional multilateralism.