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    Asian Economy
     May 24, 2005
The price of Asian conflict
By Chietigj Bajpaee

HONG KONG - The Asian way of resolving conflicts - sweeping disputes or areas of disagreement under the carpet and focusing on developing economic relations - has failed. This is proven by a series of long-standing disputes that have exploded in recent weeks, including a maritime territorial dispute in the Sulawesi Sea between Malaysia and Indonesia, a dispute between South Korea and Japan over the Tokdo/Takeshima islets, and growing tensions between China and Japan over Japan's republishing of a controversial textbook and over potentially energy-rich territory in the East China Sea. The escalation of these disputes has highlighted the urgent need for Asian states to reform their multilateral conflict and dispute resolution mechanisms.

While growing trade and economic interdependence between states increases the cost of conflict, it does not deter it. The recent protests in China against Japan's bid for a permanent seat in the United Nations Security Council, which included attacks on Japanese shops and a boycotting of Japanese brands, has highlighted this. In fact, growing cross-border exchanges reinforce differences and a sense of national identity, while economic prosperity restores national pride and confidence to address past injustices.

Across the region numerous territorial disputes lie dormant, awaiting only the manipulation by politicians to stoke nationalist passions or the discovery of natural resources to reawaken them. The fact that oil prices are rising and the majority of Asian states are significant energy importers has also placed pressure on Asian states to look for energy resources closer to home, and in some cases in disputed territories.

Long-standing disputes are also undermining confidence-building measures and preventing cooperation in addressing shared security threats, such as international terrorism, piracy in the Strait of Malacca, through which a third of the world's trade and half of the world's oil supplies transit, as well as less conventional security threats such as AIDS, SARS, bird flu and tsunamis.

Finally, Asia's climate of suspicion and distrust, coupled with its code of conduct based on non-intervention and non-confrontation, has allowed a number of internal instabilities to escalate into regional and international security crises.

For example, instabilities in Myanmar's military regime through its suppression of ethnic groups and the democratic process are fueling tensions within the Association of Southeast Asian Nations (ASEAN) over the question of Yangon's chairmanship next year. Similarly, the insurgencies in India's northeast, commonly referred to as the "Seven Sisters", have the potential to combine with the Maoist insurgency in Nepal, the insurgencies in Myanmar and rising Islamic fundamentalist sentiment in Bangladesh to create a "failed region" in Asia.

Frictions between China and Taiwan and on the Korean peninsula, while rooted in internal conflicts, have regional and global ramifications. In Central Asia, the Ferghana Valley has become a focal point for instability fueled by poverty, dictatorial regimes, growing Islamist sentiments, and "great power" competition over energy resources. This was evinced recently with a wave of protests in Kyrgyzstan, resulting in the ousting of president Askar Akayev, followed by the repression of opposition protests in neighboring Uzbekistan by President Islam Karimov.

Asia's multilateral and bilateral security bodies are proving to be deficient in addressing these disputes. Most of the current security arrangements are only temporary stop-gap measures. The irony is that while North America and Europe represent relative "islands" of peace, with few internal security threats, they possess a number of well-developed multilateral security forums, think-tanks and consultancies that continuously investigate global and regional threats to internal stability. On the other hand, in Asia, where there exist states with significant defense budgets and a high concentration of inter-state disputes and internal instabilities, multilateral security bodies are sorely lacking, or lack maturity. This discrepancy is understandable, given the legacy of the Cold War division of Asia and the fact that most Asian nation-states have only come into being in the last half century and have a still developing sense of identity. However, Asian states cannot afford to be complacent any longer, given the growing economic interdependence of the region.

Nationalism and natural resources
Most inter-state tensions in Asia combine tangible disputes over natural resources with intangible disputes over historical animosities and jingoistic passions. In East Asia, Japan has been a focal point for these disputes as a result of its World War II legacy. For example, while China has become Japan's largest trading partner, this economic progress could be unraveled by political and military confrontation and energy competition.

Most recently, protests not seen since the Tiananmen Square protests of 1989 have taken place across more than a dozen cities in China, resulting in attacks on Japanese people, shops and brands. The protests were set off by opposition to Japan's bid to gain a permanent seat on the UN Security Council, Japanese Prime Minister Koizumi's annual visits to the Yasukuni Shrine that honors war dead, including 14 class A war criminals, and Japan's republication of a history textbook that allegedly understates the brutality of Japan during its invasion of Asia, including the issues of "comfort" women and the Nanjing massacre.

These tensions only add to a string of recent Sino-Japanese frictions, which include football hooliganism at the Japan-China finals of the Asian Cup tournament in August 2004, and former Taiwanese president Lee Teng Hui's visit to Japan at the end of 2004. Japan has also decided to cut its overseas development assistance to China in the presence of China's improving standard of living, high growth levels and confrontational relations with Japan. The sporadic discovery of chemical weapons left over by the Japanese army on Chinese soil and reports of biological tests on Chinese civilians, such as those of the infamous Unit 731, have also fueled Sino-Japanese tensions.

These tensions culminated with Japan identifying China as a potential security threat in its National Defense Program Outline released in December 2004, and the US and Japan issuing a security statement that designated the Sino-Taiwan dispute as a "common strategic objective" in February.

These tensions are likely to be further inflamed by both states' quest for energy security, as both are net oil importers. A territorial dispute between China and Japan in the East China Sea, which both sides claim as their exclusive economic zone, is being fueled by reports of vast supplies of oil and gas in the area. The disputed territory includes the Diaoyu or Senkaku islands and the Chunxiao gas field. Japan regards the median line as its border, while China claims jurisdiction over the entire continental shelf. Although the Chunxiao gas field is on the Chinese side of the median line, Japan claims that China may be siphoning energy resources on the Japanese side. China has been drilling in the area since 2003 and the Japanese government gave the green light for oil and gas exploration in the disputed waters in mid-April.
This competition took the form of a military confrontation following the incursion of a Chinese nuclear-powered submarine into Japanese waters off Okinawa in November 2004. The intrusion was followed by a two-day chase across the East China Sea. While China offered a swift apology for the incursion, this was soon followed by the intrusion of a Chinese research vessel into Japanese waters near Okinotori in December. The vessel is believed to have been surveying the seabed for oil and gas drilling purposes. This was the 34th maritime research exercise by Chinese vessels within Japan's economic zone in 2004, up from eight in 2003, with China not giving prior notification in 21 of the 34 cases.

A similar pattern of relations can be seen between Japan and South Korea, with economic cooperation coexisting with political and military confrontation. Relations between South Korea and Japan have shown considerable improvement in recent years, with both states co-hosting the soccer World Cup in 2002 and growing cultural exchanges through tourism and the popularity of South Korean soap operas in Japan and Japanese pop music in South Korea. Being the 40th anniversary of the 1965 normalization treaty, 2005 was designated the "friendship year" between South Korea and Japan.

Nevertheless, tensions have recently resurfaced over a territorial dispute in the Sea of Japan, which South Korea refers to as the East Sea, over the Takeshima islets, as known in Japan, and Tokdo, as known in South Korea. While the islets, which are currently occupied by South Korea, are of little value, the seas around them are rich fishing grounds and possibly possess natural gas and mineral deposits.

Emotions in South Korea flared when a Japanese prefecture declared February 22 Takeshima Day. Flag-burning and protests against Japan have since become commonplace across South Korea, as well as attacks on Japanese government websites. The South Korean military has also increased patrols and allowed civilian tours of the disputed territory. South Korean President Roh Moo-hyun has also demanded that Japan apologize and offer compensation for World War II atrocities, although Japan claims that it has fulfilled its obligations under the 1965 normalization treaty.

Japan's relations with Russia have also been strained, as both states have not signed a formal peace treaty ending the hostilities of World War II due to a territorial dispute over the Southern Kuriles, or Northern Territories. Tensions have been further fueled by Koizumi's sail around the disputed territories in September 2004. These actions are undermining cooperation in the energy sphere. Russia had recently given the go-ahead to construct an oil pipeline from Taishet to the pacific port of Nakhodka on the Sea of Japan over a route favored by China, to Daqing in northeast Heilongjiang province. However, Russian-Japanese frictions have delayed construction and forced Russia to consider building a branch of the pipeline to China.

Another inter-state dispute that has flared in recent weeks is between Malaysia and Indonesia. Malaysia-Indonesia relations were already tense as a result of Malaysia's harsh crackdown on a million illegal workers, 450,000 of whom were Indonesians, following the end of a four-month amnesty. The situation was aggravated by Indonesia's subsequent slow processing of travel documents for Indonesians wishing to return to Malaysia, which created labor shortages in Malaysia. Tensions were further fueled by a territorial dispute in the Sulawesi Sea, set off on February 16 when Malaysia's state-owned oil company Petronas awarded oil exploration rights to Shell in two blocks of an offshore oil field where Indonesia had awarded rights to Unocal last year.

A war of words ensued, with racist slurs and Sukarno-era anti-Malaysian slogans accompanied by protests, attacks on Malaysian websites and the deployment of military aircraft and naval vessels to the disputed region. This culminated in the collision of a Malaysian patrol boat with an Indonesian navy ship in April when Malaysian vessels attempted to approach a lighthouse being built by Indonesia on the Unarang reef.

While not an active dispute, the long-standing maritime territorial dispute in the South China Sea over the Spratly and Paracel islands may also be reignited by the potentially rich supply of energy resources in the disputed region. The 130 small islands making up the Paracel islands, which have been occupied by China since 1974, are also claimed by Vietnam and Taiwan. The 400 islands of the Spratly chain have partial claims by the Philippines, Brunei and Indonesia, and are fully claimed by Vietnam, Taiwan and China. Five states have permanent military garrisons on the atolls, in addition to surveillance facilities under the guise of "bird-watching" towers, weather huts and tourist facilities.

Most recently, China commenced joint pre-exploration studies with the Philippines in the South China Sea, which have been openly opposed by Vietnam. China, meanwhile, has protested over PetroVietnam welcoming international bids for drilling and exploration activities in the disputed waters and Vietnam starting commercial flights and tours of the disputed territory. Both states have engaged in sporadic clashes on at least four occasions, the most violent of which took place in 1988, in which the Chinese sank three Vietnamese naval vessels, killing 76 sailors.

Sino-Vietnamese tensions have recently taken a back seat to the burgeoning trade relationship between both states, with China now becoming Vietnam's third largest trading partner. A hotline was also established between both states in August 2004 as part of a commitment to resolve land and sea border disputes by peaceful means. However, as China expands its naval power projection capabilities and becomes increasingly desperate to access the potential energy resources in the region, conflict may once again overtake cooperation.

A series of smaller scale disputes also continue to plague the region, such as between Malaysia and Singapore over the Johor causeway, the price of Malaysian water for Singapore, rival claims for the rocky islet of Batu Puteh or Pedra Branca, which is currently held by Singapore, Singapore's use of Malaysian airspace, Malaysia's railway land in Singapore and the bitter legacy of Singapore's separation from Malaysia in 1965. Thailand and Myanmar also have frictional relations, with the latter accusing the former of supporting insurgent groups with help from the US. Most recently, Myanmar's ruling junta accused the US and Thailand of supporting the May 7 triple bombing in Yangon that killed 19 people.

In some cases, territorial disputes are rooted in historical memory, such as the Sino-Korean dispute over the ancient kingdom of Koguryo. Other disputes are recent, such as that between Australia and East Timor over the energy-rich Timor Sea, with the former claiming the entire continental shelf as part of its exclusive economic zone, while the latter regards the median line as its boundary. Australia has been pumping oil out of the disputed territory since 1999 and has withdrawn from sections of the International Court of Justice relevant to maritime boundary disputes. The issue of terrorism is also adding an additional dimension to inter-state tensions, as seen with recent frictions between Thailand and Malaysia over the increasing violence in Thailand's south and between Indonesia and its neighbors, with the latter accusing the former of spawning terrorism in the region.

Diverting attention from internal problems
In many cases these inter-state instabilities emanate from internal instabilities. Many disputes are constructed or inflated to deflect attention from domestic problems. For example, as the Japanese government has had limited success in restarting the Japanese economy, it has diverted attention to international issues with attempts to resolve territorial disputes and grant Japan a more active role on the world stage. Koizumi's visits to the Yasukuni Shrine, his sail around the disputed Southern Kurils/Northern Territories, and deployment of Japan's Self Defense Forces to Iraq are all part of this process, as are attempts to gain a permanent seat on the UN Security Council and possibly amend Japan's pacifist constitution with respect to Article 9, which renounces war.

Meanwhile, in South Korea growing anti-Japanese sentiment has been used by the government to target the opposition Grand National Party, with investigations into wartime collaborators. In China, protests against Japan come at the same time as growing protests against the Chinese government over corruption and unemployment. With the Chinese Communist Party losing its communist credentials, as the economy increasingly resembles a capitalist market, it has put more emphasis on its Chinese credentials by addressing past injustices against the Chinese people.

The dispute between Indonesia and Malaysia also flared at the same time as the Indonesian government decided to cut fuel subsidies in the presence of rising oil prices, which raised domestic fuel prices by 30%.

New leaders, such as Indonesian President Susilo Bambang Yudhoyono, Malaysian Prime Minister Abdullah Badawi and Chinese President Hu Jintao, may also reignite inter-state disputes to demonstrate their patriotic credentials. For example, China's new anti-secession law targeting Taiwan could be used by Hu to solidify his support base and appease the hawks and hardliners within the Communist Party.

Finally, many of Asia's inter-state conflicts are rooted in the weak national identities of the region. In Asia, statehood has often been achieved or imposed by former colonial rulers before national identity has been forged, resulting in situations where the only binding factor in a country is its common external enemy. This increases the likelihood of inter-state disagreements and frictions escalating into full-scale conflict.

Irrelevant conflict resolution mechanisms
Current dispute resolution mechanisms have proven themselves deficient in addressing recent inter-state disputes, let alone resolving more active disputes such as the nuclear flashpoints between India and Pakistan over Kashmir, between China and Taiwan, and on the Korean peninsula. While Asia has a number of multilateral security bodies, most are still in their infancy when it comes to addressing active conflicts and security crises.

The plethora of regional bodies, such as the Asia Cooperation Dialogue, the East Asia Summit, the Shanghai Cooperation Organization, ASEAN, the ASEAN Regional Forum, the Asia-Pacific Economic Cooperation, the South Asian Association for Regional Cooperation, the Asia-Africa Dialogue, the Non-Aligned Movement, and the Conference on Interaction and Confidence-Building Measures in Asia are usually sidelined when addressing inter-state disputes. In most cases, if a dispute were to escalate into full-scale conflict, short of external involvement such as referring the dispute to the UN Security Council, no regional solution exists.

The code of conduct for these organizations, based on the principles of non-interference and state sovereignty, has also allowed for wealthy and stable states to coexist with poverty-stricken and conflict-ridden states and led to the escalation of internal instabilities into regional crises.

Furthermore, emphasis on non-confrontation and face-saving has sidelined regional bodies from addressing regional crises. For example, the "Bandung Spirit", the "ASEAN Way", the ASEAN Treaty of Amity and Cooperation and China's Five Principles of Peaceful Coexistence basically emphasize the need to avoid conflict at all costs, even it means avoiding discussion of the issues.

For example, the Five Principles of Peaceful Coexistence, which was first introduced between China and India in 1954, did not prevent the two states from going to war in 1962 and having adversarial relations ever since.

The "ASEAN Way" has not prevented states in Southeast Asia from making harsh statements against each other and engaging in occasional skirmishes. Even today, the "hands-off" code of conduct of the numerous security bodies of the region has prevented their involvement in addressing internal security problems that are fast escalating into regional crises. These include the Maoist insurgency in Nepal, the Muslim insurgency in southern Thailand, Islamic terrorism in the southern Philippines from the Moro Islamic Liberation Front and Abu Sayyaf, and instabilities in Indonesia from the Jemmah Islamiah terrorist movement and the Aceh and Papau separatist movements.

Finally, the climate of distrust created by long-standing inter-state disputes prevents cooperation on shared security threats such as international terrorism and piracy, energy security, epidemics such as bird flu and SARS, and developing a tsunami detection system to prevent a repeat of Boxing Day 2004. These disputes are also hindering attempts at regional integration. For example, Japan's tense relations with its neighbors are delaying plans for an ASEAN+3 Free Trade Area.

At this rate, Asia's multilateral security bodies could soon join the list of previously irrelevant and failed security bodies, such as the Southeast Asia Treaty Organization, which was envisioned by the US as Asia's version of the North Atlantic Treaty Organization and which dissolved in 1977, and the Association of Southeast Asia (ASA), which was ASEAN's predecessor.

Part of the problem lies in the fact that the Cold War did not end in Asia. Few of Asia's communist regimes collapsed with the fall of the Soviet Union. Vietnam, China and North Korea still retain their communist credentials, although all three have developed capitalist characteristics to varying degrees. Even states that claim to have shed their communist shackles maintain many of their communist-era institutions, as seen in Central Asia. Thus the Cold War climate of distrust is still very much present in Asia, as evinced by talk of a US-Japanese-Indian containment of China. This culture of mistrust in the region increases the potential for long-standing internal and inter-state disputes and conflicts to escalate into full-blown regional and international crises and undermines the utility of regional bodies to address these crises.

It is widely believed that through developing relations in economic and cultural arenas that the security arena will somehow become irrelevant, or disappear. However, the popularity of Japanese pop music in South Korea or South Korean soap operas in Japan has not prevented the escalation of tensions between both states over the Tokdo/Takeshima islets.

Nor has the fact that China is now Japan's largest trading partner prevented protests against Japan's bid for a permanent seat on the UN Security Council, or deterred football hooliganism at the Asian Cup final between the two states.

To be sure, economic interdependence and cultural exchanges are important, as can be seen by growing Taiwanese investment in China having a restraining influence on the separatist tendencies of the Democratic Progressive Party in Taiwan. Increasing transport linkages and cricket and Bollywood diplomacy have also reignited a sense of shared history and culture between India and Pakistan.

However, these processes can only go so far. Rapprochement in the security arena must proceed in tandem with improving relations in the economic and cultural arenas for the sense of goodwill to be solidified. Economic, political and security cooperation are not mutually exclusive, but rather mutually reinforcing.

Chietigj Bajpaee is a researcher for Civic Exchange, a Hong Kong-based public-policy think-tank. He has been a researcher for the London-based International Institute for Strategic Studies and a risk analyst for a New York-based risk management company. He has a graduate degree in international relations from the London School of Economics and an undergraduate degree in economics and government from Wesleyan and Oxford Universities. His areas of interest include energy security and political, economic and security developments in the Asia Pacific region. The views expressed here are his own. He can be contacted at c.bajpaee-alumni@lse.ac.uk

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