February 02, 2011

How to Get Southeast Asia Right

By Abraham M. Denmark

Source: The Diplomat

After more than half a century of relative neglect, Maritime Southeast Asia—the South China Sea and the six countries that border it—has become a major focus for US strategists and policymakers.

Since the end of World War II, Washington’s approach to this region was largely a by-product of other overarching international objectives. During the Cold War, the United States saw maritime Southeast Asia as a bulwark against communist expansion. Then, with the end of the Cold War and the onset of the Asian financial crisis, the region became ground zero in a US-led effort to save the global economy. After the terrorist attacks of September 11, 2001, the emergence of al-Qaeda-affiliated groups in the region—and their successful bombings of Western targets in Bali and Jakarta—transformed the area into a battleground in the war on terror.

But the US approach to the region is now undergoing yet another change.

Maritime Southeast Asia matters. Situated at the strategic crossroads of the Indian and Pacific Oceans, the region plays a vital role in securing global trade flows. The region contains a US ally (the Philippines), a long-time US friend (Singapore), and an up-and-coming regional heavyweight (Indonesia) who in recent years have improved diplomatic and security ties with the United States.

Economically, the region has come a long way since the dark days of the 1997 financial crisis. Singapore has joined New York and London as a top-tier financial centre; Indonesia has become one of the world’s leading emerging markets and is a member of the G-20; and Vietnam has achieved growth rates rivalling those of China. The region’s 465 million people produce a gross domestic product of nearly 1.5 trillion dollars and together constitute a vital market for US exports. Maritime Southeast Asia also hosts considerable US foreign direct investment (FDI). Indeed, its stock of US FDI is more than twice China’s and almost six times that of India.

In addition, the region lies on the front line of China’s rise. Over the past two decades, a booming China has
economically permeated the region, surpassing the United States, Japan, and Europe to become its largest trading partner. At the same time, maritime Southeast Asia’s defining body of water, the South China Sea, has become a regional flashpoint. Beijing asserts sovereignty over most of the South China Sea while a number of littoral states advance more modest territorial claims.

In recent years, China has employed blustering language and military exercises to intimidate other claimants and overlaying these local tensions in the South China Sea is an emerging maritime rivalry between the United States and China. In contravention of established international law, for example, Beijing has harassed US ships navigating areas of the South China Sea that fall within its exclusive economic zone. Whether China’s ‘peaceful rise’ amounts to more than mere rhetoric will be tested in maritime Southeast Asia early—and often.

Enter the Obama Administration

Having spent part of his childhood in Indonesia, US President Barack Obama came to office with a particularly strong interest in the region. He declared that the days of US withdrawal from the region had ended, and billed himself as ‘America’s first Pacific president.’ In addition, Secretary of State Hillary Clinton’s inaugural foreign trip included maritime Southeast Asia, signalling a renewed US commitment to the region.

This initial emphasis on maritime Southeast Asia translated into a series of initiatives aimed at strengthening US ties with the region.

The first was the launch of a US summit with the ten-member Association of Southeast Asian Nations (ASEAN), the region’s premier multilateral organization. In fact, the November 2009 summit broke new ground—for the first time a US president met with all the ASEAN leaders in one sitting.

Another move was US accession to the ASEAN Treaty of Amity and Cooperation. As Clinton put it, signing the treaty amounted to ‘a very strong statement on behalf of our administration that the United States intends to be a very active presence in the region bilaterally…and multilaterally through organizations like ASEAN.’ Ratifying the treaty effectively laid the foundation for more substantive cooperation between the United States and the region in the future.

A third step in engaging the region multilaterally was the decision to join the East Asian Summit. This five-year-old body, of which ASEAN remains the core, also contains China, Japan, South Korea, India, Australia and New Zealand. By requesting an invitation to the East Asian Summit, the United States demonstrated its commitment to playing an integral role in regional institutions.

But on one particular issue—namely the South China Sea—the Obama administration has made a particularly significant break with past US policy. Despite Beijing’s increasingly harsh rhetoric and harassment of foreign ships, Washington had refrained from publicly staking out a position on this expanse of water. But this changed last year. At the Shangri La dialogue in Singapore, Defence Secretary Robert Gates cast the South China Sea as an area of  ‘growing concern’ and warned ‘we oppose the use of force and action that hinder freedom of navigation.’ Less than two months later, at an ASEAN meeting in Hanoi, Clinton affirmed that peacefully resolving territorial disputes in the South China Sea constituted a US interest. To the nations of maritime Southeast Asia, such statements were a clear signal of the United States’ unwillingness to retreat in the face of growing Chinese assertiveness.

But the United States has done more than simply confront Beijing directly on the South China Sea issue—it has also been moving forward ties with two pivotal states in Southeast Asia: Indonesia and Vietnam.

The trend of deepening US ties with Indonesia that began during the Bush administration has accelerated under the Obama presidency. In February 2009, Clinton offered support for a comprehensive US partnership with Indonesia, and the two countries subsequently unveiled a roadmap for a comprehensive partnership emphasizing cooperation in higher education and the environment. These efforts culminated in Obama’s visit to Jakarta in November 2010, which formally launched the US-Indonesia Comprehensive Partnership. In addition, the Obama administration has completed the normalization of US military ties with Indonesia, restoring links with KOPASSUS, an Indonesian special operations unit that was once on the US black list over human rights abuses committed in the 1990s.

Meanwhile, US ties with Vietnam have advanced rapidly. In July 2009, the United States unveiled the Lower Mekong
Initiative, a five-nation effort incorporating Vietnam that’s devoted to cooperation on the environment, health, education and infrastructure development. Bilaterally, the Obama administration has also explored a civil nuclear agreement with Hanoi, and in the military field, has presided over the first ever joint exercises between the US and Vietnamese navies.

This revitalized approach to the region was given voice in Obama’s historic visit to Indonesia last November. But the visit also raised an important question: after two years of stepped up regional engagement, what comes next?
An Evolving Strategy

By any measure, the United States’ evolving strategy for maritime Southeast Asia has proven effective—compared with two years ago, the United States has noticeably greater presenceand influence in the region. But if the Obama administration is going to build on this, there will also need to be a reinvigorated trade agenda.

Within the region, international commerce functions as a medium of cooperation and a tool of influence, meaning the United States can’t play a leading role without an aggressive trade policy. Already, four countries in the region participate in the Trans-Pacific Partnership (TPP) talks—negotiations initiated by Washington that aim to create a free trade zone spanning the Pacific basin. As the United States expands the TPP’s membership, it should therefore focus first and foremost on maritime Southeast Asia. And, to its credit, the Obama administration appears headed in this direction, and has identified ASEAN as the fulcrum of its trade policy in Asia.

Yet despite its importance, there’s now a more pressing concern than the trade agenda—creating a more coherent US security strategy for the region.

Of course, this security strategy must reflect not only US interests, but also take into account the needs and ambitions of the littoral states. While many of these states harbour concerns about the direction of China’s rise, they have no desire to choose between the United States—the region’s de facto security guarantor—and China—a major driver of the region’s economic prosperity. Instead, governments in the region want positive relations not only with the United States and China, but also Australia, India, and Japan. With this in mind, and recognizing the region’s preference for balanced relations with all external powers, US strategy should be aimed at facilitating a region that is stable, democratic, prosperous and independent. Although such a region won’t necessarily embrace all US policy preferences, it will still serve as a force for stability, provide safe passage for international trade, and engage China without fear of coercion.

This is easier said than done, not least because historical memory and intra-regional rivalries are significant drivers of foreign policy in the region. Several states, particularly Indonesia, remain wary of foreign military powers as a result of painful colonial experiences. While a number of countries want to upgrade their security relationships with the United States, none wish to permanently host US military forces. As a result, US strategic partnerships in the region won’t resemble the boots-on-the-ground alliances of Northeast Asia. In addition, simmering animosities exist among several nations in maritime Southeast Asia and so any attempt by the United States to treat one country as the regional leader will be resisted and ultimately counterproductive.

All this means that the United States must craft a security strategy for Southeast Asia that exhibits flexibility and nuance, one emphasizing shared interests, including open access to the maritime commons, preserving regional stability, managing China’s rise and safeguarding regional trade flows. How? By leveraging the naval capacity of US allies and partners; developing institutional mechanisms for dispute resolution; upgrading our already robust relationship with Singapore; implementing the US-Indonesia Comprehensive Partnership; building US relations with Vietnam, and promoting deeper linkages between maritime Southeast Asia and India and Australia.

Navies and Coast Guards

At the heart of the region is the Strait of Malacca, a 500-mile long waterway connecting the Indian and Pacific Oceans that carries 40 percent of the world’s trade. Fifteen million barrels of oil per day flow through the Strait of Malacca, and the volume of energy-related tanker traffic is set to increase by half in the coming decade.
But maritime Southeast Asia remains vulnerable to insecurity and conflict.

At present, some littoral states lack the naval capabilities to monitor their own territorial waters. The Philippines, for example—an archipelagic nation of more than 7000 islands—suffers from a dearth of patrol boats despite recent donations from the United States. And Indonesia’s challenge is even greater: its maritime force of 30 principal combatants and 41 patrol boats must secure an archipelago of 17,508 islands.

At the same time, while some littoral states suffer from a shortage of naval resources, others are translating newfound wealth into maritime power. According to the Stockholm International Peace Research Institute, military expenditure in the region increased almost 60 percent between 2000 and 2010, and recent purchases include significant naval acquisitions. Vietnam, for example, is set to buy six Kilo-class attack submarines from Russia; Malaysia has procured two Scorpene submarines from France and has signed a contract to purchase two training and patrol vessels from South Korea; and Indonesia too is now exploring the acquisition of submarines.

With the distribution of naval capabilities in the region so uneven and in flux, the United States has a key role to play. It could start by launching a region-wide initiative to equip and train local navies and coast guards. Working with allies and partners around the world, the United States should make available surplus naval vessels to some of the more cash-strapped nations of maritime Southeast Asia. Concurrently, the US Navy should pursue new opportunities to train local maritime forces. The ‘influence squadron’ concept pioneered by Henry Hendrix offers a guide on how this could be done. By dispatching small groups of lower capability ships to far-flung locations across the region, the US Navy can partner with more nations in maritime Southeast Asia than would be possible if its ships operate as part of a larger task force.

And there’s another reason the United States should engage the rising powers in the region. Given Southeast Asia’s long-simmering rivalries, parallel naval build-ups could morph into a destabilizing regional arms race. Washington should therefore encourage the rising littoral powers to use their capabilities for counterpiracy, humanitarian assistance and disaster relief—the kinds of naval operations that require coordination and therefore promote confidence building.

Indeed, the reality is that the South China Sea constitutes a potential powder keg—the combination of territorial disputes among some of the littoral states and China and an emerging maritime rivalry pitting China against the United States virtually guarantees future clashes at sea that could escalate. Yet despite this danger, institutions for conflict resolution remain underdeveloped. It’s true that in 2002, China and the ASEAN countries signed a Declaration on the Conduct of Parties in the South China Sea. However, this code of conduct isn’t binding and lacks legal enforcement measures.

Moving forward, the United States should continue to support ASEAN’s efforts to negotiate a binding code of conduct with China. When high-level US officials visit the region, they should reiterate the remarks Clinton made in Hanoi last year, namely, that ‘the United States, like every nation, has a national interest in freedom of navigation, open access to Asia’s maritime commons, and respect for international law in the South China Sea’. This will serve as a regular reminder of the US commitment to the creation of a conflict resolution regime for the South China Sea—a reminder that will register in the capitals of Southeast Asia as well as Beijing.

Singapore Key

But while multilateral efforts with ASEAN are welcome, there’s a key ally in the region the United States could be doing more with—Singapore.

The city state is already an essential hub for regional trade and an important US point of entry into maritime Southeast Asia. With robust commercial, military and political ties to the United States, Singapore should be seen as a model for a close and constructive relationship between Washington and Southeast Asian capitals. Yet there’s more that can and should be done.

Economically, Singapore should continue to push for increased regional integration and engagement with the West.
It was the first country to enter into negotiations for expanded trade with Taiwan after Taipei and Beijing signed the Economic Cooperation Framework Agreement, meeting with a decidedly mild reaction from Beijing. Taiwan’s economic integration with Southeast Asia would help buttress regional stability, and should be a key objective for the United States. Singapore—a member of the Trans-Pacific Partnership and a country that has already concluded a Free Trade Agreement with the United States—should for its part become even more of a driving force behind the region’s economic integration with the West.

In addition, although security ties between Singapore and the United States are already deep, they still have room to grow. Cooperation and integration between the militaries of both countries should continue to expand, and Singapore has the potential to serve as a key hub for US military operations in the region and beyond. Although political concerns preclude the hosting of large-scale US bases, Singapore can still support the United States’ regional presence. The two countries should also examine the possibility of stationing lower-profile platforms, including Littoral Combat Ships, unmanned Global Hawk reconnaissance aircraft, pre-positioned humanitarian assistance and disaster response capabilities, as well as the aforementioned ‘influence squadrons,’ in Singapore.

Partnership with Indonesia

Meanwhile, the US-Indonesia Comprehensive Partnership that was officially inaugurated during Obama’s visit to Jakarta is also a work in progress.

Indonesia’s economy and large population make it the region’s natural centre of gravity. A comprehensive partnership that locks in Indonesia’s trajectory as a prosperous, militarily capable and democratic state will therefore go a long way toward securing the region as a whole.

However, US economic ties with Indonesia, though holding enormous potential, remain the most underperforming area of the bilateral relationship. To help remedy this, the United States can boost Indonesia’s appeal as a trade and investment hub by encouraging further regulatory and tax reforms. Yet the most substantial reforms on trade issues must come from Indonesia, as major segments of Indonesian society as well as the bureaucracy in Jakarta remain suspicious of foreign corporations and fearful of commercial exploitation.

People-to-people relationships are a particularly important element of the US-Indonesia Comprehensive Partnership. The two countries have already committed to boosting educational exchanges, enhancing links between scientists and promoting dialogue among religious groups. To complement these efforts, the US government should finance programmes to expand the teaching of Indonesia’s official language, Bahasa, in American universities. Only as more Americans gain linguistic and cultural familiarity with Indonesia will the United States become positioned to fully implement the comprehensive partnership.

Build Relations with Vietnam

Another vital US interest in the region is Asia’s newest tiger—Vietnam. After embarking down the path of economic liberalization, Vietnam has chalked up near double-digit growth rates and become a hub for low-cost manufacturing. This, plus its geography—a land border with China and a long coast abutting the South China Sea—and a willingness to stand up to Beijing all make Vietnam a potentially valuable partner for the United States.

Translating this potential into tangible benefits will require building on recent progress in US-Vietnam relations. Washington should continue to normalize military ties with Hanoi by increasing the number of bilateral naval exercises, enlarging the focus of these exercises to include missions beyond damage control and search and rescue and inviting Vietnam to participate in the annual Cobra Gold exercise, which currently involves militaries from Indonesia, Thailand, Singapore, Japan and South Korea. As currently amended, the US government’s International Traffic in Arms Regulations (ITAR) only permits the export of non-lethal defence items and services to Vietnam. Washington should explore creating additional ITAR exceptions for Vietnam in order to expand defence trade.

Moreover, the United States should help Vietnam exploit its geographic potential as a fulcrum for shipping and military replenishment. Key to this effort will be Cam Ranh Bay, which Hanoi recently announced plans to reopen for use by foreign navies, including their submarines. This development increases Vietnam’s ability to counter Chinese attempts to establish sovereignty over the South China Sea, and should be utilized by US naval forces to both bolster freedom of navigation as well as to establish a greater presence in the region.

Sustained economic development in Vietnam is critical for a future partnership between Washington and Hanoi. In order to achieve continued economic growth, Vietnam will need to significantly expand its domestic energy production. Nuclear power offers Vietnam a reliable, affordable, and low-carbon source of electricity. In March 2010, the US and Vietnamese governments signed a Memorandum of Understanding on nuclear cooperation. The two governments should open formal negotiations to establish a legal framework for commerce in civilian nuclear energy. Known as a ‘123 agreement,’ such a framework will enable US firms to fully participate in Vietnam’s nuclear power market.

Looking Outward

All this said, if the United States wants to improve security and stability in Southeast Asia it will also need to look outside the region, not least by facilitating the fuller integration of India and Australia into maritime Southeast Asia.
Over the past decade, the United States and India have transcended a long history of estrangement and established an important strategic partnership, including by inking a landmark nuclear cooperation agreement, strengthening military ties, enlarging defence trade, enhancing bilateral commerce and investment and expanding cooperation on global issues.

But despite the ‘Look East’ policy that India has pursued since the early 1990s, Southeast Asia has remained largely outside the scope of the US-India strategic partnership.

This should change. To start with, the United States should encourage Indian participation in its annual Cobra Gold exercise. India is already reportedly training Vietnamese sailors for submarine duty, and Washington should promote additional defence trade links between India and maritime Southeast Asia. In the future, India could become the region’s low-cost provider of defence goods and services—a niche other US allies and partners can’t fill.

Australia, meanwhile, is a long-time US ally, and in recent years, has ratcheted up its outreach to Southeast Asia. Washington should therefore work with Canberra to further deepen security engagement with the region. Naval and maritime cooperation has a great deal of potential: the two allies should establish professional military education facilities in Australia to train regional navies and coast guards in subsurface warfare, counterpiracy, humanitarian assistance and disaster relief, rescue at sea and other types of coordinated maritime operations.

Bilateral naval cooperation between the United States and Australia also has a great deal of potential. With Australia’s navy set to expand over the next two decades, it can join the United States in deploying ‘influence squadrons’ to maritime Southeast Asia. Moreover, the United States and Australia should explore how they can cooperate more closely to sustain the projection of US naval power into the Western Pacific as China begins to field long-range strike capabilities. This should include improved utilization of naval facilities in Australia, as well as expanded bilateral support to off-shore operations in the South and West Pacific.

So what does all this mean? As foreign policy challenges in other parts of the world become ever more intractable, maritime Southeast Asia stands out as an area of real opportunity for the United States—the region is vital to American interests because of its population size, dynamic economies, strategic geography and proximity to an ascendant China.

For too long, US strategy toward Southeast Asia was based largely around foreign policy priorities set elsewhere. But no longer: the Obama administration recognizes the region’s importance and is crafting a US approach determined by regional realities rather than outside objectives. With a reinvigorated trade agenda and a cohesive security strategy, the United States can help maritime Southeast Asia become increasingly prosperous, resistant to external bullying and a force for stability in the world.

Abraham M. Denmark is a Fellow and Daniel M. Kliman is a Visiting Fellow at the Center for a New American Security (CNAS). They are both contributors to a CNAS project on the future of the South China Sea.

  • Abraham M. Denmark