Discord in Southeast Asia over how to deal with Beijing’s claims in the South China Sea comes as the region struggles to overcome competing national interests and form a EU-style economic community by 2015.
Political leaders and officials say the row may not directly affect plans by ASEAN for the economic integration of countries ranging from wealthy Singapore to impoverished Myanmar.
However, what does not help is China’s growing investment in the bloc’s poorer members, which critics say gives it influence that it has effectively used to block a unified ASEAN stance in the South China Sea dispute. The South China Sea, which stretches from China to Indonesia and from Vietnam to the Philippines, lies atop what are believed to be rich reserves of oil and gas.
“It’s not going to hold progress [on integration] hostage,” ASEAN Secretary-General Surin Pitsuwan told diplomats in Jakarta, referring to a recent meeting in Cambodia, where rifts over the South China Sea prevented the group’s foreign ministers from issuing a communique for the first time in its history. “It is an early warning sign ... this will not be the last.”
Southeast Asia is a popular destination for investors seeking returns that are drying up in Europe, still to recover in the US and slowing in the rest of Asia.
Estimated net flows into offshore ASEAN funds stood at US$1.4 billion this year through June, according to data reported until July 10. By comparison, China and India offshore funds saw net outflows worth US$1.6 billion and US$185 million respectively. Investors have high hopes for plans by the 10-member ASEAN for a single market and production base for a combined economy of US$2 trillion, with free movement of goods, services, investment and skilled labour among 600 million people.
While there is consensus in ASEAN for economic union, the group struggles with political differences ranging from a land border dispute between Thailand and Cambodia to a cultural spat between Malaysia and Indonesia. The most destructive is the inability to deal with claims by four of its members and China and Taiwan in the South China Sea.
Since only some elements of the economic plan will be in place by 2015, such as zero tariffs, more developed members may have to push on with integration in a two-tier model, just as the EU did, leaving the others at risk of missing out on regional investment.
ASEAN’s older and more developed members are Singapore, Malaysia, Thailand, the Philippines, Indonesia and Brunei. Vietnam, Laos, Cambodia and Myanmar joined later.
The two-tier model could leave fringe members further exposed to influence from China — and the US — as they seek influence through investment and diplomacy in a “Great Game” played out in the tropics.
China is already the top investor in Cambodia and Myanmar and is catching up with investment by Europe, Japan and the US in the region overall.
“The difference is that China is giving something that Cambodia needs, while ASEAN is promising something that is abstract,” said Aleksius Jemadu, dean of the school of political and social sciences at Pelita Harapan University in Jakarta.
“ASEAN countries will act based more on their domestic needs ... When this community is built we can’t expect them to be in unison, just like what happened to the South China Sea,” Jemadu said.