Asian Development Bank at 50 and Japan’s puzzle


June 16, 2017

Asian Development Bank at 50 and Japan’s puzzle

by Dr. Titli Basu

http://www.asiaforum.org

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ADB President Takehiko Nakao

Competition for infrastructure financing is heating up in Asia. China is investing billions in mega-infrastructure projects under President Xi’s Belt and Road Initiative (BRI) as well as designing new financing mechanisms beyond the Bretton Woods institutions. Against this backdrop, the Asian Development Bank (ADB) now faces the challenge of reforming itself and remaining competitive as it commemorates its 50th anniversary.

 

In the face of growing Chinese investment, Japan has stepped up its game through Prime Minister Abe’s Extended Partnership for Quality Infrastructure and by further augmenting the ADB’s role in catering to the infrastructure appetite of emerging economies.

As the ADB debates its ‘Strategy 2030’,which will be in place by 2018, it must facilitate institutional and organisational reforms necessary to maintain its relevance. As Obama administration’s and Japan’s attempts to steer the initial debate on the AIIB failed to stop US allies from joining the China-led bank,the need to reform existing Bretton Woods institutions, including the ADB, has intensified.

The ADB remains under the control of Asia’s traditional regional actors including Japan and the United States with 15.6 percent shareholding each in 2016. There is a need to revisit this approach and create more space for emerging economies in the bank’s governance structure. China, India and Indonesia have 6.4 percent, 6.3 percent and 5.4 percent of shareholdings respectively in 2016. As the US-led international economic order has failed to reflect the shifting alignments, the ADB must grow in order to respond to the varying needs and ambitions of its developing member countries.

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While international attention was focused on Beijing’s recent Belt and Road Forum (BRF) on 14–15 May, a week earlier Japan celebrated the ADB’s 50th anniversary in Yokohama. Since infrastructure financing often translates into expanding geo-political influence, Japan has committed US$40 million over a two year period to a high-technology fund to support the application of innovative solutions throughout the project cycle of ADB-financed and administered sovereign and non-sovereign projects.The fund will be effective by July and will focus on critical areas including climate change, smart grids and renewable energy.

Two years ago, weighing the impact of the AIIB, Abe designed the Partnership for Quality Infrastructure and argued that Japan in cooperation with the ADB will provide ‘high-quality and innovative’ infrastructure and pledged US$110 billion over five years — a 30 percent increase from earlier funding. At the Yokohama meeting, Japan called for promoting infrastructure projects to be the mainstay of ADB operations and to further muster private sector financing together with public-private partnerships.

In February 2017, the ADB estimated that Asia will need US$26 trillion for infrastructure from 2016–2030.Economic rationale dictates that the ADB has enough space to operate alongside new development banks while addressing the infrastructure financing gap. ADB has adjusted with new realities and opened up to co-financing with the AIIB. The two banks signed a memorandum of understanding aimed at strengthening cooperation including co-financing in May 2016. They are co-financing the National Motorway M-4 Project in Pakistan, each financing 36.6 percent individually of the total project cost of US$273 million. ADB has approved co-financing with AIIB in Bangladesh and Myanmar.

In the run up to the BRF, ADB President Takehiko Nakao argued the merits of cooperating with the BRI design. While Japan’s national leadership refrained from attending the summit, Liberal Democratic Party (LDP) secretary general, Toshihiro Nikai and the Keidanren chief, Sadayuki Sakakibara were both present. This decision has been shaped by larger geo-political and geo-strategic variables. President Trump’s evolving Asia policy, fluidity in US–China relations and the North Korea conundrum are making Japan weigh up its options carefully.

AIIB membership has expanded since its inception. Japan has learnt it the hard way during the initial AIIB membership debate about the demerits of non-engagement and losing the opportunity to shape decisions from within. The United States and Japan are the only two G7 countries that kept out of the AIIB. At a time when BRF witnessed representation from over hundred nations and domestic debate over the AIIB is intensifying in Japan, Tokyo needs to revisit its stance on the China-led bank on one hand and drive the debate to facilitate pertinent reforms in ADB on the other.

For 50 years, the ADB has worked towards inclusive economic growth, environmental sustainability and regional integration. It’s lending focuses on infrastructure, education, environment, health, financial sector and so on. In 2016, the bank approved US$17.5 billion in financing, disbursed US$12.5 billion and attracted US$13.9 billion in co-financing. While it has fuelled Asia’s growth, garnering resources for infrastructure, poverty mitigation and supporting financial inclusion will remain ADB’s priorities.

Developing its lending capacity, the bank has merged the Asian Development Fund with the Ordinary Capital Resources. Moving ahead, ADB has agreed on a new procurement design and is firming up on delivering knowledge solutions and facilitating innovation and integration of high-level technology in projects.

The call for re-evaluating ADB’s voting rights is not new. Critics argue that present international institutions should permit space to developing nations and that failure to do so will hurt the relevance of these institutions.The emerging economies have long argued for representative governance, rationalising operations, easing the ADB’s internal processing time and encouraging public-private partnership investments. Japan must take the lead to facilitate governance reforms against the backdrop of AIIB and other new multilateral development banks. Failure to implement internal reforms will impact the ADB’s influence.

Developing Asian nations will be the beneficiaries of this race for infrastructure financing. Productive competition will diversify emerging economies’ options to choose the most favourable financing terms. Long-term, this will support the larger purpose of empowering emerging Asian economies to augment national growth and enhance Asia’s ability to compete in the global economy.

Titli Basu is an Associate Fellow at the Institute for Defence Studies and Analyses (IDSA), New Delhi.

India, Japan, and the Indo-Pacific: Breaking Out of the Middle Power Status


June 16, 2017

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Number 384 | June 15, 2017

ANALYSIS

 

India, Japan, and the Indo-Pacific: Breaking Out of the Middle Power Status

By Nidhi Prasad

A day after China launched its second aircraft carrier, the American administration under Mr. Donald J. Trump appeared jubilant about celebrating the first 100 days of its “America first” policy. Asian nations have to grapple with an uncertain security environment which lacks the structure or predictability that existed during the Cold War. They are caught between an aggressive China – their largest trading partner and their security ally or partner – and an increasingly capricious United States. Should one kowtow and shape Asia’s “common destiny” or negotiate a deal to “make America great again”? This article explains three ways in which India and Japan refuse to be caught in binary choices and are gradually creating room within which other Asian countries can  maneuver.

First, India and Japan under Prime Ministers Modi and Abe respectively, have attempted to change the geopolitical imagination of their nations. By 2014 China had announced its plans to link the Eurasian landmass and Pacific Rimland (through ports, pipelines, etc) by reviving the maritime and continental ‘Silk Road’. In 2015 India and Japan signed a joint statement to mutually work towards building peace and stability in the Indo-Pacific region within a decade. This was the first time the two nations agreed to expand the geographic scope of their strategic partnership (almost a decade after Abe first proposed it in India). Until 2014 the two nations looked for convergence in their foreign policies (‘Act East’, ‘Proactive Contribution to Peace’, ‘Make in India’, ‘Quality Infrastructure Initiative’, etc…). The United States under the Obama Administration additionally engaged in ‘burden sharing’ and institution building, as well as recognizing Indian and Japanese intentions to break out of their middle power status. It promoted India’s ‘leading power’ ambitions and supported the unprecedented changes in Japanese security legislation to make it more ‘proactive’.

Secondly, India and Japan are making attempts to transform the security order rather than being either status-quo nations or revisionist actors. The United States expects its Asian partners to balance against Chinese aggression while China’s biggest concern is a joint coalition that would resuscitate the ‘cold war mentality’ of containment. China has increasingly used its geo-economic tools punitively to target trade, tourism, and other sectors against any diplomatic disobedience. This was glaringly visible when South Korea decided to go ahead with setting up the THAAD missile defense system against Chinese wishes. Recently Beijing standardized the names of Arunchal Pradesh localities with Chinese character in retaliation against the Dalai Lama’s visit to the Indian state (which Beijing claims is part of “South Tibet”). Meanwhile, Japan has deployed its helicopter carrier Izumo to a tour through the South China Sea (where China and ASEAN countries have disputed territories). Additionally, Izumo will participate in the Indo-US-Japan Malabar exercise in the Indian Ocean in July this year. Such “resistance” by India and Japan is a sign that both nations are unwilling to be dictated to by China.

India and Japan are keen to play active roles and engage in close cooperation with all actors in their respective restive neighborhoods on issues for which China exercises influence such as the North Korean nuclear crisis or negotiations on Afghanistan. The complexity of relations further illustrates that states in this region cannot adopt simple strategies of balancing, band-wagoning, or hedging; rather, India and Japan need to present alternatives to others that are unable to afford to maneuver in the present system.

Third, India and Japan are moving beyond middle power narratives as they seek to support smaller Asian nations and provide alternatives to China’s “win-win” diplomacy that has placed nations like Sri Lanka and Cambodia in a Chinese debt-trap. In 2016 India and Japan articulated a joint “Free and Open Indo-Pacific strategy” towards achieving this goal, but have not yet spelled out any specifics. The two countries can assist with the need to fill the estimated $1.3 trillion estimated infrastructure gap in the region. China, under the pretense of connectivity and trade, is attempting to “hard-wire” geopolitical realities and Chinese influence, brush territorial disputes and disagreements under the carpet and carry out business as usual. Neither India, Japan, nor the United States were among the 28 countries that sent heads of government to China’s maiden Belt and Road Forum. Before the forum develops into an overarching platform to discuss Indo-Pacific security issues, India and Japan need to quicken the pace of infrastructure cooperation.

In order to succeed Japan and India must compete with China’s ability to mobilize resources at a fast pace and engage in robust diplomacy without threatening smaller nations or appearing interventionist. India is seeking Japan’s help to regain lost geopolitical capital in its neighborhood. Ultimately, India and Japan need to help realize the aspirations of smaller nations like Sri Lanka, Nepal, Vietnam, Pacific Island countries, and others who need economic and security assistance.

Finally, the role of the United States to project power and influence is also of great significance to Indian and Japanese strategy. Recent talks of the creation of an Asia Pacific Stability Initiative (with a fund of approximately $7.5 billion) and other diplomatic overtures hold the potential to stem the direction of the current power transition in the region. Asian nations now have to deal with an America that expects allies to do most of the heavy-lifting, and security guarantees in the future will be conditional on free and fair trade. Unlike before, it is the United States (in order to retain its dominance) that has to strengthen credibility in dealing with a new geo-strategic landscape, where intra-Asian trade is high and China is no longer shy about its hegemonic aspirations. Ultimately the United States would have to pressure China and maintain the security and stability of the region. To preclude China’s hegemony or Sino-US rapprochement, India and Japan are breaking out of their traditional roles and are willing to shoulder the responsibility of securing the Indo-Pacific region.

About the Author

Nidhi Prasad is a Researcher in the Department of International Politics at Aoyama Gakuin University in Japan. She completed her Master of Philosophy in Japanese Studies from Jawaharlal Nehru University, India. She can be reached at Nidhi29Prasad@gmail.com.

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Xi Jinping’s Marco Polo Strategy


June 13, 2017

Xi Jinping’s Marco Polo Strategy

by Joseph S. Nye*@www.project-syndicate.org

*Joseph S. Nye, Jr., a former US assistant secretary of defense and chairman of the US National Intelligence Council, is University Professor at Harvard University. He is the author of Is the American Century Over?

Last month, Chinese President Xi Jinping presided over a heavily orchestrated “Belt and Road” forum in Beijing. The two-day event attracted 29 heads of state, including Russia’s Vladimir Putin, and 1,200 delegates from over 100 countries. Xi called China’s Belt and Road Initiative (BRI) the “project of the century.” The 65 countries involved comprise two-thirds of the world’s land mass and include some four and a half billion people.

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Originally announced in 2013, Xi’s plan to integrate Eurasia through a trillion dollars of investment in infrastructure stretching from China to Europe, with extensions to Southeast Asia and East Africa, has been termed China’s new Marshall Plan as well as its bid for a grand strategy. Some observers also saw the Forum as part of Xi’s effort to fill the vacuum left by Donald Trump’s abandonment of Barack Obama’s Trans-Pacific Partnership trade agreement.

China’s ambitious initiative would provide badly needed highways, rail lines, pipelines, ports, and power plants in poor countries. It would also encourage Chinese firms to increase their investments in European ports and railways. The “belt” would include a massive network of highways and rail links through Central Asia, and the “road” refers to a series of maritime routes and ports between Asia and Europe.

Marco Polo would be proud. And if China chooses to use its surplus financial reserves to create infrastructure that helps poor countries and enhances international trade, it will be providing what can be seen as a global public good.

Of course, China’s motives are not purely benevolent. Reallocation of China’s large foreign-exchange assets away from low-yield US Treasury bonds to higher-yield infrastructure investment makes sense, and creates alternative markets for Chinese goods. With Chinese steel and cement firms suffering from overcapacity, Chinese construction firms will profit from the new investment. And as Chinese manufacturing moves to less accessible provinces, improved infrastructure connections to international markets fits China’s development needs.

But is the BRI more public relations smoke than investment fire? According to the Financial Times, investment in Xi’s initiative declined last year, raising doubts about whether commercial enterprises are as committed as the government. Five trains full of cargo leave Chongqing for Germany every week, but only one full train returns.

Shipping goods overland from China to Europe is still twice as expensive as trade by sea. As the FT puts it, the BRI is “unfortunately less of a practical plan for investment than a broad political vision.” Moreover, there is a danger of debt and unpaid loans from projects that turn out to be economic “white elephants,” and security conflicts could bedevil projects that cross so many sovereign borders. India is not happy to see a greater Chinese presence in the Indian Ocean, and Russia, Turkey, and Iran have their own agendas in Central Asia.

Xi’s vision is impressive, but will it succeed as a grand strategy? China is betting on an old geopolitical proposition. A century ago, the British geopolitical theorist Halford Mackinder argued that whoever controlled the world island of Eurasia would control the world. American strategy, in contrast, has long favored the geopolitical insights of the nineteenth-century admiral Alfred Mahan, who emphasized sea power and the rimlands.

At World War II’s end, George F. Kennan adapted Mahan’s approach to develop his Cold War strategy of containment of the Soviet Union, arguing that if the US allied with the islands of Britain and Japan and the peninsula of Western Europe at the two ends of Eurasia, the US could create a balance of global power that would be favorable to American interests. The Pentagon and State Department are still organized along these lines, with scant attention paid to Central Asia.

Much has changed in the age of the Internet, but geography still matters, despite the alleged death of distance. In the nineteenth century, much of geopolitical rivalry revolved around the “Eastern Question” of who would control the area ruled by the crumbling Ottoman Empire. Infrastructure projects like the Berlin to Baghdad railway roused tensions among the Great Powers. Will those geopolitical struggles now be replaced by the “Eurasian Question”?

With the BRI, China is betting on Mackinder and Marco Polo. But the overland route through Central Asia will revive the nineteenth-century “Great Game” for influence that embroiled Britain and Russia, as well as former empires like Turkey and Iran. At the same time, the maritime “road” through the Indian Ocean accentuates China’s already fraught rivalry with India, with tensions building over Chinese ports and roads through Pakistan.

The US is betting more on Mahan and Kennan. Asia has its own balance of power, and neither India nor Japan nor Vietnam want Chinese domination. They see America as part of the solution. American policy is not containment of China – witness the massive flows of trade and students between the countries. But as China, enthralled by a vision of national greatness, engages in territorial disputes with its maritime neighbors, it tends to drive them into America’s arms.

Indeed, China’s real problem is “self-containment.” Even in the age of the Internet and social media, nationalism remains a most powerful force.

Overall, the United States should welcome China’s BRI. As Robert Zoellick, a former US Trade Representative and World Bank president, has argued, if a rising China contributes to the provision of global public goods, the US should encourage the Chinese to become a “responsible stakeholder.” Moreover, there can be opportunities for American companies to benefit from BRI investments.

The US and China have much to gain from cooperation on a variety of transnational issues like monetary stability, climate change, cyber rules of the road, and anti-terrorism. And while the BRI will provide China with geopolitical gains as well as costs, it is unlikely to be as much of a game changer in grand strategy, as some analysts believe. A more difficult question is whether the US can live up to its part.

Foreign Policy: ASEAN, North Korea and United States in the Quest for Stability


June 13, 2017

Foreign Policy: ASEAN, North Korea and United States in the Quest for Stability

by David Han@RSIS (Rajaratnam School–NTU)

http://www.eastasiaforum.org

In recent months, North Korea has raised tensions and aroused anxiety throughout the Asia Pacific, including Southeast Asia. Although ASEAN should be concerned about this threat given the grave security implications for the wider Asia Pacific region, it needs to be mindful of why it exists in order to avoid distorting its credentials and relevance to the Korean Peninsula crisis.

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In a letter to the ASEAN Secretary General dated 23 March 2017, North Korean Foreign Minister Ri Yong-Ho indicated his ‘expectations that ASEAN, which attaches great importance to the regional peace and stability, will make an issue of the US–South Korean joint military exercises at ASEAN conferences’. He added that ASEAN should take a ‘fair position and play an active role in safeguarding the peace and safety of Korean Peninsula’.

In April 2017, during the 30th ASEAN Summit in the Philippines, ASEAN instead expressed ‘grave concern’ and urged North Korea to comply with the UN Security Council resolutions on its nuclear program. ASEAN’s firm yet measured response to North Korea reflects the international consensus against North Korea’s actions. It is also a neutral posture that avoids siding with any party involved in the crisis, including China or the United States. ASEAN’s position neither overestimates the organisation’s ability to contribute to the resolution of the crisis nor misconstrues its existing purpose as a platform for shaping regional security.

RSIS researchers Shawn Ho and Sarah Teo wrote that ‘ASEAN could strengthen its regional security credentials by paying more attention to the challenge on the Korean Peninsula’. The rationale is that given the ‘current salience of the Korean Peninsula’s security to Beijing and Washington, if ASEAN is to do more to deal with the challenge on the Korean Peninsula, ASEAN’s relevance and importance to both major powers could be enhanced’.

This argument raises the importance for ASEAN to urge the United States to continue engaging with Southeast Asia. The United States could do this through existing regional arrangements that have been shaped by ASEAN multilateralism, rather than circumventing such established structures when dealing with security and geopolitical issues.

Yet the Korean Peninsula may not be the appropriate conduit for ASEAN–US ties so this argument could be problematic for two reasons.

First, it is unclear how ASEAN would demonstrate its relevance to the United States by dealing with the North Korean threat, when ASEAN is already challenged by existing geopolitical issues within the region. As ASEAN has been unable to reach consensus over major geopolitical contentions, such as the South China Sea dispute, it is not clear how ASEAN would be relevant to the United States tackling the Korean Peninsula crisis without first demonstrating its capacity to resolve Southeast Asia’s maritime spats.

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The second problem is that it risks ASEAN becoming divided between China and the United States. During the recent meeting on 4 May 2017 in Washington DC, US Secretary of State Rex Tillerson conveyed to ASEAN foreign ministers that Washington intends to stay engaged in Southeast Asia when he commended ASEAN as an ‘essential partner’ to the United States. Tillerson also urged ASEAN to pressure North Korea by reviewing Pyongyang’s relations with ASEAN and curbing the country’s revenue flows from Southeast Asia.

But were ASEAN to comply with the United States’ request to condemn North Korea’s actions, China could perceive this as an attempt by Washington to complicate the dynamics of the Korean Peninsula crisis in which ASEAN is not directly involved.

ASEAN’s internal unity could also be affected negatively if it were to get involved in the Peninsula crisis. There are already indications that some member states are more inclined towards China while others gravitate towards the United States. If ASEAN chooses sides regarding the North Korean threat, this could widen the intra-ASEAN divide.

So if ASEAN intends to show its relevance regarding the North Korean threat, it should be realistic about its own ability to offer viable solutions to the crisis and avoid pandering to either China or the United States.

During the ASEAN Regional Forum (ARF) meetings, ASEAN could signal to North Korea that it should back down from its provocative behaviour, but beyond this there is not much that ASEAN can do to pressure North Korea to change its course. In the past, ASEAN has issued similar statements on North Korea’s brinksmanship and North Korea has disregarded them, continuing with its nuclearisation drive unabated.

This is not to downplay ASEAN’s importance as a regional organisation. Indeed, over the past few decades, ASEAN has played a key role in reducing the risk of conflict in the region through dialogue, consultation and consensus. It was even envisioned that ASEAN norms could have a wider influence on the security trajectory of the Asia Pacific. The ARF was formed in 1994 for ASEAN and external stakeholders to discuss security issues and promote cooperative measures to enhance peace and stability in the region.

But the ARF is not meant to provide and enforce solutions to conflicts, so ASEAN is limited in offering viable recommendations to both the United States and China on the Korean Peninsula crisis. In the long term, ASEAN should focus its efforts on developing the ASEAN community to advance norm formulation, measures to promote peaceful consultation on security issues and collective solutions for conflict prevention and resolution.

In the meantime, ASEAN should continue in its unequivocal insistence that North Korea step down from its aggressive actions and that all parties involved are to avoid any further provocation.

David Han is a Research Analyst with the Malaysia Programme at the S. Rajaratnam School of International Studies (RSIS), Nanyang Technological University, Singapore.

This article was first published here on RSIS.

Why South Korea eyes ASEAN


June 9, 2017

Speaking Of Asia

Why South Korea eyes ASEAN

 

Having vaulted itself in quick time into the ranks of advanced nations, South Korea is undeniably something of a modern miracle. Its success in riding on East Asia’s growth, combined with massive investments in education and innovation, has led to raised living standards and longevity, as well as given it a leading edge in a variety of fields from steel to consumer electronics and shipbuilding. A firm defence yoke to the United States lent it strategic cover as it focused its energies on growth.

That model has run its course in more ways than one. China is steadily lengthening its supply chain, buying less from its southern neighbour. Its strategic space has been crimped too by an assertive Beijing, despite a series of overtures to China from Seoul.

And the future is uncertain. There is no saying where US foreign and military policy might go. Economic growth has more than halved from the 1965-2005 period, requiring the manufacturing- and export- dependent nation to grow more of its domestic and services economy. As demographics go, at their current rates of reproduction, some fear that the South Korean, as a subspecies, may be significantly extinct by 2070. On top of it all, a generation of spoilt young Koreans has emerged, with outsize expectations for themselves but little of the work ethic of their forebears. Youth unemployment is rising, partly because the educated young are too picky to go where the jobs are. There are only so many prestigious openings at the headquarters of the giant chaebols, where they think they deserve to be. It is not unknown for a mother to call up managers to question why they gave her 23-year-old a bad time in the office, or factory.

In other words, Seoul is in a bit of a cabbage pickle.It’s time for creative thinking and fortunately for the nation of 51 million, there are some active minds at work. One train of thought that has been gaining momentum is a foreign and economic policy that eschews its reflexive North-east Asian orientation and looks southward towards the 10 nations of ASEAN, especially as they edge towards building an economic community that accounts for a market of more than 600 million people and an economy of US$2.5 trillion (S$3.5 trillion).

Last week, the South Korean scholar Shin Yoon Hwan of Sogang University, who is President of the Korean Association of South-east Asian Studies, even suggested at the annual Jeju Forum that ASEAN ought to widen its membership to include South Korea. After all, he argued, at its birth the grouping had offered Sri Lanka, a South Asian nation, a chair at the high table.

As Professor Shin sees it, the benefits of closer integration with ASEAN are mutual. For instance, the Japan-ASEAN technology gap may be too wide but the Korea-ASEAN gap is just enough for both to enjoy complementarity for their goods in world markets. The region is also now the top destination for South Korean tourists and ranks fifth in the South Korean foreign direct investment list. Besides, there is a shared colonial heritage from the days of the Japanese Occupation.

Undoubtedly, there is merit in some of what he says. At a time when globalisation and open markets are under deep scrutiny, any joint effort to lift the game is welcome. Two-way trade between South Korea and ASEAN has been stagnating, and there simply is no chance of attaining the US$200 billion targeted by 2020.

And South Koreans do seem comfortable in ASEAN; one in nine travels to an ASEAN country every year, chiefly to Thailand and the Philippines. About 330,000 people from ASEAN states live and work in South Korea. And exclusionist and isocultural as they tend to be, a small but growing number of Koreans are marrying people from the region. South-east Asia is also in the thrall of hallyu, or Korean Wave, thanks to the popularity of its songs, drama and cuisine.

ST ILLUSTRATION : MANNY FRANCISCO

Still, good intentions aside, the question is how to get results. Hallyu’s soft power can prove fleeting if tastes change, as they are known to. For a more lasting glue, Seoul will need to work harder.

Time to open up

Eight years ago, President Lee Myung Bak announced his New Asia Initiative, which sought to widen his country’s focus from North-east Asia. It was a theme he reiterated at the following year’s Shangri La Dialogue. Seoul did appoint its first ambassador to ASEAN in 2012 but, beyond that, movement has been fitful, especially on security cooperation. South Korea did join ReCAAP, the Singapore-based body that fights piracy and armed robbery on the high seas, but has seemed hesitant about doing more. Certainly, compared with China and Japan, which actively woo the region with aid and defence equipment, its profile does not show up quite enough.

Granted this is not entirely its fault; every time Seoul looks to widen its aperture, its North Korean sibling has pulled its focus back into the neighbourhood either by an act of aggression, such as the sinking of a navy ship, or by conducting ballistic missile or nuclear weapon tests.

But those irritants will not go away. What then should South Korea do to maintain and build momentum?

First, it can contribute to globalisation by keeping its markets open and contributing to wider market opening. South Korea is a part of the RCEP process, the ASEAN-led initiative for a Regional Comprehensive Economic Partnership between ASEAN and the six states ( Australia, China, India, Japan, Korea, and New Zealand) with which it has free trade agreements. But it could go further perhaps by dropping its wariness of the Trans-Pacific Partnership (TPP) agreement, especially as the 11 parties to that arrangement desperately try to salvage the accord despite America’s withdrawal from it.

South Korean participation would be a boost for TPP in more ways than one, including widening its strategic options. Likewise, an early conclusion of an Open Skies Agreement with ASEAN would benefit its own tourism sector. Amazingly, there are virtually no direct flights linking ASEAN capitals to Jeju, South Korea’s beautiful resort island.

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South Korea also must seek to fully partner with ASEAN as the Fourth Industrial Revolution gathers momentum. The country has led the Bloomberg Innovation Index in recent years and has much to offer the region as it copes with change. The new landscape of automation and additive manufacturing offers Korean companies opportunities to look beyond traditional investment destinations based on market size and wage-competitiveness to a new climate where efficient logistics and expertise in high-tech manufacturing will be key.

A Korea technological university in an ASEAN country, backed by its engineering companies, that draws students from ASEAN as well as Korea would not only boost technical skills in the region but also build a slate of engineers familiar with Korean technology who would carry this knowledge and goodwill into their occupations. This will eventually help boost Korean companies’ chances of winning business in the region.

On the strategic side of the equation, Seoul has to show more than a transactional interest in defence arrangements with ASEAN. It should signal clearly that it, as much as any other nation, places value in keeping the sealanes of communication open, and will act to do so. One lesson it could draw from ASEAN is on how this region seeks to balance all major powers, and particularly how it deals with Japan.

South-east Asians, who have endured much pain at the hands of the Japanese in an earlier era, have learnt to forgive and move on, even as they will never forget Japanese excesses. South Korea, on this score, far too often shows up as a boat that, to borrow F. Scott Fitzgerald’s words, beats back against the current, ceaselessly borne into the past.

A version of this article appeared in the print edition of The Straits Times on June 09, 2017, with the headline ‘Why South Korea eyes ASEAN’. Print Edition | Subscribe
 

 

Phasing out the US (dis)order in the Asia Pacific


June 9, 2017

Phasing out the US (dis)order in the Asia Pacific

by Jean-Pierre Lehmann, IMD

http://www.eastasiaforum.org
Image result for Thucydides trap of war

It is widely held that there is qualitative distinction between the benign, liberal US global order prevailing in the Asia Pacific, and a potentially threatening and malign Chinese imperialist order. This perspective is quite hallucinatory.

 

To cite the most egregious example, the Vietnam War, apart from its bloody savagery, was fought with cultural arrogance. It was during the Vietnam War that the Kafkaesque term ‘body count’ was coined, whereby the number of corpses from battles were tallied up and transmitted to the Pentagon. Much forgotten was the US war in neighbouring Laos where an estimated 10 per cent of the population were killed and 25 per cent, mostly civilians, were made refugees.

Also widely ignored are the origins of the US presence in the Asia Pacific. John Hay, US Secretary of State from 1898 to 1905, expressed his vision that while ‘the Mediterranean was the ocean of the past and the Atlantic the ocean of the present, the Pacific is the ocean of the future’. When the Spanish-American War (1898-1899) broke out, Hay ensured that the US also obtained Spain’s colony in the Philippines. As even The Economist, a notoriously pro-US newspaper, points out, ‘The generals in the Philippine campaign had nearly all earned their spurs fighting Native Americans; in the tropics they applied the same genocidal techniques of terror, atrocities and native reservations’.

By no means has US foreign policy in the Asia Pacific been invariably malign. On balance, the US presence in the Asia Pacific has ultimately been positive. The US occupation contributed significantly to the economic reconstruction of Japan. There can also be no doubt that US aid, the opening of its market and technology transfers contributed mightily to the economic rise of Japan, Taiwan and South Korea. This was further enhanced by former president Richard Nixon’s historic 1972 visit to Mao Zedong in Beijing and eventually the restoration of diplomatic relations between the United States and China. As Kishore Mahbubani argues, ASEAN owes its successful existence in good part to the collaborative, rather than conflictual, relationship between the United States and China.

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But that was then and now is now. In the second half of the 20th century, the US’ main rival in the Asia Pacific, as elsewhere, was the Soviet Union. The Sino–Soviet split in 1960 allowed the United States to consider China a potential ally in the Cold War, paving the way for Nixon’s visit.

But the 21st century has witnessed the spectacular re-emergence of China as a global power. China’s economic growth has had a most positive effect in China itself — especially the massive reduction in poverty for an estimated 700 million — and for the world. Following the great financial crisis of 2007, China has been an engine of global growth. Its aid, trade and investments in Asia, Africa and Latin America have been significant.

As awesome as China’s rise has been, it has also generated considerable anxiety, including — or perhaps especially — among Asian nations. In contrast to the US that has a whole network of both formal and informal alliances in the Asia Pacific, China only has one: North Korea. Asian nations are increasingly faced with the thorny dilemma: while China is their major economic partner, the United States is their major strategic partner.  

The greatest geopolitical threat to the world is China and the US falling into the so-called Thucydides trap of war, which for Asia Pacific countries would require making a choice between allying with either China or the United States. Following the early 20th century pattern in Europe, the Asia Pacific risks becoming the terrain of great power military conflict.

There are many frailties and tensions in the Asia Pacific landscape. The drama unfolding on the Korean peninsula vividly illustrates how the United States may be aggravating these tensions, rather than mitigating or resolving them. By seeking to bring its allies Japan and South Korea into a confrontation with China and North Korea, Washington is playing with potentially explosive fire in Northeast Asia. The current situation of continued US military domination and presumed political leadership in the Asia Pacific is unsustainable.

Instead, Washington should take a leaf out of the post-World War II history book. While the US ‘saved’ Europe in both World War I and World War II, after World War II it provided strategic, economic and moral support to allow and encourage European governments themselves to build the post-war European edifice, especially through Franco–German reconciliation and collaboration.

Ideally, the US should phase out its military presence, while providing leadership in trade and global economic governance — in other words, the opposite of the present situation. Recognising that while at times the US presence in Asia was malign, at others benign, and that on balance it was positive, the time has come to turn the page and open a new volume in the Asia Pacific’s narrative. The construction of the 21st century Asia Pacific must be left to Asia-Pacific nations.

This process must be undertaken incrementally over the long term. A sudden impulsive US departure from the Asia Pacific region would create a perilous vacuum. Major geopolitical great power transitions have almost invariably involved war. In the process of dismantling the US-led Asia Pacific order, a new 21st century edifice with solid foundations should be constructed by the Asia Pacific itself, though with the US’ benevolent support. This seems the only viable course for peace.

Jean-Pierre Lehmann is Emeritus Professor of International Political Economy at IMD, Switzerland, founder of the Evian Group, and Visiting Professor at Hong Kong University. You can follow him on Twitter at @JP_Lehmann.