New Dynamics Between China and Japan in Asia: How to Build the Future from the Past?

New Dynamics

between China and Japan in Asia How to Build the Future from the Past?

7813 tp.indd 1

7/15/10 1:38 PM

b939_FM.qxd

7/21/2010

11:02 AM

Page ii

This page intentionally left blank

New Dynamics

between China and Japan in Asia How to Build the Future from the Past?

Editor

Guy Faure CNRS, France

World Scientific NEW JERSEY

7813 tp.indd 2

•

LONDON

•

SINGAPORE

•

BEIJING

•

SHANGHAI

•

HONG KONG

•

TA I P E I

•

CHENNAI

7/15/10 1:38 PM

Published by World Scientific Publishing Co. Pte. Ltd. 5 Toh Tuck Link, Singapore 596224 USA office: 27 Warren Street, Suite 401-402, Hackensack, NJ 07601 UK office: 57 Shelton Street, Covent Garden, London WC2H 9HE

British Library Cataloguing-in-Publication Data A catalogue record for this book is available from the British Library.

NEW DYNAMICS BETWEEN CHINA AND JAPAN IN ASIA How to Build the Future from the Past? Copyright © 2010 by World Scientific Publishing Co. Pte. Ltd. All rights reserved. This book, or parts thereof, may not be reproduced in any form or by any means, electronic or mechanical, including photocopying, recording or any information storage and retrieval system now known or to be invented, without written permission from the Publisher.

For photocopying of material in this volume, please pay a copying fee through the Copyright Clearance Center, Inc., 222 Rosewood Drive, Danvers, MA 01923, USA. In this case permission to photocopy is not required from the publisher.

ISBN-13 978-981-4313-66-7 ISBN-10 981-4313-66-1

Typeset by Stallion Press Email: [email protected]

Printed in Singapore.

Lixi - New Dynamics Between China.pmd

1

11/10/2010, 3:34 PM

b939_FM.qxd

7/21/2010

11:02 AM

Page v

Contents

List of Tables

vii

List of Figures

ix

List of Maps

xi

Biographies of the Contributors

xiii

Acknowledgements

xvii

Introduction

The New Sino-Japanese “Great Game” in Asia: Between Competition and Complementarities Guy Faure

1

Chapter 1

Anchoring the Right Pattern of Interdependence 11 and Rivalry: China–Japan Relations under the New Leadership Taeho Kim

Chapter 2

Chinese Nationalism in Sino-Japanese Relations Jiyoung Choi

33

Chapter 3

China’s “Military Diplomacy” and Expanding Military Power Projection Capability Masayuki Masuda

49

Chapter 4

China/Japan/ASEAN: What Kind of Cooperation for What Issues? Sophie Boisseau du Rocher

65

v

b939_FM.qxd

7/21/2010

vi

11:02 AM

Page vi

Contents

Chapter 5

Foreign Direct Investments in Southeast Asia and Sino-Japanese Rivalry David Hoyrup

Chapter 6

Japan and the Reconstruction of Indochina Masaya Shiraishi

125

Chapter 7

The Asian Development Bank and Chinese and Japanese Power Plays Guy Faure

163

Chapter 8

Corridor Linkages in the Greater Mekong Subregion: New Implications for Peninsular and Regional Powers Christian Taillard

187

Chapter 9

Evaluating Effectiveness of GMS Economic Corridors: Why More Focus on Bangkok– Hanoi Road than East-West Corridor? Masami Ishida

233

Chapter 10

Myanmar and Japan: How Close Friends Become Estranged? Toshihiro Kudo

249

Chapter 11

The Chinese in Burma: Traditional Migration or Conquest Strategy? Guy Lubeigt

271

Chapter 12

Thailand’s Economic Relations with China and Japan Suthiphand Chirathivat

301

Chapter 13

Vietnam’s View of China: An Intimidating Partner Matthieu Salomon and Doan Kêt Vu

327

Index

91

341

b939_FM.qxd

7/21/2010

11:02 AM

Page vii

List of Tables

5.1 5.2 5.3 5.4 5.5

7.1 7.2 8.1 8.2 8.3 8.4 9.1 9.2 9.3

Principal indicators of the member countries of ASEAN Ease of doing business in Southeast Asia (International ranking of Southeast Asian countries) Global services location index 2006 (ranking of Asian countries) FDI stocks in Southeast Asian countries, 1996 and 2004 (millions US$) Cumulative FDI inflows in Southeast Asia, 1995–2004, by host country and origin (Millions US$ and percent) ADB’s Presidents (1966–2008) ADB’s Japanese personnel in top positions Indicators showing the relationships between the nations of the GMS Source of financing mobilized since 1992 by the GMS Population served by the GMS corridors Investments planned over the period 2005–2010 in the GMS corridors Economic indicators of east-west economic corridor by country as of 2003 Economic indicators of Bangkok–Hanoi road by country as of 2003 Ratio of economic indicators of Bangkok–Hanoi road to those of EWEC

98 101 102 102 104

166 166 196 203 208 212 239 240 240

vii

b939_FM.qxd

7/21/2010

viii

9.4 9.5 9.6 9.7 9.8 9.9 10.1 10.2 10.3

11:02 AM

Page viii

List of Tables

Ratio of weighted economic indicators of Bangkok– Hanoi road to those of EWEC Comparison of economic indicators of major cities of EWEC and BHR Ratio of weighted economic indicators of NSEC to BHR Comparison of economic indicators of major cities of NSEC and BHR Ratio of weighted economic indicators of SEC to those of BHR Comparison of economic indicators of major cities of SEC and BHR VIP visits between Myanmar and Japan Japan’s ODA loans to Myanmar Myanmar’s trade with neighboring countries: Exports and imports 1985–2003

241 242 243 244 245 245 253 255 261

b939_FM.qxd

7/21/2010

11:02 AM

Page ix

List of Figures

3.1 3.2 5.1 5.2 5.3

5.4

9.1 9.2 10.1 10.2

China’s participation in UN peace-keeping operations. (As of April 2008) Estimated ranges of Chinese medium-range and intercontinental ballistic missiles. Cumulative FDI inflows in Southeast Asia, by origin, 1995–2005, (percent of total) FDI inflows in Southeast Asia from Japan and China, 1995–2005 (in millions US$). Destinations of cumulative inflows of Japanese and Chinese FDI in ASEAN between 1995 and 2004, by group of countries (in millions of US$ and in percent) Destinations of cumulative inflows of Japanese and Chinese FDI in ASEAN between 1995–1999 and 2000–2004, by group of countries (in millions of US$ and in percent) Three economic corridors of the greater Mekong Subregion The application of the gravity model Japanese ODA received by Myanmar Myanmar’s share, of imports from China and Japan (%)

54 61 94 95 106

107

234 241 254 262

ix

b939_FM.qxd

7/21/2010

11:02 AM

Page x

This page intentionally left blank

b939_FM.qxd

7/21/2010

11:02 AM

Page xi

List of Maps

8.1 8.2 8.3 8.4 8.5 11.1

The transnational space of the GMS Two generations of economic corridors in the GMS From caravan route networks to corridor networks in the GMS Spatial structure related to corridors linkage in the GMS Thailand and the cross-border free zones The Chinese thrust in Burma

195 199 206 216 228 294

xi

b939_FM.qxd

7/21/2010

11:02 AM

Page xii

This page intentionally left blank

b939_FM.qxd

7/21/2010

11:02 AM

Page xiii

Biographies of the Contributors

Christian Taillard is Senior Research Fellow at the Southeast Asia Centre, CNRS-EHESS (Paris). He is a geography expert on mainland Southeast Asia. He first studied the impact of large dams on systems villagers in Laos and Thailand. Later, he worked on the reconfiguration of national territorial constructions in the context of the post Cold War, and their integration into the dynamics of regionalization within the globalization process, across the facade of the Asian Pacific and that of the Greater Mekong Region. He is now studying the emergence of a second generation of cities linked to these new transnational dynamics. David Hoyrup completed his Ph.D. in International Economics at Grenoble University (France) in 2004. His work dealt with trade openness and development in the four Southeast Asian countries before and after the 1997 economic crisis. He then worked as a Research Fellow at the IRASEC in Bangkok between 2005 and 2007, where he co-edited with Guy Faure, The European Economic Presence in Southeast Asia, published in French, Les Indes Savantes, 2008. He is presently an economist in the French Administration. Guy Faure is a Research Fellow at CNRS and Director of the Institute of East Asia (IAO), and head of the master course in Asian Studies at Lyon Institute of Political Studies. He was a former Director of the Research Institute on Contemporary Southeast Asia in Bangkok (2004–2008), Executive Director of the Chamber of Commerce and Industry of Japan French, (1986–1992), and Fellow xiii

b939_FM.qxd

xiv

7/21/2010

11:02 AM

Page xiv

Biographies of the Contributors

at the Maison Franco-Japonaise Tokyo (1983–1986). He taught at Tokyo and Chuo universities, and at the School of Oriental Languages in Paris. Guy Lubeigt is a geographer and obtained his Ph.D. in 1975. He is a Research Associate of the Research Institute on Contemporary Southeast Asia (IRASEC) in Bangkok. Specialized in history and cultural Buddhism of Burma, he spent most of his time there since 1968. He is an author of 13 books and 60 articles on Burma and Thailand. His latest books includes La Birmanie: l’âge d’or de Pagan (Editions Belles-lettres, 2005) and Pagan: Histoire et Légendes (Editions Kailash, Paris, 1998). Masami Ishida is a researcher at the Institute of Developing Economics of Japan External Trade Orgnization. He has a Ph.D. in Economics from the University of Indonesia. He was only Special Assistant at the Embassy of Malaysia and worked for the Institute of Developing Economics. Jiyoung Choi is an Asssociate Professor of International Relations at Hallym University of Graduates Studies, Ph.D. in Political Science from Peking University, PRC. His latest publications include “China’s Great Power Diplomacy and Its Strategy with EU” (2008); “Inquiry into the Current Reform of China’ SOEs and Finance System” (2007); “Chinese Rural Women during the De-Agriculturization in the Open and Reform Era: A Gender Perspective” (2006); “Sovereignty and Human Rights: A Study on China’s Perspection of State Sovereignty through Discourses of Human Rights in China” (2004/2005). Masaya Shiraishi has M.A. in history at Cornell University, and M.A. and Ph.D. in international relations at the University of Tokyo. Formerly an Associate Professor at Osaka University of Foreign Studies, Visiting researcher at the University of Paris, and Professor at Yokohama City University; he is currently a Professor in international relations and Southeast Asian Studies at the Graduate School of Asia Pacific Studies, Waseda University, Tokyo.

b939_FM.qxd

7/21/2010

11:02 AM

Page xv

Biographies of the Contributors

xv

Masayuki Masuda is an Associate Professor at the National Institute for Defense Studies in Tokyo. He served as Visiting Fellow, Shanghai University (2001–02), Senior Fellow, Keio Research Institute (2004–07), Special Research Fellow, Ocean University of China (2004–present), and Lecturer, Tokyo Woman’s Christian University (2008–present). His research includes Chinese security and foreign policy, contemporary international relations in East Asia, and issues in Japan–China relations. Matthieu Salomon has graduated from the Paris Institute of Political Studies (M.A. degree in Area studies, specialisation on Asia). He has conducted researches on Vietnamese contemporary politics and was an active member of the Research Group on Contemporary Vietnam at CERI (Sciences-Po). He spent three years in Hanoi (2001–2004) where he was lecturer at the Institute for International Relations. He has published on Vietnamese politics. He has returned to Vietnam in 2007 and he is currently working on governance projects for different organisations, including SIDA, UNDP and the EC, and NGOs. Suthiphand Chirathivat is an Associate Professor of Economics and former Dean of the Faculty of Economics at Chulalongkorn University. He is also Chairman of Economics Research Center and Center for International Economics and Vice-Chairman, Economics Discipline, National Research Council of Thailand. Concurrently, he holds various professional positions including: Executive Member of the Thailand University Research Association, Honorary President, Association of Former Students in France, Thailand. His main research interests are international trade and investment, regional economic integration, economic development in Southeast Asia and emerging economic issues in Asia. Sophie Boisseau du Rocher Ph.D. is a Senior Researcher at Asia Center (Paris) and teaches at the Paris Institute of Political Studies. She is currently working on political and international issues in Southeast Asia. She has written a book on “Southeast Asia: Taken into a Trap?”, published in Paris (2008, Perrin).

b939_FM.qxd

xvi

7/21/2010

11:02 AM

Page xvi

Biographies of the Contributors

Taeho Kim is a Professor of international relations and Director of the Center for Contemporary China (CCCS), Hallym University of Graduates Studies. Before joining Hallym in 2003, Dr. Kim has served as a senior China analyst at the Korea Institute for Defense Analyses (KIDA) for nearly 14 years. Toshihiro Kudo is the Director of the Area Studies Center of the Institute of Developing Economies (IDE-JETRO) in Japan. He joined the Institute in 1994 after completing his M.Phil at the University of Cambridge. From 2000–2003, he was a visiting Research Fellow at Yangon Institute of Economics, Ministry of Education and Department of Agricultural Planning, Ministry of Agriculture and Irrigation. Doan Ket Vu has graduated from the Institute for International Relations (Hanoi, 1998), the International Public Administration Institute of Paris (2000–2001) and from the Paris Institute of Political Studies (M.A. degree in International relations, 2003). He is Ph.D. candidate at Sciences-Po Paris. His Ph.D. dissertation is about: “The Image of China among Vietnamese Leaders”. He has published on contemporary Vietnamese politics. He is currently Professor of international relations at the Diplomatic Academy of Vietnam (DAVMOFA, Hanoi).

b939_FM.qxd

7/21/2010

11:02 AM

Page xvii

Acknowledgements

This book is the Proceedings of the International Symposium, “New Dynamics between China and Japan. How to build the Future from the Past?”, held at the Maison Franco-Japonaise (MFJ) in Tokyo on June 27–29, 2007, in cooperation with the MJF, IRASEC, Waseda University, Asia Center and the Réseau Asie (French Network of Asian Specialists). My thanks, therefore, go first to all organizers of the Symposium, starting with Françoise Sabban, head of the MJF, who hosted the Symposium, Shirahisi Masaya, from the Institute of Asia Pacific Studies at Waseda University, Francois Godement, Paris Institute of Political Studies, Director of the Asia Centre, and JeanFrançois Sabouret, Director of the Réseau Asie (CNRS), for their invaluable assistance in coordinating the program. Finally, I thank Benoît de Tréglodé for the initiative of this Symposium and for the financial support of the French Embassy in Tokyo.

xvii

b939_FM.qxd

7/21/2010

11:02 AM

Page xviii

This page intentionally left blank

b939_Introduction.qxd

7/15/2010

2:12 PM

Page 1

INTRODUCTION

The New Sino-Japanese “Great Game” in Asia: Between Competition and Complementarities Guy Faure

A New “Great Game” The 21st century had already been heralded several decades ago as the Asia–Pacific century. Abundant literature exists on this self-realizing prophecy without a single voice rising in protest. In parallel complement to this vision of unshakeable economic determinism for the future of this region of the world, yet another body of literature has emerged on the rising powers of regional Eastern economies. This time, though, the writings are oriented toward these new nationconquerors. The trend began in the 1960s with the first series released on Japan, prematurely given the first place on the podium by Ezra Vogel in his best-seller Japan as Number One.1 Then came the NewlyIndustrialized Countries of Asia during the 1970s and 1980s, each one a brand-new success story, with the appearance of South Korea, Taiwan and Singapore. The following decade would see the Chinese giant awaken. This was an occasion for a new literary wave to blossom. Either lofty with praise or shrill with alarm, depending on the author, nearly everyone agreed that China would be the next “number one” on the planet. History does not end, however, with the Chinese chapter. India is now perceived as an emerging force to contend with, even as the numerous consequences of China’s arrival on the world stage have not yet been entirely integrated. This literary 1

Vogel, E. F. (1981). Japan as Number One: Lessons for America. Harvard University Press. 1

b939_Introduction.qxd

2

7/15/2010

2:12 PM

Page 2

G. Faure

production has a highly varied scientific character, but much of the work shares a common and enthusiastic vision of uninterrupted economic progress that can be preceded only by democratic progress. But another position also prevails, shared by the same authors: there is apprehension that the appearance of a new actor will compromise the status quo (Trading places)2 by its turning into a serious contender. Occasionally, the malevolent or the most canny suggest a new arrival may become a predatory economy that scorns the rules of the game. Japan inaugurated this rite of passage and had to face fierce Western criticism (Japan bashing) in the aftermath of trade conflicts (economic frictions) with the West (Trade war).3 Another variant of conventional East-West or Asia-West polarity consists of speculating on real or imaginary rivalries between Asian countries and then declaring them inevitable. Today, the debate is essentially centered on the future of Sino-Japanese relations. But new thriving literature4 has already seen the light of day, this time on Sino-Indian relations. This is because India, viewed as a new emerging power, is at the core of media hype, much like what its predecessors experienced in the new “economic miracle” schema. But India is still standing by tentatively in the wings of the international stage as Asia’s frontrunner. Will the world then witness a struggle for regional leadership between China and Japan? Some observers already foresee Japan’s decline and the rise of the Chinese superpower — the die seems to be already cast. It is merely a matter of time before the Middle Empire surpasses the Empire of the Rising Sun. The Darwinian schema is here to stay among the media and analysts, going by China’s exceptional growth rates over a decade. Other schemas are also plausible besides the eternal “rise and fall of the empire”, considering only contemporary American and Japanese references. Colonial empires, too,

2

Prestowitz, C.V. (1986). Trading Places: How America allowed Japan to take the lead. Charles E. Tuttle. 3 Schlosstein, S. (1984). Trade War: Greed, power and industrial policy on opposite sides of the Pacific. St Martin Press. 4 As examples of such writing, see Meredith, R. (2008). The Elephant and the Dragon: The rise of India and China and what it means. W.W. Norton & Company.

b939_Introduction.qxd

7/15/2010

2:12 PM

Page 3

The New Sino-Japanese “Great Game”

3

have faded into oblivion during the last century but their metropolises have been redeployed in different directions — politically for countries of the European Union, or economically for commercial and industrial powers in the case of Japan. Diverse scenarios anticipate a change in dual leadership domination within Asia, shifting from a Japanese-American to a Sino-Japanese condominium. The latest analysis has been confirmed by American withdrawal from the region on the economic and strategic levels, to the advantage of Central Asia and the Middle East. The APEC’s inability to enthuse either Asians or Americans alike is suggestive of North America’s disengagement from the region. This hypothesis, persuasive though it may seem, must be backed up by facts. The schema of Sino-Japanese closeness is still nebulous and hence fragile. Many hurdles must be overcome, starting with historical conflict and competition in some markets for new prospects or access to raw materials and energy resources. Can the Japanese and Chinese ambitions be truly compatible, or will their disagreements come to a head and jeopardize ties in the future?5 Several scenarios are possible between the two extreme options of a deadlock (or, at least, open rivalry) and an alliance (or, at least, a close collaboration) at all levels. This is because it is still hard to imagine how their dialogue will be articulated between competition and cooperation. For want of a more appropriate term, their unusual relationship has been styled the “politically cold and economically hot dynamic”. This book is a study of ties between China and Japan and their Asian counterparts. It does not therefore directly treat bilateral relations between these powers, as these already constitute the subject of many other studies. A lengthy perspective has been taken into account in order to recall past legacies, some of which are still painfully contentious, and to record evolutions in attitudes and strategies vis-à-vis Asian countries. The two major players, over a period of several decades, have evoked the same fears and fascinations among their neighbours. Today, China gives less cause for worry on economic and

5

Lim, H. S. (2008). Japan and China in the East Asian Integration, 5th Ed. Singapore: ISEAS Press.

b939_Introduction.qxd

4

7/15/2010

2:12 PM

Page 4

G. Faure

security issues. Within a few years, it has managed to provide reassurance about its economic plans, just as it has about its geopolitical plans, despite its visible and rapid expansion in the region. This is a relatively recent phenomenon, of say four to five years, in the evolution of positive feelings about China in East and South Asia. For its part, Japan has had to work longer in order to rebuild its image in the region, through highly effective diplomacy, generous developmental aid and massive investments. The current perception of Japan in Southeast Asia, Taiwan and Hong Kong is extremely positive. It is more measured in China where only 50 percent of the Chinese have a favourable impression of their neighbor. On the contrary, bitter resentment for the ex-colonial metropolis persists doggedly among over three-fourths of the Korean population. The background of historical and territorial conflict does not explain all the hardship involved to wipe the slate clean of the past. Japan’s fauxpas, annual visits by the Japanese Premier and members of the cabinet to Yasukuni Jinja Shrine, revisionist school textbooks and frequent racist comments by politicians act as “needling reminders” to bring back dark memories for Japan’s neighbours. But feverish reactionary outbursts of nationalism in both China and Korea contribute to tensions as they feed off the past, only to jeopardize the future. The present work is structured in three parts corresponding to three different viewpoints on the region. First, a panoramic view of the entire region (Chapters 1 to 4) dealing with issues of the past, security and regional construction. In the second part (Chapters 5 to 9), the perspective zooms onto the Southeast Asian region and continental territories to analyze Chinese and Japanese advancement in economy and diplomacy. The concluding third part (Chapters 10 to 13) offers concrete examples pertaining to the new Sino-Japanese dynamic in three countries — Burma, Vietnam and Thailand. Can the Future be Built from the Past? For Taheo Kim (Chapter 1), there is no doubt that Sino-Japanese relations will have a decisive impact on the economic and political order of East Asia. This will depend on the ability of the two major

b939_Introduction.qxd

7/15/2010

2:12 PM

Page 5

The New Sino-Japanese “Great Game”

5

regional actors to sustain friendly relations. This condition is not simple to fulfill since existing relations between them are laborious and often strained. History nurtures traditional rivalries and age-old defiance, reinforced by differences in the political system of social values and strategic objectives in East Asia. This will not make it any easier to find the ideal posture between interdependence and rivalry. Nonetheless, in order to understand how Sino-Japanese relations will evolve in the future, it seems logical to link knowledge of a shared history between the two countries with an analysis of these dynamics which, for many, constitute a new geopolitical phenomenon. Now, how will these traditional thought processes interact with these new dynamics to shape up the main issues of regional security and prosperity? Another important question that Jiyung Choi deals with (Chapter 2) for the future of regional stability is that Chinese nationalism seems to have resurfaced since the country underwent reform and launched a policy of openness. This new Chinese nationalism merits special attention on account of its complex and polymorphous nature. It is a double-edged sword for the Chinese powers handling and experiencing it but lacking the ability to control it. This nationalism has aggravated the situation between China and its Japanese neighbor, exacerbating ties and creating a context that seems more threatening than the reality. Masayuki Masuda (Chapter 3) shows how, by moving beyond nationalist gesticulations, China has adopted more conciliatory stances and even openness toward cooperation in the highly sensitive area of defense, unimaginable several years ago. With the emergence of nontraditional threats, the People’s Liberation Army of China seeks to establish ties for cooperation with its neighbours, its process inscribed in “friendly neighbor” diplomacy, initiated by Hu Jintao in 2002. As a positive consequence of this new military diplomacy, Chinese defense objectives are more transparent and reassuring for countries in the zone. The issue of regional cooperation holds high stakes, according to Sophie Boisseau du Rocher (Chapter 4) because it will help to set up institutional mechanisms. But East Asia has been known to swing between two attitudes, one of cooperation, to the other of rivalry or competition. Despite these stumbling blocks, such as resurging nationalism, there is continuous

b939_Introduction.qxd

6

7/15/2010

2:12 PM

Page 6

G. Faure

reflection on regional integration and the idea of East Asia is making progress. It is interesting to note in passing that it is through ASEAN that the region appears to organize and build itself. To symbolize the closing in of Southeast and Northeast Asia, the equation ASEAN+3 was adopted. Since the last East Asian summit, a new step has been taken by extending the previous concept to a new equation of “ASEAN+3+3” with the inclusion of three new partners, Australia, New Zealand and India. But this Asian regionalization proceeds from a logic that diverges from the European logic of de facto regionalization, not de jure. China–Japan Rivalries and Complementarities in Southeast Asia David Hoyrup (Chapter 5) shows that Southeast Asia is a strategic destination for both Japan and China. A quick analysis of trade and investment statistics may leave the impression that there are no SinoJapanese rivalries in the region. In fact, further examination will expose two factions — countries whose economies are heavily structured by Japan, such as Singapore, Malaysia and Thailand, and those whose economies are increasingly structured by Chinese interests. This is the case of Cambodia, Laos and Burma. This phenomenon is likely to pose a threat to ASEAN cohesion in the long haul. It is translated through dissonance between ASEAN’s institutional limitations and its geographical borders, which constantly surfaces at the level of exchange and investment. Hoyrup suggests that this cohesion is more vulnerable when ASEAN does not function correctly. It does not have a charter or supranational institution to act as safeguards against massive foreign penetration into the interests of its member states. Passivity on the part of a regional organization creates apprehensions about its dismemberment, if not domination of the association, by a foreigner lurking nearby. In studying the continent of Southeast Asia or the Indochinese peninsula, Masaya Shiraishi observes (Chapter 6) that this geographical ensemble has been a testing ground for Japanese diplomacy and developmental aid. Its reconstruction plan for Indochina has strongly driven numerous initiatives to galvanize the peninsula. This policy has helped to open out ASEAN to less

b939_Introduction.qxd

7/15/2010

2:12 PM

Page 7

The New Sino-Japanese “Great Game”

7

developed countries in the region: Cambodia, Laos and Vietnam — memberships that Japan has encouraged and made possible. But within the entangled thicket of diverse initiatives (Mekong congestion), the most promising has been the Greater Mekong Subregion (GMS) plan, bringing urgently needed infrastructure into this vast zone, including the ambitious economic corridors traversing the peninsula from East to West and from North to South. The GMS plan and its massive infrastructure projects are the initiative of the Asian Development Bank (ADB), presented in a study by Guy Faure (Chapter 7). The ADB offers its perceptions of the new Chinese evolution in matters of multilateralism and advances certain hypotheses on the future of Sino-Japanese relations. Since its entry in 1986, China has made considerable inroads into this banking institution. Just how far will it go? Moreover, will Chinese and Japanese visions, already diverging in the case of ADB’s path-breaking GMS project, converge or clash? Finally, will Chinese and Japanese diplomatic styles eventually concur in a more shared and consensual approach, one of “soft diplomacy”? The GMS plan offers a redefinition of broad scale territorial strategies, according to Christian Taillard (Chapter 8). The GMS is by far the most advanced program for transnational integration in East Asia. Taillard analyses and reinterprets the spatial logic of the corridors, as a function of the cooperation between Chinese and Japanese stakeholders. He sees in this a kind of geographical division of tasks between the two Asian actors, until India enters to complete the general schema of the project. Masami Ishida (Chapter 9) studies the practical utility of these corridors from an economist’s angle. He provides the pragmatic reasons behind the Japanese drive to shorten distances between Thailand and Vietnam to facilitate exchange. He also shows convergence between Japanese and Chinese interests since the Bangkok–Hanoi–Shanghai link will draw 3370 Japanese businesses closer within the zone (apart from those in Hong Kong). Sino-Japanese Dynamics: Country Studies The third part analyses the situation in the three countries which have traditionally held strong ties with China and Japan — Burma, Thailand

b939_Introduction.qxd

8

7/15/2010

2:12 PM

Page 8

G. Faure

and Vietnam. For Toshihiro Kudo (Chapter 10), Burma is an example of a country which will eventually surrender its privileged ties with Japan to change orbit and enter the Chinese sphere of influence. Kudo provides a retrospective view of the surrender of JapaneseBurmese links. Burma had been for a long time among the first beneficiaries of Japanese developmental aid until 1988. The military confiscation of power sounded the knell to this aid. But Japan intends to continue providing aid under its policy of “value-oriented diplomacy”, which places values such as human rights above immediate economic interests. Guy Lubeigt (Chapter 11) devotes attention to the increasingly visible presence of Chinese interests. He states that China within a few years has managed to establish control over a major part of its natural and energy resources, critical to its development. Within a few years China has become a top trading partner, far surpassing Thailand and India. At the strategic level, China intends to acquire access to the Indian Ocean. This strategy is dependent on heavy migration especially to the North and the city of Mandalay. The historical Burmese capital has received several successive waves of Chinese migrants, who eventually “colonized” the centre and transformed centrally located neighborhood districts. This phenomenon apparently met with little resistance, given the open collusion between the Burmese military and Chinese migrants. Back home in Thailand, Suthipand Chirativat (Chapter 12) describes a very different and far more balanced situation vis-à-vis the two Northeast Asian powers. China and Japan both have in-depth knowledge of Thailand, its strengths and weaknesses. The Kingdom on the one hand enjoys strong historical and economic ties with Japan and on the other, has benefitted from heavy Chinese cultural influences owing to the vast Chinese Diaspora in the country and the defining role it plays in the business realm, among others. For Japan, Thailand has been a leading partner for years. Its economic interests are considerable, and of strategic importance especially for the automobile and electronics industries. The Japanese presence in Thailand is hence very visible, especially in Bangkok with its huge expatriate population and over 1500 firms and subsidiaries across the country. However, this wellconsolidated position has not obstructed rapid progress of Chinese

b939_Introduction.qxd

7/15/2010

2:12 PM

Page 9

The New Sino-Japanese “Great Game”

9

economic activity. The author expresses concern on the eventual consequences of this evolution which could leave Thailand caught in a vise between two partners jealously vying for privileged relations with the country. Lastly, for Matthieu Salomon and Doan Kêt Vu (Chapter 13), Vietnam perceives China as both role model and threat. In the recent past, relations between the two countries have been very strained and even culminated in a brief military confrontation. But the situation will gradually evolve, from the Doi Moi (1986) toward the normalized relations which convince the Vietnamese to see China as a model to replicate, probably the only possible one after the collapse of the Soviet Union, its old system of reference. But its perception of its Northeastern neighbor is accompanied by fears born of a long history between the two countries. The simple Vietnamese in the street though still envies the Chinese for their accomplishments, prosperity and manufactured goods which are growing increasingly in favour in Vietnam. Strengthened by its proximity to the Middle Empire, Vietnam aims to play the intermediary between its huge neighbor and ASEAN, while sharing its ideals under the slogan of “peaceful development”, this too a Chinese import! In conclusion, the contributions in this volume expose a situation far removed from the expected confrontational shock between the two giants in a struggle for regional domination. The rhetoric of this confrontation corresponds to that of a new “Great Game” at play between current forces. But unlike the past, events are happening more peacefully. Advance of one country need not mean retreat of the other. Besides, Chinese and Japanese dynamics do not consistently clash; they may even complement one another as the development of the Indochinese peninsula has proven. To consider that it is but one step for these dynamics to converge one day is, however, still clearly premature.

b939_Introduction.qxd

7/15/2010

2:12 PM

Page 10

This page intentionally left blank

b939_Chapter-01.qxd

7/15/2010

2:11 PM

Page 11

CHAPTER 1

Anchoring the Right Pattern of Interdependence and Rivalry: China–Japan Relations under the New Leadership Taeho Kim

The future of China–Japan relations will have a decisive impact on post-Cold War East Asia’s economic and security order. Japan and China embody the world’s second and third largest economies, respectively, and wield growing political clout in regional affairs. Militarily, albeit different in nature and size, both countries are major factors to be reckoned with in any East Asian strategic equation. The relative rise in influence of both China and Japan in post-Cold War regional affairs is not only evident but also unprecedented in the history of East Asia. Japan is the world’s largest creditor nation and largest donor of official development aid (ODA) in East Asia and in the world. It is also one of the major spenders in defense budget with US$52.6 billion (US$1 = 89) in FY 2009.1 Japan’s total armed forces are small — approximately 260,000 strong — and being reduced, but they are buttressed by its vastly superior technological, industrial, and financial prowess. Seen from this perspective, Japan is already a potential major military power seeking a greater political and security role in post-Cold War East Asia. 1

International Institute for Strategic Studies (2010). The Military Balance 2010, p. 408. London: Routledge. Unless noted otherwise, the data and figures on the Japanese and especially Chinese militaries used in this essay are from the above source and the author’s estimates. Due to significant fluctuations in conversion rates between the Japanese yen and the US dollar in recent years, however, measuring the Japanese defense budget in US dollar terms might be misleading. 11

b939_Chapter-01.qxd

12

7/15/2010

2:11 PM

Page 12

T. Kim

In contrast, China is predominantly an independent military power with growing economic capability. China is the only Asian nation with strategic nuclear forces, and it maintains the world’s largest military of over two million soldiers — also being reduced, thus standing in a position to effect major changes in Asia’s security environment. In particular, since the early 1990s, China’s rise including its growing military power has precisely been the focal point of Asian and global security debate which has subsequently shaped the widespread perception that regional stability and prosperity will increasingly hinge on the future capability and behavior of China. This fundamental fact has taken on a new relevance in light of the global discourse over the “rise of China” — be that “China’s peaceful rise” (heping jueqi),2 “China’s peaceful development” (heping fazhan)3 or “China threat theory” (weixielun).4 The two countries’ growing national power and their respective will to use it are complex and important questions in their own right, deserving serious attention from both scholarly and policy communities. 2

See, for example, Xia. L. and Jiang, X. (2004). Zhongguo Heping Jueqi (China’s Peaceful Rise). Beijing: Zhongguo Shehuikexueyuan Chubanshe; Zheng, B. (2004). “China’s Peaceful Rise and Opportunities for the Asia Pacific Region,” China Strategy, Vol. 3, pp. 2–4. 3 For a difference between “peaceful rise” and “peaceful development,” see Han, S. (2004). “The Rise of China and East Asia’s Changing Order” ‘(in Korean),’ New Asia, Vol. 11, No. 3, pp. 113–34, especially pp. 116–23. 4 There are simply too much literature on the “China threat.” Most representative single volumes include Mosher, S. W. (2000). Hegemon: China’s Plan to Dominate Asia and the World. San Francisco: Encounter Books; Gertz, B. (2000). The China Threat: How the People’s Republic Targets America. Washington, DC: Regnery; Timperlake, E. and Triplett, W. C. Jr. (1999). Red Dragon Rising: Communist China’s Military Threat to America. Washington, DC: Regnery. For various reactions from the regional actors to a rising China, see Yee, H. and Storey, I. (eds.), The China Threat: Perceptions, Myths, and Reality (2002). Richmond, UK: RoutledgeCurzon; Pumphrey, C. W. (ed.) (2002). The Rise of China in Asia: Security Implications. Carlisle Barracks: U.S. Army War College Strategic Studies Institute. For more recent and more balanced assessments on the rise of China, see Bergsten, C. F.; Gill, B.; Lardy, N. R.; and Mitchell, D. (2006). China: The Balance Sheet. New York: Pacific Affairs and Sutter, R. G. (2006). China’s Rise: Implications for U.S. Leadership in Asia, Policy Studies 21. Washington, DC: East-West Center.

b939_Chapter-01.qxd

7/15/2010

2:11 PM

Page 13

Anchoring the Right Pattern of Interdependence and Rivalry

13

In particular, their traditional rivalry and current and likely future power potential will continue to be a source for concern in their neighbors’ strategic planning. For both historical and contemporary reasons, each country has also pursued its foreign policy goals with an eye on the other. In terms of future regional stability, what is perhaps more significant in the beginning of the new century is whether the two major regional powers will develop a relationship that is either strong and cooperative or weak and confrontational in the years ahead. Of equal importance is the diverse yet uncertain impact of this evolving relationship on the future of East Asian security, particularly in light of their changing domestic and international contexts. Beijing–Tokyo relations also directly touch upon a host of major regional security issues such as peninsular stability, the Taiwan question, the South and East China Sea disputes, multilateral security issues, and the US role in the region — to name but a few. In brief, its potential impact on regional security should not be underestimated.5 This article argues that despite their huge and growing stakes in maintaining an amicable relationship, China–Japan relations will remain a difficult and often tense process. The persistence of their traditional rivalry and historical distrust over time suggests that they may have more to do with deeply ingrained cultural, historical, and perceptual factors than with the dictates of economic cooperation or shared interest in regional stability that are mutually beneficial. Also underlying their complex but competitive ties is the rise of newgeneration leaders in both countries who are tasked with coping with a complex set of challenges from below as well as from outside. How well and in what manner they handle the challenges could significantly affect not only the wealth and health of their respective nation but also the future of the regional order. The future stability in East 5

For different assessments on the impact of Sino-Japanese relations on salient regional economic and security issues, see Roy, D. (2005). The Sources and Limits of Sino-Japanese Tensions. Survival, Vol. 47, No. 2, pp. 191–214; Dreyer, J. T. (2006). Sino-Japanese Rivalry and Its Implications for Developing Nations. Asian Survey, Vol. 46, No. 4, pp. 538–57; Wang, Z. (2007). On the Domestic and Foreign Affairs of Japan. International Strategic Studies, Serial No. 84, No. 2, pp. 34–43.

b939_Chapter-01.qxd

14

7/15/2010

2:11 PM

Page 14

T. Kim

Asia will hang in the balance as China and Japan continue to seek a new balance between their interdependence and rivalry. The Leadership Factor in Bilateral Ties [T]he development of Sino-Japanese relations is a historical tide independent of the will of some individual leaders such as [Junichiro] Koizumi. It is a historical trend of objective necessity. People’s Daily editorial (1 April 2004). Wen [Jiabao] talked about melting ice, but the ice is floating on the water….I would like China to pick them up. Shoichi Nakagawa, LDP policy chief (April 2007)6

The above quotations typify the classic examples of two social psychology concepts: the fundamental attribution error and projection theory.7 The former “attributes” the behavior of others to their interior motivations — often in a monolithic context, while attributing one’s own behavior to situational factors. The latter concept is simply accusing others of the events occurring. As one is not responsible for the events of its own making, he or she may not only repeat the same thing — without any guilt — but also maintain one’s own self-esteem. While both concepts, like other theoretical constructs, are simplified forms of far more complex realities, they nonetheless capture the essence of the long-running modalities of mutual accusations in Sino-Japanese relations. In order to assess the role and the importance of the leadership factor in their bilateral ties, it is necessary to understand some new developments and recent trends occurring in both countries and beyond. 6

As quoted in Japan and China Bask in Summit Success, not Friendship. 16 April 2007, South China Morning Post. 7 For a fuller explanation of the two concepts as well as its application for events, see Garver, J. W. (2006). China’s Decision for War with India. In New Directions in the Study of China’s Foreign Policy, Johnston, A. I. and Ross, R. S. (eds.), pp. 86–130, esp. pp. 88–89. Stanford: Stanford University Press.

b939_Chapter-01.qxd

7/15/2010

2:11 PM

Page 15

Anchoring the Right Pattern of Interdependence and Rivalry

15

First and foremost, both countries now have a new generation of leaders who are generally less burdened by the baggage of history. On the Chinese side, the new lineup of the so-called “fourth-generation leadership” after the 16th CCP Congress in November 2002, in which those with substantial provincial or bureaucratic background were represented, strongly indicates China’s continuing priority on economic development which depends on external stability, among others.8 The generational turnover in the Chinese leadership, in tandem with its need to maintain political and social stability, would likely reinforce its current pragmatic policy orientation toward the region in general and toward Japan in particular. For its part, Japan has also experienced the assumption to power of the postwar-generation leadership, which has reinforced Japan’s more nationalistic and more assertive push for protecting its growing economic and security interests. In particular, a host of domestic and regional developments in the 1990s such as Japan’s “unfair” reputation in the 1991–92 Persian Gulf War, North Korea’s nuclear and missile threats, and China’s rising power have all led the Japanese leadership to redefine and expand the US–Japanese security relationship and Japan’s regional and international security role.9 Second, that Japan is the focal point of China’s traditional nationalism is well known. What is new, especially since the mid-1990s, has been the tendency for China and Japan to see each other as the target of their own “popular nationalism”, which is distinguishable from government-sponsored state nationalism. As Che-po Chan and Brian Bridges have persuasively argued,10 an increasing gap between state 8

See, for example, Dittmer, L. (2003). Leadership Change and Chinese Political Development. China Quarterly, No. 176, pp. 903–25. 9 Japan’s new security strategy as well as its defense orientation in the post-Cold War have been underwritten in the September 1994 Higuchi Report and in the October 2004 Araki Report. See Dillion, D. R.; Feldman, H. J.; Hwang, B. Y. and Tkacik, J. J. (2005). Asia’s Security Challenges. Heritage Backgrounder, No. 1839, pp. 3–4. 10 For an excellent analysis on the “clash of nationalisms” between China and Japan along the lines of state and popular nationalisms as well as of the “assertive and reactive” spectrum, see Chan, C. and Bridges, B. (2006). China, Japan, and the Clash of Nationalism. Asian Perspective, Vol. 30, No. 1, pp. 127–56.

b939_Chapter-01.qxd

16

7/15/2010

2:11 PM

Page 16

T. Kim

and popular nationalisms in both countries is not only evident but it could become a source that complicates Beijing–Tokyo ties. This also means that popular sentiments might run counter to the national interests defined by their respective governments and that the government itself is vulnerable to attack by its own people if it takes too accommodative an approach to the other. A case in point is the widespread anti-Japanese demonstrations, mass movements, and internet sign-ups in China throughout 2005, which were spontaneous and voluntary, not necessarily state-sponsored.11 A series of anti-Japanese demonstrations was predictably put down before it could irreparably damage its relations with Japan or turn against the government, but there is no doubt that Chinese leaders now must take into consideration popular demands more than ever before. Third and related to the above is the emergent trend of describing the other side as an explicit security threat. China’s spectrum of security threat is wide ranging and inclusive of both traditional and nontraditional threats; but a combination of such factors as geographical proximity, mutual mistrust, and territorial disputes has made Japan a particular security concern for Chinese strategists. Interestingly, China’s increasing economic interdependence with Japan is often seen as a challenge as well as an opportunity in the eyes of the Chinese.12 To the Japanese, North Korea has always been the manifestation of multiple security threats ranging from nuclear weapons and missiles and the abduction of the Japanese to the intrusion of Japanese territorial waters and a possible breakdown of the North Korean regime. Compared with North Korea, however, China is by far the greater entity in almost all aspects that could complicate post-Cold War Japan’s 11

The sources of recent anti-Japanese demonstrations remain quite debatable and complicated to be adequately addressed here. See Chow, C. Y. Who’s Behind antiJapanese Tide — Party or People? (11 April 2007). South China Morning Post. 12 A recent research monograph on China’s conceptions of traditional and nontraditional security threats points out Japan as a country with which China is likely to engage in a military confrontation. See Craig, S. L. (2007). Chinese Perceptions of Traditional and Nontraditional Security Threats, esp. pp. 58–86. Carlisle Barracks, PA: US Army War College Strategic Studies Institute.

b939_Chapter-01.qxd

7/15/2010

2:11 PM

Page 17

Anchoring the Right Pattern of Interdependence and Rivalry

17

strategic calculations. At both bilateral and multilateral levels, the late US President Nixon’s observation on the age-old China–Japan rivalry is likely to be borne out. Besides their perennial bilateral concerns, their continuing rivalry for regional leadership (read: hegemony) has not only contributed to the creation of a “leadership vacuum” but has also adversely affected the growth of down-to-earth multilateral security mechanisms in the region. In particular, China’s recent efforts to enhance its role in regional security fora are often juxtaposed against the strengthened USA–Japan alliance ties, and vice versa. While both sides have long tried to dissociate the people from the leaders of the other in lodging protests, they are mostly thinly-veiled diplomatic gestures not grounded in reality. As leaders must engage in what is called “two-level games” in international negotiation, they must be able to meet both domestic as well as diplomatic requirements in order to maintain a fine balance in multiple games. Chinese Premier Wen Jiaobao’s April 2007 visit to Japan illustrates the point. While calling his visit an “ice-melting trip,” Wen noted that a limited number of Japanese leaders are responsible for the military past and added that Japanese people were the victims of war as well.13 While calling for across-the-board improvement in bilateral ties under “strategically and mutually beneficial relations,” he has also not failed to urge the Japanese leaders to take “concrete actions” (e.g., discontinuation of the Yasukuni Shrine visit). While the above speaks volumes about the leaders’ intention to maintain a manageable relationship with the other, it is often the same leaders who put a brake on the “historical trend of objective necessity” — as evidenced by the tenure of Jiang Zemin (1989–2002) and Junichiro Koizumi (2001–2006). Mutual Perceptions in a Historical Context As befits their traditional rivalry for regional influence and as the current two most powerful states in East Asia, Japan and China have quite a broad range of bilateral concerns with each other. This should 13 Wen Seeks Friendship with Japan (12 April 2007). South China Morning Post. For a full text of Premier Wen’s Diet speech, see Xinhua (12 April 2007).

b939_Chapter-01.qxd

18

7/15/2010

2:11 PM

Page 18

T. Kim

surprise no one, as historian Akira Iriye has strongly argued,14 given the fact that both countries have since the 1880s developed multifaceted rivalry relations on the power, culture, and economic dimensions. Traditional mutual perceptions between the Chinese and the Japanese have been very complex, but far from cordial, as the following long quotation typifies: Scholars who have examined Chinese and Japanese mutual perceptions have suggested misunderstanding, or indifference, or condescension, or arrogance — anything but communication. The Chinese are usually depicted as having clung to traditional images and looked down on Japan as a country of imitative dwarfs. They had not bothered to learn anything about Japan until it was too late. The Japanese in the Meiji era, for their part, avidly Westernized themselves until they no longer considered their country Asian, a member of the Chinese sphere of civilization....Such mutual arrogance and condescension was conducive to misunderstanding, a reflection of the two countries’ antagonistic power relationship.15

As Iriye has correctly noted, it is a pervasive yet distorted interpretation, and both countries had known one another’s history and people for centuries. It may even be added that their pace of “learning” about each other only became quicker in the second half of the 20th century. It can be equally plausibly argued, however, that their mutual and growing knowledge of each other could also generate conflicting rather than cooperative bilateral relations, contrary to Iriye’s suppositions. Historically, their traditional mutual condescension was sharply aggravated by an array of such major historical events as the SinoJapanese War in 1895, the Japanese invasion of China in the first half of this century, and particularly the Nanjing Massacre. All of these, 14

Iriye, A. (1992). China and Japan in the Global Setting. Cambridge: Harvard University Press. See also Iriye, A. (1996). Chinese–Japanese Relations, 1945–1990. In China and Japan: History, Trends, and Prospects. Howe, C. (ed.), pp. 46–59. Oxford: Oxford University Press. 15 Iriye, A. (1992), ibid, p. 28.

b939_Chapter-01.qxd

7/15/2010

2:11 PM

Page 19

Anchoring the Right Pattern of Interdependence and Rivalry

19

which the Chinese call “historical facts”, continue to undergird China’s anti-Japanese feelings and attitude, even if they are now expressed less frequently than in the past and in a less explicit manner. Different ideological subscription after 1945 had set them apart into different “camps” until the early 1970s, when they normalized the diplomatic relationship after the Nixon visit to China. Responding to the common Soviet threat, China and Japan opted for a “marriage of convenience” in the US-led global containment against the Soviet Union. Even if China and Japan were not pulled by the across-theboard improvement in bilateral ties, but pushed by the overriding external security threat, both tried to consciously — for the moment at least — set aside historical and cultural baggage and hammer out a new working relationship. It thus seems safe to say that Sino-Japanese relations in the 1970s and 1980s were an amalgam of practical need for strategic and, to a lesser extent, economic considerations, on the one hand, and historically deep-seated suspicions about the other’s intentions and behavior in the region, on the other. Seen from this perspective, the removal of the strategic garb after the end of the Cold War, coupled with China’s growing economic and military power and Japan’s domestic changes, has pitted China and Japan against each other in a competitive bid for economic influence and regional role in East Asia. As many scholars have noted, moreover, the enduring dual images of superiority and inferiority permeate their mutual perceptions to an extent and in ways that official and public perceptions in both countries regarding the other remain different, divergent, and distorted, and that there seems to be no strong constituency in either China or Japan to promote lasting friendship and cooperation. In a study on Japan’s cultural diplomacy toward China in the 1990s, Diana Betzler and Greg Austin have convincingly argued that “the main impulses for official interaction between the two countries [China and Japan] remain outside what might be called the popular imagination.”16 16

Betzler, D. and Austin, G. (1997). Gulf in Sino-Japanese Relations: An Evaluation of Japan’s Cultural Diplomacy Toward China. Journal of East Asian Affairs, Vol. 11, No. 2, pp. 611–12.

b939_Chapter-01.qxd

20

7/15/2010

2:11 PM

Page 20

T. Kim

In a March 2004 three-country survey conducted by Asahi Shimbun, Dong-A Ilbo, and the Chinese Academy of Social Sciences (CASS), 64 percent of Chinese and 63 percent of Korean respondents said they disliked the Japanese, which were up from 53 percent in a similar Chinese survey in 2002 and from 57 percent in a 2001 Korean survey.17 As to the question of Prime Minister Junichiro Koizumi’s visit to the Yasukuni Shrine, a whopping 92 percent of Koreans as well as an almost equal percent of Chinese opposed it, whereas Japanese opposition was only 28 percent, with 54 percent supporting the visit.18 In contrast, the same poll shows, 28 percent of the Japanese respondents said they disliked China against ten percent who liked it. As to South Korea, 22 percent of the Japanese showed antagonism, while 15 percent showed affection. In the 2004 Japanese Cabinet Office survey, a record high 58.2 percent of the Japanese polled felt negatively toward China with only 37.6 percent favorable.19 On the question of Sino-Japanese relations, a whopping 61 percent of the Japanese found them problematic. Seen from the results of another survey conducted in August 2005, only 25 percent of the Chinese held “friendly feelings” toward Japan and 83.7 percent of them held Japan accountable for the victims of the imperial war.20 A glance at the survey results indicates that the historical issue remains a significant undercurrent in Beijing–Tokyo relations, especially in the eyes of the Chinese. It should also be borne in mind that a majority of the Chinese public, especially young Chinese, formed their opinions about Japan via the domestic media and internet and 17

Survey Shows Anti-Japanese Sentiment Soaring in China, S. Korea (27 April 2005), South China Morning Post. 18 It should be noted that the March 2004 poll was conducted right after a Korean–Japanese dispute over small islands but before widespread anti-Japanese demonstrations in China in April 2005. 19 As reported in Yonhap News (19 December 2004). 20 The survey was conducted jointly by the Korean MBC and Chinese Dongfang Satellite TV and aired on MBC (13 August 2005). See also Yonhap News (13 August 2005).

b939_Chapter-01.qxd

7/15/2010

2:11 PM

Page 21

Anchoring the Right Pattern of Interdependence and Rivalry

21

that according to a China Daily’s poll a whopping 80 percent of young Chinese have never met anyone from Japan.21 Not surprisingly, the underlying historical distrust and suspicions are often manifested in their contemporary policy toward the other. Each side has been critical of the other’s moves toward greater military capability or a larger regional role. In addition, Japan has long been a rallying point for renewal of nationalism in China, while Japan is suspicious of a reincarnation of China’s traditional cultural and other kinds of dominance in the region once the latter achieves its Four Modernizations — a perception that has recently been accentuated by the debate on the “rise of China.” While the growth of nationalistic sentiments seems evident in both post-Cold War Japan and China, the latter’s increasing reliance on the nationalistic agenda to arrest the decline of communism as a credible ideology and to fend off international pressure for change in China does not augur well for the future of their bilateral relations. Official Ties and Deepening Interdependence Official dialogues and inter-governmental cooperation between Japan and China have gradually but steadily expanded over the years. Both governments also assign top priority to bilateral economic ties. At the heart of their official relationship lie trade, investment, and aid. Since 2004 China (including Hong Kong) has overtaken the USA as Japan’s largest trading partner. In that year China’s share in Japan’s overall trade stood at 20.1 percent, while the share of Japan’s trade with China — without Hong Kong — occupied 16.5 percent of China’s total trade — thus deepening economic interdependence.22 According to 21

For the role of the media and internet in forming anti-Japanese sentiments in China, see, for example, Craig, Chinese Perceptions of Traditional and Nontraditional Security Threats, pp. 58–59, 67–72. 22 See, for example, China Displaces US as Japan’s Biggest Trading Partner (27 January 2005) South China Morning Post.

b939_Chapter-01.qxd

22

7/15/2010

2:11 PM

Page 22

T. Kim

the Japanese Ministry of Finance, bilateral trade in 2006 between Japan and China (excluding Hong Kong) reached 25,427.6 billion yen, making China Japan’s largest trading partner.23 Japan’s trade deficit with China, however, has somewhat reduced to 2,798.6 billion yen. People-to-people contacts between the two sides are evidently and steadily growing; they are indeed necessary and commendable efforts to acquire first-hand experience and a minimal understanding about the other. But growing bilateral contacts have yet to produce better and more objective understanding of each other, let alone lasting friendship. It is also likely that China’s rapidly expanding economy would likely make the Japanese share smaller in the years ahead. Due to the asymmetrical importance of economic relations to China, it has largely abstained itself from openly and directly criticizing Japan — except the so-called “historical problems,” while Japan has tried to link the ODA with enhanced “transparency” in Chinese military affairs, as seen in the cases of withholding small part of ODA since the mid-1990s and in the 2000s. But trade imbalance becomes a growing concern for Tokyo, as it has run a chronic trade deficit with China since 1988. More often than not, the data from the Japanese Ministry of Finance indicates Japan’s trade deficit with China, whereas Chinese official statistics showed an essential balance over the years. The discrepancy is caused by the fact that Beijing includes the Japanese exports that go through Hong Kong, where as Tokyo does not — an unusual practice Beijing applies to Japan, but not to the USA or Europe. Salient Political and Security Issues Issues of concern in Chinese–Japanese relations are quite diverse in kind and arguably expanding in scope. While it may seem natural for such major powers as China and Japan — with a long history of interactions — to have both cooperation and conflict at the same time, theirs are notably long-running and/or hard to resolve in any practical way. 23

As cited in Yonhap News (25 April 2007).

b939_Chapter-01.qxd

7/15/2010

2:11 PM

Page 23

Anchoring the Right Pattern of Interdependence and Rivalry

23

One explanation might be the nature of their bilateral ties, which are structural and competitive at bilateral, regional, and global level. With this in mind, this section highlights a few salient political and security issues whose implications go beyond their mutual concerns. It should also be noted that while most of them are familiar issues to begin with, they are now laid within new contexts, thus evolving into a new phase. They also serve as a political barometer with which the directional changes in Sino-Japanese relations can be gauged. The Taiwan Issue That the PRC government regards Taiwan as part of China is a household word. It is also said that the Taiwan issue concerns China’s sovereignty, territorial integrity and national unity. The Chinese leadership is also likely to take a tough posture against Taiwan, as vividly demonstrated during the 1995 and 1996 Taiwan Strait tensions, and has not ruled out the use of force, particularly if the latter declares de jure independence or if China’s national and security interests including Taiwan were deemed to be at stake by the actions of other countries. To Tokyo, on the other hand, the Taiwan issue cuts across several identifiable yet overlapping contexts in which Japan’s major domestic and foreign policy debate is conducted: Japan–China relations, the USA–Japan alliance, its pursuit of a permanent membership in the UN Security Council, and its changing yet undefined political profile and security role in the region. For this reason alone, Japan’s Taiwan policy has been very cautious and has always been conducted with an eye on China and the other on the United States. Because of a combination of factors, including its low-profile, non-confrontational foreign policy posture toward China since 1945, its history of aggression and occupation in both mainland China and Taiwan, and China’s past, present, and future influence toward itself and the region, Japan has tried to prevent the Taiwan issue from standing in the way of an improved Japan–China relationship, notwithstanding its huge stake in Taiwan’s prosperity and stability.

b939_Chapter-01.qxd

7/15/2010

2:11 PM

Page 24

T. Kim

24

Tokyo’s utmost caution with respect to the Taiwan issue is best captured by Shinkichi Eto, a long-time China observer, in the following old yet useful metaphor: Matters that China regards as most central to its national interest — for example, the territorial issues revolving around Taiwan and Tibet — should be regarded as the sensitive hairs on the elephant’s chin: one prerequisite for a manageable relationship [with China] is never to touch them.24

Likewise, while policy divergence in USA–Japan relations in their approach to China has not been uncommon (e.g. human rights, post-Tiananmen sanctions), their difference on the Taiwan issue apparently has not been so great as to cause an irritation between Washington and Tokyo.25 This is partly due to Japan’s low-profile, cautious approach to China, as noted above, but Japan’s cautiousness itself is derived from the fact that Japan is far more vulnerable to China’s pressure than the United States, running the whole gamut from the historical issues to Japan’s regional role to the perceived and actual threat. Taken together, the Taiwan issue touches upon several major policy debates in Japan that are still evolving. But Japan has been able to make it to a manageable proportion in the context of Japan–China and USA–Japan relations and is likely to do so in the near future. Mutual Security Concerns Both countries have quite a broad range of bilateral security concerns with each other. For its part, Japanese is concerned with China’s political uncertainty, lack of military transparency, territorial disputes over the Senkaku/Diaoyu Islands, Sino–Russian military cooperation, 24

Eto, S. (1996). China and Sino–Japanese Relations in the Coming Decades. Japan Review of International Affairs, Vol. 10, No. 1, pp. 16–24. The quotation is on p. 32. 25 Yardley, J. and Bradsher, K. (2005). China’s Accuses US and Japan of Interfering on Taiwan (21 February 2005) New York Times.

b939_Chapter-01.qxd

7/15/2010

2:11 PM

Page 25

Anchoring the Right Pattern of Interdependence and Rivalry

25

and the PLA’s increasing strategic reach to the South China Sea.26 China’s growing regional influence and its burgeoning power projection capability amidst the region’s “strategic uncertainty” could well complicate Japan’s economic and security policy in two major ways: First, China’s expanding maritime interests, manifested in its recent moves in the South and East China Seas, could pose a challenge to Japan’s huge trade and investment stakes in Southeast Asia. Not only has Japan been the largest investor in that subregion, but, as an energy-deficient nation, it needs to continuously secure the extensive sealanes for trade and energy, which lies at the heart of Japan’s security policy. It is noteworthy that Japan’s 1,000-nm defense perimeter overlaps with China’s maritime claims and that both navies are increasingly operating in the same area. Second, China can also indirectly influence Japan’s lingering security concerns with North Korea. Japanese defense officials are well aware that China is either directly or indirectly related to the potential missile threat to an insular Japan. In addition, Sino-Russian military cooperation could not only raise the level of regional arms buildup, but it could contribute to the development of China’s power projection capability — an issue Japan intends to deal with by linking economic aid to Russia with the latter’s arms sales to China. Furthermore, China’s influence in Korean affairs has traditionally been a source for great concern to Japan, now more in the context of the Chinese role in a future North Korean contingency and in the Korean unification process. To Chinese security planners, on the other hand, Japan’s “recurrent militarism,” defense budget and naval modernization pose a source of concern. For this reason, there have been only limited bilateral security dialogues between the two sides.27 Of particular importance is 26

The disputed small island group off Taiwan is currently occupied by Japan and is called Senkakus by Japan, Diaoyudao by mainland China, and Diaoyutai by Taiwan. 27 Their military-to-military contacts as well as efforts for military confidence-building measures (MCBM) have apparently increased after Shinzo Abe’s assumption of the office of prime minister in September 2006, especially compared with his immediate predecessor’s tenure of office in 2001–2006. But it is too early to ascertain that the recent trend will hold in the future. See Torode, G. and Shi, J. (2007). Delicate Diplomatic Dance Circles around Military Ties (13 April 2007). South China Morning Post.

b939_Chapter-01.qxd

7/15/2010

2:11 PM

26

Page 26

T. Kim

Japan’s 1,000-nm defense perimeter to secure the SLOC for trade and raw material, which has obvious implications for China’s expanding maritime interests. Recent high-level visits by Prime Minister Shinzo Abe (October 2006) and Premier Wen Jiabao (April 2007) — which were punctuated during the tenure of Junichiro Koizumi (2001–2006) — have all emphasized the importance of their bilateral ties and the need for common efforts to build a “strategic and mutually beneficial relationship.” But the point is that their traditional rivalry and historical distrust still linger on. The USA–Japan Alliance During the Cold War the principal purpose of the USA–Japanese security alliance was to deter the common Soviet threat. Since that threat has dramatically dissipated, the alliance has no particular enemy state to focus on. Additionally, a host of recent bilateral and regional developments such as the discordant trade relations between the USA and Japan, Japan’s dubious role in the Persian Gulf War, and China’s rising power have all led the Japanese leadership to redefine the USA–Japanese security relationship and Japan’s regional and international security role. The Taiwan issue is also related to the ongoing debate on Japan’s regional security role. At issue is a definitional shift in Japan’s defense contribution from the “defense of the Far East” (Article Six of the USA–Japan Mutual Security Treaty) to the “areas surrounding Japan,” as stipulated in the new November 1995 National Defense Programme Outline (NDPO) and reconfirmed in the April 1996 USA–Japan Joint Declaration on Security and the September 1997 Review of the Guideline for USA–Japan Defense Cooperation (the “new Guideline”).28 Since then, China has particularly been wary of

28

For the Chinese critique on USA–Japan security ties and especially the 1997 Guideline, Liang, M. and Ding, Z. (1998). How Can One Win the Trust of Others by Shifting His Troubles Onto Others. (18 May 1998) Jiefangjun Bao, p. 5, in (2 June 1998), FBIS–CHI.

b939_Chapter-01.qxd

7/15/2010

2:11 PM

Page 27

Anchoring the Right Pattern of Interdependence and Rivalry

27

Japan’s expanded regional role. Given Chinese and other neighboring nations’ sensitivity on Japan’s regional security role, Japan’s official policy on this issue seems to be “not to offer a specific definition,” echoing the American position that the scope of the new Guideline is “situational, not geographical.” China adamantly opposes the revised Guideline and other moves between the USA and Japan — for its possibility of USA–Japan collaboration in a Taiwan crisis and of Japanese militarism.29 However, despite the Chinese analysts’ pessimistic view of the revised Guideline and the USA role in post-Cold War East Asia, they are well aware that USA–Japanese security relations remain the primary linchpin to East Asian stability. In addition, the Chinese analysts believe that the disappearance of the common foe and the new dynamics in both American and Japanese domestic politics could lead to a further redefinition of US–Japanese security relations in the years ahead. But the so-called “double containment” role of the US forces over Japan’s possible unilateral military role is seen in the positive light among many Chinese security analysts. In a nutshell, notwithstanding the remaining regional controversies over the interpretation of the “areas surrounding Japan,” the NDPO and the new Guideline have steered Japan’s security role and policy toward a new direction that may enhance common regional security, if guided by prudence. The Territorial Disputes and Multilateral Diplomacy Like any other territorial disputes, the Senkaku/Diaoyudao dispute is a thorny issue in their bilateral ties that touches upon sovereignty, nationalism, and national development. Likewise, while Japan is not a claimant to the South China Sea, it has a direct bearing on the Senkaku/Diaoyu Islands issue. Particularly disturbing to Japan is a series of China’s recent determined moves into the South and East China Seas. Ever since China’s promulgation in February 1992 of the “Law of the People’s Republic of China on Its Territorial Waters and 29

Wu, X. (2005). The End of Silver Lining: A Chinese View of the US–Japanese Alliance. Washington Quarterly, Vol. 29, No. 1, pp. 119–30.

b939_Chapter-01.qxd

28

7/15/2010

2:11 PM

Page 28

T. Kim

Contiguous Areas,” it has laid jurisdictional claims to practically all disputed island groups in the South China Sea and the Senkaku/Diaoyu Islands, and defined the surrounding waters as China’s “inland waters,” implying that all foreign military vessels must have permission for passage from the Chinese authorities. During the first half of the 2000s, moreover, there has been a noticeable increase in the case of “intrusions and incursions” between China and Japan in their contiguous waters such as gas/oil rivalry, submarine incidents, and the demarcation of the EEZ.30 The overall trend indicates a likely increase in such cases in the future than has been the case so far. On the other hand, all major powers — China in particular — have changed their attitude toward multilateral security since the mid1990s. China’s multilateral diplomacy and security efforts are aimed at forming a “stable and peaceful external environment” conducive to its domestic economic development. For this reason, the number of Chinese participation in governmental IOs and NGOs skyrocketed from 21 and 71 in 1977 to 51 and 1,079 in 1996, respectively. Likewise, its international agreements have seen a whopping increase from 34 in 1979 to 220 in 2002. More pointedly, China’s about-face in supporting and leading multilateral organizations have been amply shown in ARF (1994), “Shanghai Five” (1996) and later Shanghai Cooperation Organization (2001), ASEAN Plus Three (1997), and Six-Party Talks (2003) — to such an extent and in a way that one observer called it China’s “hub and spokes multilateralism.”31 It should be reminded that the American sponsorship of multilateral security dialogues in the region was deemed suspect from the beginning by its Asian allies and friends. First and foremost, the USA itself during the Cold War had long opposed any Asian multilateral security regimes, which might have eroded the coherence and effectiveness of its bilateral 30

Kosuke, T. Gas and Oil Rivalry in the East China Sea. (14 July 2005). Asia Times; East China Sea Gas Field May Straddle EEZ, (20 February 2005). Daily Yomiuri; Faiola, A. Japan–China Oil Dispute Escalates (22 October 2005), Washington Post, p. A17. 31 Discussion with Alex Liebman, Taipei, Taiwan (8 December 2006).

b939_Chapter-01.qxd

7/15/2010

2:11 PM

Page 29

Anchoring the Right Pattern of Interdependence and Rivalry

29

alliances throughout Asia. President Clinton’s open support for Asian security multilateralism in the 1990s came at a time when he wanted to cut the defense budget and force levels more deeply, thus raising the suspicion that the multilateral approach was intended to compensate for the reduction of the US presence in Asia. Furthermore, multilateral security is reminiscent of America’s NATO policy. Despite its repeated appreciation that “Asia is not Europe,” the Clinton administration nevertheless pursued the policy towards Asia of limited applicability, European orientation, and “indiscriminate internationalism.” While Japan is a long-time advocate of multilateral diplomacy — especially in the ASEAN context, its percentage in the ASEAN’s Foreign Direct Investment (FDI) has actually fallen from 20 percent in 1995 to 12 percent in 2004. In a similar vein, the share of Japan’s trade with ASEAN countries has also shown a decline in relative terms. In the same period under examination, in fact, Japan has significantly bolstered its alliance ties with the United States, most notably the 1994 Higuchi Report, the 1997 New Guidelines with the USA, and the 2004 Araki Report. While Japan’s limited role in ASEAN context is not the result of its strengthened ties with the USA, both seem to have correlated with each other. China–Japan Relations and Future East Asian Security The future of Northeast Asian prosperity and security will be increasingly shaped by the economic and security trajectories of China and Japan, and by USA relations with both countries. A continued US–Japanese security relationship is vital to American interests and to Asian stability. But how long the current lopsided security ties are acceptable to their respective public remains uncertain. While popular anti-militarism remains strong in Japan, it now carries a more nationalistic tone or what the Chinese call the “right deviation.” Moreover, its historical extremism in foreign and security policy since the mid19th century is still not reassuring, especially to its neighboring countries. In China, now that Hu Jintao is likely to emerge from the 17th Party Congress in late 2007 with his position strengthened, he and

b939_Chapter-01.qxd

30

7/15/2010

2:11 PM

Page 30

T. Kim

other Chinese leaders must achieve leadership unity to maintain political stability and economic development or just to remain in power. Furthermore, coping with the new and complex challenges in Chinese society unleashed by a quarter-century reform drive will also be a daunting task for the Chinese leadership. China’s growing social and economic problems — inflation, corruption, the center-regional divide, regional inequalities, and migrant workers, to name but a few — could well complicate leadership unity and political stability, especially in the light of demographic pressure, relatively limited resources, and environmental constraints. Externally, the new Chinese leaders in China should not only remain engaged with the outside world but also address the widespread perceptions and worries about the long-term consequences of China’s rise. It is this complex set of major domestic and external challenges that the Chinese leadership will face for many years to come. How well and in what manner they handle the challenges could significantly affect not only political stability in China but also, to some degree, the future capability and behavior of China. In Japan as well, there is growing criticism over the effectiveness of its economic aid and assistance to China over the years on the current and future behavior of China. Not only is Japan’s traditional image of an “agricultural China” rapidly eroding, but the Japanese government seems more determined than before to take a stronger response to China’s posturing. Perhaps most significant over the long haul is, as Michael Green and Benjamin Self have argued years ago, that Japan’s Cold-War policy toward China based on four pillars of security, politics, history and economics is also undergoing significant changes and its China policy in the new era is now inundated by “a wide range of actors with various distinct interests.”32 In the years ahead, continued US engagement with China will be an important step towards the long road to a stable East Asia. Engagement with China remains a sensible policy, but requires a clear and consistent set of goals such as regional stability, shared development, and 32

Green, M. J. and Self, B. L. (1996). Japan’s Changing China Policy: From Commercial Liberalism to Reluctant Realism. Survival, Vol. 38, No. 2, pp. 35–58.

b939_Chapter-01.qxd

7/15/2010

2:11 PM

Page 31

Anchoring the Right Pattern of Interdependence and Rivalry

31

integration into international norms. To advance this longer goal, however, not only should the USA and East Asian nations recognize China’s differing yet often legitimate security requirements, but also make genuine efforts to build confidence with China, which is a timeconsuming yet least threatening way to make China more transparent. Finally, it is worth repeating that the future of East Asian security would increasingly hinge on how to deal with the old “China factor” in the new era. It is worth repeating that the greater relevance to this study is how Japan–China relations would evolve in the future. As the above analysis has shown, this requires an understanding of the history of Japan–China relations and the current dynamics of their bilateral ties, which are in many respects a new phenomenon. How the old ways of thinking and new dynamics interact with each other in China–Japan relations would continue to be problematic for Asia’s security and prosperity.

b939_Chapter-01.qxd

7/15/2010

2:11 PM

Page 32

This page intentionally left blank

b939_Chapter-02.qxd

7/15/2010

2:13 PM

Page 33

CHAPTER 2

Chinese Nationalism in Sino-Japanese Relations1 Jiyoung Choi

1. Introduction China and Japan have been geopolitical archrivals in Northeast Asia, sharing a number of thorny issues such as historical animosities, territorial claims and energy conflicts.2 Nevertheless, during the Cold War of strategic balance between the US and the USSR, the two neighbors were able to maintain rather stable relations, thanks to their governments’ pragmatic approach, albeit as “a cooperation in rivalry” or “a feud in cooperation.” Since the 1990s, however, the power balance between the US and the USSR had completely changed along with rapid collapse of the Soviets and the Eastern European Bloc. China which has almost instantly built its muscle through successful economic reforms rapidly replaced the power vacuum left by the demise of its communist neighbor, thus creating new tensions with its regional rival, Japan. Furthermore, with the

1

This paper does not ignore aggressive and threatening qualities that the rise of Chinese nationalism might have in Sino-Japanese relations and international relations in East Asia. As evidenced in the relations with the West, especially with the US, or with China’s minority nations, and with its neighboring countries including South Korea over the issue of Koguryo history distortion since 2004, Chinese nationalism can also be significantly aggressive and hostile. As was pointed out by most China experts, however, China does not want an all-out aggravating discord with Japan in practical and strategical aspects, and that the nationalistic sentiment may be contained to the certain extent for the time being to its own political situation. 2 Shutter, R. G. China’s Rise in Asia: Promises and Perils pp. 125–132, Rowman & Littlefield Publishers, New York, 2005. 33

b939_Chapter-02.qxd

34

7/15/2010

2:13 PM

Page 34

J. Choi

Japanese government’s recent leaning to the right, and the US’s strategic approach, such as reinforcing the US–Japan alliance, to contain China as a future rival in Northeast Asia, China–Japan relations have entered a new phase. Against this backdrop, the two countries’ relations seem to have gone through one of its most difficult times since 2005. In April 2005, despite China’s massive anti-Japan demonstrations sparked by Japan’s distorted history textbook, then Prime Minister Junichiro Koizumi kept visiting the Yasukuni Shrine, and shuffled a new cabinet, deploying hawks for its foreign policy. Consequently, the two nations’ relations which had been showing slight signs of recovery since the 1998 visit of then President Jiang Zemin to Japan, sharply cooled, thus resulting for the first time in the cancellation of summit talks between South Korea, China and Japan during the ASEAN+3 Meetings.3 During the Abe administration, the Yasukuni visit by some official members continued, and Japan’s evasive attitude toward it has also contributed to widening the nationalism gap between China and Japan. Since the official recovery of Sino-Japanese relations in 1972, the two countries have basically maintained the equilibrium with alternating cycles of cooperation and conflict. But the global impact of the debacle of the Soviet Union and its Eastern European allies, the rise of China, and Japan’s Yasukuni visit, history textbook distortion and reluctance in acknowledging its wartime atrocities including sex slavery by the Japanese military, all seemed to have caused the two countries’ relations to face “the worst situation ever since the establishment of diplomatic ties” as a senior Chinese official, Tang Jiaxuan, put it. Nevertheless, when it comes to future Sino-Japanese relations, many experts assess the two nations as rational players who will resolve their rivalry as best they can to avoid extreme situations in the context 3 December 12, 2005 at a press conference after summit talks between South Korea and China in Kuala Lumpur, Malaysia, Chinese Prime Minister Wen Jiabao made it clear that Japan was responsible for the delay of the South Korea–China–Japan summit meeting by commenting, “China considers cooperation among the three neighbors of South Korea, China and Japan very important, but the Japanese leader has visited the Yasukuni Shrine five times, thus hurting people’s feelings in South Korea and China, raising many obstacles in the relations of China–Japan as well as South Korea–Japan.

b939_Chapter-02.qxd

7/15/2010

2:13 PM

Page 35

Chinese Nationalism in Sino-Japanese Relations

35

of national interest.4 In this regard, it is notable that both domestic and overseas observers have commented that China should take a sensible and rational approach in its policy toward Japan. Some argue that instead of dwelling on past wrongdoing, China should strategically take the initiative to promote its relationship with Japan, (New Thinking toward Japan)5 by supporting Japan as a permanent member of the UN Security Council, for example; others claim that it would be more beneficial for China to restrain its nationalistic responses for future improved relations between the two neighbors. These views are based on the premise that the two nations as rational players are able to control their impulsive, emotional and irrational activities. These approaches, however, raise a problem that nationalistic issues such as Japan’s history textbook distortion and visit to the Yasukuni Shrine could only be identified technically, thus ignoring the potential danger and unpredictability of the issues. After all, despite its origin from the top,6 nationalism as an ideology takes, beyond its government’s reach, the public’s consensus as its basis7; consequently it harbors potential danger of igniting uncontrollable conflict when combined with structural, institutional and accidental factors.8 Given these premises, this paper tries to analyze the impact that Chinese nationalism might have on future Sino-Japanese relations.9 To 4

People’s Daily (Renmin ribao) (1 September 2006). Shi Yinhong, http://military.china.com/zh cn/critical2/23/20030507/11464179. html [20 November 2005]. 6 Hobsbawm, E. (1992). Nations and Nationalism since 1780. Cambridge University Press. 7 Antonio Gramsci (or Gramsci, Antonio) (1971). Selections from Prison Notebooks, p. 244. New York: International Publishers. 8 Downs, E. S. and Saunders, P. C. Winter (1998–1999) Legitimacy and the Limits of Nationalism: China and the Diaoyu Islands. International Security, Vol. 23, No. 3, p. 115. 9 Currently there are two different views about Chinese nationalism: One view is based on the “China threat”, stressing the aggression and danger of Chinese nationalism; the other view focuses on the defensive, official and instrumental properties of Chinese nationalism, and regards it as mere ideology to preserve the PRC regime. In my view, the former overly exaggerates China’s potential threat, and the latter has its limits in that it overlooks the changeability of nationalism as an irrational sentiment. 5

b939_Chapter-02.qxd

36

7/15/2010

2:13 PM

Page 36

J. Choi

this end, I will analyze the nationalism which emerged in place of socialism in China after the reform and opening-up policy, and then discuss the danger it might pose as a double-edged sword to the Chinese government. For the Chinese government today has taken advantage of nationalism as a new ideology for societal consolidation and the regime’s justification which can be pretexts for a tougher stance, even if mere political rhetoric, against its opponents. I will also point out the potential anarchy this could give rise to as nationalism is fed by emotional consent from below; at the same time, the moral authority of the Chinese communist government has been weakened by the collapse of socialism in the world. 2. Chinese Nationalism Since the Reform and Opening-up Policy The reasons behind the rapid proliferation of nationalism (patriotism) in China may include the following reasons: it is more favorable for the nation’s integration in dealing with public complaint about the economic inequality which has emerged since the reform and opening-up policy with an abstract concept (the Great Chinese notion) than with the traditional class concept; a strong cultural pride and national sense of superiority (Sino-Centralism) that is rooted in long historical tradition have widely prevailed in the society10; top-down state-nationalism policy has been continuously enforced among the people as a multiethnic nation since the birth of the new China; and the tendency of stressing the ethnicity of the Chinese nation for investment in mainland China and the unification effort by Chinese compatriots in Taiwan and elsewhere around the world. With this backdrop, the collapse of the socialist bloc, ever-accelerating globalization, and the Tiananmen Square uprising have propelled nationalism as the most influential ideology in China since the 1990s.11 10

For more details, See Levenson, J. R. (1968). Confucian China and Its Modern Fate: A Trilogy. University of California Press; Townsend, J. (1996). Chinese Nationalism. In Chinese Nationalism, Unger, J. (ed.), pp. 1–30. M. E. Sharpe. 11 Hughes, C. R. (2006). Chinese Nationalism in the Global Era. London and New York: Routledge.

b939_Chapter-02.qxd

7/15/2010

2:13 PM

Page 37

Chinese Nationalism in Sino-Japanese Relations

37

Therefore, it should be noted that: First, it is necessary to look at the relationship between nationalism and socialism in China. As has been stated that “there are no nations for laborers”, classic socialism initiated by Karl Marx represents proletariat internationalism which contradicts some aspects of the traditional Western concept of nationalism. China’s socialist ideology survives only in empty catchphrases; in fact, sino-nationalism is centred on the ethnic Han. During Mao Zedong’s era which emphasised production relations and continuous revolution, it was in a way true that nationalism was considered an obsolete ideology that could undermine class solidarity, and a certain tension was maintained between internationalism (socialism) and nationalism (state-ism).12 Such a tension, however, has changed significantly since the Soviet Union and Eastern European socialist countries had collapsed in the 1990s, and China faced the Tiananmen Square uprising. As the circumstances became unfavorable for the use of socialism as an integrating ideology, China had to seek a course of practical socialism, and introduced patriotic state-ism in the process. As a result, nationalism (state-ism) has been functioning as the most powerful ideology in China. Unlike other countries, there are considerable obstacles for nationalism to openly prevail in China as it remains a socialist nation politically as well as ideologically. These obstacles are an internal censor mechanism for the Chinese Communist Party (CCP), and will exist as long as China officially maintains its socialist regime. Second, it is necessary to consider that “nationalism” differs functionally from “state-ism” in a multi-ethnic nation such as China. Generally in a multi-ethnic nation, the more nationalism gains 12

In view of domestic policy for ethnic minorities, however, China at that time was also seen as contradictory to its original path when it turned to a radical policy of national assimilation by strengthening the Han ethnicity-centred nationalism and disregarding specific histories of individual ethnic minority nations. Therefore, it seems more appropriate to identify Mao Zedong’s China with a multi-layered approach, rather than either-or structure of proletariat internationalism or nationalism. This is still considered to be an effective interpretation in that China’s ethnic minority policy has been shifted from radical assimilation to gradual dissolving and assimilation since the reform and opening-up policy.

b939_Chapter-02.qxd

38

7/15/2010

2:13 PM

Page 38

J. Choi

strength, the more likely it gets divided; whereas, state-ism plays a role to integrate multiple ethnic nations into a single state. So it is “patriotism” (state-ism) that China officially makes good use of in order to form a consolidated identity of its people as China has an internal problem of potentially splitting its ethnic nations. During the first half of 2005, when anti-Japanese demonstrators rallied against Japan’s history textbook distortion, it was “patriotism”(state-ism) that the Chinese government employed, calling on its people to exercise self-restrain for the “long-term development of China”. In this way, patriotism has an aspect of limiting the rise of nationalism as an ideology to a certain level where contradicting issues of nationality lie dormant. Third, while state-ism is more of “state-led nationalism,” it is necessary to look at the “popular nationalism” that exists at the same time.13 Generally in the modern nation state, nationalism initially serves as an ideology to enforce top-down state power, but results in consolidating the state and its people through public consensus from below. Therefore, “state-led nationalism” assumes more pragmatic and rational features, whereas “popular nationalism” is more fundamental, seeking emotional, pure, original models. “State-led nationalism” puts its emphasis, in view of national integration, mainly on state-ism that has nothing to do with ethnicity or nations, but “popular nationalism” has a strong ethnic and national tendency. In this regard, popular nationalism can potentially escalate into extremism, and recent socio-economic inequality in Chinese society has fueled this tendency. Fourth, it is worth noting that there is a special quality of “resistant nationalism” in Chinese nationalism. “Resistant nationalism” is a type of nationalism that can be observed in Asia’s Third World countries such as Korea and China, former victims of imperial aggression. It enables nationalism to remain strong through collective experiences and memories of victimization long after the event, and most Third World countries use it to mobilize their people to rebuild their 13 Gries, P. H. (2004). China’s New Nationalism: Pride, Politics and Diplomacy. University of California Press.

b939_Chapter-02.qxd

7/15/2010

2:13 PM

Page 39

Chinese Nationalism in Sino-Japanese Relations

39

nations. China has comparatively high moral justification and considerable confidence in using “resistant nationalism” against Japan and other former Western imperialist powers. As such, because of the special quality of resistant nationalism that functioned as “discourse of liberation and progress”14 in a certain period of history, the possibility of inciting heated feelings and even aggression among the victims is high. In fact, the anti-Japanese movement, which was triggered in April 2005 by Japan’s history textbook distortion and the Japanese PM’s visit to the Yasukuni Shrine, first began in some areas of Shenzhen and Guangzhou, but grew, in less than three weeks, to a massive demonstration by 100,000 participants in Shanghai and rapidly heated to the extent that some demonstrators threw stones at the Japanese Consulate General while others attacked Japanese stores and vehicles. Although the demonstrations were contained by the active intervention of the Chinese government, it was an amazing eruption of public anger in a society where the authorities exercise tight control over any collective movements including demonstrations. The explosive rage based on the moral superiority of “resistant nationalism” can become a substantial burden for the Chinese government in its future relations with Japan. 3. Chinese Nationalism in Sino-Japanese Relations Since 2005, China and Japan have been entangled in a series of conflicts over nationalism issues. In connection with Japan’s history textbook distortion during the first half of 2005, a series of antiJapanese protests were held almost every day in Beijing and Hong Kong, and massive boycotts of Japanese goods were launched.15 This affected Sino-Japanese diplomatic relations, and on 14

Choi Jiyoung, (2004). China’s Ideas of Sovereignty in the Discourse of Human Rights and Globalization Issues. PhD dissertation, Peking University PRC. 15 Japan’s campaign for a permanent UN Security Council membership fueled China’s anti-Japanese sentiment to new heights, as the number of votes against Japan from Chinese netizens accounted to 16 million in less than seven days, and the web sites of the Japanese Police headquarters and Defense headquarters crashed and experienced connection difficulty due to Chinese hacking.

b939_Chapter-02.qxd

40

7/15/2010

2:13 PM

Page 40

J. Choi

April 5, 2005, Chinese Vice Foreign Minister Qiao Zonghuai lodged a strong protest with the Japanese Ambassador to China, and on April 17, at a meeting in Beijing, the Japanese Foreign Minister Nobutaka Machimura and his Chinese counterpart, Li Zhaoxing, did not even shake hands, according to diplomatic custom, but traded angry words with red faces.16 On April 23, at the China–Japan summit meeting arranged at Japan’s insistence in Jakarta, Indonesia, President Hu Jintao strongly urged his Japanese counterpart to correct the distortion of Japan’s history textbook and to stop visiting the Yasukuni Shrine; when Japan responded that “raising the issue of visiting the Shrine is tantamount to intervention in Japan’s domestic affairs,” Chinese Vice Prime Minister Wu Yi abruptly cancelled a meeting with Japanese Prime Minister Koizumi and returned home.17 Meanwhile, Koizumi’s fifth visit to the Yasukuni Shrine on October 17, 2005, wildly outraged the Chinese people at it coincided with the return of China’s manned spaceship Shenzhou-6. In Beijing and Hong Kong, anti-Japanese protests, that had been dormant since the history textbook issue earlier that year, were revived and demonstrators took to the streets daily with some burning Japanese national flags. The Chinese government was also taking a tough stance and officially notified Japan to postpone Japanese Foreign Minister Nobutaka Machimura’s visit to China18; finally China rejected its summit talks with Japan at the 2005 APEC meeting. Although summit reciprocal visits between the two countries had been suspended since 2002, given Japan’s whitewashing of its history and the visit to the Yasukuni shrine, they had continued to participate in the APEC summit, and maintain bilateral meetings over current issues. The fracas over the history textbook seemed to have died down as the leaders of the two countries met at the Asia–Africa Conference in Indonesia, and apparently moved to narrow their gap. At the conference, Prime Minister Koizumi expressed “his deep remorse and apology for the past Japanese invasion and colonial rule,” and then held summit talks with 16 17 18

The Kyunghyang newspaper 6 April 2005, (17 April 2005). The Kyunghyang newspaper 24 April 2005, (24 May 2005). The Kyunghyang newspaper (19 October 2005).

b939_Chapter-02.qxd

7/15/2010

2:13 PM

Page 41

Chinese Nationalism in Sino-Japanese Relations

41

President Hu Jintao. Koizumi’s ensuing visit to the Yasukuni Shrine on August 15, however, cooled Sino-Japanese relations, and in effect the agreement reached at the summit blew up. Even after Prime Minister Abe’s taking office, there were no significant changes in Japan’s approach toward the history textbook and the Yasukuni Shrine issues, so relations between the two neighbors have been worsening. Nevertheless, Chinese foreign policy toward Japan, contrary to its harsh rhetoric, has been rather cautious in practice. Even during the first half of 2005 when the anti-Japanese protests against Japan’s history textbook distortion spread across mainland China, the Chinese government acted to contain the demonstrations. With former Prime Minister Koizumi’s continual visits to the Yasukuni since his inauguration, China consistently criticized Japan’s harsh line toward China rather than Japan’s distorted understanding of its history. In addition, the Chinese government had kept to a suggestion to separate Class A war criminals from the war dead honoured by the Yasukuni shrine as a solution to the Yasukuni issue, which the South Korean government had already rejected as meaningless, thus creating doubts about whether the Chinese government had hurriedly resorted to a stopgap measure overlooking the essence of the issue.19 Unlike the Chairman of the Standing Committe of the National People’s Congress Wu Bangguo’s assertion in connection

19

Since the distinction between Class-A and Class-B war criminals is based on a classification of crime, not on vertical categories such as severity of the crime, the separation of the Class-A war criminals from the Yasukuni cannot be an appropriate measure to solve the fundamental issue that the Shrine in Tokyo implicated the war of aggression that imperial Japan had committed. However, China’s attitude was seemingly reduced to removing the tablets of the Class-A criminals from the rest of the war dead, as Beijing had said “It would not be difficult to find a solution (on the Yasukuni issue) if only the issue of separate enshrining (on the Yasukuni issue) were settled appropriately; when then-Prime Minister Nakasone visited the Shrine, and Chinese Ambassador to Japan Wu dawei who took office immediately prior to Prime Minister Koizumi’s first trip to the Yasukuni also said, “It is without harm to pay tributes to the ordinary war dead, but the problem is enshrining the Class-A war criminals together in the same shrine.”

b939_Chapter-02.qxd

42

7/15/2010

2:13 PM

Page 42

J. Choi

with the Yasukuni shrine issue in June, 2005, that China might rule out the Japanese businessmen’s participation in the high speed railroad project which was then in progress, it was reported that the project would be shared 50:50 between Germany’s Siemens (ICE) and Japan’s Shinkansen.20 Again with Prime Minister Abe’s evasive attitude toward the Japanese military’s sex slavery issue, China maintained its posture of watching the development of the situation, while the South Korean government had taken a tougher stance against it. In fact, these responses from the Chinese government confirmed its rather rational approach toward its relations with Japan for a more realistic strategy. A closer analytical view on this is as follows: First, China has to consider the US alliance with Japan. China perceives the international order as one super power in a multi-polar structure, and maintaining stable relations with the US, the world’s sole superpower, has been key issues of its foreign policy. At the same time, China makes its independence clear; rather than be completely incorporated into the USA-led international order, it is cooperative in part but not totally submissive.21 On the other hand, as is well known, the US has considered Japan an effective check on China’s increasing leverage in East Asia since the end of the Cold War. As a result, the US strongly supported the addition of Japan as a permanent member of the UN Security Council and emphasis Japan’s role in the world through reinforcing the US–Japan alliance. As for the US, however, there are no plausible excuses to check China directly as it has not yet directly challenged the US-centred order in East Asia. US Therefore, it continues to try to incorporate China as a responsible member of the international community on one hand, and adopts a containment policy toward China to eliminate any potential hostility on the other. 20

The Hankyoreh newspaper (21 November 2005), People’s Daily (Renmin ribao) (9 January 2006). 21 Deng Xioaping’s “hide our capacities and bide our time (Taoguangyanghui, Yousuozuowei)” response strategy has been a backbone of China’s foreign policies since the collapse of the socialist countries in the 1990s. Especially in response to for the west’s (USA’s) “China Threat Theory”, China has selectively taken a pragmatic foreign policy line while maintaining passive principles of keeping a low profile as much as possible.

b939_Chapter-02.qxd

7/15/2010

2:13 PM

Page 43

Chinese Nationalism in Sino-Japanese Relations

43

Under these circumstances, there remains lingering concerns for China that it may end up confronting the US face to face in case tensions with Japan escalate and lead to serious outbreaks of local skirmishes in some disputed areas (Taiwan, Diaoyu Islands, East China Sea, etc.). Consequently, China has no option but to avoid conflict with Japan as much as possible. Second, since the reform and opening-up policy, China has not yet reserved enough capacity for dispersing its national power other than promoting domestic economic growth to build a socialist market economy and a society that is “moderately better off in an all round way.” It also has to ensure stable neighborhoods, if at all possible, for continued economic development. Stable environments in the neighborhoods for economic development have been a backbone of foreign policy of the Hu Jintao regime.22 Also, as was known in “the Three Represents Theory,” it increasingly seeks its justification of ruling for economic growth rather than traditional socialism. In the end, China will stick to the current opening-up reform policy until it reaches a certain level of economic development unless there is a major security threat. In the meantime, China has, in some respect, to be cautious not to aggravate its overall relationship, but to restrain its substantial response. Third, there is an issue of its political basis of ruling, in other words, securing justification of government by the CCP. As is wellknown, China’s reform and opening-up policy (also, known as “let-some-people-get-rich-first ideology”) that put emphasis on improving production capability rather than Product relation has played a key role in achieving high economic growth in China. However, it has caused serious socio-economic inequality between urban and rural residents and a rapidly widening gap between rich and poor. This has led eventually to large scale demonstrations and unrest since the late 1990s, and even warnings of the CCP’s regime under crisis. In these circumstances, nationalism issues that may trigger public anger can easily escalate into large scale mass demonstrations, which in turn may likely develop into anti-government protests. The Chinese 22

Hu Jinto, a speech in the CCP’s 16th National Convention (People’s Publications (Renmin chubanshe), 2002).

b939_Chapter-02.qxd

44

7/15/2010

2:13 PM

Page 44

J. Choi

government’s unprecedented crushing of the nationwide antiJapanese demonstrations in China’s major cities in 2005 seemed to reflect such concerns. The Chinese government has to take a careful approach to the current nationalism standoff with Japan by not highlighting it to temper, nationalist emotions. Fourth, China’s attitude to Japan has something to do with its foreign policies of being “a responsible big country”. According to China’s notion of “a responsible big country,” it should spontaneously acquire its authority by taking greater lead in international affairs, without resorting to physical as domination of the former western powers. This can be confirmed by China’s internal discussions over the future orientation of its foreign policy, and it is certain that China in the 21st century will pursue an image of being “a responsible big country.” In other words, China wants to play the role of a major power in the region, at least in East Asia, although it now reluctantly admits the US’s leading role on the global stage. To this end, it is essential for China to ensure long-term moral superiority in relations with Japan. In this case, China’s notion of “a responsible big country” has double meaning in its relations with Japan: it shows that China, based on its own sense of being a big country, will live up to its commitment to act magnanimously, overlooking relatively trivial issues (or considered to be trivial, such as history textbook distortion, the Yasukuni Shrine tribute, etc.), while, at the same time, it will build up excuses for its possible strong reaction against future contingencies.23 China has avoided any possible conflict with Japan in consideration of a realistic approach to its strategic interest as discussed above. So far the nationalist movement in China has been effectively managed and controlled by the CCP at least within the country.24 But 23

Thus, taking a larger perspective for the peace of Asia and the world, as in the official statement of the Chinese government about Japan’s responsibility for past wars, China resorts to friendship between the two nations, and at the same time limits Japan’s responsibility for past wars to a handful of militarists, calling for public consensus at home and abroad to oppose Japan’s shifting to the conservative right. 24 Of course, in a multi-nation state, nationalism can be a “hot potato,” so it is true that it requires a certain level of management by a nation’s authority. In the case of China, however, I cannot help but think that nationalism has been arbitrarily and

b939_Chapter-02.qxd

7/15/2010

2:13 PM

Page 45

Chinese Nationalism in Sino-Japanese Relations

45

the serious problem, among others, is that unlike the Chinese government’s pragmatic approach to nationalism, some aspects in the future of Sino-Japanese relations remain pessimistic. Since the reform and opening-up policy, the nationalism (patriotism) promoted by the Chinese government as a new ideology of social integration has the potential for extreme developments as people’s emotions are stirred. What matters is that the Chinese government’s technical and instrumental approach toward nationalism can become a tremendous burden in the longer term for Sino-Japanese relations. Internally, nationalism (patriotism) can be very effective in maintaining incorporated society, enhancing the “we” feeling of solidarity, but externally, if it fails to deal effectively with nationalism issues, the moral justification of the CCP will be seriously damaged. As discussed above, especially for the Chinese Communist government’s need to maintain a stable regime and justify its power, the risk of mass demonstration is even higher as the central government can easily become the target. In short, the CCP has no other options but to choose nationalism (patriotism) as a new ideology of social integration after the reform and opening-up policy, and “manage” the aftermath. So it cannot be ruled out that the Chinese government in this bind may opt for extremes once it loses its options for its foreign policy. 4. Conclusion — Implications of the Rise of Nationalism in East Asia As is generally known, since the end of the Cold War, nationalism in East Asia has increasing filled the vacuum created by the dwindling of the anti-communist ideology or socialism that had served as national technically used by the ruling class; for example, China has been very inactive when it comes to individuals’ claiming or suing for Japan’s liability in issues such as wartime comfort women (Japanese military sex slaves), forced or drafted laborers, and the Nanjing massacre. That said, it is almost tantamount to human rights infringement when a nation arbitrarily tries to decide the compensational limit or method for individual damage. More recently, with regard to Iris Chang’s suicide that shocked the Western intellectual society, China seems to prefer “managerial methods” to extensive fact-finding efforts.

b939_Chapter-02.qxd

46

7/15/2010

2:13 PM

Page 46

J. Choi

integrating mechanisms. Nationalism as an ideology in its early stage shows an aspect of top-down flow, but eventually ends up a two-way structure in which the general public is motivated to influence their nation’s activities.25 In China, nationalism (state-ism) has played a national integrating role since the era of the western imperialists’ invasion in the form of culturalism or the Great China ideology. Although it is a socialist nation, modern China, based on a diversity of epistemological foundations as a victim,26 has kept hard-line policies on “sovereignty diplomacy,” when it comes to international issues related to “sovereignty, territory, and nation.” It is, in a way, true that China’s tough stance has wide emotional support from the public, giving it some integral leverage points for the issues of Taiwan, and the return of Hong Kong and Macao. As a result, China has to take its people’s emotional response into account for its future relations with Japan, especially on the issues of nationalism. And this will consequently affect China’s diplomatic approach toward Japan to a certain degree. In most cases, however, China has maintained a reserved and pragmatic posture despite its harsh rhetoric since its reform and opening-up policy. This can be noted in the government’s response to the fore-mentioned anti-Japanese demonstrations, and the people’s nationalistic emotions have been managed for the time being by socialism, patriotic appeal and strong authoritative public power. The problem looms large when Japan’s stride toward being a political and military power is visualized into national strategy. In this case, conflicts over nationalism issues between the two neighbors can get worse, thus it is highly likely to create continuing tensions over the issue of “sovereignty and territory,” which China sees as a matter of life and death. As discussed above, the Chinese government has secured its orthodoxy and legality based on wide consensus and emotional support of its people, which have been strengthened since the reform and opening-up policy. In short, it is uncertain how long China’s domestic 25

Hobsbawm, E. (1992). Nations and Nationalism since 1780, pp. 101–130. Cambridge University Press. 26 Pye, L. W. (1996). How China’s Nationalism Was Shanghaid. In Chinese Nationalism, Unger, J. (ed.), pp. 86–112. M. E. Sharpe.

b939_Chapter-02.qxd

7/15/2010

2:13 PM

Page 47

Chinese Nationalism in Sino-Japanese Relations

47

complaints can be contained by a government in a vulnerable regime. When paradoxically cornered by issues in connection with national pride, the government may end up resorting to tougher responses in order to avoid strategic isolation and nationalism’s negative effects. One of the most worrisome matters, among others, is that these Chinese responses may in turn strengthen the US–Japanese alliance in connection with the US’s East Asia strategy, and create a new power-conflict structure in East Asia, where an alliance of South Korea–US–Japan may compete with the North Korea–China axis. More fundamentally, of course, the nationalism conflicts that have been currently sweeping East Asia are legacies of the old Cold War structure. They are largely rooted in the result of the historical issues that had been forcibly patched up by the powers that sought their own national interests.27 Historically, however, nationalism has functioned as an ideology that builds solidarity by overcoming internal differences through alienating outside enemies. So it has a potential danger of turning a blind eye to new conflicting structures or tightening the negotiating margin and exaggerating the threats. This is clearly evidenced by the development of conflict between China and Japan over nationalism issues. In 2005, the Japanese PM’s visit to the Yasukuni shrine caused explosive anti-Japanese sentiment among the Chinese public, which in turn invited Japan’s nationalists’ responses, leading to a serious confrontation between the two peoples. According to a survey conducted at that time, 86% of Chinese disapproved of the Japanese Prime Minister’s pilgrimage to the Yasukuni Shrine, and 83% harbored distrust of Japan. In particular, distrust rate against Japan has jumped 16% up from a previous survey in 2003 (the rate against South Korea has only jumped by 6% according to the same survey), revealing that anti-Japanese sentiments in China has relatively seriously deteriorated in 2005.28 Meanwhile, Japan’s opposition against then Prime Minister Koizumi’s visit to the Yasukuni Shrine dropped from 87% in the first half to 46% in the second half of that year.29 27

http://knsi.org/~knsiorg/knsi/kor/center/view.php?no=762&c=1&m=11; [accessed 2 November 2005]. 28 The Kyunghyang newspaper (19 June 2005). 29 The Kyunghyang newspaper (29 May 2005; 4 November 2005).

b939_Chapter-02.qxd

48

7/15/2010

2:13 PM

Page 48

J. Choi

As discussed above, the aggravating situation between China and Japan based on their peoples’ national sentiment not only makes the two countries’ conflicting structure seem to be a more serious threat than in reality,30 it also reduces the number of options for solving the conflict, thus triggering excessive response from both governments and in turn forming a vicious cycle of creating even more distrust. After all, the possibility of historical regression cannot be ruled out. That means a new cold war structure in East Asia where the US–Japanese alliance will confront China. If the old Cold War structure provided physical foundations on which each nation’s nationalism could take root, then again, the nationalism conflict between China and Japan since the end of the Cold War can become an ideological tinderbox that may revive the disintegrated Cold War structure of confrontation.31

30

Actually, when tensions were running high between China and Japan, Chinese President Hu Jintao visited the 26th Army Group under the Jinan Military Region in Shandong Province, and the accumulation of such moves led to a commotion by rumors on the Internet that China had invaded Okinawa, increasing unnecessary wariness against China. 31 As one of the measures to reduce such risks, it is suggested that a discourse community beformed in East Asia to build a regional peace framework. The movement partially in progress is focused on easing conflicts among nations through coalition of a wide variety of civil societies by establishing an East Asian community and an Asiatic identity in each nation, and through lobbying of their own governments by each national group.

b939_Chapter-03.qxd

7/15/2010

2:13 PM

Page 49

CHAPTER 3

China’s “Military Diplomacy” and Expanding Military Power Projection Capability Masayuki Masuda

1. Expanding China’s Presence in Global Security

Military diplomacy Faced with emerging nontraditional security threats, the People’s Liberation Army (PLA) of China is seeking to enhance a broad range of cooperation with neighboring countries, regions and the international community. At the all-Army foreign-related work conference in September 2006, Gen. Cao Gangchuan, minister of National Defense of China, said, “The armed forces’ foreign-related work is an important component of the Party and state’s foreign-related work. We should conduct multi-channel and multi-tier military exchanges and cooperation with foreign countries.”1 He encouraged all the departments concerned to study the strategy of “military diplomacy”. As his statement indicates, the PLA has actively promoted military diplomacy in recent years and has been conducting a wide range of activities: high-level military exchanges, joint search-and-rescue exercises, mutual visits of navy vessels, strategic dialogue, cooperation in dealing with nontraditional security threats, joint counter-terrorism exercises, and the mutual exchange of observers to military exercises.2 Although it is the Hu Jintao administration that emphasizes the importance of military diplomacy, military exchange programs were also

1 2

PLA Daily (23 September 2006). Guangming ribao (7 December 2005). 49

b939_Chapter-03.qxd

50

7/15/2010

2:13 PM

Page 50

M. Masuda

conducted in the Jiang Zemin era. For example, in 1997, a formation of two destroyers and one supply ship of the Chinese navy called at Hawaii and then crossed the Pacific for the first time to visit the United States, Mexico, and Chile. In the past, the PLA focused on visits of navy vessels, dispatch of personnel to peacekeeping operations, and high-level exchanges, which were largely symbolic measures for confidence building. However, China has in recent years come to emphasize military diplomacy as an instrument for building a stable and favorable international security environment for it. One factor prompting China to promote military diplomacy was the emergence of nontraditional security threats such as the September 11 terrorist attacks in the United States in 2001 and the outbreak and spread of severe acute respiratory syndrome (SARS) in China in the spring of 2003. Lu Yu, an official at the Legislative Bureau of the Central Military Commission, stresses the importance of nontraditional security threats, mentioning “nontraditional security is now a cornerstone of national security”.3 According to her, every element of traditional and nontraditional security threats is now inseparably intertwined: a situation developing in one area of the world will affect the region surrounding China or the entire world. Therefore, Lu says, the new task of the PLA is to pay closer attention to neighboring areas and the world at large and, in so doing, to strengthen military diplomacy is critical. Another factor in the rise of “military diplomacy” was a new foreign policy enunciated by the Hu Jintao administration that came to power at the 16th National Congress of the Communist Party of China (CCP) in November 2002. The Hu administration announced that “neighboring diplomacy” (zhoubian waijiao) as a policy line based on the new principle, “good-neighbor relationship and partnership” emphasizing strengthening bilateral and multilateral relations with its neighbor states and regions. This “neighboring diplomacy” included military diplomacy by the PLA. At an international seminar held at the PLA National 3

Lu, Y. (2006). Lvxing lishi shiming bixu jubei shijie yanguang. (In carrying out historical mission, we have to have world perspective) Jundui zhenggong lilun yanjiu (Theorical Studies on PLA Political Work), Vol. 7, No. 1, p. 11.

b939_Chapter-03.qxd

7/15/2010

2:13 PM

Page 51

China’s Military Diplomacy

51

Defense University in September 2004, Gen. Xiong Guangkai, deputy chief of the general staff of the PLA, said “the PLA had promoted military cooperation with neighboring countries within the framework of China’s overall national diplomacy, creating a favorable strategic environment for the overall interests of national development”.4 For China “a favorable strategic environment” means, firstly, creation of the stable environment essential to the continued economic growth, and development of military cooperation, based on friendly relations, with neighboring countries. The favorable strategic environment also means the formation, with neighboring countries, of a coalition to counter the Unite States which is carrying out force realignment with its allies in the region. Since the latter half of the 1990s, China has been advocating a “new concept of security” replacing the “traditional” one based on alliances. According to Wang Baofu, deputy director of the Institute for Strategic Studies at the PLA National Defense University, China’s “military diplomacy” represents this new concept of security.5

China’s initiative in regional security cooperation China’s “military diplomacy” has two main components: (a) military cooperation with neighboring countries and regions, and (b) China’s involvement in global security issues. In terms of military cooperation with its neighbors, China has promoted security cooperation through the Shanghai Cooperation Organization (SCO) which was launched in June 2001. China, Russia, and the Central Asian countries had been seeking to promote counterterrorism cooperation even before the SCO came into being. When the SCO was established, its member states decided to conduct joint military exercises. In August 2003, the SCO 4

Xiong, G. (2006). China’s Military Diplomacy in Relation to Her Foreign Policy and National Defense Policy. In International Situation and Security Strategy, pp. 377–378. Beijing: Tsinghua University Press. 5 Wang, B. (2006). Shijie junshi xingshi yu daguo junshi zhanlue tiaozheng xindongxiang (World’s Military Situation and New Trends in Military Strategies of Major Powers). Guoji zhanlue xingshi fenshe: 2005–2006 (International Strategic Analysis: 2005–2006). Institute of Strategic Studies, PLA National Defense University, (ed.), p. 301. Beijing: Shishi Chubanshe.

b939_Chapter-03.qxd

52

7/15/2010

2:13 PM

Page 52

M. Masuda

member states, with the exception of Tajikistan, conducted their first joint counterterrorism military exercise, “Joint-2003”, in the eastern area of Kazakhstan and China’s Xinjiang Uygur Autonomous Region. In August 2005, China–Russia joint military exercise “Peace Mission 2005” was carried out within the framework of the SCO. Also, in March 2006, the “East Counter-terrorism 2006” exercise was conducted in Uzbekistan by special operation forces of SCO states. In addition, the SCO Regional Anti-Terrorist Structure (RATS) was established in Tashkent, Uzbekistan, to promote security cooperation. In East Asia, China has been promoting cooperation with Southeast Asian countries primarily in dealing with nontraditional security threats. The heads of states from China and ASEAN in November 2002 signed a Joint Declaration of ASEAN and China on Cooperation in the Field of Non-traditional Security Issues that called for cooperation in dealing with terrorism and piracy.6 There has been a move toward creating a mechanism for security cooperation. For instance, in a speech delivered at a symposium on cooperation between China and ASEAN in maritime law enforcement held in Dalian, China, Major Gen. Guo Shun, deputy director of the Frontier Guard Administration Bureau, Chinese Ministry of Public Security, proposed the establishment of a mechanism for better communication and the exchange of information among the maritime law enforcement agencies in order to cope with maritime security threats.7 Military exchange between China and ASEAN is also strengthened. At the second ASEAN Regional Forum (ARF) Security Policy Conference (ASPC) held in Laos in May 2005, Gen. Xiong Guangkai disclosed that China and ASEAN were exploring the possibilities of observing each other’s military exercises, and indicated the future possibility to conduct bilateral or multilateral joint military exercises with ASEAN countries.8

6

Joint Declaration of ASEAN and China on Cooperation in the Field of NonTraditional Security Issues. Phnom Penh (4 November 2002). 7 Beijing ribao (31 August 2006). 8 Xiong, G. (2006). International and Regional Security Situation and the Role of the Armed Forces in Maintaining Security. In International Situation and Security Strategy, p. 362. Beijing: Tsinghua University Press.

b939_Chapter-03.qxd

7/15/2010

2:13 PM

Page 53

China’s Military Diplomacy

53

China has also actively participated in multilateral security cooperation in the Asia Pacific region. At a ministerial meeting of the ARF held in June 2003, Chinese Foreign Minister Li Zhaoxing proposed the establishment of the ASPC. The ARF has promoted confidence building mainly among foreign ministries since its establishment. However, China, recognizing the necessity of involving defense officials in the ARF, proposed the establishment of a vice defense minister-level ASPC. The first meeting of the ASPC was held in Beijing in November 2004 and issued a chairman’s statement that recommended bilateral and multilateral military cooperation in dealing with nontraditional security threats.9

China’s expanding role in global security The second component of China’s “military diplomacy” is its involvement in global security issues. China has begun to actively participate in UN peacekeeping operations throughout the world. Since taking part in peacekeeping operations for the first time in 1990, it has dispatched a total of close to 10,000 personnel on 17 missions including military observers, engineers, army medics, and transport units by the end of 2007 — the largest number of military personnel sent by any permanent member of the UN Security Council. According to UN figures, China at the end of April 2008 had 1,981 civil and military personnel serving in 12 missions, including the UN missions in the Democratic Republic of the Congo, Liberia, Haiti, and Lebanon.10 China also participates in the United Nations Stand-by Arrangements System (UNSAS), under which member states notify the United Nations of the resources they can provide within an agreed response time, and the Secretary General of the United Nations requests them to provide the United Nations with standby resources when specific

9

Chairman’s Summary of the First ASEAN Regional Forum Security Policy Conference. Beijing (4–6 November 2004). Available at http://www.aseansec.org/ arf/12arf/1st-ASPC/Report.pdf 10 UN Mission’s Summary Detailed by Country (30 April 2008).

b939_Chapter-03.qxd

7/15/2010

2:13 PM

Page 54

M. Masuda

54

needs arise. Although its level of participation in the UNSAS — Level 1, in which it is required merely to submit a list of the resources it can provide — is not very high, China has been positive in sending its military personnel on peacekeeping missions. In 2006 China sent a contingent consisting of mine clearance, engineering, and logistic troops as well as a medical detachment to the UN Interim Force in Lebanon (UNIFIL) deployed in the southern area of the country. Premier Wen Jiabao announced in September 2006 that China would

Names of the Mission

Areas to Which UN Forces are Deployed

UNDOF UNIFIL UNTSO UNFICYP UNOMIG UNMIK UNMOGIP UNMIT

Golan Heights Lebanon Middle East Cyprus Georgia Kosovo India/Pakistan East Timor

MINUSTAH UNMIS

Haiti Sudan

ONUB UNOCI UNMIL

Burundi Cote d’Ivoire Liberia

MONUC

Republic of Congo

UNMEE UNAMID MINURSO

Ethiopia/Eritrea Darfur Western Sahara

Figure 3.1: 2008)

Kinds of Personnel

No. of Personnel Sent

None Troops Military observers None None Police personnel None Military observers Police personnel Police personnel Troops Military observers Police personnel None Military observers Troops Military observers Police personnel Troops Military observers Military observers Troop Military observers

None 343 4 None None 18 None 2 23 134 446 14 8 None 13 566 5 10 218 16 2 147 14

China’s participation in UN peace-keeping operations. (As of April

Source: UN Mission’s Summary Detailed by Country (30 April 2008).

b939_Chapter-03.qxd

7/15/2010

2:13 PM

Page 55

China’s Military Diplomacy

55

increase the number of its troops from the initial 200 to 1,000.11 China has sent personnel on six of the seven missions the United Nations has dispatched to Africa, except for the Burundi mission (ONUB). This active participation of China in regional and global security issues is a welcome development insofar as it means China is playing a greater role in the existing international system. Both the political leadership and scholars in China have come to argue that in order for China to expand its international influence, it must be actively involved in the existing international system.12 On the other hand, it must be noted that many of the frameworks in which China has strengthened its involvement are those in which the Western, and particularly the US presence is relatively weak. As one example, the SCO, which is a growing presence in the affairs of Central Asian security, offers almost no channel for the United States and other Western countries to be involved in the organization. Rather, the Declaration of the Heads of State of the SCO adopted at the SCO summit meeting in July 2005 maintains “the countries participating in the coalition campaign in Afghanistan should set a deadline for their temporary use of military facilities in the SCO member states”.13 Pursuant to this declaration, the SCO member states asked the United States to withdraw its troops from Kyrgyzstan and Uzbekistan at an early date. While China is now active in UN peacekeeping operations, it might cast a wary eye on recent calls for reform of the UN. In the view of Chinese specialists on the issues, recent debates about UN reform have tilted toward three objectives: to raise the influence of Western countries, to increase pressure from the United States, and to weaken the position of developing countries.14 The reform efforts put a premium 11

PLA Daily (29 September 2006). Wang, Y. (2003). Mohezhong de jiangou (Construction in contradiction), p. 85. Beijing: Zhongguo fazhan chubanshe. 13 Renmin ribao (6 July 2005). 14 Li, D. (2006). Lianheguo gaige de jincheng, xianzhuang yu zoushi (UN reforms: process, situation, and prospects). In 2006 nian: Quanqiu zhengzhi yu anquan baogao (Reports on international politics and security: 2006). Li, S. and Wang, Y. (eds.), pp. 47–67. Beijing: Social Sciences Academic Press. 12

b939_Chapter-03.qxd

56

7/15/2010

2:13 PM

Page 56

M. Masuda

on democracy, human rights, and humanitarianism, but if such values become the basis for a global interventionism then they could be used as a “pretext to invade other countries”. In part because China, wary about the criticism leveled against it with respect to “democracy, human rights, and humanitarianism”, has become concerned about the future directions of peacekeeping operations, it has contributed to its decision to increase participation in such UN mission. As China’s “military diplomacy” has these two opposite aspects — one accepting, and the other opposing, the existing international system — its future development remains unclear. 2. Expanding Military Power Projection Capability

RMA with Chinese characteristics: Informationization The PLA leadership realizes that the PLA must import advanced weapons and military technology from other countries through “military diplomacy”. China feels strongly that it must actively proceed on a “revolution in military affairs (RMA) with Chinese characteristics” in keeping with the RMA now in progress across the world.15 In order to achieve the RMA, it is faced with the task of the “informationization” of the PLA.16 However, the “mechanization” of the PLA to strengthen the mobility and protection of PLA units is still less than complete. Having witnessed the first Gulf War and the Kosovo war where precision-guided weapons were extensively employed, China realized that major conflicts in the 21st century will be “information warfare”, and that their outcome will be determined by C4ISR capability (command, control, communications, computers, surveillance, and reconnaissance). With this in mind, the PLA set the “dual-historical task” of simultaneous mechanization and informationization.17 15

Xiong, G. Op. cit, p. 382. Li, D. (2006). Anzhao kexuefazhanguan yaoqiu tuijin zhongguo tese junshi biange (In Response to Requirements of the Scientific Concept of Development, China should Push forward RMA with Chinese Characteristics). Qiushi (Seeking Truth), No. 17, pp. 24–25. 17 Huang, H. and Hong, B. (2004). Shijie xin junshi biangezhon de zhongguo guofang he jundui jianshe (China’s Defense and Force Building in the Era of New RMA), p. 396. Beijing: Renmin Chubanshe. 16

b939_Chapter-03.qxd

7/15/2010

2:13 PM

Page 57

China’s Military Diplomacy

57

This policy was confirmed at an expanded meeting of the Central Military Commission (CMC) in December 2000. At that meeting, Jiang Zemin, chairman of the CMC, emphasized informationization of the PLA over mechanization by saying that the wide-ranging use of information technology had brought about a new RMA.18 The Afghanistan War in 2001 and the Iraq War in 2003 where traits of information warfare had become more distinct, further impressed the leadership of the PLA with the urgency of the task of informationization of the PLA.19 Thus the PLA has placed an clear focus on informationization. The Chinese defense white paper, China’s National Defense in 2006, also declared “the strategic goal of building informationized armed forces and being capable of winning informationized wars by the mid-21st century”.20 To achieve its goal of “RMA with Chinese characteristics”, based on its military strategy to win “informationzed wars”, China is strengthening military cooperation with other countries in addition to its own efforts. Gen. Xiong Guangkai, deputy chief of the general staff of the PLA, has confirmed military cooperation as among missions of China’s military diplomacy.21 Military cooperation also involves keeping up with global trends of RMA, and the Iraq war in 2003 brought home to the PLA leadership the importance of exchanges of military technology with other advanced countries. Such exchange includes the area of military and strategic studies as well as specialized technology. According to the China’s National Defense in 2006, more than 500 military personnel were dispatched to study in more than

18

Jiang, Z. (2006). Jiang Zemin wenxuan (Collected Works of Jiang Zemin), Vol. 3, pp. 157–167. Beijing: Renmin Chubanshe. 19 Xiong, G. (2006). International Strategic Situation in 2004: Retrospect and Prospect. In International Situation and Security Strategy, pp. 186–189. Beijing: Tsinghua University Press. 20 Information Office of the State Council of the People’s Republic of China (2006). China’s National Defense in 2006 (29 December, 2006). Xinhua. 21 Xiong, G. (2006). China’s Military Diplomacy in Relation to Her Foreign Policy and National Defense Policy. In International Situation and Security Strategy, pp. 382–383. Beijing: Tsinghua University Press.

b939_Chapter-03.qxd

7/15/2010

2:13 PM

58

Page 58

M. Masuda

20 countries during the two-year period of 2005–06, and the PLA is trying to send more students in coming years. The research and development facilities of the PLA have also been actively sending their personnel abroad. Another option for strengthening the combat capability of the PLA, which has difficulty in promoting informationization on its own, is procuring equipment from Russia. The air force is introducing Su-27 fighters, which are domestically produced under license, and has also received Su-30 fighters capable of anti-ship and groundattack missions. For the naval force, China has purchased from Russia Kilo-class submarines that generate little noise and Sovremennyy II guided missile destroyers (DDGs) with a sophisticated anti-ship capability. According to the Military Power of the People’s Republic of China, a report published by the US DOD, Russian advanced weapons systems — AA-12 air-to-air missiles and the S-300PMU-2 surface-to-air missile system — are expected to arrive in the near future. China has thus been seeking to improve the air-defense and anti-ship capability of the PLA by purchasing aircraft and naval vessels equipped with sophisticated information technology and precisionguided missiles. Moreover, the European Union (EU) may eventually lift its embargo on the sale of EU-made arms and technology to China in the long terms. China has continued to seek a lifting of the embargo at summit meetings and strategic dialogues with the EU, and has been actively cooperating with the EU in high-tech fields. In May 2004, China and the EU signed an agreement for Chinese participation in the Galileo Navigation Satellite Project, an EU global positioning system (GPS). China hopes that its participation in the Galileo Project will help develop satellite-guided navigation technology by domestic industries.22 However, China also sees a military benefit in joining the Galileo Project, for example, being able to increase accuracy of its missiles by providing precise location data. Special Fellow Wu Guifu at the China Institute for International

22

Keji ribao (14 October 2005).

b939_Chapter-03.qxd

7/15/2010

2:13 PM

Page 59

China’s Military Diplomacy

59

Strategic Studies, an advisory body to the PLA, notes that during the Iraq War, the US forces used more than 100 military satellites, including reconnaissance, communications, and GPS satellites for operational purposes. He sees securing military superiority in space as essential to achieving operational objectives and as decisive in the final outcome of a war. Although China claims that its participation in the Galileo Project is aimed at economic benefit, the long-term military significance of its participation in the project cannot be ignored given the seriousness of its military interest in space.23

“Beyond Taiwan” Thanks in part to the military cooperation of Russia, the modernization of China’s military has made considerable strides. The greatest potential threat to China is a military clash with the United States over Taiwan, but the PLA can now project its military power beyond the Taiwan Straits to the entire Asia Pacific region. The US DOD estimates that the around 1,000 short-range ballistic missiles deployed across the Taiwan Straits are mobile missiles which can be deployed to areas other than the coast facing Taiwan.24 Its medium-range ballistic missiles have been upgraded to the Dong Feng-21, which is equipped with a solid-fuel propulsion system and can be transported and operated on board the Transporter-Erector-Launcher (TEL), with a range extending not only to Japan but also to the whole of Asia. China’s intercontinental ballistic missiles (ICBMs) have a range long enough to reach not only the continental America but also most areas of the world. China has also been making efforts to develop submarinelaunched ballistic missiles (SLBMs), which will improve the survivability of China’s nuclear arsenals. The Ju Lang-2, now under

23

Wu, G., Yang, C. and Wang, X. (2006). 21 shiji chu de hangtian keji yu xin junshi biange (Space Technology and RMA in the Early of the 21 Century), Taipingyang xuebao (Pacific Journal ), No. 3, pp. 5–6. 24 US DOD (2008). Annual Report to Congress: Military Power of the People’s Republic of China, p. 2.

b939_Chapter-03.qxd

60

7/15/2010

2:13 PM

Page 60

M. Masuda

development, has an estimated range of 8,000 kilometers, and if it becomes operational, China’s nuclear deterrence capabilities against the United States would be strengthened. China is also developing a nuclear-powered submarine capable of carrying the Ju Lang-2 SLBMs, and is reportedly developing a Jin-class (Type 094) SSBN, an improved version of the Xia-class (Type 092) SSBN, with the technological help of Russia. China’s National Defense in 2006 states that China will enhance its capability of “nuclear counterattack” by building up its navy, which hinted that Chinese efforts to strengthen its nuclear and missile capabilities are likely to continue. The Chinese navy and air force has improved their power projection capabilities. Sukhoi fighters (each with a combat radius of about 1,500 kilometers) obtained from Russia have been deployed to bases across the Taiwan Straits as well as in southern China, and training in in-flight refueling has often been conducted in recent years.25 The leadership of the Chinese air force says that in-flight refueling not only enables its combat aircraft to attack far-flung targets, but also enables the air force to conduct both defensive and offensive operations. In addition, China has signed a contract to purchase from Russia Il-76 transport aircraft with a cruising distance of over 3,000 kilometers. An Il-76 is capable of transporting 140 personnel, and when they are in front line service in China, they will improve the PLA’s capacity to deploy airborne troops and logistical supplies to distant locations. The Chinese air force has thus been increasing power projection capabilities, enabling it to send aircraft and troops for operations in the South China Sea and the western Pacific. The Chinese navy has also been converting from a brown- to bluewater navy. As noted earlier, China has been acquiring Kilo-class submarines from Russia and, at the same time, has been building new indigenous submarines. It is also endeavoring to improve the airdefense and anti-ship capability of its destroyers and frigates. More recently, China has hinted at the possibility of building aircraft carriers.

25

See, PLA Daily (19 January 2006); PLA Daily (21 June 2006); Mingpao (28 October 2006).

b939_Chapter-03.qxd

7/15/2010

2:13 PM

Page 61

China’s Military Diplomacy

61

Figure 3.2: Estimated ranges of Chinese medium-range and intercontinental ballistic missiles. Source: US DOD (2007). Annual Report to Congress, Military Power of the People’s Republic of China, p. 19.

In a press interview with the Hong Kong’s Wen Wei Po in March 2006, Lt. Gen. Wang Zhiyuan, deputy director of the Science and Technology Commission of the PLA General Armament Department, said that the PLA “will conduct research and build aircraft carriers on its own, and develop its own carrier fleet”.26 Building an aircraft carrier indigenously would not be easy given the limits of Chinese funds and technology. Sun Laiyan, vice minister of the Commission of Science, Technology, and Industry for National Defense, did not deny the possibility of building aircraft carriers in the future.27 However, he also pointed out that China will consider the option by comprehensively examining all factors involved, which indicates China’s cautious approach to the matter. There are also reports

26 27

Wenwei Po (10 March 2006). Huanqiu shibao (27 October 2006).

b939_Chapter-03.qxd

62

7/15/2010

2:13 PM

Page 62

M. Masuda

that China is considering the introduction of Russian-made Su-33 carrier-based fighters, therefore an eye should be kept on developments in this area.

From transparency to accountability In spite of its military modernization efforts, China asserts that its defense policy is defensive in nature and that the modernization of its military forces is still at a low level. The China’s National Defense in 2006 also stresses the defensive nature of China’s defense policy, stating that its mission is to maintain China’s national security and unity and to help build a prosperous society. The white paper China’s Peaceful Development Road, published in December 2005, tries to refute a “China threat” theory by averring that “China will unswervingly follow the road of peaceful development”.28 In an effort to increase the transparency of its military spending, the China’s National Defense in 2006 lists items in its defense budget such as compensation, education, and development and experimentation of weapons and equipment as well as adding a new section that explains its defense budget process. However, it does not give specific details of number and type of PLA armaments, maintenance schedule, the alignment of units, or troop movements and training records and defense spending. Although China claims that it has improved the transparency of its defense policy through military diplomacy, others may not necessarily perceive the situation in the same light. A case in point is China’s handling of an invitation from US Commander Admiral William Fallon in May 2006 for PLA observers to attend a military exercise codenamed “Valiant Shield 2006”.29 According to Admiral Fallon, the invitation was a step designed to build confidence on both sides to

28

Information Office of the State Council of the People’s Republic of China (2005). China’s Peaceful Development Road (22 December 2005). Xinhua. 29 US Representative Duncan Hunter (R-CA) Holds a Hearing on China’s Military Power. FDCH Political Transcripts (22 June 2006).

b939_Chapter-03.qxd

7/15/2010

2:13 PM

Page 63

China’s Military Diplomacy

63

improve military relations, and he expressed the hope that the PLA would also invite American military officers to observe one of its military exercises in the future. The US would like to see large-scale Chinese military measures, like those conducted jointly by China and Russia in August 2005, opened to outsiders. In testimony before the House Armed Service Committee on June 22, 2006, Brig. Gen. John R. Allen, principal director of Asia and Pacific Affairs, Office of the Secretary of Defense, DOD, said that the United States hoped to gain access to a Chinese military exercise or to a joint exercise conducted within the framework of the SCO in reciprocation for the invitation to observe “Valiant Shield 2006”. However, a Xinhua article dated June 21, 2006, reported that in return for the Chinese invitation of US observers to “Northern Sword-0308U” (October 2003) and “Northern Sword-2005” (September 2005), the United States had invited a Chinese delegation to observe Valiant Shield, and did not touch on the possibility of opening future military exercises to US observers.30 How China and other SCO member states will respond to such kinds of request merits attention. Despite its continued efforts, China’s military forces or its defense policy is far from transparent. Although China asserts that its defense policy is of a defensive nature and that the modernization of its armed forces lags behind the United States and other advanced countries, Chinese efforts to modernize its armed forces are leading to the enhancement of power projection capabilities. If only to clear up the fears of the countries in East Asia and the international community, China must not only improve the transparency of its defense spending and armaments, but also make clear the future direction of its military policy, including the modernization of its armed forces.

30

Xinhua (21 June 2006).

b939_Chapter-03.qxd

7/15/2010

2:13 PM

Page 64

This page intentionally left blank

b939_Chapter-04.qxd

7/15/2010

2:13 PM

Page 65

CHAPTER 4

China/Japan/ASEAN: What Kind of Cooperation for What Issues? Sophie Boisseau du Rocher

Introduction The question of regional cooperation between the important economic and political zones of East Asia (China, Japan, South Korea and ASEAN) and the possible setting up of institutional mechanisms is one of the major issues Southeast Asian states will have to tackle in the coming years. It is surprising to us Europeans to note that East Asia, in spite of being the most dynamic zone in the world for several decades, has but few regional institutions, which were in any case found to be insufficient during the 1997 crisis, and that the shifts needed for such an evolution have still not happened. The reflection on the organization of East Asia is not new. It was often fueled by a mobilizing antagonism represented by the West’s willingness, explicit or implicit, to have the monopoly on modernity. Later, in the 1980s, the East Asian states, and the regional intellectual communities, refused to approach this question through “mutual and common gain” (as Europe did) and refused to put at stake, even mentally, the notion of nation-state and power games. The clash between the western definition of regionalism and the Asian one was inevitable. A new conceptual approach could help remove the impediments that may, eventually, worsen blocked situations amongst East Asian States but also between East Asia and the rest of the world. While dealing with this question, we will take up the fundamental themes and actors, the states, national interest, regional 65

b939_Chapter-04.qxd

66

7/15/2010

2:13 PM

Page 66

S. Boisseau du Rocher

construction, regional integration, regionalization and world balances. What perception and interpretation of these concepts prevail in this region of the world? Is there a (regional) model rivalry? Is Europe destined to become an “international extravagance”? What is the interest of the other powers, notably the United States? We obviously should not confound the terms regional construction, regional cooperation and regional integration. The construction of a region, setting up of common institutions, is a process of a nature other than interstate cooperation. This construction takes place at a level other than cooperation. It is not just a process in which a limited number of states, linked by geographical closeness, develop a degree of mutual interdependence, of an economic, financial or political nature. It is a voluntary process where a state agrees to share a part of its legitimacy and its sovereignty when shared problems are better solved together. But obviously, regional construction cannot be measured solely by the yardstick of efficiency. As it has a direct impact on security and identity, it is first and foremost a political evolution, almost a mental revolution. Questioning the dynamics of regional integration implies first questioning the foundation of these dynamics and opens a consistent debate on logics, procedures and intentions. Since for there to be a region, it must exist, it must have constancy, a recognized existence, its own rationale, which distinguishes it from other regions. Is this the case in East Asia? It would be Trivial to say that the centre of gravity of world economy is shifting towards East Asia, in which India is included more and more (a strange idea that shows its limits?). Home to more than a third of humanity and strengthened by several decades of rapid and sustained economic growth, these countries are becoming the new economic powers of the 21st century. With three of the world’s biggest economies (China, Japan and India), and producing more than 35 percent of the global GDP, Asia is today the keystone of the international economy. Thanks to its economic vitality, its share of world GDP keeps increasing. After recovering from the 1997–98 financial crisis, the economy of the region is the most

b939_Chapter-04.qxd

7/15/2010

2:13 PM

Page 67

China/Japan/ASEAN: What Kind of Cooperation?

67

dynamic in the world and contributes to world growth by nearly 50 percent. The 2008 Western economic and financial downturn has also given Asia a new impetus, and probably, a new significance. If Asia displays such vitality today, it is mainly because it knew how to integrate with the world econsssomy. Apart from a brief setback after the IT bubble burst in 2001, its share of world exports has been ever growing and has reached 27 percent today. Equally important is the perspective of seeing Asia create not a century of Asia or the Pacific to replace the century of the Atlantic, but rather an Asian community that is dynamic and well integrated with the world, capable of stimulating world growth through a network of commercial exchanges and investments. Asia became prosperous thanks to its efficient integration with the world economy and is one of the major beneficiaries of globalization, with its far reaching effects on exchange trends, production processes and job prospects. But Asia also experienced the risks and costs of financial globalization, and today faces new problems resulting from the acceleration of globalization. What we observe today are the countries that have best integrated with the world inflows which strengthen their regional links without, however, coming closer at the institutional level. It will be essential to understand the reason for this, weigh up the consequences and assess the probabilities of an institutional organization both positively and negatively. The question of regional construction, and its definition, is obviously a power issue. The big nations, Japan, China, possibly India, if included, have understood this well. It raises many questions both about the substance (What do we wish to construct together? What objectives do we set ourselves?) and the form (What unity? What coherence? What means?). But above all, it indicates the degree of willingness to go towards common institutions, surmount rivalries, develop inter-dependence. In short, let us be quite clear, the question of leadership is also being raised. Not well formulated, certainly not tackled, is this question which is ultrasensitive in East Asia. What strikes the European observer is that the question of regional construction is locked in a trade context and does not manage to acquire a true political content (which is always eliminated). In this

b939_Chapter-04.qxd

68

7/15/2010

2:13 PM

Page 68

S. Boisseau du Rocher

sense, we cannot talk of regionalism but only regional cooperation which is, in fact, nothing but a circumstantial conjunction of interests. 1. What Kind of Cooperation? An Already Familiar Question The rapprochements and procrastinations among the East Asian countries are not recent; the management of intra-regional relations is already a very loaded one, with a huge amount of unsaid resentment, mistrust and implicit hierarchy. Except for some episodes, it’s not often a history of war, conquest and violence but more the ritualization of a sinocentric order with its procedures and habits. After the involvement of western powers, the rules of the game have changed, the balance of power has been deeply modified and new concepts have been introduced. On the internal historcial substrata are thus superimposed external influences that slow down certain processes, accelerate others, and complicate the implicit hierarchy by producing a superimposition of organizations based on their spatial control and their specific interests (SEATO, the South-East Asia Treaty Organization (1954–1977), being one among other examples). Even today, regional identity cannot be dissociated from relations of cooperation and/or rejection with the West, and is fueled by this dual identity. Geo-economic analysis produces the same conclusion: East Asia is undisputedly gaining regional importance, yet these rapprochements cannot be dissociated from links with the outside world, notably the industrialized countries.

1.1 East Asia and difficulties of identity-related contours

A name weighed down by prejudices In the beginning, the East was defined by the Greeks as the “region of the rising sun” (5th century BC); thus Asia is first of all a western term, that indicates a direction, the East. The name is then linked to the expansion of European colonization. From the 16th century onwards, the East became a more precise area and all of its riches were

b939_Chapter-04.qxd

7/15/2010

2:13 PM

Page 69

China/Japan/ASEAN: What Kind of Cooperation?

69

discovered by the Old Continent. In the 19th century, as our knowledge became clearer, orientalism not only claimed to establish the difference between the East and the West, but also highlighted the differences within this very East. It is only with the Second World War, for which the Pacific war was a crucial sequence, that certain definitions became more precise. The notion of “Southeast Asia”, featured in the 19th century in the academic works of German geographers, assumed its entire reality when Lord Mountbatten took charge of the Command of “South East Asia”. Another expression also dates back to the Second World War, “Asia for Asians”, when the Japanese occupied the entire East Asia regrouped under the term “sphere of co-prosperity” and promised independence to the colonized Southeast Asian States. The concept of Asia, invented by the Europeans, then took shape in the collective consciousness as a reaction to European power and acquired a political overtone. But what could be the base of a possible Asianness? What is being debated is Asia’s identity, a common perception of it and also, eventually, its capacity to organize itself on institutional lines and become a regional actor.

The difficulty of a clear definition East Asia is not and never was an obvious notion: its contours are difficult to define. There is definitely an “identity puzzle”. For example, a review of the literature shows that more than 10 terms are used for referring to this area: Asia-Pacific, Asia of the Pacific, the West Pacific, East Asia, Asia of the Monsoons, Far East, among others. A question of definition is clearly raised. China belongs simultaneously to the categories East Asia and Central Asia. Does India belong to East Asia or to the Indian subcontinent? What are the risks of integrating it with the area and the East Asian regional initiatives? The integration of Russia as well, being on the Pacific coast, raises a problem. What makes this question so delicate is that the definition bears more rapprochements than divergence. East Asia oscillates between cooperation and competition/conflict. For the Asians themselves, the region

b939_Chapter-04.qxd

7/15/2010

2:13 PM

Page 70

S. Boisseau du Rocher

70

constitutes a meeting point but also a world full of differences. A Chinese feels fundamentally different from an Indonesian, who is himself different from a Thai or a Korean. Besides, national historiographies often put forward the differences with other countries of the region in an attempt to reinterpret history; none stresses the importance of being a region. Moreover, rapprochement dynamics at the regional level started late. If we go by traditional criteria of culture, religion or history, the East Asian states could never boast of regional unity. This geographical entity is made up of multiple lines that creates division as well as opposition and give it a character of great diversity. This diversity very often further divides the configuration of states, expresses itself on different planes according to the economic (differences in development), political (diversity of regimes), social or cultural realities observed: •

basically, few elements authorize defining a common identity for East Asia. However, the pragmatic willingness observed since several centuries for constructing this identity probably supplies its strongest substrata. But is it and will it be sufficient, eventually and in times of difficulty?

Unity of East Asia It has already been shown that the progress towards Asian unity is recent as this area, inhabited by giants and subalterns who tried to break free from the former, has such great difficulty in finding a collective dimension. Besides, nothing decisive helps ensure its permanence. To a large extent, East Asia is still incomplete. However, we can highlight common features that have always mutually linked the Asian countries. There is water, vector of communication (right from the 16th century, the importance of intra-Asian commerce, greater than intra-European commerce till the beginning of the 19th century): Hanseatic Asia, the big rivers (the Mekong flows through five countries). There is rice, symbol of Asia par excellence. There are these blends, this intermingling of populations: the Chinese diasporas are a common factor to numerous countries in the region.

b939_Chapter-04.qxd

7/15/2010

2:13 PM

Page 71

China/Japan/ASEAN: What Kind of Cooperation?

71

But the strongest common feature, that is also the most unifying, is the antagonism that mobilizes an external pressure that led to similar behavior in reaction and resistance. We could indeed defend the idea of an Asian nationalism which appeared in the second half of the 19th century. This resistance movement, informal and nonstructured, once again appeared in the past few years, strengthened by economic success and the organization of an area of prosperity which the western countries pressurized to accept certain political and economic rules. The East Asia movement was fueled by the refusal, unequal in its scope and often divergent in its motivations, of these pressures. The rupture element which will permit passing from a relatively regional indifference to a beginning of coordination, in the reaction, will be the mobilizing antagonism towards external interference, felt everywhere with difficulty. A similar threat created a new perception of space and a more active and organized search for regional partners.

A complex relationship with the West “The most obvious signs of unity in Asia are, paradoxically, those of Western influence”. (Steadman, J. (1969). The myth of Asia. New York, Simon and Schuster.

The arrival of Europeans and Americans on the East Asian scene did create the emergence of Asia’s own conscience, the affirmation of its right to be different and the affirmation of certain specificities. Besides, the notion of Asia was adopted by the Asians themselves only in their national resistance to Western influences. In the beginning of the 19th century, only the Philippines, under Spanish rule since 1564, and scattered fragments of the Indonesian archipelago, under Dutch rule, were under European control. But, during the century, Asia was colonized, with the exception of Japan and Thailand. In Northeast Asia, this traumatic shock accelerated modernization (Japan was obliged to open up to international relations by the action of Commodore Perry’s fleet in 1853), or provoked tensions (China

b939_Chapter-04.qxd

7/15/2010

72

2:13 PM

Page 72

S. Boisseau du Rocher

interpreted Western pressures as aggression, a quasi existential questioning of its system of thought and its manner of positioning itself on the international scene. Its partial division, and the one sided treaties signed with France and Great Britain, and then with Russia and Japan, profoundly traumatized the Chinese who experienced the action of external powers as a mutilation of their sovereignty. Territorial concessions obtained by force clashed with and nurtured Chinese nationalist sentiment); it would result in an sensitive expression of nationalisms that, for certain states, led to the triumph of an Asian communism. In Southeast Asia, colonization redrew the statonational political organization map and broke the dynamics of society mentioned earlier. At the same time, the metropolises organized the region following the criteria of optimization of local resources. This western intrusion, perceived as violent and humiliating (“a collective loss of face”) led to a “feverish submission”. Contact with the West was often established on the basis of rivalry that would characterize the future political organizations and consequently, the regional maps. From this time, the debate has been launched between preservation of tradition (resistance) or westernization; this debate is not yet closed and is even exacerbated by the integration of China into globalization. But fuelled by sporadic revolts, the debate expresses itself at the national level and not the regional level. Separated by lines of fracture exploited by colonial powers, the people of Asia do not organize a collective movement. Chinese Boxers, coming from traditional secret societies, were not really emulated in the region. The first Asian nationalist leaders like Sun Yat Sen, Aquinaldo or Sukarno later on, all frequented schools of Western thought without establishing close and nurtured intellectual links among themselves. Once again, identical reactions were shown to similar constraints, but were not mechanically convergent.

Japan’s decisive role In this erratic movement of Asian crystallization, Japan’s intermediation was decisive. The Chinese nationalists, notably Sun Yat Sen, found in

b939_Chapter-04.qxd

7/15/2010

2:13 PM

Page 73

China/Japan/ASEAN: What Kind of Cooperation?

73

Japan a true logistic support and an attentive listener. It is at the end of the 19th century that Japanese Pan-Asiatism would take shape: the Okuma doctrine (1898) maintained that Japan had to “retain” the Westerners so that China could benefit from the respite and make a new surge. The invasion of China by the Japanese (progressive occupation starting from 1895 with the Shimoneseki treaty), after that of Taiwan (1895) and Korea (1910), would profoundly transform East Asia. Military occupation of Southeast Asia between 1942 and 1945 encouraged, on the one hand, the expression of nationalism and, on the other, the expression of a Pan-Asiatism (centered around Japanese interests) that was certainly strongly subjective, but also reactive: the “Whites” are not invincible and the Asians must once again hold their heads high and come out of centuries of humiliation and enslavement. Therein lie the seeds of a pride felt everywhere, and if we were to date the genesis of what is called Asiatism today, we could take it back to this important period of political crystallization. The claim to emancipation became possible. All the first generation nationalist leaders repeated the Japanese leitmotif of those days with more or less emphasis: “Asian solutions for Asian problems”. However, the utopia of a “sphere of co-prosperity” would leave profound imprints, notably in China and Korea, creating tenacious resentment still mentioned today for justifying the absence of collective architecture. Besides, the ambivalence of Japanese legacy in regional construction adds to the difficulties of interpreting the initiatives since undertaken in this field, as can be seen, for example, from the highly varied reactions to Nakayama’s proposal to establish a multilateral dialogue on security in East Asia. This ambivalence already prefigures a confused national, regional and world articulation. 1.2 Institutional organization: Recompositions at work In the early 1960s, after the political upheavals of Japanese defeat and American occupation, the Chinese civil war, the division of Korea and decolonization, the East Asian area was split. Its disintegration, was exacerbated by ideological competition and an imposed external rationale

b939_Chapter-04.qxd

74

7/15/2010

2:13 PM

Page 74

S. Boisseau du Rocher

(like the famous “Domino Theory” of the American Secretary of State, Foster Dulles): external powers invested in the zone in order to remodel it according to their ambitions and interests (ref SEATO).

ASEAN, insufficient, outdated or precious? It was in a climate of more or less latent conflict (between 1963 and 1965, Malaysia was at war with Indonesia and the Philippines), where the powerful forces at work were those of the states that five Southeast Asian leaders would launch in the mid-1960s the initiative of ASEAN, the Association of South East Asian Nations. This remains an exemplary initiative as ASEAN represents the only institutionalized regional organization in East Asia; even if it is defective, it has an exemplary default function. Initiated during a period of uncertainty (diplomatic with Konfrontasi — policy of confrontation — as mentioned earlier but also stato-national with the questioning of frontiers; and political, with challenging of regimes), the ASEAN project could perhaps be primarily considered an additional means created by the state machineries for consolidating their legitimacy: regional diplomacy would be used to prolong the process of crystallization of the nation and allegiance to power. Establishing regional reconciliation mechanisms would permit the conflicts inherited from colonization (notably border conflicts) not to degenerate and facilitate the reintegration of Indonesia, the “giant of Southeast Asia”, in the regional game. In brief, ASEAN would give the five founder members (Indonesia, Malaysia, Philippines, Singapore, Thailand) the collective assurance necessary to be different from the ambitions and policies of the big powers, particularly virulent in Southeast Asia during this period (Vietnam was not only a privileged arena for East/West confrontation but also a field of rivalry between the two big communist powers). The creation of ASEAN clearly marked a rupture, at least mental, in the way these states saw themselves and their position in an international system perceived to be destabilizing and predatory. In this context, we understand better the rationale behind the establishment of ASEAN and that supporting its functioning. The priority of

b939_Chapter-04.qxd

7/15/2010

2:13 PM

Page 75

China/Japan/ASEAN: What Kind of Cooperation?

75

the newly independent states (with the exception of Thailand which had never been colonized) was to consolidate and develop state interests and national sovereignty: the idea of integrating with a big regional group was not even under consideration as each one’s prime objective was to optimize its political and economic development. The functions assigned to the Association were very flexible, enabling them to be modified if necessary: 1) to establish new communication plans, a mechanism of confidence that attests a political will to resolve conflicts by means other than force. The postulate was as follows: It was the Westerners who introduced war in the region; thus if the Asians succeed in getting on with one another following the cooperation modes prior to Western interference (cf. personal networks and traditional adjustment procedures), they could (re)introduce peace and stability. 2) to serve as a shield and a springboard to the outside. As a shield because it is easier to resist external pressures as a group rather than alone; as a spring board as well since for peripheral states, ASEAN would become an essential instrument for negotiations, which helped obtain indispensable advantages such as access to external markets. The Association provided a platform and a power that each national diplomacy lacked. On the diplomatic front, ASEAN gave a clear assurance to its members and permitted them to participate in the big world market of ideas: by organizing their rise to power through a politico-cultural argument supported by ASEAN, the Southeast Asian countries claimed their specificity (notably concerning their interpretation of human rights and democratization processes). This rise to power was expressed by their active participation in resolving the Cambodian conflict or at the Paris Conference (copresided by France and Indonesia), by the East Asia Economic Caucus (1991), the stand on Asian values (1993–1994), the regional ASEAN Forum (1994) where East Asian security issues were debated, ASEM (Asia Europe Meeting) (1996). ASEAN called for discussion, convinced about its capacity to put together and coordinate multiple and sometimes

b939_Chapter-04.qxd

76

7/15/2010

2:13 PM

Page 76

S. Boisseau du Rocher

contradictory agendas. It was not by chance that the question of North Korea and that of integration of Pyongyang in the process of regional discussion were brought up for the first time within the framework of the ARF discussions (in 1996). The issue could not be directly broached by Seoul, Tokyo or Beijing: ASEAN played the role of intermediary, an insufficient but indispensable function. Likewise, Japan and China could not validate the assumption of a region without the support of Southeast Asia. ASEAN as an area, confirms its accession to the status of the third pole in East Asia as well as the base of multipolarity in the region. 3) to work in such a way that each one could develop for its part the triple objective “security, stability and prosperity”, vague objectives which could not be challenged. Regional cooperation was considered a means, a vector and not as an end in itself (utilitarian pragmatism). The institutional structure progressively developed even while remaining surprisingly light with respect to other regional organizations since community institutions did not exist. The summit meeting (formal every 3 years, informal the two years that follow) is the prime body of ASEAN. Since 1997, Chinese, Japanese and South Korean leaders have been participating in these meetings. From 1976, the annual meetings of Foreign Affairs Ministers are complemented by those of Ministers of Economy, and then were extended (agriculture, ecology, culture, science and technology), and the creation of a troïka composed of three Foreign Affairs Ministers permitting a collective initiative when an internal crisis has regional repercussions (stream of refugees, economic problems) in July 2000. If ASEAN’s priority objective to galvanize national sovereignties is reconsidered, we can, to a certain extent, defend ASEAN’s positive aspect: “national resiliencies” led to a better “regional resilience”. ASEAN created a dynamics of security that favored a dynamics of stability and then prosperity. Besides, it is on the basis of this promise that the regional organization would proceed towards its growth: Vietnam would become the seventh member of the Association in 1995, Laos and Myanmar would join in July 1997 and Cambodia in

b939_Chapter-04.qxd

7/15/2010

2:13 PM

Page 77

China/Japan/ASEAN: What Kind of Cooperation?

77

April 1999. But the difference in development (economic as well as political) with the new entrants removed the optical illusion that ASEAN contributed to maintaining a situation between economic liberalization and political sovereignty. ASEAN is at the very centre of paradoxes: an instrument of preservation of the sovereign prerogatives of its members: it served as a shock absorber for reducing external constraints generated by the opening up to investment flows and world trade without, however, stimulating a movement towards regional integration. At the very best, it supported price increases, thereby reinforcing competition among the member countries. But the 1997 crisis would show the limits of this exercise and the risks that are its consequences today for the credibility of the organization when the upsurge of internal as well as external pressures profoundly upsets the rules of the game and places ASEAN in an uncertain but irreversible configuration. Besides, the interstate rapprochements initiated by ASEAN were supported and activated by the logic, extensive interdependence of flows (cultural, religious, intellectual networks, business networks, movement of labor) which were progressively liberated from constraints of sovereignty. Indicative of these rapprochements as internal political evolutions: since 1997, during the ASEAN summit, an Assembly of the Asian people took place and gave civil society (NGO’s, universities, business communities) the opportunity to speak out; in the same spirit, the idea of an ASEAN parliament is being debated for several years now, and confirms the aspirations of the societies for a bigger political participation at the national and regional levels. The future of ASEAN depends on the leaders’ replies to these demands.

Post-1997, a new period for regional construction in East Asia? With the 1997 crisis, ASEAN was the victim of a triple crisis: a crisis of the development model that it defended, a national sovereignty crisis and an institutional crisis. This shows to what extent the reference point that it represented was destabilized by a multitude of

b939_Chapter-04.qxd

78

7/15/2010

2:13 PM

Page 78

S. Boisseau du Rocher

pressures, both exogenous and endogenous. In the face of globalization, the vector of development, in the face of an emerging “regional community”, a product of 30 years of various rapprochements, in the face of opposition to national legitimacy by the actors projecting themselves in multicentered networks (cf the Muslim radicals in the Malay areas), the hypersovereign ASEAN foundations did not resist (the famous basic principle of the Association, the principle of noninterference, lost all its substance). The Association is entangled in its contradictions (the establishment of a free trade zone is incompatible with national policies implemented for coming out of the crisis), paralyzed by its powerlessness (during the Timor events, ASEAN never exposed itself, remained silent at the UN and could not unify the different proposals put forward by certain members so as not to embarrass Jakarta, and blocked in its vague reform ideas by the most reticent members — Myanmar, Cambodia, Laos, Vietnam). Basically, the member states are not yet convinced about the relevance of regional integration, they dread its consequences on their room for internal manipulations (and on certain particularistic interests). Because of this, ASEAN’s resistance is weakening and Southeast Asia is losing its initiation capacity to become once again a geostrategic area commanded from outside.

Regional turmoil: Prevalence of the commercial universe In this traumatizing context for ASEAN and its members, the regional partners have once again become a priority. These partnerships extend the deep rapprochements created by Japan during its economic reconstruction and redeployed from the mid-1980s in East Asia with the help of Japanese endaka on the one hand and on the other, the opening up of the Chinese economy. The economic integration of East Asian countries is not exclusive; it did not come into being at the expense of external partners. It is an open regionalism: the Asian space functions like a machine turned towards markets outside their zone, and interdependence becomes greater in order to make better use of the potentialities of globalization.

b939_Chapter-04.qxd

7/15/2010

2:13 PM

Page 79

China/Japan/ASEAN: What Kind of Cooperation?

79

From the early 1980s, the East Asian countries have enriched their economic and financial links in a sufficiently significant manner for us to talk of the formation of a new pole in a tripolar world made up of East Asia, West Europe and North America. The idea of East Asia owes a lot to external recognition of the “East Asian miracle” (1993). The “adoption of a moderate stand by Asia” is justified by both the uninterrupted rise in trade and intrazone investments and also by the similarity of a growth model. From this date, we observe a clear increase in intraregional movement of goods, capital and labor among the Asian countries and these movements are firstly the products of private and not institutional interactions. For the 10 ASEAN partners, intraregional trade (24 percent of the total trade of the members) is less determining than the exchanges with the Northeast Asian economies. Japan used three of these instruments — aid, commerce and investment — for reinstating itself in the Asian scenario after the 1945 defeat and creating regional production networks: in 1997, it was the first to bring aid to the region, the first trade partner and the first investor. From 1994–1995, it would be followed by the second generation of newly industrialized countries: Taiwan, South Korea and Singapore. In 1997, a little more than 70 percent of the investments received by East Asia came from East Asia (in China, this rate is approximately 75 percent); during the same period, intraAsian exchanges constituted more than half of the trade among the countries of the zone. The spread effect of the Asian crisis can now be better understood; in Indonesia for example, five out of six main foreign investors in 1997 were Asians and more than 60 percent of Thailand’s regional trade was carried on with its regional partners. The individual difficulties of some had immediate effects on the others. At this stage, the absence of institutional cooperation and support mechanisms were keenly felt. The much lauded virtues of an informal regionalization had to be qualified and the crisis gave the opportunity, and the pretext, for broaching the question of the modes of regional organization. The regional environment became a priority because it directly influenced national evolutions; the economic dynamics of East Asia are essential for the regional partners as is illustrated by the importance of Japan’s return to Southeast Asian products. However, from the north to the south of

b939_Chapter-04.qxd

80

7/15/2010

2:13 PM

Page 80

S. Boisseau du Rocher

East Asia, the thought process was not the same; no emblematic political figure is able to put together the ins and outs of the debate for forging a common vision of the future, and this goes to show as a counterpoint, the difficulty of defining a meaningful space. In the context of a weakened ASEAN, the relay is in fact assured by Northeast Asia which combines both East Asia’s economic engine (Japan represents 60 percent of regional economic activity) and the most promising potential (China). In addition, the regional diplomatic diapason from now onwards is indicated by the two big capitals of the North, Tokyo and Beijing, without which no regional initiative could be seriously considered. In brief, the vectors of political and military power shift increasingly from the Southeast to the Northeast; delicate questions like the Korean reunification were indeed raised in the collective framework of the regional ASEAN forum, but the discussions are at present held within highly restricted circles where ASEAN does not have any say.

ASEAN+3 The 1997 financial crisis undoubtedly enhanced the feeling of economic interdependence within the region. The general discontent concerning the IMF’s interventions prompted the East Asian countries to undertake the task of strengthening regional coordination mechanisms, notably in the finance sector, in order to collectively confront any new crisis. While this was being done, a new regional concept emerged with the progressive structuring of ASEAN+3, that is, the 10 ASEAN members and their three main partners in Northeast Asia — Japan, South Korea and China. The projects of cooperation in East Asia are quite a few, since they are starting from scratch. These projects are now discussed in the “ASEAN+3” meetings; As mentioned earlier, the ASEAN framework (summit meetings and ministerial meetings) was expanded to include China, South Korea and Japan. In this dynamics, we see again the idea launched in 1991 by Malaysian Prime Minister Mahathir, to activate regional cooperation for optimizing local rapprochements, and also for not submitting to the “predatory manipulations” of the white powers.

b939_Chapter-04.qxd

7/15/2010

2:13 PM

Page 81

China/Japan/ASEAN: What Kind of Cooperation?

Japan: Proposal for an AMF The origin of the crisis having been technically linked to monetary questions (among others, the fragility of fixed parity against the dollar), the reflection about the future of the markets and possible co-ordinations has been given prime importance. Today it is habitual to organize a meeting of Finance Ministers (and not just the central bankers or the ministry directors) for regular summits that lead to taking a common stand or recommendations. The most famous initiative, launched in the middle of the financial crisis (August 1997), is that of the Asian Monetary Fund (AMF), with 100 billion US dollars. The Japanese proposal was favorably received in the region: for some like Thailand and South Korea, it offered the relieving prospect of the rapid arrival of foreign exchange. For others like Singapore and Malaysia, it represented a desirable counterweight to the power of the IMF and the United States. China alone saw in it a Japanese maneuver for imposing the yen as the high-powered currency in Asia. Washington, too, opposed this project immediately, arguing about possible competition with respect to the IMF and the temptation of the Asian countries to be exonerated from certain reforms considered indispensable: the conditions would have been more flexible than those of the IMF. Japan took up once again the initiative with the Miyazawa plan, assuring in a very spectacular way its support and solidarity towards its neighbors in crisis. Beyond the hostility first expressed, the discussions were again taken up in the meeting of Asian Central Bank Governors taking place annually since 1996, and ideas progressed. In May 2000, the Chiang Mai (Thailand) initiative was enlarged to include all the member states of ASEAN+3 in the foreign exchange trade accord concluded in 1997 and permitted to institute monitoring of private capital flow in order to anticipate new crises. The Chiang Mai initiative was constituted an important stage in strengthening regional financial cooperation as it makes it both significant on the financial front and credible on the political front by associating the three big powers in the region. It was supposed to have a truly dissuasive effect on speculators and improve the protection of Asian currencies. The conditions of application were specified in Honolulu the following year and were integrated in the IMF process (IMF’s opinion is necessary for releasing funds). Indeed, the ambition is reduced with respect to the initial project but gradually, coordinating the monetary policies of the countries of the zone was set up and completed in June 2003 when the “Asian Bond Fund” was established.

81

b939_Chapter-04.qxd

7/15/2010

2:13 PM

82

Page 82

S. Boisseau du Rocher

Other subjects are debated: one/some free trade zone(s), a zone of monetary cooperation and an accord of limited security to start with in the fight against piracy. Each of these points was thoroughly examined during ministerial meetings held in the spring of 2000. At the April 2000 meeting in Tokyo on piracy, Japan proposed that the coast guards of East Asian countries should take care of security in the straits of Southeast Asia up to the China Sea.

The East Asia summit China and South Korea got down to a “Vision for East Asia” and submitted their report in 2002 (Brunei). This report recommended the holding of an East Asia summit. The idea was re-launched by Abdullah Badawi, the new Malaysian Prime minister, during the ASEAN+3 summit in Vientiane in 2004. That it took 10 years for organizing such a summit (since the initiatives of Mahathir in 1991) shows however that the project did not appear to be that necessary, as well as desirable, to the majority of the participants! This delay also illustrates the complexity of intra-regional relations that weighs down the negotiations and hinders decision-making. The summit welcomes annually the representatives of ASEAN+ 3+3 (India, Australia, New-Zealand). For the moment, it is a discussion forum but in no way a decision-making authority.

2. What are the Issues?

The issue of institutions The regionalization in East Asia is mainly an economic process that is developing without explicit objectives or schedules, and has no precise institutional translation: a de facto regionalization and not de jure. Inflows, networks, consensus are some of the terms generally used. Even if the formal question of institutions is cleared, the question that is raised straightaway is knowing which role is still allocated to the states and more generally to politics in a region where very strong economic powers appear to be free from their control. And the

b939_Chapter-04.qxd

7/15/2010

2:13 PM

Page 83

China/Japan/ASEAN: What Kind of Cooperation?

83

temptation becomes strong to imagine that East Asia is poised to free itself from the burden of politics and entirely give itself up to the inflows of economy and other transnational phenomena. More than standards and institutions placed in a network, we are probably seeing in East Asia a subtle deployment of power plays, the political ends of which remain open. In Kuala Lumpur, Prime Minister Wen Jiabao spoke of a “win-win” wager: (the awakening of the Chinese economy, the fourth economy in the world, has given the opportunity to Southeast Asian countries to achieve economic progress): does the race for prosperity constitute China’s political designs? The issue of institutions, however, seems strategic. One remains always in the process, in the movement, refusing to commit oneself too much. But one does not go from a discussion forum format to that of a free trade zone without significantly putting forth common rules. Till now, all partners were contented to stay in a somewhat vague declaratory register. But when China implemented its interpretation of the accords signed (be it the code of conduct in the South China Sea or the China/Thailand trade accord), the first doubts appeared. Not only should the rules be more precisely framed, China should accept that a leader’s role implies not only responsibilities, but also a series of obligations. The “functional” issue of institutions brings up the more political one of sharing sovereignty, power and mutual commitment. The reticence to commit themselves illustrates the difficulty in finding common legal bases for these states having great political disparities. Certainly the process of political convergence of East Asian societies remains formally defined by the “Declaration of Dunhuang”. A formal declaration according to which Chinese, South Korean and Japanese authorities proclaimed their joint desire to “construct, in East Asia, a common area based on non-violence, symbiosis and search for harmony’’. But would it be sufficient if tensions were to break out? Of course, this process of political integration in East Asia remains equally influenced by the efforts that are desired by one and all. But, it remains fragile, threatened by deep-seated resentment and by the state of Sino-Japanese and Japanese-Korean relations in the context of the present North Korean nuclear crisis.

b939_Chapter-04.qxd

84

7/15/2010

2:13 PM

Page 84

S. Boisseau du Rocher

The issue of rapprochements The first issue is evidently that of Sino-Japanese reconciliation. An observer from outside Asia is often surprised by the importance given to conflicts related to the history that links Japan to its Chinese, Russian and Korean neighbors. In the eyes of the West, the issue of bilateral meetings between Japan and its Chinese neighbor thus often seem to be reduced to questions of unresolved historical debts and timid apologies. Different issues are still the bane to the improvement of bilateral relations: — Question of the Senkaku (in Japanese) or Diaoyutai (in Chinese) islands: These islands, now Japanese possessions, coveted as much by Taiwan as the PRC, are the subject of historical controversies. Extorted from China by the treaty of Shimonoseki, according to the PRC and the government of Taiwan, Japan retorted that its sovereignty there was proclaimed when they were terra nullius and advanced their selective colonization right from 1897 as well as the recognition of this state of affairs by the United States with the 1971 Okinawa retrocession law (13). However it was only during the 1970s (14) that the problem became more pronounced, and for an energy reason: the discovery of offshore petroleum deposits that make the zone attractive for the three nations highly dependent on petroleum supplies. — Question of war crimes: The reality of Japan’s violent acts is diverse; it covers as much the use of biological weapons, often for experiments (with several tens of thousands of victims), sexual slavery and mass rape of Chinese and Korean women, the Nankin massacre (16), as violent repressions carried on for 10 years in the territories occupied by an army known for its brutality. — The crystallization of memory problems: school textbooks and the Yasukuni shrine. Beyond the problems of memory and acknowledgement, the Sino-Japanese rapprochement thus proceeds from a fundamental

b939_Chapter-04.qxd

7/15/2010

2:13 PM

Page 85

China/Japan/ASEAN: What Kind of Cooperation?

85

representation of the relation of Asia to otherness, representations fundamentally different for centuries and which feed today all mutual fears from servile collusion with the West to overtaking it but also give hope for a materialistic union, two scenarios on which all analysts remain undecided. The weight of history by the influence of its perceptions of the other thus remains more than real and could sometimes even contradict the economic or strategic interest that these two potential partners could find by becoming allies. The distrust induced by century-old references is still too strongly rooted to go against a logic of integration which had found its strongest expression several centuries ago: Dobun Doshu, same script, same culture, same race, to which one could add same Confucian and religious bases, but recent antagonistic reading of history. This delicate situation is obviously worked on and exploited by the United States which is not interested (probably) in a Sino-Japanese rapprochement that may go against the Japanese–American partnership and the Sino-American dialogue: the current discussions between the Obama and the Hatoyama Administrations are to be followed carefully.

Leadership issue The structural reasons for Sino-Japanese antagonism do remain: the shock of memories and the resurgence of nationalisms partly explain this, but isn’t the main cause situated on another level, that of two conflicting ambitions? If the relations between these two countries forced to be economic partners still bear the stamp of such distrust, it is, in fact, because they are rivals in the race for leadership in Asia. What we note is flourishing economic relations with a base of political divorce. Japan is now the main supplier of China, which is itself Japan’s first trade partner. The trade flow between the two countries doubled between 2002 and 2009 and this tendency should continue, as the two economies complement each other so much, at least on a short-term basis. Yes, but the two economies are also interdependent through direct Japanese investments in China which have doubled since 1999; the dependence is however more marked for

b939_Chapter-04.qxd

86

7/15/2010

2:13 PM

Page 86

S. Boisseau du Rocher

China in this regard, as Chinese industrial development depends a lot on foreign companies’ technological contribution. In 2009, China became the first export market for Japanese products. The contrast between these flourishing economic relations and the political distance, is only all the more striking. Other than territorial disputes and the competition for accessing energy resources, two main reasons can explain this deterioration. Divergent reading of a conflicting past has already been highlighted; but also an antagonistic affirmation of national identities ensuing from the new geopolitical context in Asia and the international positioning, respectively “Pacific ascent” for China, and hope of “normalization” for Japan. Beyond past conflicting relations and the antagonistic affirmation of national identities, it is really the confrontation of ambitions that brings the two countries into conflict. Each of the two dominant powers possesses solid assets to claim supremacy, but neither brings together all conditions necessary for an undisputed hegemony on the economic, diplomatic and military fronts. If China were to maintain its present rhythm of its economic expansion, diplomatic dynamism and modernization of its armed forces (+17.8 percent for 2007), probably its domination in Asia would be inevitable on the horizon of the next quarter century. Japan cannot reconcile itself to such a reversal of troubled history that links the Middle Empire and hopes to contain these Chinese ambitions thanks to its own economic leadership and the strengthening of its regional influence, notably in the matter of security. China on the other hand could record an average 7 percent growth during the next two decades and thereby catch up with Japan. For this, it has solid assets: strong savings by economic agents, massive inflow of foreign investments stimulating technological progress, considerable availability of low salary work force and thus excellent competitive export prices. However it is not certain that such a rhythm of expansion could be maintained over such a long period as strong constraints weigh on Chinese growth : mounting inequality, financial fragility and particularly foreign dependence, as much for natural resources as for technologies and export markets. Moreover, Beijing is very active in terms of trade diplomacy. The conclusion of a free trade accord has become an important vector in any endeavour

b939_Chapter-04.qxd

7/15/2010

2:13 PM

Page 87

China/Japan/ASEAN: What Kind of Cooperation?

87

of politico-diplomatic rapprochement and this is particularly true in the case of China. Thus at the end of nearly two years of negotiations, China signed an accord in November 2002 for the creation of a free trade zone with ASEAN in 2010. A highly ambitious project — to such an extent that it could run into serious obstacles — but the accord is nonetheless significant on the political scene. Beyond strict economic calculations, it is a part of a global strategy aimed at strengthening China’s prominent regional position in a climate of confidence and cooperation. China also has solid assets on the diplomatic and strategic fronts: being a permanent member of the UN Security Council and a nuclear power, it is an influential participant in matters of regional cooperation and security. As in the case of economic policy, one of the essential aims of Chinese foreign policy is to strengthen the legitimacy of the Party by reinforcing the international influence of the People’s Republic of China. The three ensuing objectives are: (1) to reduce the influence of the United States in Asia, (2) to oppose any of Taiwan’s ambitions for independence (3) to prevent Japan from imposing itself as a dominant power in Asia. The latter, for its part, wants to assert itself as a “world power” and is no longer satisfied with being condemned to the status of “a political dwarf” by its Constitution’s pacifism. It feels that its candidature for becoming a permanent member of the Security Council is justified as much by its economic influence as by its diplomatic action: the first democracy in Asia, Japan aspires to actively strive for maintaining peace within the limits of its Constitution and have more say in the search for solutions to major international problems. Its pacifist stand itself is under a double pressure, the hope for “normalization” and the anxiety for its security; national ambition and external threats thus lead to its redefining its strategic outlook and envisaging a constitutional reform for clarifying the role of selfdefense forces and modifying its defense policy in a more “interventionist” direction. As the economic leader in Asia, Japan does not therefore lack assets on the strategic front for countering

b939_Chapter-04.qxd

88

7/15/2010

2:13 PM

Page 88

S. Boisseau du Rocher

China’s ambitions. However, its diplomatic action in Asia is sometimes difficult to decipher: it wishes to play a frontline regional role but wavers between regionalism and multilateralism, concerned as it is about circumventing its neighbors’ distrust. Obliged to be economic partners but being strategic rivals, Japan and China remain divided by the weight of the past and, even more so, by their ambitions. Neither of the two dominant powers can at present claim to have a truly economic and political leadership in Asia; this leadership can only be shared. The emergence of such a SinoJapanese couple is however improbable, even in a becalmed political atmosphere: a closer economic cooperation will not put an end to their strategic rivalry and it might not be a question of political leadership’s decision. The question of regional leadership is not unequivocal and is likely to be highly problematical. Without losing sight of their Chinese neighbor’s activism in Southeast Asia, Indians reacted too, by imitation: right from November 2002, New Delhi proposed to ASEAN the creation of a free trade zone in the coming decade, a proposal moreover negotiated in just 10 months. Thus New Delhi signed in October 2003 an accord for the future creation of a free trade zone with ASEAN, that is, hardly a year after China concluded a similar accord. The same for Japan, which reacted immediately but was unable to initiate the same, whereas its trade relations with ASEAN are very close and longstanding.

The issue of regional security The same calculation is found in other domains notably in the strategic domain where power interests and nationalist logic easily take precedence over factors of cooperation. This perspective gives cause for concern as the zone’s political weight keeps increasing in world stability while there are still multiple risks on the security front. 1) Upsurge of nationalisms. The political crisis in East Asia is dangerous because, in the regional framework of economic rapprochement but lacking in clear organization, there is the risk of internal crises

b939_Chapter-04.qxd

7/15/2010

2:13 PM

Page 89

China/Japan/ASEAN: What Kind of Cooperation?

89

rekindling certain old fractures and adding new ones. Certain oft forgotten but known events should be recalled. First of all, immediately after the Second World War, the dawning of nationalisms took a particularly intense form in most parts of East Asia. Secondly, the conflicts stirred up by the Cold War attained frightening proportions and violence, and not only in Indonesia (cf. Malaysia ransacked and pillaged in the late forties, the Korean war, Indonesia which almost slipped towards communism before the September 1965 bloody coup d’état or Thailand threatened by guerillas towards the end of the following decade). These dramatic events left profound and deep-rooted memories. Besides, many conflicts arose in the conquests, partitions or border disputes that left resentments, irredentism and hatred. Often economic progress and the circulation of goods covered up these discords without putting an end to them. In short, military power once again is becoming a mode of nationalist expression today. Last of all, nationalist reactions today are less predictable and less structured, socially less central and of less continuous expression. In general, they are no longer conducted by parties or mass movements but are often spontaneous or manipulated by governments. 2) Massive re-engagement by the United States since September 2001, notably in Southeast Asia. A race for military power? The building-up of a Chinese military base on the island of Hainan (South China Sea) rises new doubt in the region and might call for a counter-balance by the United States. What could be the implications on regional construction? 3) Multiplication of transnational worksites that must be taken into consideration: environment, urban development are not always under control, as are transnational crime, trafficking.

The issue of relations with the West and globalization The question of relations with the West and, more generally, with globalization cannot be avoided. It is also clear that East Asia came into being as a reaction to western intrusion and that today strong

b939_Chapter-04.qxd

90

7/15/2010

2:13 PM

Page 90

S. Boisseau du Rocher

common interests hold the region together. We have seen that Asia thought itself an alternative to a world perceived to be dominated by the West. ASEAN was also considered by its founders a shock absorber when facing an international system that was felt to be a predator and at the same time an endogenous rapprochement mechanism. In an identical perspective, the Asian stand of the first half of the 1990s can be interpreted as the last avatar of the anticolonial struggle and a counterweight to an indispensable West that was, however, perceived as imperialist in its way of thinking as well as its political and economic organization. The 1997 crisis aggravated this feeling, revealing at the same time interdependencies with world networks and established dependence with respect to aid, technologies and western markets. Besides, the effect of the issues of regional integration in East Asia are considerable on world balance and will probably not be left (by external powers, notably the United States) only to the decision of Asian countries. The “democratic” parameter also has a strong centrifugal potential deepening the differences a little bit more. A democratic setup integrates the respect of norms and practice: now the question that arises is how and by whom are the norms defined, which principles underlie them and how are they respected? As far as one could observe, nothing indicates yet that East Asia is transforming into a normative area. Beijing and ASEAN still refuse to intervene in its internal affairs and establish regional restrictive structures or control systems. So many uncertainties originating from the fear of a possible future establishment, eventually, of some non democratic Asian continental super power, likely to be dominated by China put a stress on East Asia. And which would be capable-eventually-of robbing the United States of its world leadership. Fears also rest on the extrapolation of «Asian» theories recently put forward by certain former political leaders of the region and according to which Western values (such as democracy or market economy) might not be universal values... What is at stake here is the capacity of East Asia to propose a credible alternative model to what has been experimented elsewhere, notably in the Western hemisphere. If it succeeds, East Asia would have gained its credentials to become the leading regional space in the 21th Century world.

b939_Chapter-05.qxd

7/15/2010

2:13 PM

Page 91

CHAPTER 5

Foreign Direct Investments in Southeast Asia and Sino-Japanese Rivalry David Hoyrup

Introduction For a long time, Southeast Asia has been one of the most dynamic regions and one of the favored destinations of multinational firms primarily based in Europe, the USA and Japan.1 For some years now, and especially since the emergence of China and America’s “relative” lack of interest in the region, Southeast Asia is, moreover, the area of a regional reconfiguration2 and of a struggle for influence between Japan and China. In such a context, the aspects relating to FDI merit a detailed study to see how the four major players in the international economy, namely Europe, USA, Japan and now China, interact in this region. To be more precise, the objective of this paper is to ponder over the rivalry between Japan and China from the FDI angle. Foreign investments are important not only in terms of economic dynamics for the countries that invest, as well as the countries that benefit from the investment, but also in terms of the influence gained by the multinational firms through the political and economic weight

1

Hoyrup, D. et Simon, J.-C. (2005). The ASEAN Countries. Challenges and Successes of Development in a Region Under Construction. In New Geopolitices of Asia, G. Faure (eds.), Paris: Ellipses. 2 Boisseau du Rocher, S. (2005). The Southeast Asia and ASEAN Face New Challenges. In New Geopolitics of Asia, G. Faure (eds.), Paris: Ellipses.

91

b939_Chapter-05.qxd

92

7/15/2010

2:13 PM

Page 92

D. Hoyrup

they carry.3 This is all the more true in the case of China and Japan, taking into consideration their intrinsic characteristics. The Chinese economy being still dominated by big public enterprises, investment decisions are not necessarily made following only the reasoning based upon economic rationality, but are sometimes the result of political strategies that one should keep in mind when analysing the flow of investments. In Japan, investment decisions are determined by the big Japanese firms; the fact remains that Japan, the principal donor in Asia, often closely associates this aid with the investment choices made by these firms. The analysis of FDI and the likely rivalry between these two Asian powers in this matter should therefore be in keeping with both the economic and political dimensions. The theory being defended here is the following: even though the rivalry in the matter of FDI appears secondary to the small volume of the investments made by China in a region which is no doubt dynamic but very heterogeneous, this rivalry certainly exists. Instead of being expressed by intense competition between Japanese and Chinese firms in the various markets of Southeast Asia, it takes the form of a divide between one part of Southeast Asia dominated by Japanese investments and another part dominated by the Chinese inflow. Therefore, Japanese and Chinese firms do not target the same countries in Southeast Asia. This rivalry, which is explained by historical, economic and political reasons, is likely to have significant consequences in political terms for the functioning and the capacity of ASEAN to make its presence felt in the region, in the context of the struggle between Japan and China for regional hegemony. The first section will focus upon the statistical analysis of FDI in Southeast Asia, and highlight the principal characteristics of the rivalry between Japan and China in the region. The second section will put this rivalry back into its historical, economic and political context and will identify the likely consequences of this rivalry for ASEAN. 3

Lall, S. (1998). Changing Perceptions of Foreign Direct Investment in Development. In International Trade, Foreign Direct Investment and the Economic Environment, P.K.M. Tharakan and D. Van Den Bulcke (eds.), pp. 101–34. London: MacMillan Press.

b939_Chapter-05.qxd

7/15/2010

2:13 PM

Page 93

FDI in Southeast Asia and Sino-Japanese Rivalry

93

1. The Sino-Japanese Rivalry Through FDI in Southeast Asia: Very Distinct Kinds of Investment Rationales The Southeast Asia region is very open to FDI and the competition here between multinational firms is very strong. Nevertheless, can we speak of a rivalry in this matter between Japan and China? We will show in the first paragraph that a superficial analysis of the data collected at the regional level regarding FDI rather induces one to reply in the negative. The second paragraph will however show that ASEAN is an extremely heterogeneous region especially in the matter of attractiveness and welcoming of FDI and that it is possible to identify two groups of countries, the characteristics and strategies of which are very different. The third paragraph will go back over the analysis of the figures based upon this division into two groups, and will reveal the nature of the rivalry which exists between Japan and China in the matter of FDI in Southeast Asia. 1.1 Southeast Asia: Stage for a rivalry between Japanese and Chinese firms? China, though it is considered by most observers as a great power, is still not one of the principal investing countries. It has, however, become evident that China has been contesting more and more the status of Japan as regional leader, or rather as regional hegemon, to put it in the terminology of international political economics.4 Since foreign investments made by national firms constitute one way to gain leadership, it is opportune to debate upon the rivalry, in terms of FDI, between Japan and China. What do the figures relating to FDI reveal? In order to reply to this question, it would be ideal to obtain the amounts and origin of FDI stocks located in Southeast Asia. Unfortunately, this data is not available from the point of view of Southeast Asia (we know the 4

Figuière, C. et Guilhot, L. (2006). China, a Regional Hegemon in East Asia? In China Central to Global Growth? Competitions, Opportunities, and Restructuring of Economic Networks, F. Hay et Y. Shi (eds.), Presses Universitaires de Rennes.

b939_Chapter-05.qxd

7/15/2010

2:13 PM

Page 94

D. Hoyrup

94

USA 17.2% Others 19.8%

Europe 32.0%

ASEAN* 11.7% Japan 12.2%

India 0.4%

China

Asian NIES 6.1%

0.7%

Figure 5.1: Cumulative FDI inflows in Southeast Asia, by origin, 1995–2005, (percent of total). Source: ASEAN Secretariat.

amount of European, American or Japanese stocks in Southeast Asia, but these statistics are not subject to the same definitions or the same processing, and are therefore not comparable). For want of these statistics, it is possible to use the figures relating to FDI inflows recorded over a decade, as they are represented in the pie chart above in (Figure 5.1). These figures do not speak in favour of the hypothesis of a significant rivalry between Japan and China: more than 12 percent of the FDI entrants into the region for 10 years come from Japan, while only 0.7 percent of the inflows come from China. If there is a rivalry, it is more between Europe, USA and Japan. These cumulative figures hide perhaps, in dynamics, a tendency towards increase in inflows of Chinese origin, which would indicate an intensification of the competition between Japanese and Chinese firms. Statistics show that, on an average, the FDI inflows of Chinese origin have increased by 15.3 percent p.a., while the inflows originating from Japan have reduced by 5.76 percent p.a. These figures are not enough to speak about the picking up or the intensification of the competition, as the level of investments in 2005 was very different.

b939_Chapter-05.qxd

7/15/2010

2:13 PM

Page 95

FDI in Southeast Asia and Sino-Japanese Rivalry

95

6 000 5 000 4 000 Japan 3 000 2 000 1 000

China

0 -1 000 1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

Figure 5.2: FDI inflows in Southeast Asia from Japan and China, 1995–2005 (in millions US$). Source: ASEAN Secretariat.

The graph above in (Figure 5.2) confirms that for the moment, the competition between Japan and China is barely visible in the matter of FDI. Japanese inflows have certainly reduced while Chinese inflows have been increasing. But the reduction in the Japanese inflows is explained by the Asian crisis and the slowing down of the Japanese economy; Japanese firms, which were very involved in the region, found themselves in difficulty, prompting them to reduce their investments in Southeast Asia. Since 2000, the inflows have been increasing systematically, and even faster than Chinese inflows. It must be noted, moreover, that these figures do not take into consideration the massive investments made by Japanese firms in the region at the time of Endaka (strong yen) and of the “Asian miracle”. Between 1986 and 1995, Japanese firms, have, by far, been the principal actors in the redefinition of the productive systems in Southeast Asia and the leading investors.5 During this period, it is probable (figures are not available) that Chinese firms had made only very modest investments 5

Phongpaïchit, P. (1990). The New Wave of Japanese Investment in ASEAN. Singapore: ISEAS.

b939_Chapter-05.qxd

96

7/15/2010

2:13 PM

Page 96

D. Hoyrup

abroad, so limited was their opening up to the rest of the world, their mastering of advanced technology and the procedures in the countries of the region. The data collected in relation to FDI entrants into Southeast Asia do not illustrate either a significant rivalry between Japan and China in the region or a significant intensification of this rivalry. China is certainly beginning to become an important investor in general,6 and in its favourite zone, in East Asia, in particular, but this still does not place the Chinese firms in a position that threatens their Japanese competitors. Is it, however, enough to affirm that such a rivalry does not exist? It is permissible to have doubts, taking into account what the collected data hide: a very big heterogeneity within the countries of the region, a heterogeneity that compels the observer to go beyond an approach that is exclusively regional. 1.2 The very great heterogeneity in Southeast Asia, especially in the matter of FDI, prompts one to undertake a more detailed analysis The geographical boundary of Southeast Asia, defined by the block of countries that lie between India and China, corresponds to the institutional boundary represented by ASEAN. This association possesses the characteristic of being the only regional institution in the Asia Pacific and has achieved indisputable successes, even though it has also, on many occasions, shown its limitations. It is therefore tempting to consider the region as a single separate entity. Though this approach has some meaning, it is necessary to be aware of the great heterogeneity that characterises the region. The diversity of the countries that make up Southeast Asia is not in itself anything new. ASEAN has, since its inception, in 1967, by Indonesia, Malaysia, the Philippines, Singapore and Thailand, constituted 6

Hong, E. and Sun, L. (2004). Go Overseas via Direct Investment: Internationalization Strategy of Chinese Corporations in a Comparative Prism. Discussion Paper 40. University of London: Department of Financial & Management Studies, SOAS.

b939_Chapter-05.qxd

7/15/2010

2:13 PM

Page 97

FDI in Southeast Asia and Sino-Japanese Rivalry

97

one of the most heterogeneous regional organisations, even more than the European Community has been, or ALENA, Mercosur or other institutions will be. Studies have shown this heterogeneity in various fields for a long time now.7 The integration, within ASEAN during the second half of the 1990s, of the socialist countries of the region (Vietnam in 1995, Burma and Laos in 1997, Cambodia in 1999) will however further strengthen this heterogeneity,8 as is perfectly illustrated by the indicators classified in the following table (Table 5.1). This evaluation of the different indicators shows that the sociocultural and economic diversity within ASEAN, already significant on the eve of the addition of the four new members at the end of the 1990s, is extremely important.9 It would seem opportune in this regard to perceive, within Southeast Asia, two groups of countries that are very distinct. On the one hand, the founder members of ASEAN, to which should be added Brunei, have been for a long time now, open market economies and have attained a stage of development that is relatively advanced. On the other hand, the new member countries came in from the 1990s during a period of transition toward a market economy and are still poor. This intraregional distinction made in accordance with stages of development naturally translates into the capacity to attract different foreign investment. According to the group to which they belong, the countries in the region do not benefit from the same advantages that would be of interest to foreign investors. From the point of view of development strategy, the four socialist countries being involved in the transition phase toward a market economy do not have any marked difference with the countries of the region. All of them wish to accelerate growth to encourage

7 Boisseau du Rocher, S. (1998). ASEAN and the Reconstruction of Southeast Asia. Paris: Edition L’Harmattan. 8 Paribatra, S. (1996). From ASEAN Six to ASEAN Ten: Issues and Perspectives. Alternatives Sud, Vol. 3, No. 4. 9 Sakakibara, E. et Yamakawa, S. (2004). Regional Integration in East Asia, Part I: History and Institutions. Policy Research Working Paper, WPS3078. World Bank.

Area (km²)

ASEAN

554.9

4479992.0

Life expectancy 2004

Literacy rate (%) 2004

HDI 2002

GNP/Capita (US dollars) 2004

74.7 64.8 77.7 117 25 76.9 276.8 6361.8 125.2 254

Dictatorship Monarchy Monarchy Republic Republic Monarchy Republic Republic Monarchy Republic

Buddhism Islam Buddhism Islam Buddhism Islam Catholicism Buddhism Buddhism Buddhism

60.5 76.6 56.5 67.2 55.1 73.4 70.7 78.9 70.3 70.8

89.9 92.7 73.6 90.4 68.7 88.7 92.6 92.5 92.6 90.3

0.551 0.867 0.568 0.692 0.534 0.793 0.753 0.902 0.768 0.691

166 13879 358 1193 423 4625 1042 25207 2537 554

68

87.2

0.712

4998

Source: Guilhot, L. et Hoyrup, D. (2007), Relecture critique d’un processus d’élargissement régional: l’ASEAN-10 dix ans après (Critical Review of a Process of Regional Expansion: ASEAN-10 Ten Years After), Working document, LEPII, Université Pierre Mendès-France, Grenoble II. ASEAN Secretariat Website, sites of UNDP and UNCTAD.

Page 98

676578 5765 181035 1904569 236800 329758 300000 683 513115 331689

Main religion

2:13 PM

50.5 0.4 14.1 222.8 5.9 25.3 83.1 4.3 64.2 84.2

Political system

D. Hoyrup

Burma Brunei Cambodia Indonesia Laos Malaysia Philippines Singapore Thailand Vietnam

Density (inhab/km²) 2005

7/15/2010

Population (millions) 2005

Principal indicators of the member countries of ASEAN.

b939_Chapter-05.qxd

98

Table 5.1:

b939_Chapter-05.qxd

7/15/2010

2:13 PM

Page 99

FDI in Southeast Asia and Sino-Japanese Rivalry

99

development, all of them reckon that this can be achieved through an increase in exports, and all of them recognise that multinational firms can play an important role in the growth of exports. Vietnam led the way, as early as 1986, in adopting a revival policy (the “Doi Moi”). Laos followed its influential neighbour by opting for an economic reform of great magnitude in 1988. The reforms in Cambodia will come about later, when peace is finally established. The six older members were already open to FDI for many years, even though all of them had opted, during varying periods, for more autocentric development strategies which were less favourable to foreign investors. Toward the mid-1980s, they had all considerably modified their strategy, choosing to centre their development on export promotion and hosting multinational firms. This is how very liberal reforms were adopted between 1985 and 1992 in the four large countries of the region (Indonesia, Malaysia, Philippines and Thailand). Singapore had moreover chosen to count on its hosting big multinational firms to accelerate its economic development. Finally, Brunei, despite its very small size, has also welcomed FDI very early, especially in the hydrocarbon sector. On paper, therefore, Southeast Asia is today a region that is open to FDI. The regulations and incentives proposed by the various countries are certainly not identical, but they are inspired by a common philosophy that considers FDI a driving force of growth, a carrier of technological transfers and a means of stimulating exports. In all the countries of the region, foreign investors are restricted to certain sectors, generally in the sectors that are considered to be strategic by the authorities (media, armaments, defence) or in those sectors that the governments wish to favour (wood, metallurgy, automobile industry). In all the countries, ceilings are also imposed in terms of participation in capital, ownership of property, local content, the use of expatriate labour or access to local financing. On the other hand, all the governments have created agencies entrusted with the promotion of foreign investments, with the providing of aid meant to attract investment in strategic sectors or in the zones that are considered high priority, with infrastructure development programs for that would meet the expectations of investors.

b939_Chapter-05.qxd

100

7/15/2010

2:13 PM

Page 100

D. Hoyrup

It is therefore not the strategy or the philosophy on which it is based that enables one to distinguish between the countries of Southeast Asia. The differences in development, however, are translated by the big differences in the quality of the measures adopted to attract FDI and by the perception that investors have of the assets possessed by the countries in the region. The study conducted under the aegis of the World Bank illustrates the magnitude of the differences in perception that can exist because of this (Table 5.2). This table demonstrates a very clear distinction between the three countries that are the most attractive (Singapore, Thailand and Malaysia) on the one hand, the least attractive (Cambodia and Laos) on the other, and the intermediate cases (Vietnam, Philippines and Indonesia). It should be noted that Indonesia and the Philippines, considered during the 1980s and 1990s as countries that were developing very dynamically and were attractive to investors (Indonesia had, for example, FDI stock that was higher than that of Thailand in 1996), suffered a lot in the 1997 crisis. Indonesia, especially, had a problem managing a political transition that was made more difficult by more than 30 years of Suharto’s reign. On the other hand, Vietnam benefits from certain advantages arising especially from the quality of its labour. Other studies yield similar results. A. T. Kearney, for example, proposes a ranking of 50 destinations that are the most attractive (Table 5.3). This ranking is made based upon indicators relating to costs, qualification and availability of labour and the legal environment. It appears clearly that Malaysia, Thailand, Indonesia, the Philippines and Singapore (Singapore is ranked 11th only on account of very high costs) are the destinations that are particularly interesting for multinational firms. Vietnam is also a strategic location, as it is ranked 19th. Of course, neither Burma nor Cambodia nor Laos are included in this ranking, which concerns only the top 50 locations. Is this differentiation in terms of business environment also reflected in the inflows and the FDI stocks? The reply is affirmative, and the analysis of the FDI stocks show that multinational firms do not invest as much in all the countries in the region (Table 5.4).

b939_Chapter-05.qxd

Malaysia

Vietnam

Philippines

Indonesia

Cambodia

Lao PDR

2 5 7 7 14 8 2 9 6 11 2

20 29 8 23 22 59 33 34 89 49 37

21 57 101 34 53 6 5 19 36 61 43

99 82 18 122 39 106 143 107 83 102 95

113 89 91 82 92 121 132 80 33 89 132

115 144 107 120 107 63 58 118 49 145 116

133 137 140 79 84 154 55 24 117 127 144

147 102 111 62 135 152 130 36 143 143 149

Source: http://www.doingbusiness.org/

Page 101

Thailand

2:13 PM

Ease of Doing Business Starting a Business Dealing with Licenses Hiring and Firing Registering Property Getting Credit Protecting Investors Paying Taxes Trading Across Borders Enforcing Contracts Closing a Business

Singapore

7/15/2010

Ease of doing business in Southeast Asia (international ranking of Southeast Asian countries).

FDI in Southeast Asia and Sino-Japanese Rivalry

Table 5.2:

101

b939_Chapter-05.qxd

7/15/2010

2:13 PM

Page 102

D. Hoyrup

102

Table 5.3: Global services location index 2006 (ranking of Asian countries). 1. 2. 3. 4. 6. 8. 11. 19. 29. 30.

India China Malaysia Thailand Indonesia Philippines Singapore Vietnam Sri Lanka Pakistan

Source: http://www.atkearney.com/main.taf?p = 1,5,1,184.

Table 5.4: FDI stocks in Southeast Asian countries, 1996 and 2004 (millions US$).

Singapore Thailand Malaysia Vietnam Philippines Indonesia Brunei Darussalam Myanmar Cambodia PDR of Lao

1996

2004

75021.5 19705.6 36027.6 10065.3 7366.9 26757.5 1302.6 1790.4 941.8 338.6

160422.3 48598.4 46291.2 29115.3 12685.0 11352.0 7548.4 4678.5 2089.8 641.2

Source: UNCTAD.

Singapore, Malaysia and Thailand (as also Brunei, when compared with its size) possess much larger stocks than the other countries, while the stocks held in Myanmar, Laos and Cambodia are very small. The case of these three other countries corresponds to what has been said earlier. Vietnam attracted a lot of FDI for more than a decade (stocks tripled) while Indonesia on the other hand was subject to a massive disinvestment process, and the stocks in the Philippines increased only moderately.

b939_Chapter-05.qxd

7/15/2010

2:13 PM

Page 103

FDI in Southeast Asia and Sino-Japanese Rivalry

103

Finally, there would therefore be four countries with strong potential and appreciable performance (Singapore, Malaysia, Thailand, Brunei), two countries with strong potential but poor performance (Indonesia and Philippines), one country with weaker potential but with enviable performance (Vietnam), and three countries with weak potential and mediocre performance (Laos, Cambodia, Burma). We therefore find a division here among ASEAN, with the six old members having a higher attraction potential and performance on the one hand, and the four new members less so on the other hand. It is in the light of this division that one should analyse the rivalry that may exist between Japan and China in the matter of FDI. The figures relating to the FDI inflows do not provide the same lessons as those given by the data collected at regional level.

1.3 Japanese and Chinese investments that do not go in the same direction First of all, if one considers the cumulative inflows by country between 1995 and 2004, the disparity between the inflows of Chinese origin and the inflows of Japanese origin is neither of the same type nor of the same magnitude (Table 5.5). In Singapore, Brunei and Malaysia, the three richest and most developed countries, FDI are essentially of European and American origin. The Japanese however have made their presence felt in quite a big way (between 5 and 15 percent of the FDI) while the Chinese not that much (less than 0.3 percent of the FDI). In the Philippines and in Thailand, FDI are dominated by Japan, which accounts for more than a quarter of the cumulative inflows. China plays a marginal role here, with 2.5 percent of FDI in the Philippines and 0.2 percent in Thailand. On the other hand, the Japanese firms are more cautious in Cambodia and Laos, where they account for 0.3 percent and 3.7 percent of the cumulative inflows. At the same time, their Chinese competitors play a much more important role here, as they represent 21.8 percent and 6.3 percent respectively of the inflows.

Cumulative FDI inflows in Southeast Asia, 1995–2004, by host country and origin (Millions US$ and percent).

China

EU-15

Total 1/

32.6 122.7 6.3 0.3 19.0 5899.0 3.7 14.5 24.2 9427.8 4.7 23.2 4.4 10839.6 0.8 26.6 439.1 14396.9 84.6 35.4 519.3 40686.0 100 100

18.4 0.5 119.3 3.1 1757.8 46.3 406.2 10.7 1490.8 39.3 3792.5 100

303.9 2.5 3099.3 25.4 1389.8 11.4 2967.6 24.3 4451.4 36.5 12212.0 100

224.4 0.2 11309.2 9.8 39587.9 34.2 25739.9 22.2 38830.2 33.6 115691.6 100

51.2 0.2 8785.0 26.3 3330.3 10.0 3627.4 10.9 17626.7 52.7 33420.6 100

188.7 1.2 2474.0 15.3 2773.8 17.1 612.8 3.8 10154.6 62.7 16203.9 100

ASEAN

1018.0 0.4 32071.3 13.6 68477.5 28.9 42285.4 17.9 92698.7 39.2 236550.9 100

Source: ASEAN Secretariat — ASEAN FDI Database, 2005. 1/ Excludes: (a) total FDI in Cambodia (1995–2000); (b) reinvested earnings in Myanmar (1995–2002); (c) reinvested earnings (1995–2002 & 2004) and intercompany loans in the Philippines (2004); and (d) reinvested earnings (2004) and intercompany loans (1995–1996 & 2004) in Singapore ; includes privatization and asset sales under the Indonesian Bank Restructuring Agency program (2002); figures for Myanmar cover the fiscal year ending in March of the following calendar year.

Page 104

Other

−37.3 −0.8 −30.8 −0.6 3775.9 77.7 −1981.6 −40.8 3134.7 64.5 4860.9 100

Malaysia Myanmar Philippines Singapore Thailand Viet Nam

D. Hoyrup

USA

111.3 21.8 3.5 0.7 −5.8 −1.1 11.2 2.2 389.6 76.4 509.8 100

Lao PDR

2:13 PM

Japan

2.2 0.0 393.8 4.6 6415.6 74.1 58.1 0.7 1784.4 20.6 8654.1 100

Cambodia Indonesia

7/15/2010

Brunei

b939_Chapter-05.qxd

104

Table 5.5:

b939_Chapter-05.qxd

7/15/2010

2:13 PM

Page 105

FDI in Southeast Asia and Sino-Japanese Rivalry

105

What remains are the three “intermediate” cases, which apparently do not follow the rationale of the division of the ASEAN into two groups. On the one hand, Indonesia has recently attracted only very little FDI from Japan and China (incidentally, inflows that are negative), Burma is in a somewhat slightly similar situation, despite the fact that the cumulative inflows are positive and that the Japanese inflows are more significant than the Chinese inflows. In both these countries, the major portion of the inflows originates from the European Union and from the rest of the world. On the other hand, Vietnam, though it belongs to the group of least developed countries, has visibly attracted more inflows originating from Japan than from China. There exists, however, a relatively simple explanation of the deviation between these figures and the hypothesis that has been put forth above, at least for the cases that are the most extreme. In the case of Indonesia, the negative inflows recorded for Japan and China can be attributed to the massive disinvestment which followed the Asian crisis, the overthrowing of Suharto and the political, economic and social troubles that were prolonged as a result. The country was, on the other hand, a destination favoured by Japanese firms between the late 1980s and the 1997 crisis. Besides, most of them are still in existence in the country, even though their investments have considerably slowed down since. On the contrary, Vietnam is a special case that breaks away from that of the other socialist countries ; its relationship with its big neighbour China is much more controversial while the Japanese firms find things much more conducive (market size, geographic location and quality of labour) here than in the other countries of the group. The distribution of the cumulative inflows of Japanese and Chinese FDI within the two groups of countries between 1995 and 2994 provides a second indicator of a differentiated strategy adopted by the Japanese and Chinese firms that correspond to the two groups mentioned. Where the Japanese firms invest hardly 8 percent of their total investments in the region in the four least developed countries, the Chinese invest more than a third. The ratio between the amounts invested in the two groups is more than

b939_Chapter-05.qxd

7/15/2010

2:13 PM

Page 106

D. Hoyrup

106

100% 90%

CLMV 2 615.9

80%

CLMV 351.0

70% 60% 50%

ASEAN6

40%

29 455.5

30%

ASEAN6 667.1

20% 10% 0% Japan

China

Figure 5.3: Destinations of cumulative inflows of Japanese and Chinese FDI in ASEAN between 1995 and 2004, by group of countries (in millions of US$ and in percent). Source: ASEAN Secretariat.

12 times higher in the six most developed countries where Japan is concerned, whereas it is “only“ two times higher in the case of China (Figure 5.3). The difference in orientation of the FDI is much clearer if we break up the period into two. Japan directs its investments in a structured manner toward the most developed countries, while the geographic distribution of Chinese investments has greatly changed. On the one hand, the inflows into the four poorest countries have increased. On the other hand, the inflows into the ASEAN-5 have greatly reduced, on account of the negative inflows in 2000 and 2002 (Figure 5.4). Therefore, it clearly seems that the two groups of countries identified, within ASEAN, on the basis of intrinsic characteristics, their levels of development and their attractiveness, do not benefit from either the same amounts or the same types of FDI. The most advanced countries still receive more Japanese FDI and are only of moderate interest to the Chinese firms. The poorest countries, with the exception of Vietnam, attract only a few Japanese enterprises while Chinese firms have a stronger presence here.

b939_Chapter-05.qxd

7/15/2010

2:13 PM

Page 107

FDI in Southeast Asia and Sino-Japanese Rivalry 2000–2004

1995–1999 100%

BCLMV 1

BCLMV

644.6

63.9

100%

80%

60%

60% ASEAN 5

ASEAN 5

20 143.3

606.6

20%

BCLMV 1 365.0

80%

40%

107

BCLMV 289.3 ASEAN 5

40%

8 918.5

20% ASEAN 5

0%

58.2

0% Japan

China

Japan

China

Figure 5.4: Destinations of cumulative inflows of Japanese and Chinese FDI in ASEAN between 1995–1999 and 2000–2004, by group of countries (in millions of US$ and in percent). Source: ASEAN Secretariat.

Conclusion The objective of this first section was to see if the rivalry between Japan and China in Southeast Asia, which is more and more evident and commented upon, was also shown through the FDI. The figures collected at regional level do not provide any conclusive indication on the subject, as the Chinese FDI is still at very low levels while the region has already been dominated for a long time by the inflows of Japanese FDI. Nonetheless, it is not enough to entirely reject the existence of this rivalry. The region is in fact extremely heterogeneous, and it does not necessarily make much sense to be content with this approach at the regional level. In fact, the political and economic characteristics, especially in the field of attracting and receiving FDI, of the 10 countries of the region show that there are two very distinctive groups within Southeast Asia — a group of six countries, relatively advanced, receiving the major part of the inflows of the region, and a group of four countries, much poorer, which are in transition towards a market economy, and hosting only a few multinational firms.

b939_Chapter-05.qxd

108

7/15/2010

2:13 PM

Page 108

D. Hoyrup

By examining the figures in the light of this division, it therefore appears that Japan and China do not at all adopt the same investment strategy in the region. Japan invests in the most advanced countries while the small volume of Chinese investment is directed towards the least developed countries. There is therefore a rivalry between the two regional powers; the rivalry in question takes the form of a division between two groups, one dominated by Japan and the other by China, rather than a competition between the two countries in each of the economies in the region. Having said this, one still needs to understand the reason for the existence of such a division in the matter of FDI in Southeast Asia, and its consequences. 2. A Rivalry Through FDI That Goes Beyond the Economic Sphere Japanese and Chinese firms have opted for different strategies in Southeast Asia. It is necessary to understand this difference (2.1) and to grasp the possible implications of the same (2.2). 2.1 A logical division on the whole: The weight of history, the strength of the economy and the political proximities These are at least three elements that enable one to comprehend a difference of this kind in the investment strategies of Japanese and Chinese firms in Southeast Asia. They also reinforce the theory of a rivalry between the two regional powers through a division of ASEAN. The first argument that is considered here is historical in nature. Until the end of the 1980s and the Cold War, a deep fissure had been created between the capitalist and communist countries. The former were supported politically, economically and militarily by the United States, and therefore by their most loyal ally in the region, Japan. Besides, it is partly in reaction to the propagation of communism, both within the national frontiers and in the countries of the former French Indochina, that ASEAN was founded by the five most advanced

b939_Chapter-05.qxd

7/15/2010

2:13 PM

Page 109

FDI in Southeast Asia and Sino-Japanese Rivalry

109

countries. Naturally, the political and economic relations between Japan and these five countries developed and intensified,10 and it was only natural that their economic takeoff happened within a regional division of work structured by Japanese firms. The Asian “miracle“ which operated in these countries between the late 1980s and the early 1990s partly originated from the growth of exports, resulting in the setting up of a division of productive processes at the regional level as desired by the big Japanese enterprises following Endaka. Constrained by the appreciation of the yen to find a solution to keep exports competitive, these enterprises made rapid and massive investments in the ASEAN countries and established their low value-added activities here (standardised products, assembly lines, apparel, low technology components), while they retained the more lucrative and complex tasks on their soil (management, R&D, products developed through new technologies). The Southeast Asian countries greatly benefited from this growth in Japanese FDI (in addition, followed by investments, based upon a similar rationale, made by South Korea, Hong Kong and Taiwan.) This polarisation around the Japanese firms has of course been reduced for some years, following the 1997 Asian crisis and the emergence of China, but the economic relations between the ASEAN countries and Japan remain strong. During this entire period, China was just beginning to open up, and was still not a very significant commercial and economic partner. Bilateral investments were practically nonexistent and China was perceived more as a potentially destabilising future rival.11 This perception has also changed a lot, but the relations between China and the ASEAN countries remain marked by a strong competition to attract capital and to conserve external market share. It should however be noted that if the Chinese do not still have a strong presence in the most advanced countries of the region, it 10

This does not in any way prevent the continued existence of a tenacious grudge held by certain peoples of Southeast Asia against Japan, because of what this country was accountable for during the Second World War. Almost all the countries in the region were occupied by the Japanese army during the conflict and this occupation was often painful. 11 Chia, S. Y. (2006). ASEAN–China Economic Competition and Free Trade Area. Asian Economic Papers, Vol. 4, No. 1.

b939_Chapter-05.qxd

110

7/15/2010

2:13 PM

Page 110

D. Hoyrup

should not be interpreted as a lack of their influence in this region. Most of the observers are in agreement that Chinese communities, in existence for a very long time in all the countries of the region, do play a leading role. For the other group, the relations between the two regional powers have been very different. Almost completely closed to all influence outside of the socialist bloc, these countries have had very little to do with Japan and Japanese firms, except in a few rare cases (especially where it involved natural resources), having made very few investments here. Although they have relations with China, these were certainly complex and sometimes strained. China had, very early in the day, extended its support to the Khmer rouge and the Burmese Junta. Their relations with Vietnam were much more strained. At the end of the Cold War, the crumbling of the USSR resulted in the drying up of funds allocated until then to the four countries, which had to look elsewhere for financial support and which they obtained from China. As these countries offered only very few advantages, except in the case of Vietnam, the Japanese firms did not rush into these countries after they opened up, and therefore, the FDI made here is very small. The small volume of investments made here enables China to appear as one of the major investors. A second indicator, economic in nature and which is logically in keeping with the prolongation of these historical links, merits a mention. Since the Asian crisis, free trade agreements have been multiplying in all of East Asia.12 Whatever the motivation behind these agreements (impasse in multilateral negotiations, failed attempts at regionalisation, opening up of new markets, political reasons), they contribute to the structuring of the political and economic relations within the region.13 In fact, the analysis of these free trade agreements 12

Milelli, C. (2005). The Surge of Preferential Trade Agreements across Asia: What is at stake? Journal of International Logistics and Trade, Vol. 3, No. 2. 13 This is not a phenomenon which is limited to East Asia, as the tendency towards the multiplication of free trade agreements is observed all over the world for some years now. Bhagwati (1995) has analysed this phenomenon and has described it as a “spaghetti bowl”, thus referring to a complex entanglement of agreements between countries.

b939_Chapter-05.qxd

7/15/2010

2:13 PM

Page 111

FDI in Southeast Asia and Sino-Japanese Rivalry

111

clearly show that these agreements pertain almost exclusively to the most advanced countries and Japan, and pertain only in rare cases to China and the least advanced countries. Since the accession of the new member countries to ASEAN, between 1995 and 1999, the 35 free trade agreements bringing into play a member country of ASEAN are characteristic of the five most advanced countries of the region, and especially that of Singapore (18), of Thailand (9) and Malaysia (5).14 In addition, all these countries have signed a free trade agreement with Japan. Singapore signed this agreement in November 2002, Malaysia in July 2006 and Philippines, too, in 2006, while in the case of Indonesia and Thailand, negotiations with Japan are currently underway. But, at the same time, not a single bilateral agreement was signed between a member of ASEAN and China, with the exception of the one between Thailand and China which came into effect from 2003, an agreement concerning only agricultural products. A free trade agreement has of course been signed between ASEAN, as an entity, and China (an agreement that envisages the creation, by 2010, of a free trade zone for the six richest countries and by 2015 for the four others, but at the same time, the association is engaged in negotiations with the Japanese authorities for the signature of another agreement between the two partners). In other words, China and Japan have both signed though on regional terms, a bilateral free trade agreement with ASEAN; Japan has signed the agreement with the five most advanced countries but none with the four least developed countries, while only Thailand has signed a bilateral agreement with China. The free trade agreements, which are both a result of strong economic relations and a vector for 14

Indonesia is currently in the process of negotiating two, while Philippines has already signed one that is yet to be communicated to the WTO. Of the 35 agreements that are considered here, 10 are already in force and communicated to the WTO, six are already in force but not communicated to the WTO and 19 are under negotiation. Moreover, only one agreement concerning Thailand and Laos has been signed before inclusion of the new members. See the website of the WTO http:// www.wto.org/english/tratop_e/region_e/eif_e.xls, and of the Asian Bank for Development www.adb.org and www.bilaterals.org.

b939_Chapter-05.qxd

112

7/15/2010

2:13 PM

Page 112

D. Hoyrup

the intensification of these economic relations, are essentially characteristic of the members of the first group and of Japan, which therefore remains an incontrovertible favoured partner for the most developed countries of ASEAN. The third indication, eco-political in nature, deals with the specific relations that the poorest countries have with China and clearly illustrate the influence that the Chinese giant has on these countries.15 A brief examination of the nature of the bilateral political relations between these four countries and China furnishes a certain number of lessons. Vietnam, first of all, has long considered China an enemy. Today, the country is committed to a transition towards a market economy, moreover inspired by the Chinese experiment (opening up of the economy and adoption of a market economy, while retaining a political apparatus that is extremely centralised around a single party) rather than by its former Soviet elder brother. Though competitors on the external markets and where attraction of FDI is concerned, the two countries also complement one another and Vietnam benefits, in certain fields, from Chinese dynamism. Besides, China has become the principal commercial partner, while trade was done especially between Japan and Singapore in the early 1990s. China does not yet appear as a major investor in Vietnam (ranked 16th) while Japan is, today, a leading investor; but Chinese projects are developing rapidly. On the diplomatic and political front, the long-time rivalry between the two nations today seems to be giving way to a strategic partnership that the two countries have a mind to develop. China continues to favour an approach in terms of “peaceful ascendancy”, which necessitates the settlement of litigation relating to land and maritime frontiers with Vietnam. The latter also wished to smooth its relations with its powerful Northern neighbour, banking especially on the positive consequences of the strong growth of the Chinese giant. In the case of Laos, that is dependent both on Thailand from the economic point of view and Vietnam from the political point of view, China is perceived as an alternative to these two powerful 15

This paragraph summarises the ideas mentioned in Guilhot and Hoyrup (2007) and in Osborne (2006).

b939_Chapter-05.qxd

7/15/2010

2:13 PM

Page 113

FDI in Southeast Asia and Sino-Japanese Rivalry

113

neighbours.16 China has become the third largest commercial partner after these two countries and the second largest investor after Thailand. The Chinese enterprises, that are more and more visible,17 show themselves to be particularly interested in the hydraulic energy, wood, agriculture, mineral resources, and construction and textiles sectors. Japan, nevertheless the leading provider of public aid, largely remains in the background at the economic level (ranked 10th on the list of clients, seventh in suppliers and 14th on the list of investors). In addition, China has made advances in the field of aid (writing off of debts, loans at preferential rates) and that of diplomacy (while not insisting, for example, on reforms in return for its aid). Cambodia also seems to be “snatched“ by the Chinese giant. Strongly connected economically to Thailand, China has become the second largest supplier, and especially, the leading investor between 1994 and 2005 with more than 720 million US dollars of investments accumulated between 1994 and 2005 (Cambodian Investment Board, 2005), accounting for more than half the total investments received by the kingdom (799.4 million). Japan is largely absent in the economic inflows (0.29 percent of the FDI, 3.4 percent of exports and 2.1 percent of the imports), even though it is the leading donor here. The Chinese giant is also becoming more and more influential politically and diplomatically (financing infrastructural projects, writing off debts).18 During his official visit to Phnom Penh in April 2006, Prime Minister Wen Jiabao promised the equivalent of 600 million US dollars to Cambodia in the form of aid and loans.19 The promises made by 16

Storey, I. (2005). China and Vietnam’s Tug of War over Laos. Jamestown Foundation’s China Brief. 17 According to the DDFI (unpublished document), the agency for promotion of FDI, of the 663 firms that have been listed, the largest contingent is that of the Chinese enterprises, with 141 firms as against 95 from Thailand, 73 from South Korea and 44 from Vietnam. The Chinese enterprises therefore account for 21 percent of the foreign firms and for 34 percent of the Asian firms. 18 Osborne, M. (2006). The Paramount Power: China and the Countries of Southeast Asia. Lowy Institute Paper, No. 11. 19 Peking strengthens its influence on Cambodia. www.questionchine.net, [11 April 2006].

b939_Chapter-05.qxd

114

7/15/2010

2:13 PM

Page 114

D. Hoyrup

China are equivalent to the public aid provided by the entire international community (CDC). Its largest investor and donor, and second largest supplier, China seems to be deeply interested in Cambodia. This can be attributed both to historical reasons (support of the Khmer rouge, and help extended during the struggle against Vietnam) as well as strategic reasons (access to Gulf of Thailand). Lastly, Burma is the most emblematic case of a Southeast Asian country more interested in dealing with China than with ASEAN. Burma currently finds itself at the centre of an influence struggle between ASEAN (through Thailand), China and India,20 and even though the economic exchanges and investments are still dominated by Thailand, China is increasingly making its presence felt. Economically, cross-border trafficking, which does not figure in the official statistics, results in the country being literally invaded by goods manufactured in China.21 But, it is especially on the political and economic front that the Burmese Junta finds in the Peking government one of its few allies.22 Even the ASEAN countries (particularly Singapore, Malaysia and Philippines, supported by the American and European governments), which have to date preferred the settlement of the Burmese problem within ASEAN, are beginning to become edgy and finding the reforms too slow. The allies of the Junta (Viet Nam, Laos, Cambodia), supported by China, do not wish to have sanctions levied or threats of exclusion made against Burma. In this context, the unconditional aid extended by China, which, thanks to Rangoon, is seeking a more direct access to the Indian Ocean, is welcome. The four least developed countries in the region seem therefore to increasingly appreciate the support on the international scene of a China that is least insistent on the subject of economic and political 20

Egreteau, R. (2005). Burma: the Army Closes the Political Game. Les Etudes du CERI, No. 114. 21 Following the opening up (relative) of the country in 1988 and the commercial agreement made with China in the same year, the invasion of Chinese products in the small shops of Rangoon is more than that of the Thai products which dominated the market earlier (Steinberg, 2004). 22 Than, M. (2005). Myanmar in ASEAN, Regional Cooperation Experience. Singapore: ISEAS.

b939_Chapter-05.qxd

7/15/2010

2:13 PM

Page 115

FDI in Southeast Asia and Sino-Japanese Rivalry

115

reforms, that is a provider of developmental aid, that is becoming increasingly involved commercially and is moving on to become a significant investor in the region. The capitals of these four countries naturally open up to Peking, while China, in this way, finds the means of obtaining raw materials, of taking control of the important geostrategic areas and especially of acquiring a greater influence at the regional level. The division that has been identified in the first section, between one part of Southeast Asia that is economically structured by the Japanese firms and another part dominated by the presence and influence of China can be explained fairly well. The possible consequences of such a division will now be taken up. 2.2 This division falls within a framework that is much larger than just a struggle for hegemony The rivalry between Japan and China in Southeast Asia through FDI falls within a framework that is much larger than a dual rivalry, economic and political, and concerns the struggle between the two giants for regional hegemony. This rivalry is translated by a division within Southeast Asia. What could then be the consequences of such a division for Southeast Asia? A detour through history is necessary here to perceive the issues therein. A reconfiguration of the regional organisation in which ASEAN remains the linchpin. Since its inception in 1967, ASEAN is the only effective intercountry institution in East Asia. Originally created to bring peace to the region and contain the march of communism, it was transformed into a body of economic cooperation during the years 1980–1990. By virtue of its age, ASEAN appears to be an incontrovertible group in the region. But since the 1997 Asian crisis and the emergence of China, a process of reconfiguration of the regional organisation is underway.23 23

Hoyrup, D. et Simon, J.-C. (2004). The Industrial Integration in East Asia: Regionalization and Globalization. In Regional Integration in East Asia, C. Taillard (eds.), pp. 147–167. Paris: NORAO, Editions Indes Savantes.

b939_Chapter-05.qxd

116

7/15/2010

2:13 PM

Page 116

D. Hoyrup

In fact, two problems have prevented ASEAN from functioning correctly in terms of economic integration and development. ASEAN has neither a charter nor a supranational institution, the secretariat based in Jakarta playing only the role of management of current affairs, and no restrictive decision is imposed upon the member countries. The practical functioning of ASEAN is based upon some principles upon which the member countries refuse to compromise to date. Desirous of retaining their sovereignty, the founder members do not want the association to impose restrictions upon them. They therefore want decisions to be taken unanimously. The seeking of a consensus has become the rule, and the principle of non-interference in the internal affairs thus precipitated the formation of ASEAN. But the Asian crisis brought to light the limitations of such an informal approach. The rapidity of the propagation of the crisis in Thailand to neighbouring countries showed that the region needed formal institutions and common rules to face the challenges of economic development and globalisation. The second problem relates to the discord between the institutional boundary and the geographical boundary of regional integration. The process of regional integration that is underway in East Asia is essentially structured on the Japanese economy, and increasingly on the Chinese and Korean economies while the institutional boundary that ASEAN represents does not encompass these three economies that are nevertheless dominant in the economic exchanges in East Asia. As long as the Asian countries chose a regionalisation that was de facto rather than de jure, this did not pose any particular problem. The moment the necessity for institutionalisation of this process appears, the question of the institutional boundary has to be raised — which countries should be part of the regional organisation in East Asia? Should India be part of such an organisation? How will the United States, its presence and power in Southeast Asia still being strong, react to the formation of a regional Asian organisation of which it would not be a part? Should the countries of the Asia Pacific, and in the first place Australia and New Zealand, be considered as “Asian“? What would the role of ASEAN be in such a grouping? But above all, the main question is the one relating to leadership: who will

b939_Chapter-05.qxd

7/15/2010

2:13 PM

Page 117

FDI in Southeast Asia and Sino-Japanese Rivalry

117

assume the role of the dominant power in the region, or the regional hegemon, to put it in the terminology of international political economics? In order to reply to these two problems, various initiatives have been carried out since the early 2000s. ASEAN of course had already created, in 1994, the ARF (ASEAN Regional Forum), a forum bringing together the countries of the association and their 14 main partner countries,24 enabling discussing and finding solutions by consensus in the field of security (terrorism, piracy, North Korea). But it is with the Chiang Mai agreement, signed in Thailand in May 2000 and envisaging the swapping of currencies between the central banks of the region, that the first official agreement would be signed between the 10 countries of ASEAN, Japan, South Korea and China. A plan relating to the Asian bond markets, ABMI (Asian Bond Markets Initiative) would be put in place in August 2003. Following this, these three countries would be regularly invited to the meetings of ASEAN to discuss the strengthening of regional integration within what would become “ASEAN+3”. In December 2005, there was an “East Asian Summit” organised on the occasion of the meeting of the heads of state of ASEAN. This summit brought together the 13 member countries of ASEAN+3, India, Australia and New Zealand. The idea of an East Asian community goes back to the early 1990s, when the Malaysian Prime Minister, Mahathir bin Mohamad, proposed the creation of a community excluding the United States and Australia (which, along with the other countries of Latin America, were part of APEC — Asian Pacific Economic Forum). Initially, only the countries of ASEAN+3 were to be a part of this community. Finally, India, Australia and New Zealand would be part of the first two forums. Discussions are underway on specific subjects such as bird flu, questions on energy, finance or management of natural disasters. But certain countries would like to go further and put in place a pan-Asian free trade zone. In April 2006, Japan launched the Nikai Initiative which would aim at the creation of an Asian OECD involving the 16 countries of the EAS, and having 24

European Union, United States, China, India, Japan, Russia, Australia, Canada, South Korea, North Korea, New Zealand, Mongolia, Pakistan and Papua New Guinea.

b939_Chapter-05.qxd

118

7/15/2010

2:13 PM

Page 118

D. Hoyrup

funds at their disposal, planning the creation of common institutions and the signature of a free trade zone. The struggles for influence in Asia and the dangers for ASEAN of a division between its members. Despite its intrinsic weaknesses and the different voices within it, at the heart of all the regional initiatives — ARF, free trade agreements with China, with Japan or with South Korea, ASEAN+3, EAS — is the single existing institution that is ASEAN. But at the same time, the ratio of power between ASEAN, Japan and China is evolving and the question of the regional leadership or regional hegemon is raised. What are the objectives that are officially or unofficially followed by the various countries involved in this process? Today, the emergence of China is no longer disputable;25 the refusal to devaluate the yuan and thus aggravate the competition between the Asian economies during the 1997 crisis, the entry of China into the WTO, the signature of a free trade agreement with ASEAN are all elements that have contributed to making the Chinese giant a serious competitor for regional hegemony. Japan, however, continues to play a fundamental role in the economic structuring of the region, through its enterprises on the one hand, and its political and diplomatic moves, on the other. Japanese firms continue to invest massively in the region and to organise a regional division of the productive processes that has a profound repercussion on the economies of Southeast Asia. The archipelago remains the principal donor in a number of countries in the region, and this aid often accompanies the setting up of Japanese firms. Japan’s desire to create an Asian monetary fund during the 1997 crisis, a desire that was countered by reluctance on the part of America, or its massive financial involvement in Thailand during this period, has strengthened its influence. Moreover, Japan reacted to the signing of a free trade agreement between ASEAN and China by engaging, since 2003, in negotiations with the association, with a view to creating a partnership between the two entities. 25

Teo, C. C. E. (2004). China, Regional Soft Power. Politique étrangère, No. 4.

b939_Chapter-05.qxd

7/15/2010

2:13 PM

Page 119

FDI in Southeast Asia and Sino-Japanese Rivalry

119

But the discussions enable us to sense deep disagreements between the various countries. The integration of Australia and New Zealand is thus criticised by Mahathir, who considers these countries as the representatives of the United States in the region. Malaysia, on the other hand, is willing to welcome India into the future structure (Bowden, 2005). Japan, Indonesia, the Philippines and Singapore also wish to integrate India in the negotiations in order to act as a counterbalance to China. China, on the other hand, considers that the inclusion of India, Australia and New Zealand is the result of the desire of Japan and some other countries to limit its influence, and would prefer that the summits bring together only the countries of the ASEAN+3 (Bowring, 2005). Such a boundary would presumably restrict the influence of the United States and would especially permit China to be the only demographic, political and economic power in the region. The battle that the two powers are waging, in order to acquire the status of regional leader, is therefore being carried on through an association with and the close support of ASEAN. In this situation, can ASEAN remain at the heart of the regional initiatives, or at least, remain an important player in this regional reconfiguration? The only solution for ASEAN, if it wishes to have a voice in the matter of this reconfiguration in progress in East Asia, is in fact to speak in one voice. It was, moreover, one of the objectives of the expansion carried out at the end of the 1990s — bringing together, within the same assembly, all the countries of this corner of Asia in order to reinforce the political weight of the nations that comprise it. But the discrepancies which are intensifying within the association between the old members and the new members are having an adverse effect on the sound functioning of the association.26 It is therefore in the context of this struggle for regional leadership between Japan and China mainly, that one should understand the possible implications of the Japanese and Chinese strategies in the 26

Guilhot, L. et Hoyrup, D. (2007). Relecture critique d’un processus d’élargissement régional: l’ASEAN-10 dix ans après (Critical Review of a Process of Regional Expansion: ASEAN-10 Ten Years After), Working Document, LEPII, Université Pierre Mendès-France, Grenoble II.

b939_Chapter-05.qxd

7/15/2010

120

2:13 PM

Page 120

D. Hoyrup

matter of investment in ASEAN. This may only be conjecture, but it is plausible to consider that the FDI originating from these two countries are not motivated uniquely by economic considerations, but also serve political objectives. In the case of China especially, this involves seeking the support of the ASEAN countries in order that they validate the orientations sought by Beijng. Its investments in countries that are in dire need of capital and generous aid granted with no imposition of reforms enable it to hope for the support of two or three countries of ASEAN. Japan, by strengthening its economic presence in the most advanced countries and by playing the card of a strengthened cooperation with ASEAN, hopes to benefit from the support of the association in its economic and political initiatives. But ASEAN functions on the principle of consensus and the seeking of positions that are accepted by all. A scission between the countries that are integrated into the Japanese economic sphere and those that are drawn under Chinese influence could therefore cause considerable harm to the ability of the organisation to carry its weight on the international scene. General Conclusion Despite figures that hardly communicate anything when they are collected at regional level, there clearly exists a rivalry between Japan and China in the matter of investments in Southeast Asia. This rivalry does not take the form of fierce competition between Japanese and Chinese firms in Southeast Asia, as one would expect. It however, takes the form of the respective domination of the two powers in certain countries of the region. Japan remains one of the leading investors in the six most advanced countries of the region and in Vietnam, while it seems to ignore the three other countries. China, with a relatively smaller volume of investments in Southeast Asia in general as compared to Japan, is increasingly making its presence felt in the four least developed countries, while, for the moment, its firms play only a very negligible role in the most advanced countries. This rivalry that takes the form of an internal divide in Southeast Asia between a group that is economically structured by Japanese firms

b939_Chapter-05.qxd

7/15/2010

2:13 PM

Page 121

FDI in Southeast Asia and Sino-Japanese Rivalry

121

and another group that is politically integrated into the sphere of Chinese influence can be explained relatively well historically, economically and politically. Moreover, this is in keeping with the larger context of a struggle for influence at regional level between the two powers, namely Japan and China, a struggle that is being carried on through the extension of support to the whole or a part of ASEAN, the only intercountry institution in East Asia. In this way, such a divide within ASEAN between those who remain Japan’s partners and those who support China will in the end create problems for the association. If the latter does not succeed in speaking out in a single voice in the context of a reorganisation of the regional integration in East Asia, it is likely to lose its capacity to remain at the heart of the regional initiatives. This paper, by bringing to light some of the characteristics of the rivalry between Japan and China in the matter of FDI in Southeast Asia, enables us to draw two conclusions. From the methodological point of view, the analysis of FDI cannot be restricted to the figures and quantitative data collected. One must place these elements back in the historical, political and economic context in order to understand their meaning. From the operational point of view, even though it may be only conjecture, the divide that appears within Southeast Asia should be taken into consideration by the governments of the ASEAN countries. The association’s desire to equip itself with a charter, the first infringement of the principle of non-interference, to shed its weak will of resolving the Burmese problem without a restrictive solution and to institute recovery measures for the four poorest countries is a step in the right direction. It is only by reducing the gap in development between the two groups of countries that the association will continue to make the voice of its members heard, and will remain one of the mainstays of the regional construction that is currently underway. References Bhagwati, J. (1995). U.S. Trade Policy: The Infatuation with Free Trade Agreements. In The Dangerous Drift to Preferential Trade Agreements, J. Bhagwati and A. O. Krueger (eds.), Washington DC, USA. AEI Press.

b939_Chapter-05.qxd

122

7/15/2010

2:13 PM

Page 122

D. Hoyrup

Boisseau du Rocher, S. (1998). ASEAN et la construction régionale en Asie du Sud-Est. Paris: Edition L’Harmattan. Boisseau du Rocher, S. (2005). The Southeast Asia and ASEAN Face New Challenges. In New Geopolitices of Asia, G. Faure (eds.), Paris: Ellipses. Boulanger, E. (2006). Japan and the Appeal of Asia. Cahier de Recherche Continentalisation, GRIC. Bowden, R. (2005). Battle Looms Over Inaugural East Asia Summit. (11 December 2005). Worldpress.org. Bowring, P. (2005). An Asian Union? Not yet (16 December 2005). International Herald Tribune. Chia, S. Y. (2006). ASEAN-China Economic Competition and Free Trade Area. Asian Economic Papers, Vol. 4, No. 1. Egreteau, R. (2005). Burma: the Army Closes the Political Game. Les Etudes du CERI, No. 114. Faure, G. et Hoyrup, D. (eds.) (2008). The European Economic Presence in Southeast Asia. Paris: Les Indes savantes. Figuière, C. et Guilhot, L. (2006). China, a Regional Hegemon in East Asia? In China Central to Global Growth? Competitions, Opportunities, and Restructuring of Economic Networks, F. Hay, et Y. Shi (eds.), Presses Universitaires de Rennes. Guilhot, L. et Hoyrup, D. (2007). Relecture critique d’un processus d’élargissement régional: l’ASEAN-10 dix ans après (Critical Review of a Process of Regional Expansion: ASEAN-10 Ten Years After), Working document, LEPII, Université Pierre Mendès-France, Grenoble II. Hong, E. and Sun, L. (2004). Go Overseas via Direct Investment: Internationalization Strategy of Chinese Corporations in a Comparative Prism. Discussion Paper 40, University of London: Department of Financial & Management Studies SOAS. Hoyrup, D. et Simon, J.-C. (2004). The Industrial Integration in East Asia: Regionalization and Globalization. In Regional Integration in East Asia, C. Taillard (eds.), pp. 147–167. NORAO, Paris: Editions Indes Savantes. Hoyrup, D. et Simon, J.-C. (2005). The ASEAN Countries. Challenges and Successes of Development in a Region under Construction. In New Geopolitics of Asia, G. Faure (eds.) Paris: Ellipses. Hugon, P. (2001). The East Asia after the crisis: Between Globalization and Regionalization. Mondes en développement, Tome 29. Lall, S. (1998). Changing Perceptions of Foreign Direct Investment in Development. In International Trade, Foreign Direct Investment and the

b939_Chapter-05.qxd

7/15/2010

2:13 PM

Page 123

FDI in Southeast Asia and Sino-Japanese Rivalry

123

Economic Environment, P. K. M. Tharakan and D. Van Den Bulcke (eds.), pp. 101–134. London: MacMillan Press. Milelli, C. (2005). The Surge of Preferential Trade Agreements across Asia: What is at Stake? Journal of International Logistics and Trade, Vol. 3, No. 2. Osborne, M. (2006). The Paramount Power. China and the Countries of Southeast Asia. Lowy Institute Paper, No. 11. Paribatra, S. (1996). From ASEAN Six to ASEAN Ten: Issues and Perspectives. Alternatives Sud, Vol. 3, No. 4. Phongpaïchit, P. (1990). The New Wave of Japanese Investment in ASEAN, Singapore: ISEAS. Sakakibara, E. et Yamakawa, S. (2004). Regional Integration in East Asia, Part I: History and Institutions. Policy Research Working Paper, WPS3078, World Bank. Steinberg, D. I. (2004). Burma: Feel-Good US Sanctions Wrongheaded. YaleGlobal. http://yaleglobal.yale.edu/display.article?id=3901 [19 May 2004]. Storey, I. (2005). China and Vietnam’s Tug of War over Laos. Jamestown Foundation’s China Brief. Teo, C.-C. E. (2004). China, Regional Soft Power. Politique étrangère, No. 4. Than, M. (2005). Myanmar in ASEAN, Regional Cooperation Experience. Singapore: ISEAS. World Bank, (1993). The East Asian Miracle: Economic Growth and Public Policy. New York: Oxford University Press. http://www.unctad.org/Templates/StartPage.asp?intItemID=2068&lang=2 http://www.aseansec.org www.bilsaterals.org www.adb.org http://www.wto.org/english/tratop_e/region_e/eif_e.xls

b939_Chapter-05.qxd

7/15/2010

2:13 PM

Page 124

This page intentionally left blank

b939_Chapter-06.qxd

7/15/2010

2:13 PM

Page 125

CHAPTER 6

Japan and the Reconstruction of Indochina Masaya Shiraishi

Introduction Indochina, in the broader definition, includes five mainland Southeast Asian nations, namely Myanmar, Thailand, Laos, Cambodia and Vietnam. This subregion, also known as continental Southeast Asia, is surrounded by the China continent, the India subcontinent, Bay of Bengal, Andaman Sea, Gulf of Siam and South China Sea.1 Partly owing to its geographical location, the subregion had long been a stage for conflicts and wars. It was only after the end of the Cambodian conflict that the subregion was able to enter into a new stage of peace and cooperation. Though Japan is located several thousand kilometers from the Indochina subregion, she is one of the major countries which have been deeply involved in the changing situation of this subregion, especially since the Asia Pacific War period. This involvement continues to this day and will most likely continue into the future. The purpose of this chapter is to disccuss Japanese relations with the Indochina subregion, and the countries in it. Following a brief 1

In this paper, Indochina, in the broader sense, is used identically with the term continental Southeast Asia which consists of five nations. Indochina, in the narrower sense, is also used to indicate the three countries of former French Indochina, namely Cambodia, Laos and Vietnam. CLMV means new ASEAN members, i.e. Cambodia, Laos, Myanmar and Vietnam. GMS (Greater Mekong subregion) is the terminology first applied by ADB and is now widely used by many stakeholders, which consists of five continental Southeast Asian countries and the southwestern part of China (Yunnan Province and, since 2005, Guangxi Zhuang Autonomous Region). The Mekong subregion is also used to loosely indicate the whole or part of GMS. 125

b939_Chapter-06.qxd

7/15/2010

126

2:13 PM

Page 126

M. Shiraishi

overview on the subregion’s historical background in Section 1, the Second Section discusses historical experiences of Japan in Cold War and Post-Cold War periods. Section 3 examines the current situation, especially in terms of Japan’s ODA policy, and Section 4 covers her competition with China in various initiatives for the subregional cooperation. The chapter finally refers to some implications for the future development of Japan’s relations toward the subregion. 1. Historical Background of the Nations in the Indochina Subregion 1.1 Cold War period One of the most important aspects in the modern history of Indochina or continental Southeast Asia is the fact that all of the nations, with the exception of Thailand, were under Western colonial domination during the 19th and early 20th century and only gained independence in the mid-20th century. For many years after the end of World War II, three former French colonies, Vietnam, Laos and Cambodia, suffered from prolonged conflicts and wars. Furthermore, these three countries experienced the socialist system of the command economy and isolated themselves from the capitalist world. In the case of northern Vietnam, this lasted for three decades. As for Southern Vietnam and her neighboring countries, Laos and Cambodia, this economic system lasted for more than a decade. In the meantime, Burma (now called Myanmar) too adopted a socialist type of command economy in the early 1960s. She also applied a seclusionist neutralism in order to stay away from the Cold War conflict, especially from the war fires occurring in the adjacent areas. Having said that, the country was not immune to conflict, being domestically divided by armed rebellions of ethnic groups, and maintaining only a nominal form of her federal system. Thailand, on the other hand, survived the colonial period as an independent kingdom and held a pro-US and anti-communist posture during the Cold War period. She, in fact, became a member of SEATO (Southeast Asia Treaty Organization) in 1954 when it was established under a strong US initiative. During the Vietnam War period, she not

b939_Chapter-06.qxd

7/15/2010

2:13 PM

Page 127

Japan and the Reconstruction of Indochina

127

only let the United States use her military bases in the country, but also sent a small contingent of soldiers to South Vietnam. At the same time, Thailand was very sensitive to possible support by China and North Vietnam toward communist rebels who were based mostly in the northeastern part of the country.2 The subregional balance of power, however, made a significant change during the Cambodian conflict which broke out in late 1978. Thailand closely cooperated with communist China to support the anti-Hanoi Cambodian groups, while confronting Vietnam, Laos, and the Phnom Penh government of Cambodia.3 Thus, for a long time, Thailand was deeply involved in the conflicts of her neighbors. Nevertheless, she also enjoyed a reputation of being the only country in continental Southeast Asia whose society was rather stable despite occasional military intervention into politics. This reputation together with her policy of opening doors to the capitalist world enabled the country to enhance economic relations with developed countries, especially after the 1985 Plaza accord which led to the increasing appreciation of the Japanese yen.4 Thailand was also a 2

Cady, J. F. (1974). The History of Post-War Southeast Asia. Athens: Ohio University Press; Yahuda, M. (1996). The International Politics of the Asia Pacific, 1945–1995, Chs. 1–3; London and New York: Routledge; Neher, C. D. (1999). Southeast Asia in the New International Era: 3rd Ed., Chs. 3, 9–12. Boulder: Westview Press. 3 Elliott, D. (ed.), (1981). The Third Indochina Conflict. Boulder: Westview Press; Chanda, N. (1986). Brother Enemy: The War after the War. Orlando: Harcourt Brace Javanovich. 4 Until the 1985 Plaza Accord, Japan was the second largest investor in Thailand, next to the United States. But the high appreciation of the yen and other factors during the latter half of the 1980s pushed Japan to the position of the top investor. Chinwanno, C. and Tambunlertchai, S. (1983). Japanese Investment in Thailand and Its Prospects in the 1980s. In ASEAN-Japan Relations: Investment, Sekiguchi, S. (ed.), Singapore: Institute of Southeast Asian Studies; Phongpaichit, P. (1990). The New Wave of Japanese Investment in ASEAN, Ch. 2, Singapore: Institute of Southeast Asian Studies; Sakurai, M. (1992). Japanese Direct Foreign Investment and Asia. In The U.S.-Japan Economic Relationship in East and Southeast Asia, Okuizumi, K. et al. (eds.), Washington D.C.: The Center for Strategic and International Studies; Suehiro, A. (1993). Tai: Kaihatsu to Minshushugi (Thailand: Economic Development and Democracy), pp. 137–141, Tokyo: Iwanami Shoten; Kobayashi, H. (2000). Nihon Kigyo no Ajia Tenkai (Japanese Enterprises in Asia), pp. 156ff. Tokyo: Nihon Keizai Hyoron-sha.

b939_Chapter-06.qxd

7/15/2010

2:13 PM

128

Page 128

M. Shiraishi

founding member of ASEAN (Association of Southeast Asian Nations) which started in 1967. China, the northern gigantic neighbor of Indochina, supported anti-imperialist and revolutionary forces including Vietnamese in the subregion during the early years of the Cold War. Therefore, her relations with anti-communist ASEAN members remained rather weak, and came almost to a standstill during the turmoil of the Cultural Revolution. By the late 1970s, however, her relations with Thailand as well as the United States and Japan improved remarkably thanks to her new policy of economic reform and opening doors and their common position against the Soviet Union and her ally, Vietnam.5 In brief, Thailand as an ASEAN member enjoyed rapid economic growth, whereas progress in other countries in continental Southeast Asia experienced stagnation due to successive conflicts and a stumbling command economy. 1.2 Post-Cold War era Nonetheless, the situation dramatically changed in the late 1980s and increased its momentum in the early 1990s. Laos and Vietnam launched a new policy of economic reform and began opening their doors in 1986. Burma followed them in 1988, shortly after the military coup. Cambodia restored her monarchy in 1993 after a two-year rule by UNTAC (UN Transitional Authority in Cambodia). Together with a series of changes in policy orientation by the respective countries, the 1991 conclusion of the Paris Peace Agreement on Cambodia and the rapprochement between China and Vietnam in the same year opened a new page in the history of the subregion and Southeast Asia. ASEAN began to expand by admitting new members: Vietnam in 1995, Laos and Myanmar in 1997 and finally Cambodia in 1999. The ASEAN enlargement was nothing more than a process where a regional grouping, which had initially consisted of predominantly 5 Yahuda, M. (1996). The International Politics of the Asia–Pacific, 1945–1995, Ch. 6, London and New York: Routledge.

b939_Chapter-06.qxd

7/15/2010

2:13 PM

Page 129

Japan and the Reconstruction of Indochina

129

insular Southeast Asian members, absorbed continental Southeast Asian countries one by one.6 The realization of ASEAN 10 however brought about a new problem, which is sometimes known as the ASEAN divide issues.7 The ASEAN new members, often categorized as the CLMV countries, were poorly equipped with infrastructures and industrial facilities, and lacked adequate systems, regulations and human resources necessary for managing a market economy and external relations. This led to a serious gap between the new entrants and the ASEAN forerunners in various aspects. Reducing this gap became a crucial challenge for both the new and old members, because without it a real regional integration could not be successfully accomplished. Facing this new challenge, international organizations as well as regional and extra-regional governments took the initiative to establish forums, taskforces and mechanisms to promote regional and subregional cooperation. Thus during the mid-1990s, various frameworks were born almost simultaneously, such as the GMS (Greater Mekong Subregion) Development Cooperation, the Forum for Comprehensive Development of Indochina (FCDI), the Mekong River Commission (MRC), the Working Group for Economic Cooperation in Indochina and the ASEAN Mekong Basin Development Cooperation (AMBDC).8 The frameworks often overlapped with each other in terms of mandate, purpose and activities and subsequently brought about the

6

Than, M. and Gates, C. L. (eds.), (2001). ASEAN Enlargement: Impacts and Implications, Singapore: Institute of Southeast Asian Studies. 7 For instance, Owada, H. (2001). Japan-ASEAN Relations in East Asia, Tokyo: Japan Institute of International Affairs, www2.jiia.or.jp/report/owada/Singapore.html; Yamakage, S. (ed.), (2001). Tenkanki no ASEAN (ASEAN in the Transitional Era), pp. 7–11, Tokyo: Nihon Kokusai Mondai Kenkyujo; Kuroyanagi, Y. (2003). ASEAN 35nen no Kiseki (The 35-Year Historical Process of ASEAN), pp. 151ff, Tokyo: Yushindo; Sato, K. (2003). ASEAN Rejimu (ASEAN Regime), p. 119, Tokyo: Keiso Shobo. 8 Shiraishi, M. (1998). Posuto-Reisenki Indoshina-ken no Chiiki Kyoryoku (Regional Cooperation in Post-Cold War Indochina), In Betonamu to Tai (Vietnam and Thailand), Isobe, K. (ed.) Tokyo: Taimeido; Kao, K. H. and Kaplan, J. (eds.), (2000). The Greater Mekong Subregion and ASEAN from Backwaters to Headwarters, Phnom Penh: Cambodian Institute for Cooperation and Peace.

b939_Chapter-06.qxd

130

7/15/2010

2:13 PM

Page 130

M. Shiraishi

“Mekong congestion”.9 However, their synchronized appearance also indicated the fact that the international society was increasingly concerned about the future of the subregion. The importance and urgency of the above-mentioned challenges were further aggravated by the outbreak of the financial crisis in East Asia in 1997. Enlarged ASEAN, now embracing the economically less developed countries of Indochina, had to face an even more formidable task of accelerating economic integration and enhancing competitiveness in the whole region, while narrowing the gap between the old and new members. It merits attention, however, that the financial crisis also gave a new impetus for both Southeast and Northeast Asian nations to launch an ambitious attempt to enlarge regionalism in East Asia. ASEAN members and three Northeast Asian counterparts, Japan, China and South Korea, now came to realize that they belonged to a single region with a common fate and a mutual dependency based upon the de facto formation of closely knitted business networks. They quickly institutionalized the ASEAN+3 dialogue mechanism. Furthermore, as an extension of it, the annual East Asia Summit began in 2005, which includes not only ASEAN plus three (APT) countries but India, Australia and New Zealand as well. The rapid development of these regional and megaregional attempts has provided a new important meaning to the Indochina subregion. Looking back at the history of the subregion, the majority of nations in it had been practically excluded from the East Asian regional networking of interdependency, mainly due to the prolonged conflicts and wars, their isolationist and often antagonistic policy toward their neighbors, and their strict application of the command economy. What is worse, the countries within the subregion and even the people inside a nation themselves had been physically and psychologically separated from each other. Although the Indochina subregion is surrounded by continental China, insular Southeast Asia and subcontinental India and thus 9

This term was first used by the ADB, according to Mr. Toru Tatara (now working in the ADB Institute in Tokyo).

b939_Chapter-06.qxd

7/15/2010

2:13 PM

Page 131

Japan and the Reconstruction of Indochina

131

geographically occupies a highly strategic position in the heart of East Asia, it has long been the missing link to the regional networks of East Asia. The missing link should now be reconnected to become meaningful crossroads.10 It is true that during the 1997–98 Financial Crisis, the existing regional and subregional frameworks that fostered Indochina’s development and cooperation were largely inactive. But some of them became revitalized at the turn of the millennium. And furthermore, many other projects were newly born, aiming to help the subregion’s socioeconomic and human resource development. These include the Initiative for ASEAN Integration (IAI), the AEM–METI Economic and Industrial Cooperation Committee (AMEICC), and the Aeyawadi– Chao Phraya–Mekong Economic Cooperation Strategy (ACMECS). The GMS Development Cooperation initiated by ADB (Asian Development Bank) also proposed an ambitious plan to create economic corridors in the subregion.11 It should be noted, however, that the rapid development of East Asia regionalism and Indochina subregional cooperation has also provoked rivalry and competition among concerned governments and organizations, most typically between Japan and China, as will be discussed later. 2. Japan with the Indochina Subregion 2.1 Early years of Cold War During the 1940s, Japan waged a self-destructing war with the ambition to create the “Greater East Asia Co-Prosperity Sphere”, but 10

Shiraishi, M. (2007). Mekong Sabu Chiiki no Jikken (Experiments in the Mekong Sub-region), In Aratana Chiiki Keisei (New Regional Formation [in East Asia]), Yamamoto, T. and Amako S. (eds.), Tokyo: Iwanami Shoten. 11 Shiraishi, M. (2004). Mekon Chiiki Kyoryoku to Betonamu (Mekong Regional Cooperation and Vietnam), In Betonamu no Taigai Kankei (Vietnam’s External Relations), M. Shiraishi (ed.), Tokyo: Akatsuki Inshokan; Shiraishi, M. (2006). Opening Speech, In [Proceedings of] The International Workshop: Greater Mekong Sub-Regional Cooperation and East-West Economic Corridor, Institute of World Economics and Politics (Vietnamese Academy of Social Sciences) and Institute of Asia–Pacific Studies (Waseda University) (eds.), Hanoi.

b939_Chapter-06.qxd

132

7/15/2010

2:13 PM

Page 132

M. Shiraishi

was defeated and then occupied by the Allied countries. It was only in 1951 with the San Francisco Peace Treaty (validated in the following year) that Japan regained her legal status as an independent nation, paving her return to the international society. The peace treaty however was the outcome of a US Asia Pacific strategic plan which was articulated under regional circumstances that included events such as the communist victory in China (1949) and the outbreak of the Korea War (1950). As a matter of fact, though the People’s Republic of China and the Ho Chi Minh government of Vietnam were not invited to the San Francisco peace conference, the Kingdoms of Laos and Cambodia and the Bao Dai government of Vietnam, all of which were recognized by Western countries as independent nations within the French Union, as well as Thailand, were invited and became signatories of the peace treaty. Japan was thus able to restore official relations with those countries in the Indochina subregion. She also reestablished diplomatic relations, through a bilateral peace treaty, with Burma which had refused to join the San Francisco peace conference. While normalizing relations with the subregional countries, Japan also paid war reparations to Burma and South Vietnam (successor of the Bao Dai government) and aid equivalent to it (what is called quasi-reparations) to Laos and Cambodia, which spontaneously relinquished the right of war reparations. As for Thailand, which had not been “occupied” by the Japanese military and therefore did not have the right to claim war reparations, Japan instead provided her with compensation to liquidate inconvertible special yen which the Tokyo government had owed to Bangkok during the Asia Pacific War. In this way, Japan paved the way for the future development of diplomatic and economic relations with anti-communist countries in the Indochina subregion. But she officially ignored the very existence of Ho Chi Minh’s socialist government in the northern half of Vietnam. This policy adopted by the Japanese government reflected her intention to follow the US regional policy. Washington expected that Japan would realize an economic recovery followed by development through the establishment of close relations with non-communist countries

b939_Chapter-06.qxd

7/15/2010

2:13 PM

Page 133

Japan and the Reconstruction of Indochina

133

in the Asia Pacific and with limited business relations with communist North Vietnam and China. This basic stance of the Tokyo government did not largely change during the 1960s, when Japan was becoming an economically strong power. For instance, Japan showed a strong initiative to create ADB (Asian Development Bank) and Ministerial Conference for the Economic Development of Southeast Asia. Both of them were officially established in 1966. Socialist countries in the Asia Pacific were practically excluded from those institutions. Furthermore, for the case of ADB, Japan as well as the United Sates became the biggest financier, thus demonstrating her will to help the economic development of non-communist nations in the region by collaboration with other developed countries in the Asia Pacific. The same logic was well demonstrated in 1973 when Japan successfully invited Australia and New Zealand to join the Ministerial Conference. Furthermore, as the Vietnam War escalated in the late 1960s and early 1970s, the Tokyo government supported Washington’s policy by allowing Americans to use the military bases in the country to serve their war efforts. Japan also positively responded to US requests for burden sharing, by increasing economic assistance to South Vietnam and non-communist Asian countries surrounding it.12 2.2 Later years of Cold War Generally speaking, Japan’s regional policy since her return to international society in 1952 had been largely shaped within the framework of US strategy. Japan had been more or less satisfied with this basic arrangement so as to pursue her own national interests, while receiving US support and encouragement. Nevertheless, a tremendous shock hit Japan in 1971, when the Nixon administration suddenly announced the rapprochement with Beijing. The Nixon shock was a crucial turning point and the Tokyo government 12

Shiraishi, M. (1990). Japanese Relations with Vietnam, 1951–1987, Ch. 1. Ithaca: Southeast Asia Program. Cornell University; Sudo, S. (2002). International Relations of Japan and Southeast Asia, Chs. 4–5. London and New York: Routledge.

b939_Chapter-06.qxd

134

7/15/2010

2:13 PM

Page 134

M. Shiraishi

launched diplomatic efforts to normalize relations with socialist countries in Asia: China and Mongolia in 1972 and North Vietnam in 1973. These efforts have often been called “independent diplomacy”. However, as far as her contacts with North Vietnam were concerned, Japan’s rather prudent approach towards the country did not deviate far from Tokyo’s earlier policy of working within the framework of US policy. Japan signed an agreement to normalize diplomatic relations with the Hanoi government in September 1973, only eight months after the conclusion of the Paris peace agreement between the United States and North Vietnam. The Tokyo government signed agreements with its Hanoi counterpart in order to mutually open embassies and provide economic aid (which was tacitly understood as equivalent to Japan’s reparations of the Asia Pacific War) in October 1975, just half a year after the fall of Saigon.13 Even so, it is also noteworthy that Japan’s relationship vis-à-vis Hanoi went further than Washington’s diplomatic efforts. The United States refused to provide Hanoi with aid, which, according to the latter, was promised at the peace talks in Paris. The United States did reject Hanoi’s claim though, based on the reasoning that Hanoi had violated the 1973 Paris peace agreement by using her armed forces to liberate the South. Furthermore, the United States continued to embargo Vietnam, extending its target area from the northern half to the rest of the country. It is true that the possibility for improved relations arose between Washington and Hanoi during the Carter administration. The bilateral talks for the normalization of relations started in 1977, which enabled reunified Vietnam to become the 149th member of United Nations in the same year. But the United States finally suspended its talks with Hanoi by the end of 1978. As Sino-Vietnam relations deteriorated, Washington decided to choose Beijing and established diplomatic relations with China in January 1979.14 13

Shiraishi, M. (1990). op.cit. Chs. 2–3. Hess, G. (1998). Vietnam and the United States, Ch. 7. New York: Twayne Publishers; Ogasawara, T. (1989). US-Vietnam Relations, In Indochina in Transition: Confrontation or Co-prosperity, Mio, T. (ed.), Tokyo: Japan Institute of International Affairs. 14

b939_Chapter-06.qxd

7/15/2010

2:13 PM

Page 135

Japan and the Reconstruction of Indochina

135

In the meantime, Japanese leaders often tried acting as an intermediary to revive stagnated contacts between Washington D.C. and Hanoi. As Guy Faure and Laurent Schwab have put it,15 “bridge diplomacy” was the Tokyo government’s ability to use her diplomatic ties with both countries, to play an intermediary role between them. Another indicative expression of Tokyo’s willingness to engage in bridge diplomacy is found in the 1977 Manila speech delivered by Prime Minister Takeo Fukuda. In the speech which has been later called the Fukuda Doctrine, he emphasized three pillars of Japan’s diplomacy toward Southeast Asia: one, she would never become a military super power; second, she would develop multi-faceted and heart-to-heart relations with ASEAN partners; and third, she would contribute to peace and prosperity in the entire region of Southeast Asia by supporting ASEAN’s efforts for solidarity and resilience and at the same time cultivating good relations of mutual understanding with three socialist countries in Indochina. The third pillar was the expression of Japan’s readiness to act as a bridge between five ASEAN and three Indochinese countries. And this was especially aimed at dispelling the widely existing notion among ASEAN leaders that Japan had a hidden agenda in her provision of aid to socialist countries in Indochina. Prime Minister Fukuda wanted to express good will and foster Japan’s image as an honest broker.16 However, the outbreak of the Cambodian conflict in 1978 hampered Japan’s aspiration. She was forced to align herself with ASEAN and China and stand against pro-Soviet Vietnam and her sponsored Cambodian government in Phnom Penh. As a matter of fact, the Tokyo government froze her promised aid to Hanoi after the latter sent soldiers to Cambodia in late 1978 and formally suspended aid after the Soviet invasion of Afghanistan in late 1979. Thus, Japan’s relations with three socialist regimes in Indochina stagnated during the “New Cold War” 15

Faure, G. and Schwab, L. (2008). Japan–Vietnam: a Relation under Influences, p. 2. Singapore: NUS Press. 16 Sudo, S. (1992). The Fukuda Doctrine and ASEAN: New Dimensions in Japanese Foreign Policy, Singapore: Institute of Southeast Asian Studies; Shiraishi, M. (1990). op. cit. Ch. 3.

b939_Chapter-06.qxd

7/15/2010

2:13 PM

136

Page 136

M. Shiraishi

period, even though she tried to keep open her dialogue channels with those countries as much as possible. One such effort was reflected in the resumption of small-scale humanitarian aid to Hanoi in 1982. In the meantime, the Tokyo government continued aid (grants and technical assistance) for Laos, even though its amount was rather small. Nonetheless, Japan did not have much leeway in acting freely vis-à-vis Indochina. This was well illustrated by the fact that ASEAN members, especially Thailand and Singapore, as well as the United States Congress, openly raised voices against Japan, when some Japanese enterprises began to intensify business activities with Vietnam, shortly after Hanoi’s declaration of the Doi Moi policy in late 1986. At this point, the Japanese recognized that they had to wait for a more opportune time in order to break through the stalemate and improve relations with Indochina’s socialist countries.17 2.3 Cambodian peace In the late 1980s, several signs indicated a new development toward reconciliation in the Indochina subregion. An informal meeting for Cambodian peace, hosted by Indonesia that included the Cambodian contesting forces and Vietnam, was first held in Jakarta in July 1988. Soon after, Thai Premier Chartchai Choonhavan announced a new policy to transform Indochina from a battle field to a market place. As a matter of fact, Thailand, as a “frontline state”, which had initially taken a hawkish attitude toward Vietnam and her sponsored Phnom Penh government, was now beginning to show a reconciliatory posture toward them and even acted as a mediator among the contesting parties of the Cambodian conflict. When the international conference on Cambodia, which was a more comprehensive mechanism for peace, started in Paris in July 1989, Japan was invited as a member. In October 1990, the Japanese government contributed to the peace process by hosting the Tokyo meeting for the four Cambodian parties. Japan became one of the signatories of the Paris Peace Agreement on Cambodia in October 17

Shiraishi, M. (1990). op. cit. Ch. 4.

b939_Chapter-06.qxd

7/15/2010

2:13 PM

Page 137

Japan and the Reconstruction of Indochina

137

1991. This was the first occasion for post-World War Japan to participate in an international peace conference and sign a peace agreement as a third party country.18 When the UN transitional administration started in Cambodia, the Tokyo government sent its self-defense forces there in September 1992 to contribute to the UN-led peace keeping operation (PKO). This was again the first occasion for post-war Japan to dispatch her land forces abroad, even though a year earlier she had sent her naval forces (mine sweepers) to the Persian Gulf. Prior to this, Prime Minister Toshiki Kaifu made a speech in Singapore in May 1991, in which he announced Tokyo’s willingness to host an international conference for the economic recovery of Cambodia. In actuality, the Ministerial Meeting on Reconstruction of Cambodia was held in Tokyo in June 1992.19 Japan also took up a very positive attitude toward Vietnam. In November 1992, she resumed official development aid (yen loan) to the Hanoi government. Furthermore, the Japanese and French governments cooperated with one another to lead the successful holding of the first Vietnam Consultative Group (CG) Meeting in Paris in November 1993. Incidentally, the US government had expressed its new policy to allow international organizations’ resumption of financing to Vietnam in July 1993. Following this move, Washington finally lifted an embargo against Vietnam in February 1994 and normalized diplomatic relations in July 1995.20 18

Tomoda, S. (1997). Detaching from Cambodia, In Vietnam Joins the World, Nishihara, M. and Morley, J. (eds.), Armonk: M. E. Sharpe; Ogasawara, T. (2000). Kanbojia Wahei to Nihon Gaiko (Cambodian Peace and Japanese Diplomacy), In Nihon-Betonamu Kankei wo Manabu Hito no tameni (For Those who Study JapanVietnam Relations), Kimura, H. et al. (eds.), Kyoto: Sekai Shiso-sha. 19 Yamakage, S. (2003). Nihon-ASEAN Kankei no Shinka to Henyo (Deepening and Changes in Japan-ASEAN Relations). In Higashi Ajia Chiikishugi to Nihon Gaiko (East Asian Regionalism and Japanese Diplomacy), Yamakage, S. (ed.), Tokyo: Nihon Kokusai Mondai Kenkyujo. 20 Soeya, Y. (1997). Vietnam in Japan’s Regional Policy, In Vietnam Joins the World, Nishihara, M. and Morley, J. (eds.), Armonk: M.E. Sharpe; Dahm, H. (1999). French and Japanese Economic Relations with Vietnam since 1975, Ch. 3. Richmond: Curzon

b939_Chapter-06.qxd

138

7/15/2010

2:13 PM

Page 138

M. Shiraishi

In January 1993, Premier Kiichi Miyazawa made a speech in Bangkok, where he proposed the establishment of the Forum for Comprehensive Development of Indochina (FCDI). Its preparatory meeting at a senior official level took place in Tokyo at the end of the same year, and the ministerial meeting in Tokyo in February 1995. The main purpose of the Forum was to attract international attention in support of the economic recovery of Cambodia, Laos and Vietnam. The United States only sent observers, avoiding full involvement in this Japanese effort, which demonstrated her rather reserved attitude toward three Indochinese countries.21 The Japanese Ministry of Foreign Affairs itself also gradually lost eagerness in sustaining the FCDI and instead paid more attention in involving herself with other frameworks to help the CLMV countries’ socioeconomic development and Greater Mekong subregional cooperation. This suggested the fact that the 1977 Fukuda Doctrine’s key principle was losing its applicability vis-à-vis the rapidly changing situation in Southeast Asia. The third pillar of the Doctrine had been based on the premise that Southeast Asia was divided into two different, if not antagonistic, camps and therefore Japan could and should play a bridging role between them. Nevertheless, the actual development in the region was moving at a much faster pace than what the Japanese leaders had anticipated. The enlargement process of ASEAN had already started by the time the FCDI ministerial meeting was held.22

Press; Hess, C. (1998). Vietnam and the United States (revised edition), Ch. 7. New York: Twayne Publishers; Shiraishi, M. (2004). Taigai Kankei to Kokusai Ninshiki no Henka (Changes in [Vietnam’s] External Relations and Perceptions), In Betonamu no Taigai Kankei (Vietnam’s External Relations), Shiraishi, M. (ed.), Tokyo: Akatsuki Inshokan. 21 Shiraishi, M. (2004). Mekon Chiiki Kyoryoku to Betonamu (Mekong Regional Cooperation and Vietnam), In Betonamu no Taigai Kankei (Vietnam’s External Relations), Shiraishi, M. (ed.), Tokyo: Akatsuki Inshokan. 22 Ogasawara, T. (2001). Indoshina Gaiko Senryaku no Henyo (Changes in [Japan’s] Indochina Policy), In Ajia Seiji Keizai-ron: Ajia no nakano Nihon wo Mezashite (On Asian Politics and Economies with Special Attention to Japan’s Position in Asia)

b939_Chapter-06.qxd

7/15/2010

2:13 PM

Page 139

Japan and the Reconstruction of Indochina

139

2.4 ASEAN enlargement The ASEAN enlargement was the main locomotive behind the structural change of the regional balance of power in Southeast Asia after Cambodia regained peace. The first Japanese effort to catch up with this new development was to help the CLMV countries join ASEAN itself. And in the next stage, as the CLMV countries one after another became ASEAN members, Japan tried helping them to narrow their gap with the ASEAN forerunners (ASEAN divide issues) and consequently contributing to the process of ASEAN integration. It was the Ministry of International Trade and Industry (MITI) rather than the Ministry of Foreign Affairs that quickly started this kind of effort. When Economic Minister Ryutaro Hashimoto (who would become Prime Minister two years later) met his Southeast Asian counterparts at the third AEM–MITI in Chiang Mai in April 1994, they agreed to establish the Working Group on Economic Cooperation in Indochina. The Working Group first met in Bangkok in March 1995. The main purpose of this Working Group was to provide CLMV officials and specialists with opportunities of training and workshops in order to obtain necessary knowledge and skills to become ASEAN members and also to conduct joint research and studies for drafting development plans in various industrial sectors. This scheme fell into the category of triangular assistance from the Japanese point of view: i.e. Japan would encourage and help the south-to-south cooperation between and among developing countries. For instance, Japan would provide financial and technical assistance to a Thai organizer of seminars that invited and trained government officials and specialists from CLMV countries. By 1997, however, the mandate of the Working Group had almost become outdated, as Laos and Myanmar became regular ASEAN Suehiro, A. and Yamakage, S. (eds.), p. 357. Tokyo: NTT Shuppan; Yamakage, S. (2003). op. cit. pp. 16–17; Shiraishi, M. (2004). Mekon Chiiki Kyoryoku to Betonamu (Mekong Regional Cooperation and Vietnam). op. cit., pp. 208–209.

b939_Chapter-06.qxd

140

7/15/2010

2:13 PM

Page 140

M. Shiraishi

members following the suit of Vietnam. In the meantime, the financial crisis broke out in Thailand and swiftly spread over the whole region of East Asia. In order to cope with this changing situation, the sixth AEM–MITI in Kuala Lumpur in October 1997 decided to replace the Working Group within a new framework: ASEAN–MITI (later ASEAN–METI) Economic and Industrial Cooperation Committee (AMEICC). The Committee first met in Bangkok in November 1998. Its main function was to help the CLMV countries tackle the ASEAN divide issues and also to enhance the competitiveness of ASEAN economies as a whole by promoting regional integration and upgrading main industries not only in new ASEAN members but the old members seriously hit by the financial crisis as well.23 Meanwhile, the Japanese Ministry of Foreign Affairs also expressed its eagerness to contribute to infrastructure building in GMS, especially EWEC and SEC, and support regional and subregional cooperative frameworks such as IAI and ACMECS. EWEC (East-West Economic Corridor) and SEC (Southern Economic Corridor) were the projects proposed by the ADB and agreed upon by the 8th GMS ministerial conference in Manila in October 1998. The projects aimed to build and improve cross-border transport infrastructures and communication and energy links from central Vietnam through Laos and northeastern Thailand to eastern Myanmar and from southern Vietnam through Cambodia to Thailand respectively. With the formation of such corridors, the flow of goods, people, information and energy across borders would be facilitated between and among subregional countries, which had long been physically and psychologically separated from each other. This creation of mutual connectivity would eventually stimulate socio-economic development and reduce poverty in the subregion.24 23

Shiraishi, M. (2001). Indoshina-ken wo meguru Betonamu no Inishiatibu to ASEAN-Nihon Kyoryoku. (Vietnam’s Initiative in the Mekong Region and ASEANJapan Relations), In ASEAN Togo to Shinki Kameikoku Mondai Kenkyu Iinkai Hokokusho (Report of the Study Group on ASEAN Integration and Its New Members’ Issues), Sangyo, C. Kenkyujo, B. (ed.), Tokyo. 24 Asian Development Bank (2005). Building on Success: GMS Flagship Programs and Development Matrix. http://www.adb.org/GMS/Projects/default.asp.

b939_Chapter-06.qxd

7/15/2010

2:13 PM

Page 141

Japan and the Reconstruction of Indochina

141

The IAI (Initiative for ASEAN Integration) was first proposed by Singaporean Premier Goh Chok Tong and agreed upon by the Fourth ASEAN Informal Summit in Singapore in November 2000, to narrow the development gap within ASEAN (as well as between ASEAN and the other parts of the world) to foster better ASEAN integration.25 The ACMECS (Ayeyawadi–Chao Phraya–Mekong Economic Cooperation Strategy) was the framework created under Thai Premier Thaksin Shinawatara’s initiative. Its original members were Thailand and her neighboring countries, Myanmar, Laos and Cambodia, but Vietnam later became the fifth member, thus the framework encompassed all countries in continental Southeast Asia.26 IAI and ACMECS were typical frameworks of south-to-south cooperation in which the founding members of ASEAN could help the newcomers. The Tokyo government also expressed its willingness to help the three Indochinese countries’ plan: the “Development Triangle”. This was originally agreed upon at the tripartite summit of Vietnam, Cambodia and Laos, which was held in Vientiane in October 1999. This was the first occasion since the Cambodian peace where only the three heads of state met together. The Development Triangle plan was aimed at, through mutual cooperation between the three nations, eradicating poverty and stimulating socio-economic development in the least developed areas of these countries, which were bordering provinces. This attempt also fell into the category of south-to-south cooperation, but without the involvement of more developed members. It was certain that Vietnam was ahead of the two in economic development and was therefore in a position to provide limited scale of aid to her counterparts. But, at any rate,

25

Association of Southeast Asian Nations Secretariat (2009). Initiative for ASEAN Integration (IAI) Work Plan for CLMV Countries. http://www.aseansec.org/pdf/ IAI_doc 1_6904pdf ; Association of Southeast Asian Nations Secretariat (2009). Bridging the Development Gap among Members of ASEAN. http://www.aseansec.org/ 14683.htm. 26 ACMECS Official Site (2009). About ACMECS. http://www.acmecs.org/index. php?id=9.

b939_Chapter-06.qxd

142

7/15/2010

2:13 PM

Page 142

M. Shiraishi

they badly needed financial and technical assistance by any third parties.27 When Premier Koizumi visited Vientiane to attend the ASEAN+3 summit in November 2004, the three prime ministers of Indochina met him and asked Tokyo’s support for the Development Triangle plan.28 Since then, the Japanese assistance to the plan has been rendered mainly through the GGS (Grant Assistance for Grassroots Human Security Projects) and, more recently, JAIF (Japan ASEAN Integration Fund) schemes for basic human need (BHN) facilities such as local clinics, schools, clean water supply systems and small roads.29 Thus, many of Japan’s recent assistance toward the Indochina subregion have been clearly oriented to gain a wider scope in promoting cross-border connectivity and regional integration. At the same time, the triangular assistance scheme is often applied to support multilateral cooperation and enhance mutual complementarity among the subregional economies. 3. Japanese ODA toward the Indochina Subregion In the history of Japan’s official development assistance (ODA), the bilateral scheme has been predominant: Japan provides a certain country with aid through bilateral negotiation and agreement and with the anticipation that the aid will help socio-economic development in the 27

Shiraishi, M. (2006). Mekong Chiiki Kyoryoku no Tenkai (Development of the Mekong Regional Cooperation). In Indoshina niokeru Ekkyo Kosho to Fukugo Kairo no Tenbo (Prospects of Border-Cross Transactions and Multi-layered Corridors in Indochina), Shiraishi, M. (ed.), pp. 12–13. Tokyo: Waseda Daigaku Daigakuin AjiaTaiheiyo Kenkyuka. 28 Joint Press Release of Cambodia, Laos, Vietnam (CLV) and Japan Summit, (30 November 2004). http://www.mofa.go.jp/region/asia-paci/clv/joint0411.html. 29 Japan Ministry of Foreign Affairs (2005). Nihon no CLV (Kanbojia, Raosu, Betonamu) Shien no Aratana Inishiativu (New Initiative in Japan’s Supports to the CLV), (13 December), http://www.mofa.jo.jp/mofaj/s_koi/asean05/clv.html; Japan Ministry of Foreign Affairs (2008), Memorandum for Cooperation on the Cambodia–Lao PDR–Viet Nam Development Triangle Using the Assistance by Japan through the Japan–ASEAN Integration Fund. (16 January), http://www.mofa/go/jp/region/asia-paci/Mekong/meet0901-2.html.

b939_Chapter-06.qxd

7/15/2010

2:13 PM

Page 143

Japan and the Reconstruction of Indochina

143

recipient country. Again in this regard, the Indochina subregion has become a testing ground for Japan’s new and pioneering experiment beyond the conventional bilateral scheme, which she had not seriously tried elsewhere. Japan’s ODA is usually divided into two categories: bilateral and multilateral. Multilateral aid is the scheme within which Japan provides a budget to international or multi-governmental organizations. Bilateral aid on the other hand is the scheme where Japan provides aid to a single recipient country on the basis of the two parties’ negotiation and agreement. And the most frequently used classification of bilateral assistance is based on the three types of payment: grants, yen loans, and technical assistance.30 However, here, we apply another way of categorization. This is based upon the three different aims of assistance: for (1) hard infrastructure buildings mainly to promote economic growth itself, (2) the improvement of social facilities and living standards largely aimed to reduce poverty and narrow the socio-economic gap, and (3) legal and institutional reforms, human resource development and capacity building.31 3.1 Hard infrastructure projects Among the hard infrastructure projects in which Japan has assisted in the Indochina subregion, the projects aimed to enhance mutual connectivity along with the GMS East-West Economic Corridor (EWEC) are the rehabilitation and upgrading of the Da Nang sea port, the building of the Hai Van tunnel between Da Nang and Hue of central 30

Sato, H. (ed.), (1996). Enjo Kenkyu Nyumon (Introduction to ODA Studies), pp. 6–7. Tokyo: Ajia Keizai Kenkyujo. 31 For example, Japan’s New Country Assistance Program for Vietnam, mapped out by the Comprehensive Strategic Council for ODA in April 2004, applied this type of categorization. Embassy of Japan in Vietnam (2004), Japan’s New Country Assistance Program for Vietnam. http://www.vn.emb-japan.go.jp/html/ pr_CAP.html. The full text in English is Japan Ministry of Foreign Affairs (2004), Japan’s Country Assistance Program for Vietnam, http://www.mofa.go.jp/policy/ oda/region/e_asia/Vietnam.pdf.

b939_Chapter-06.qxd

144

7/15/2010

2:13 PM

Page 144

M. Shiraishi

Vietnam, the improvement and widening of the western portion of Route No. 9 in Laos, and the construction of the second Mekong international bridge between Laos and Thailand. The improvement and widening of Cambodian Route No. 1 between Phnom Penh and Neak Loeun, which is now undergoing construction, is the project along the GMS Southern Economic Corridor (SEC), or sometimes called by the Japanese as the Second East-West Corridor. In addition, the Tokyo Government has expressed interest in a project to construct the Neak Loeun bridge on Route No. 1 over the Mekong mainstream. The building of the Thi Vay and Cai Mep ports near Ho Chi Minh City are to serve as another sea outlet than the existing Saigon port for the Southern Corridor.32 In brief, the Tokyo government has provided aid on a bilateral basis to almost all of the above projects, the majority of which are in the form of yen loans but some in the form of grants. Despite her bilateral arrangement in ODA payments, Japan is very much concerned about their wider significance in subregional development and cross-border connectivity. Among them, quite exceptional in terms of the payment scheme is the case of the second Mekong international bridge which connects Savannakhet in Laos and Mukdahan in Thailand over the Mekong mainstream. The Japan Bank for International Cooperation (JBIC) provided yen loans to both Thailand and Laos, applying the same favorable conditions in repayment, with which Japan usually would not bestow upon a relatively developed country such as Thailand. At any rate, this is the first occasion in the history of JBIC where it gave loans to more than one country for a single project.33 There were still many other ODA projects in places other than the East-West and the Southern Corridors, which consequently improved 32 The Japanese Ministry of Foreign Affairs lists ODA projects that assist the Mekong subregional development in “Mekon Chiiki Kaihatsu” (Mekong Regional Development). http://www.mofa.go.jp/mofaj/gaiko/oda/data/chiiki/m_kaihatsu/ 01viet.html; 02camb.html; 03thai.html; and 04lao.htm; field.html. 33 Japan Bank for International Cooperation (2001). http://www/jbic.go.jp/ autocontents/Japanese/news/2001/000127/Thai.htm; http://www.jbic.go.jp/ japanese/base/topics/040603/index.php.

b939_Chapter-06.qxd

7/15/2010

2:13 PM

Page 145

Japan and the Reconstruction of Indochina

145

crossborder development in the subregion, even though they were not in Japan’s original idea. For example, the upgrading of National Route No. 5 in northern Vietnam between the country’s capital, Hanoi and the major port city, Hai Phong, the rehabilitation and improvement of the Hai Phong sea port, and the construction of the Bai Chay bridge in Ha Long on Route No. 18 have all turned out to greatly improve connectivity between northern Vietnam and southwestern China.34 The future construction projects of Vietnam’s north-south super highway and rapid transit railway, which Premier Shinzo Abe promised to his counterpart Nguyen Tan Dung in a bilateral meeting in Tokyo in October 2006,35 also has big potential to enhance connectivity between continental Southeast Asia and China. One can even dream of travel by super express train from Singapore through Bangkok, Ho Chi Minh City and Hanoi northward to Beijing. In summary, those transport infrastructure projects as well as thermo power and other projects for which Japan has assisted ASEAN new members do not only contribute to the economic growth and competitiveness of each recipient country, but also serve the purpose of helping her catch up with the more developed economies in the region. Many of the transport projects have also actual and potential significance in physically connecting the recipient country with the rest of the subregion and areas beyond it.

34

For instance, the Route 5 project, carried out in three phases from 1994 to 1996, began well before the concept of the GMS Economic Corridors was publicly announced in 1998. But the Japanese Ministry of Foreign Affairs now includes this project in the list of the ODA projects cited in note 32. As for the Bai Chay bridge construction project (completed in December 2006), JBIC only mentions its anticipated effects on the transportation and economic development in northern Vietnam [http://www/jbic.go.jp/autocontents/Japanese/news/2001/000028/nr13d.html], although its constructor, Shimizu Kensetsu Co., emphasizes its importance with regard to the transport connection between Vietnam and China. http:// www.shimiz.o.jp./tokusyu/kyouryou/baichaihtml. 35 Japan–Vietnam Joint Statement toward a Strategic Partnership for Peace and Prosperity in Asia, (19 October 2006). http://www/mofa.go.jp/region/asia-paci/ Vietnam/joit06.10.html.

b939_Chapter-06.qxd

146

7/15/2010

2:13 PM

Page 146

M. Shiraishi

3.2 The second and third categories of Japanese ODA The second category of Japanese bilateral assistance, which is to improve social facilities and living standards, usually financed in the form of grants, is also workable for the promotion of subregional links and connectivity, as demonstrated in the case of the CLV Development Triangle plan. For instance, a provincial clinic in Vietnam, built with Japanese ODA, will be able to serve not only the local inhabitants, but also the people in southern Laos and northeastern Cambodia who travel across the border. If Japan helps the establishment of a vocational training school on either side of borders, it would bring a similar merit. The third category of Japanese aid, in the field of legal and institutional reforms, human resource development and capacity building, which is usually financed through grants and technical assistance, can also contribute to the CLMV’s efforts to reduce the development gap and encourage ASEAN integration. It is equally beneficial for promoting confidence-building and mutual understanding among subregional countries and between new and old ASEAN members. Taking the case of legal and institutional reforms, Japan is helping the Indochina countries undergoing transitional economies to promote the marketization process, legal and tax reforms, among many others. In this respect, one example is the Japan–Vietnam Joint Initiative to improve the latter’s investment environment. This started with an agreement between Premiers Junichiro Koizumu and Phan Van Khai in April 2003.36 The Initiative which is joined by Japanese business people as well as Japanese government officials has now entered the third phase, following the successful achievements in the first and second phases (2003–2007). This is quite unique in the sense that the Japanese side points out inadequacies in Vietnam’s legal and institutional frameworks and operating mechanisms while working together with Vietnamese counterparts to ultimately list up practical prescriptions 36

Joint Committee of the Vietnam–Japan Joint Initiative to Improve Business Environment with a view to strengthen Vietnam’s Competitiveness (2003). VietnamJapan Joint Initiative to Improve Business Environment with a View to Strengthen Vietnam’s Competitiveness. Hanoi.

b939_Chapter-06.qxd

7/15/2010

2:13 PM

Page 147

Japan and the Reconstruction of Indochina

147

for each sector. This entails the creation of new rules, the alteration of existing regulations and the changes in the ways of conduct, which the Vietnamese authorities, backed by Japanese financial and technical assistance, should realize. The implementation process is to be regularly monitored by the joint committee. This kind of attempt has a shade of Japanese intervention in domestic politics and internal affairs of the recipient country. In this regard, it is again a rather bold pilot experiment for Japan, whose traditional ODA policy has been based upon the principle of non-interference. In the field of human resource development and capacity building, the Japanese governmental and semigovernmental agencies have a variety of aid programs that invite and train officials and specialists from CLMV countries, either separately on the respective country basis or jointly on the subregion-wide basis. They also send Japanese experts to recipient countries to give advice and organize seminars, etc. The Japan International Cooperation Agency (JICA) has built a human resource development center in major cities in the subregion.37 These programs are intended to narrow the gap in knowledge, skills and experiences between the new ASEAN members and the rest of the region. Furthermore, in the case where multinational trainees from the subregional countries are invited to Japan and put together in the same place, they are given a good opportunity for mutual contacts and exchanges. The triangular support mechanism can also be a good vehicle to encourage the process of mutual understanding not only among the trainees but between the trainers of host countries such as Thailand and trainees from CLMV countries. In the same vein, programs such as the Japanese Grant Aid for Human Resource Development Scholarship (JDS) which have invited young talents from Asian countries of transitional economies to study at 37

The Japan Center for human resource cooperation has been established in Vietnam (both Hanoi and Hochiminh City), Cambodia, and Laos as well as some former Soviet republics (Ukraine, Uzbekistan, Kazakhstan and Kyrgyz) and Mongolia. The construction of a center in Myanmar is now suspended. See the home page of Welcome to Japan Center. http://japancenter.jica.go.jp/index_e.html.

b939_Chapter-06.qxd

148

7/15/2010

2:13 PM

Page 148

M. Shiraishi

graduate level in Japanese universities have been quite successful.38 These young students encounter those from various countries in and out of the Indochina subregion as well as Japanese colleagues on the same campus. In brief, through various programs in the second and third ODA categories, Japan does not only help with the catch-up efforts of CLMV countries, but provides them with good opportunities for direct human contacts and networking. Japan also donates a part of her ODA budget to intergovernmental agencies such as ADB (i.e. through a multilateral scheme) so that the latter can carry out multinational programs and projects covering a wider scope and involving multiple recipient countries.39 As mentioned earlier, triangular assistance programs also have similar merits.40 4. Japan and Indochina Facing the New Development of East Asia Regionalism As mentioned above, with the 1997–98 financial crisis as a crucial turning point, a new wave of regionalism or mega-regionalism had spread in East Asia, which includes both Southeast and Northeast Asian countries. One embarrassing problem in this expansion is however the increasing rivalry and competition among concerned parties. The most notable is the case between Japan and China who are competing for 38

JDS is now offered to students not only from Cambodia. Laos and Vietnam, but China, the Philippines, Mongolia, Bangladesh, Kyrgyz, and Uzbekistan as well. http:// sv2.jice.org/jds/scholarships/index.html. 39 Twenty-four projects are listed (as of 2009) by the Japanese Ministry of Foreign Affairs to support the Mekong subregional development through the Japan Special Fund (JSP) donated to ADB. Among them only one case targets a single recipient country, and two cases target two countries. The rest are all multilateral projects involving three or more countries (often including China as well) mainly for joint research, capacity building, workshops and training courses in the fields of environment, health care, poverty reduction, tourism, transport and energy among others. http:// www.mofa.go.jp/mofaj/gaiko/oda/data/chiiki/m_kaihatsu/main03-01.html. 40 The Japanese Ministry of Foreign Affairs lists 31 cases of Japanese grants to Thailand to carry out training Third world countries from 1992 to 2005 which invited trainees from neighboring countries. See the list cited in note 32.

b939_Chapter-06.qxd

7/15/2010

2:13 PM

Page 149

Japan and the Reconstruction of Indochina

149

the leadership role in making a new regional arrangement and especially in trying to gain influence in Southeast Asian nations. 4.1 Pan-Asianist and pan-Pacific trends against the historical backdrop Looking back at the history of Japan’s concerns toward the region, there was a strong psychological attachment among many Japanese leaders and intellectuals to Pan-Asianism from the Meiji period. This concept was generally based on the dichotomous view of the world, divided between the invading Western powers and the oppressed Asian nations. A sort of Pan-Asianism culminated, during the period of the Asia Pacific War, in the Greater East Asia Summit which was held in Tokyo in November 1943.41 By contrast, the idea of Pan-Pacific cooperation was relatively new for the Japanese. The first outstanding instance was the creation of the Institute of Pacific Relations in 1925, where Japanese intellectuals shared a spirit of friendship and harmony with their counterparts from USA, Canada, Australia and New Zealand as well as China and the Philippines.42 In the Cold War period and especially since the 1970s, the Japanese were more interested in the Pacific-rim and, in its extended form, Asia Pacific cooperation. And in actuality, such forums including the Pacific Economic Cooperation Council (PECC, 1980–) and the Asia Pacific Economic Cooperation (APEC, 1989–) were born through an intimate collaboration between Japanese and Australian academic, business and political elites.43 These architectures seem to have contained, especially 41

Furuya, T. (2001). Ajia-shugi to sono Shuhen (Asianism and the Related Issues) In Kindai Nihon no Ajia Ninshiki (Japanese Perception of Asia in the Modern Ear), Furuya, T. (ed.), Tokyo: Ryokuin Syobo. 42 Yamaoka, M. (2005). Kokusai Kankei ni kansuru Chi no Seido-ka (Institutionalization of an Intellectual Organization in International Relations), pp. 1–8. Tokyo: Ronso-sha. 43 Watanabe, A. (1992). Ajia-Taiheiyo no Kokusai Kankei to Nihon (International Relations in the Asia Pacific and Japan), Ch. 5–6. Tokyo: Tokyo Daigaku Shuppan-kai; Terada, T. (2006). Thirty Years of the Australia-Japan Partnership in Asian Regionalism. Australian Journal of International Affairs, Vol. 60, No. 4.

b939_Chapter-06.qxd

150

7/15/2010

2:13 PM

Page 150

M. Shiraishi

in the initial period, an idea to create a regional cooperation mechanism by developed Pacific-rim powers (namely Japan and Australia as well as USA and Canada) as the core members while involving developing countries as followers or junior partners. On the other hand, post-war Japanese leaders were rather reluctant vis-à-vis the concept of East Asia regionalism, which would explicitly or tacitly exclude developed powers other than Japan. One of the reasons behind their reluctance was the stigma of the “Greater East Asia Co-Prosperity Sphere”. Many Japanese almost instinctively rejected or avoided invoking this memory, especially where Japan would take a lead in promoting a regional block. Another more important reason was that the Japanese were worried about the exclusive nature of such an attempt, especially when the United States disliked this pattern of regional formation. It is true that Japan had more vested interests in Southeast Asia than the United States, and she had cultivated very close ties as a dialogue partner with ASEAN since the early 1970s. But this was purely a relationship of dialogue and negotiation between Japan on the one hand and Southeast Asian nations as a group on the other, but not the mechanism within which both parties would create an exclusively institutionalized group, much less a regional community of any sort.44 When Japan proposed to ASEAN partners the holding of a special summit to commemorate the 30th anniversary of ASEAN in 1997, it seemed that she only intended to enhance the already existing close ties between them. ASEAN’s counterproposal was however to invite not only Japanese but Chinese and South Korean heads of state to attend the ASEAN summit as special guests. It is hardly conceivable that the proposers had a very articulated vision from the start to eventually establish an East Asia community. But as the ASEAN+3 framework became quickly institutionalized, more and more voices and discourses for such a community started to be widely heard.45 44

Sudo, S. (2002). op. cit., Ch. 3. Yamakage, S. (2003). op. cit.; Ito, K. and Tanaka, A. (eds.), (2005). Higashi Ajia Kyodotai to Nihon no Shinro (East Asia Community and Japan’s Course Ahead), Ch. 1. Tokyo: NHK Shuppan.

45

b939_Chapter-06.qxd

7/15/2010

2:13 PM

Page 151

Japan and the Reconstruction of Indochina

151

One of the main reasons for this new movement was that the United States did not strongly oppose this idea as she had done before, even though her voice of apprehension was heard from time to time. Nevertheless, Japan tried to avoid the formation of a narrow East Asian regionalism, by strongly supporting the invitation of Australia and New Zealand as well as India, when ASEAN+3 leaders were discussing the start of the East Asia Summit. The first summit was actually held in Kuala Lumpur at the end of 2005, with the participation of ASEAN plus six countries, as Japan had hoped for. The inclusion of “white” countries would dilute the stereotypical image of the East Asia community as a closed club for yellow people.46 At the same time, it is widely believed that the Japanese strong voice was also motivated by their hidden agenda to use Australia and India as a counterweight against the growing presence of China in the regional setting.47 As a matter of fact, China’s influence was growing in the Asia Pacific in general and Southeast Asia in particular. 4.2 Japan’s diplomatic contest with China It is really remarkable when one compares China’s current status in the region with that of just a decade ago. During the early 1990s, China was still regarded with suspicion by Southeast Asians, even though she had succeeded in the establishment or restoration of official relations with all of Southeast Asian countries by 1991. The major sources of their apprehension were that China’s rising economy in itself might turn her into a formidable competitor, not to mention security concerns that include her growing military, especially naval, power and the Spratly issues coupled with her 1992 adoption of the territorial water law. 46 Japan had consistently insisted on including Australia and New Zealand in the East Asian regional cooperation, most notably ASEM (Asia–Europe Meeting), since the mid1990s. Funabashi, Y. (1995). Ajia Taiheiyo Fujon (Asia Pacific Fusion), p. 352. Tokyo: Chuo Koron-sha; argued that one of the reasons behind the Japanese insistence was their uneasiness about the exclusive Asian grouping which had the odor of a “racist block”. 47 Foreign Press Center Japan (2005). Hatsu no Higashi Ajia Shuno Kaigi (The First East Asia Summit), (15 December 2005) [http://fpcj.jp/old/j/mres/japanbrief/ jb_594.html]; Malik, M. (2005). The East Asia Summit: More Discord than Accord. Yale Global.

b939_Chapter-06.qxd

152

7/15/2010

2:13 PM

Page 152

M. Shiraishi

However, since the outbreak of the 1997 financial crisis, China’s relations with Southeast Asia was ameliorated and then became increasingly closer. China started to openly support the idea of regionalism, by becoming a member of the ASEAN+3 dialogue and concluding a free trade agreement (FTA) with ASEAN. She also bilaterally promoted economic and diplomatic relations with CLMV and Thailand.48 In order to cope with China’s diplomatic offensives and her rapidly increasing ties with Southeast Asia, Japan also started negotiations for an economic partnership agreement (EPA) with ASEAN as a group and with its members on a bilateral basis. She also hosted a special summit of ASEAN plus Japan in Tokyo in December 2003.49 48

Glosserman, B. (2003). China and the New Geometry of East Asia. China: An International Journal, Vol. 1, No. 1; Shambaugh, D. (2004). China Engages Asia. International Security, Vol. 29, No. 3; Ho, K. L. and Ku, S. C.Y. (eds.) (2005). China and Southeast Asia: Global Changes and Regional Challenges, Singapore: Institute of Southeast Asian Studies; Mori, K. (2005) Higashi Ajia Kyodotai to Chugoku no Chiiki Gaiko (East Asia Community and China’s Regional Diplomacy), In Chiikishugi no Kokusai Hikaku (International Comparison of Regionalisms), Yamamoto, T. (ed.), Tokyo: Waseda Daigaku Shuppankai, 2005. 49 Sutter, R. (2002). China and Japan: Trouble Ahead? The Washington Quarterly; Yunhua, C. (2005). US–ASEAN, Japan–ASEAN Relations and Their Impacts on China. In ASEAN–China Relations: Realities and Prospects, Swee-Hock, S. et al. (eds.), Singapore: Institute of Southeast Asian Studies; Sato, K. (2006). Higashi Ajia Community Koso to Nihon (Idea of the East Asia Community and Japan), Ajia Kenkyu (Asian Studies), Vol. 52, No. 3. Incidentally, Self, B. (2002). China and Japan: A Façade of Friendship, p. 85. The Washington Quarterly, uses a metaphor of “the two big fish in a small pond” to describe the Sino-Japanese rivalry for regional leadership. In the meantime, Ditimer, L. (2002). East Asia in the ‘New Era’ in World Politics, p. 63. World Politics, No. 5, points out that China and Japan are trapped in a kind of dilemma: “if one of the two grasps the nettle, the other feels obliged to participate for fear of being left out”. Generally speaking, the Sino-Japanese dissonance is seen at three levels. At the bilateral level, there are the historical controversy of Japanese aggression and its issues related to the Yasukuni Shrine and revisionist textbooks, and the territorial dispute in the East China Sea, among others. In the regional context, there is a competition for the leadership role. And in the framework of United Nations, Japan’s bid for a permanent Security Council seat and China’s opposition to it. The various issues at these three levels are often influenced by each other and caught in a vicious circle.

b939_Chapter-06.qxd

7/15/2010

2:13 PM

Page 153

Japan and the Reconstruction of Indochina

153

In this special summit, the Tokyo Declaration and the Plan of Action were agreed upon by the participants, and another document was presented by the Tokyo government, the title of which was the “New Concept of Mekong Region Development”.50 In these documents, Japan placed the significance of the Mekong subregional development on the promotion of ASEAN’s integration through a well balanced development of its members. In line with this principle, Prime Minister Koizumi declared at the summit that Japan would provide 1.5 billion US dollars over a threeyear period for the Mekong subregion. More precisely, he expressed the preparedness to help the construction of the East-West and Southern Corridors which would connect horizontally continental Southeast Asian countries. The Tokyo government also promised to support the activities of IAI and ACMECS, aiming to narrow the development gap through south-to-south cooperation between the old and new ASEAN members. Japan on the other hand did not show her willingness to support the building of the North-South Corridor which would strengthen the vertical linkage between China and continental Southeast Asia. Two years earlier than the aforementioned summit, a ministerial meeting of the East-West Corridor was held in Mukdahan of northeastern Thailand in November 2001. Japan was the only extraregional invitee to meet Thai, Laotian and Vietnamese counterparts. Taimei Yamaguchi, parliamentary secretary for foreign affairs, attended the meeting as the deputy of Foreign Minister Junko Kawaguchi.51 He stressed the following points in his speech. The significance of Japan’s 50

Japan Ministry of Foreign Affairs (2003). Tokyo Declaration for the Dynamic and Enduring Japan–ASEAN Partnership in the New Millennium (12 December); The Japan–ASEAN Plan of Action; and New Concept of Mekong Region Development http://www.mofa.go.jp/mofaj/kaidan/s_koi/asean_03/index.html. 51 Full title of the meeting was “Quadripartite Ministerial Meeting on the Utilization of the Second Thai-Lao Mekong Bridge (Mukdahan-Savannakhet) and the Development of Areas along the Eastern Part of the East-West Economic Corridor”. Thai Ministry of Foreign Affairs (2001). http://www/mfra.go.th/web/showNews. php?newsid=3575&Qsearch]. Yamaguchi’s speech in the meeting on November 22, 2001 is in Japan Ministry of Foreign Affairs (2001). http://www.mofa.go.jp/mofaj/ press/enzetsu/13/eya_1122html.

b939_Chapter-06.qxd

154

7/15/2010

2:13 PM

Page 154

M. Shiraishi

assistance for the Mekong subregional development was, first, its wide ranging attempt to produce cross-border effects and, second, its contribution to ASEAN integration through narrowing the gap between the new and old members. In line with this basic understanding, he more concretely explained Tokyo’s attachment to support the EastWest Corridor and Southern Corridor projects as well as ASEAN’s efforts for south-to-south cooperation. But he remained quiet as to any projects related to China such as the North-South Corridor. More recently, the Japanese government hosted the first JapanMekong Foreign Ministers’ Meeting in Tokyo. The idea of the meeting was first expressed by Tokyo in January 2007, when it published a policy paper “Japan–Mekong Region Partnership Program”.52 The meeting was actually held in January 2008, with the participation of Foreign Minister Masahiko Komura and his counterparts from five continental Southeast Asian countries, excluding the Chinese. The timing of the meeting was two months earlier than that of the third GMS summit in Vientiane where Chinese Prime Minister Wen Jiabao would meet his counterparts of CLMV and Thailand. In the Tokyo ministerial meeting, Japan repeated her preparedness to support subregional cooperation projects, such as the East-West and Southern Corridors and the CLV Development Triangle, while all the participants reaffirmed the further deepening of bilateral and collective partnership between Japan and the subregional countries. They also agreed that 2009 would be the “Japan-Mekong exchange year”.53 The second Japan-Mekong ministerial meeting was held in Siem Reap of Cambodia in October 2009. New Foreign Minister Katsuya Okada attended it and declared that Japan would contribute to the Mekong subregion’s development more actively than in the past years, from the view point that the subregion’s stability and 52

Japan Ministry of Foreign Affairs (2000). Japan’s Official Development Assistance White Paper 2007, Part II, Ch. 1, Section 3.1. 53 Japan Ministry of Foreign Affairs (2008). Chair’s Statement Mekong–Japan Foreign Ministers’ Meeting. http://www.mofa.go.jp/region/asia-paci/Mekong/ meet0801.html.

b939_Chapter-06.qxd

7/15/2010

2:13 PM

Page 155

Japan and the Reconstruction of Indochina

155

development would reduce the gap within the ASEAN region and that the regional integration of ASEAN would help the peace and prosperity in Asia and promote the future formation of East Asia community. He and his counterparts also agreed to hold regularly Japan-Mekong foregin ministers’ meeting.54 Shortly after, but still in the same month, the first Japan-Mekong economic ministers’ meeting was held in the same place as the ASEAN+3 and East Asia summits, Hua Hinh of Thailand. Japanese Minister of Economy, Trade and Industry Masayuki Naoshima met his counterparts from five continental Southeast Asian countries. The participants agreed to start the Mekong-Japan economic and industrial cooperation initiative (MJ-CI) by utilizing existing cooperation schemes such as AMEICC working group on West-East corridor development.55 Furthermore, as a highlight of the exchange year, the first JapanMekong summit was held in Tokyo in November 2009. Premier Yukio Hatoyama declared that Tokyo would increase aid toward the Mekong subregion as a prioritized area in its ODA policy, providing more than 500 billion yen within three years especially to Cambodia, Laos and Vietnam. Heads of Governments from five continental Southeast Asian countries also agreed with Hatoyama’s idea to launch an inititative for “a decade toward the green Mekong”.56 Thus, partly spurred by the rapidly growing presence of China in the East Asia region, Japan has become more and more ardent in the Mekong subregional development, insofar as to promote horizontal connectivity inside continental Southeast Asia. On the other hand, she remains less active concerning other aspects of the Greater Mekong subregional cooperation, i.e. the enhancement of the vertical linkage between the southwestern part of China and the continental part of Southeast Asia. Even so, it is also true that, of the projects for 54

Japan Ministry of Foreign Affairs (2009). http://www.mofa.go.jp/mofaj/area/ j_mekong/0910_kg.html; Kyodo News (Oct. 3 and Oct. 5, 2009). 55 Japan Ministry of Economy, Trade and Industry (2009). http://www.meti.go.jp/ topic/downloadfiles/091024e.pdf. Kyoto News (Oct. 24, 2009) 56 Japan Prime Minister Office (2009). http://www.kantei.go.jp/jp/hatoyama/ statement/200911/07mekong.html and Japan Ministry of Foreign Affairs (2009). http://www.mofa.go.jp/region/asia-paci/mekong/summit0911/declaration.html

b939_Chapter-06.qxd

7/15/2010

156

2:13 PM

Page 156

M. Shiraishi

which Japan has provided ODA to Southeast Asian countries on a bilateral basis, some have the effect of facilitating and enhancing the connections between China and Southeast Asia as mentioned earlier.

Conclusion 1. From Bilateralism to Multilateralism Since the end of the Asia Pacific War, the Indochina peninsula has often been the testing ground for Japanese diplomacy. Vietnam was the only case in East Asia where Japan recognized both governments of a nation divided by the Cold War confrontation. In the case of China, Japan severed diplomatic relations with Taipei in 1972 when it officially recognized the Beijing government. In the case of Korea, to this day, Japan hasn’t still established official relations with Pyongyang.57 South Vietnam was probably the first case for post-World War II Japan where she had to close down her embassy, facing the abrupt collapse of a government which she had long recognized as a legitimate ruler of the nation. Indochina was also the first area from which a huge number of refugees arrived in Japan. The Tokyo government was obliged to accept some of them as permanent residents. This new policy eventually led to Japan’s belated acceptance of the international law on refugees and thus brought about significant changes in her policies on immigration and toward foreign residents. The Paris Peace Conference for Cambodia was the first occasion for post-war Japan to participate in international peace talks as one of the third party members. Cambodia was also the first country to which post-war Japan sent her army forces. Indochina was also the subregion in whose post-war reconstruction Japan showed her willingness to take a lead to mobilize the international society’s attention and support. 57 Japan recognized East Germany in 1973 and maintained diplomatic relations with two German governments until 1990.

b939_Chapter-06.qxd

7/15/2010

2:13 PM

Page 157

Japan and the Reconstruction of Indochina

157

Vietnam is the first country with which Japan has a joint initiative including an experimental attempt to go beyond the traditional principle of non-interference in her ODA policy. It was the bridge construction project along the GMS East-West Corridor for which JBIC financed yen loans for the first time in its history to more than one recipient country. What is more, the Bank exceptionally offered the same conditions for repayment to the countries with different levels of economic development. More generally, the Mekong subregion is the test case for Japan to apply a wide ranging ODA policy whose benefits are expected to reach the areas beyond national boundaries. Thus, Japan had a lot of new experiences through accumulated experiments in the Indochina subregion in accordance with the changing situation there. One of the important lessons learnt from the past experiences for Japan might be the necessity to go beyond traditional bilateralism in her ODA policy. It may be true that the conventional scheme of ODA on a bilateral basis may suffice for many of her future projects which expect wider ranging effects, but at the same time, there will be an increasing number of cases in the coming years where such a scheme will no longer be effectively functional. In such cases, Japan may have to introduce a more extensive multilateral method of ODA spending in place of the present and dominant bilateral mechanism. For example, Japan will directly deal with multiple recipients for a single project. She will also increase the ODA budget for inter-governmental organizations and south-to-south cooperation frameworks. 2. Contribution to Regional Public Goods As have been discussed above, Japan’s relations with the Indochina subregion have shifted from a stage where she basically followed the US regional strategy to a stage where she could have a certain amount of independence and even stay ahead of US policies. Japan has sometimes tried to play a bridging role between the USA and Indochinese countries. Furthermore, by the mid-1990s, in order to cope with the new development in the subregion, where the third principle of the 1977 Fukuda Doctrine was proved to be no longer workable, Japan

b939_Chapter-06.qxd

158

7/15/2010

2:13 PM

Page 158

M. Shiraishi

flexibly applied a new policy to support the process of ASEAN enlargement and integration. However, since the 1997–98 regional financial crisis, Japan appears to take a more reactive rather than a proactive attitude toward the rapidly changing situation in East Asia and Indochina. She is still repeating her efforts in gap reduction and regional integration in Southeast Asia as she was doing during the mid-1990s. This suggests that she has not been successful in finding a new “philosophy” that would firmly place both Japan and Southeast Asia in a single region. She still tends to act as an extra-regional power that assists countries in a region that she does not be-long to. For one thing, this may be the reflection of the fact that Japan’s policy on East Asian regionalism is still trapped in her self-binding sensitiveness about the rivalry with China. She has yet to search for a vision that is more suitable for the newly emerging situation through such serious and painstaking endeavors to deal with the Indochina or Greater Mekong subregion, having been convinced that not only Japan and Southeast Asia, but China, Korea, and possibly even India are also members of a common community. In other words, even though the 1997–98 financial crisis of East Asia gave an important momentum for Japanese leaders to realize that the country belonged to a “region” with closely connected business networks, this kind of notion has not brought enough conviction for them to fully get involved in a new project of an East Asia-wide “regionalism”. There is still a strong tendency for Japan to regard herself as an extra-regional aid donor and investor to developing countries in Southeast Asia, while she deals with the East Asia region as a battle ground where she is competing with China for the initiative over the still amorphous regionalism. In August 2003 when Japan published a revised ODA Charter, she affirmed the three main objectives: first, to serve directly or indirectly her own national interests; second, to help the recipient nations’ economic growth and better living conditions; and the third but not the least, to contribute to the international society.58 If one reflects carefully on the 58

Government of Japan (2003). Japan’s Official Development Assistance Charter. http://www.mofa.go.jp/policy/oda/reform/revision0308.pdf.

b939_Chapter-06.qxd

7/15/2010

2:13 PM

Page 159

Japan and the Reconstruction of Indochina

159

significance of the third objective, one would come to the conclusion that Japan is in a good position to contribute to the common interests of the region which is not only a part of global society but a space where she and her neighbors belong to. More concretely speaking, it is necessary for Japan to have a clear concept of regional public goods which should not only be owned and enjoyed by the host countries, but must be commonly utilized by any member in the region and even out of it. In the age of regionalism, it is even more necessary to recognize the commonness and inclusiveness of regional public goods.59 3. Filling the Missing Link As pointed out in the preceding paragraphs, one of the most important goals for the various frameworks related to the Mekong subregional cooperation is to create connectivity and well-balanced development. The connectivity in the subregional context can be multifold: the restoration of linkage between and among nations which had long been separated physically and psychologically; the transformation of landlocked areas into landlinked areas; the connection of the hinterlands with the sea outlets; the facilitation of cross-border flow of goods, people, cars, and information; the enhancement of mutual supplementarity and synergism in socioeconomic development, etc. Well-balanced development can yield numerous benefits as well. It can literally narrow the development gap among nations, among provinces, and between urban and rural sectors. It can contribute to the fair distribution and utilization of limited resources in the subregion, among which one of the most important is the water resource of the Mekong river and its tributaries. It can provide for the sustainability of development vis-à-vis ecological environments, and the well-deliberated efforts to maximize the positive aspects of development, and minimize and prevent its negative aspects, among others. 59

Shiraishi, M. (2005). Japan Needs Bolder Aid Plans for the Mekong, (20 July). International Herald Tribune (The Asahi Simbun Opinion).

b939_Chapter-06.qxd

160

7/15/2010

2:13 PM

Page 160

M. Shiraishi

It is, of course, too ambitious to discuss all of these issues in such a short essay, therefore at present the author has limited the scope of analysis largely to the connectivity among nations and the shared values in the subregional development cooperation. What the author wishes to add in the final part of this chapter is the Japanese business concerns toward the Mekong subregion. As the GMS East-West and North-South transport corridors have taken shape and as the AFTA (ASEAN Free Trade Area) and the CAFTA (China–ASEAN FTA) process continues, many Japanese business people have come to regard the dynamism of East Asian economies in a wider context: they expect the formation of a tripartite linkage among the three economies of Japan, Southern China and continental Southeast Asia.60 Of course the business scene is just as competitive as diplomacy. However, while business is chiefly motivated by profit-making in accordance with market mechanisms, politicians and diplomats tend to be more concerned about power balance and struggle. For this reason, the business connection has more room to expand its networks, regardless of the diplomatic competition and rivalry. Nevertheless, on the other side of the coin is that business concerns tend to be concentrated in economic centers in Canton, Bangkok and to a lesser extent in Ho Chi Minh City and Hanoi–Hai Phong, where industrial clusters have been or are being established. Their attention is almost always placed on the flow of products between and among these economic centers. In other words, many localities in between are generally left out of their concerns. It is rather natural though for business to work in accordance with market mechanisms. For a well-balanced development, nevertheless, it is indispensable to think about the socio-economic progress of areas in between, including the Central Highlands of Vietnam, Laos, Cambodia, Northeastern Thailand and Myanmar. And it is initially the responsibility of politicians and government officials to undertake this task. The Japanese government is strongly expected to make even further 60 The author’s personal interviews in 2008 and 2009 with Japanese business people stationed in Hanoi, Hochiminh City and Bangkok.

b939_Chapter-06.qxd

7/15/2010

2:13 PM

Page 161

Japan and the Reconstruction of Indochina

161

efforts by collaborating with host governments as well as other donors and stakeholders, to support the smooth and steady development of these localities in fields such as institutional reform, human resource development, capacity building and information proliferation, as well as hard infrastructure building.

b939_Chapter-06.qxd

7/15/2010

2:13 PM

Page 162

This page intentionally left blank

b939_Chapter-07.qxd

7/15/2010

2:14 PM

Page 163

CHAPTER 7

The Asian Development Bank and Chinese and Japanese Power Plays Guy Faure

Introduction: Regional Banks and Zones of Influence: The Case of the ADB International financial institutions including the regional ones in the developing world have, in the vast majority of cases, been presided, managed and dominated by Western countries. The Asian Development Bank1 (ADB) constitutes a notable exception to the rule. Since its inception, Japan has played a pivotal role in this organization and its position had never been seriously contested. In fact, Japan’s influence in this multilateral bank was perceived as a tool at the service of Japanese diplomacy, given that this banking establishment made it possible for the country to combine its bilateral and multilateral diplomatic actions. Not very prominent in the international community as far as participation in international organizations (I.O.) is concerned, Japan has now progressively gained confidence. Today, Japanese personnel are present in large numbers in international organizations. Thus, Japan has taken more responsibilities in many sectors such as health care, refugees, or even culture where, for example, a Japanese national headed UNESCO. Japan’s increasing

1

There are two possible acronyms for the bank both in French (BAD or BasD) and in English (ADB or AsDB) so as to clearly distinguish it from its African counterpart: The African Development Bank. In Asia and the Pacific, where there is no chance of confusion with the African multilateral bank, the acronyms BAD or ADB are frequently employed, by the Asian Development Bank in all its documentation. 163

b939_Chapter-07.qxd

7/15/2010

2:14 PM

164

Page 164

G. Faure

involvement in these institutions is concomitant to its growth and its economic, if not political, importance.The rise to power of the other heavyweights in Asia, China and India, calls for a change in the status quo within this institution. In this article, we will examine China’s growing importance. It is customary to compare the Japanese and Chinese geopolitical visions. Relations between them are inevitably likened to a game of musical chairs where China wins leadership. The ADB offers a case study of the relations and interactions between these two countries and the countries of this region and a different scenario emerges, where the viewpoints tend to converge rather than diverge. 1. Japan, the ADB’s Benevolent Hegemon 1.1 The bank’s origins To gain a better understanding of Japan’s special position in the ADB, it is necessary to trace the bank’s history. A resolution to create this multilateral regional bank was adopted in 1963 by the United Nations Economic Commission for Asia and the Far East. This Commission, based in Bangkok, was later renamed the Economic and Social Commission for Asia and the Pacific (ESCAP). According to its experts, the creation of this multilateral Asian bank was necessary in order to fulfill three objectives.2 The first objective was to provide the region with additional financial aid for its investment projects. The second was to aid projects insufficiently financed by financing agencies. The third was to act as a central coordinator as far as regional economic cooperation was concerned. There were other secondary reasons for the creation of this institution. One of these was the desire to create local expertise capable of preparing and defining appropriate plans for the region’s development, and which could propose solutions better suited to the region than those offered by the World Bank. At that time, this institution 2

Kappagoda, N. (1995). The Asian Development Bank. The Multilateral development Banks, Vol. 2, p. 14. London: Intermediate Technology Publications.

b939_Chapter-07.qxd

7/15/2010

2:14 PM

Page 165

The ADB and Chinese and Japanese Power Plays

165

was seen to be more inclined towards aid to India and Pakistan and was considered too Western in its governance as well as in its in the origin of its financing. Contrary to its African (AfDB) and Interamerican (IDB) counterparts, the Asian bank had opened up its capital to industrialised countries, since its Asian mentors rightly believed that a large part of the resources would come from these rich countries. The industrialised countries were motivated by the possibility of furthering their own development policies and also preserving their economic and political interests. Among these industrialised superpowers, Japan quite naturally played a leading role, given that it was the only industrialised country in Asia at that time. Thanks to its expertise and technological prowess and also its raw material requirements, the expansion of its export market as well as its constant quest for new investment oppurtunities, Japan wielded considerable power almost immediately within the organization. However, the Japanese knew how to keep a low profile in the initial phase of discussions on the creation of the multilateral bank. But it was their model drafted before the 1963 negotiations which was adopted despite American objections. America went along with this project following their increasing involvement in Vietnam due to which they were forced to humor their Japanese allies; there was also the need to bring in extra resources for the region’s development. Having gained America’s support, the Japanese announced their financial commitment to the project. These two decisions made it possible to establish the ADB in 1966 with Takeshi Watanabe as its first President. Since then there have been only Japanese Presidents. This fact bears witness to the prominent role that Japan plays in the destiny of this regional financial organisation. (Tables 7.1 and 7.2 of the Japanese in the ADB) The ADB’s nickname “A bank for half the world”3 is justified as geographically it covers a significant zone which encompasses nothing

3

Wilson, D. (1987). A Bank for Half the World. The Story of The Asian Development Bank 1966–1986, Manila: ADB.

b939_Chapter-07.qxd

7/15/2010

2:14 PM

Page 166

G. Faure

166 Table 7.1:

1 2 3 4 5 6 7 8

ADB’s Presidents (1966–2008).

Name

Tenure

Takeshi Watanabe Shiro Inoue Taroichi Yoshida Masao Fujioka Kimimasa Tarumizu Mitsuo Sato Tadao Chino Haruhiko Kuroda

24/11/1966–24/11/1972 25/11/1972–23/11/1976 24/11/1976–23/11/1981 24/11/1981–23/11/1989 24/11/1989–24/11/1993 24/11/1993–15/11/1999 16/01/1999–31/01/2005 01/02/2005–Present

Sources: Tomoyo Saito, Kyoko Ishida, ADB and Japan, NGO Forum on ADB, Manila (March 2007).

Table 7.2: Name Mikio Kashiwagi Kazu Sakai Kensaku Munenaga Jo Yamagata Katsuji Matsunami Kunio Senga Kazuhiko Higuchi Yukiko Kojima Tadashi Kondo Ayumi Konishi Kuniki Nakamori Toru Shibuichi

ADB’s Japanese personnel in top positions. Position Treasurer, Treasury Department Director General, Strategy and Policy Department Director General, Budget, Personnel & Management Systems Department. Director, Infrastructure Finance Division 2, Private Sector Operations Department Director, Agriculture, Environment and Natural Resources, Central & West Asia Department Director General, South Asia Department Director, Transport and Communications, South Asia Department Director, Country Coordination and Regional Cooperation, South Asia Department Country Director, India Resident Mission, South Asia Department Country Director, Vietnam Resident Mission, Southeast Asia Department Senior Advisor, Southeast Asia Department Country Director, People’s Republic of China, East Asia Department

Sources: Tomoyo Saito, Kyoko Ishida, ADB and Japan, NGO Forum on ADB, Manila (March 2007).

b939_Chapter-07.qxd

7/15/2010

2:14 PM

Page 167

The ADB and Chinese and Japanese Power Plays

167

short of East Asia, South Asia and Central Asia, as well as the Pacific islands including Oceania, that is, 48 countries. In addition to these, 19 other countries in Europe and North America contribute financially to its capital. Totally, ADB has 67 countries4 as members. Japan, America and China are amongst the main contributors of the bank followed by India, Australia and Germany.The number of votes is proportional to the number of shares held and it is the number of votes that decides and determines the balance of power within the bank. Officially, Japan and America are on the same level. But Japan’s additional and substantial contributions to other funds managed by the bank make this country by far its main contributor. America has ensured that Japan does not have the leading position de jure as the biggest donor, by preventing it from increasing its capital, which would modify its ranking. However, Japan has circumvented this restriction by voluntarily contributing to other funds managed by the bank. It has thus financed to a large extent the Asian Development Fund (ADF), the Japan Special Fund in its entirety and the Technical Assistance Special Fund as well as the ADB’s Research Institute in Tokyo and the Asian Currency Crisis Support Facility. This distinctive situation constitutes a rare fact in the history of international institutions and must be mentioned. Although America and Japan have the same percentage of votes and the same amount of subscribed capital in the bank, Japan is de facto on top due to its auxiliary contributions. The presidency as mentioned above is traditionally reserved for a Japanese. (Refer to Table 7.1). This domination is visible even at the management and operational level. The Japanese control numerous high-level positions within the bank including human resources (Table 7.2). The Japanese feel almost at home in the ADB. Most of the Japanese personnel employed in the bank are recruited from the ranks of the Finance Ministry in Tokyo. The President is a high ranking official generally at the Deputy Minister level prior to his posting in Manila.The current President Haruhiko Kuroda was a special advisor to Prime Minister Koizumi

4

Luxembourg joined the Bank in 2006.

b939_Chapter-07.qxd

7/15/2010

2:14 PM

168

Page 168

G. Faure

and Deputy Minister for International Affairs in the Ministry of Finance (MOF). Japanese government officials deputed to the bank for a few years do not really feel that they are on overseas assignments. To them it is just a case of internal mobility. However, if Japan exercises a marked influence on the bank’s policy as far as development is concerned, the inverse is also true. It is a noted fact that ADB had helped the Japanese draft their own development aid policy which had been redefined at the begining of the new millennium. Thus it is possible that the bank served equally as a tool of influence and a learning ground for development aid, especially for linking bilateral and multilateral aid. 1.2 ADB’s strategic agenda Today, ADB’s main mission is to eradicate the region’s poverty. Its “strategic agenda” has three objectives: firstly, to create conditions conducive to “sustainable economic growth” based on sound principles which exclude, for example, uncontrolled exploitation of natural resources leading to excessive pollution since this is an essential criterion for the bank. Secondly, the agenda focuses on inclusive “social development”. The third objective pertains to “good governance” which is an essential criterion for healthy management without corruption and paves the way for a fair distribution of the rewards of growth. To achieve its “agenda”, the multilateral institution has adopted a triple approach: Firstly, it relies on the “development of the private sector”. ADB has an undeniable preference for the private sector which it considered far more virtuous when compared to the public sector which is more often than not believed to be inefficient and more expensive. ADB was often rebuked for this attitude of favouring the private sector. “Regional cooperation” is the second constituent of this approach and this is one of the most characteristic traits of the development philosophy of the ADB. Lastly, the third constituent of the bank’s approach, at least as far as the official stand is concerned, is “environment protection”. Paradoxically, ADB which projects itself as being environment-friendly, is attacked by environmentalist NGOs

b939_Chapter-07.qxd

7/15/2010

2:14 PM

Page 169

The ADB and Chinese and Japanese Power Plays

169

who regularly criticize it for not doing enough and accuse the bank of being responsible for future ecological and human disasters.The debate between the two opposing parties rages on. The NGOs exaggerate the risks of certain development projects. As for the ADB, it neglects the opinion of the population directly affected by certain programs. Along with its banking activities, ADB organizes numerous international meetings with regional governments, donor countries or international organizations (WB, IMF, ESCAP, other UN agencies), in order to define and implement appropriate policies, to create institutions or to adopt regulations on a regional, national or local level for the implementation of its projects. The Bank’s charter includes regional cooperation, which is one of the fundamental reasons for its existence. The charter says that “regional cooperation must be considered inherent to the bank’s operations”. Regional cooperation would be an empty word without the harmonization of the policies of the various member states in order to align them with the bank’s regional initiatives. In order to fulfill its mission successfully, the essential principle put forth by the ADB is that the internal reform processes, particularly for countries in transition, should correspond to the region’s growth and development requirements. According to the bank, the least developed countries are undergoing a double transition. The first transition pertains to the shift from an economy relying on subsistence agriculture to a more diversified economy and the second from a planned economy towards a market economy. The initiatives of international institutions like the ADB have a considerable impact on the least developed countries and the countries in transition, which are often one and the same. Although the ADB denies it, the Bank does not restrict itself to banking alone. It plays an emminently political role, generally keeping a low profile and acts as a “honest broker” as far as development is concerned. Being “Asiacentric” by nature and this despite a strong Western presence, ADB stands apart from international financial institutions like the World Bank and the IMF generally perceived as representing Western interests, even exclusively American ones. ADB constitutes an exception of not being under “Western domination” but being dominated by the

b939_Chapter-07.qxd

170

7/15/2010

2:14 PM

Page 170

G. Faure

Japanese. Since the creation of the institution, the Japanese have left a strong mark on the Bank’s culture by securing the presidency and occupying a multitude of key positions, and have brought a certain dose of “Japanese management” where consensus is customary. However, ADB’s work culture is composite: there are other influences, particularly of India and other countries of the sub continent represented by high and mid-level executives. Filipinos, who constitute 50 percent of the staff and who are represented not only at the administrative level but also among the highly qualified executive positions, cannot be left out. 2. China, Star Pupil of Multilateralism China lacked a presence in international institutions. However, it has become more active in the international system with its rise to power. Since its admission to the UNO in 1971, China has joined more than 50 major institutions in which it became increasingly involved from the mid-1980s. Thus, 20 years ago in 1986, China joined the ADB and took a stake in its capital. Lastly, China’s membership in the World Trade Organization in 2001 was an important milestone in this process. Being a member of these institutions, China expects to exercise its right and also play its role fully. But its position vis-à-vis International organizations had evolved since 1949. In retrospective, it appears that China went through three stages in its relations with the I.O. First, it went through a phase of mistrust for “these western instruments of imperialism and hegemony” during the Maoist era. Then, it entered the second stage at the time of its admission to the UNO in 1971, when it tried to change the international system from the inside by being present in the international organisations. In the 80s, there was a new evolution when China took advantage of the possibilities offered by its participation in the international system to promote its own interests. From the Southeast Asian perspective, the Chinese presence could appear to be a threat. However, China quickly noticed that it was being perceived to be a serious threat by its neighbours in the

b939_Chapter-07.qxd

7/15/2010

2:14 PM

Page 171

The ADB and Chinese and Japanese Power Plays

171

developing world at all levels, be they strategic, economic or political. In response to this perception and to dissipate these fears, China tried to change its image, especially its diplomatic style. The ADB’s framework makes it possible to analyze a new shift on China’s part as compared to its stand of “multilateralism with vested interests”. It also makes it possible to verify or come up with a certain number of hypotheses on Sino-Japanese relations which are very often reduced to the scenario of an inevitable conflict of interests leading to a battle between the two Asian superpowers for regional hegemony. Can international organisations like the ADB function only under the leadership of a “dominant country” or a hegemonic country like Japan in this case? But since its entry in the ADB in 1986, China has gained ground within this institution, but to what extent will it rise? In the case of the development of the Greater Mekong Subregion GMS,5 the bank’s key program, Chinese and Japanese visions differ — will they be contradictory or convergent? Lastly, will the very different Chinese and Japanese “diplomatic styles” converge in time to adopt a shared approach for a more constructive and consensual approach, a soft diplomacy?6 China has intended to play a prominent role on the Asian scene and its ever increasing involvement with the Bank has particularly altered the relations between Beijing and Manila, the ADB’s headquarters. In the 20 years since its entry in 1986, China has not only largely benefited by its membership of the multilateral bank, by

5

The term “région” in french refers to an infranational space close to the term province (Corse, Bretagne). We use it here in its English meaning of a supranational space.The term “sous-région” in the Anglo-Saxon vocabulary refers to a sub-continental division of the world, which had been adopted by the French administration in its documents pertaining to “the sub-region of du Grand Mekong”. The word “subregion” not having a French equivalent, we have translated GMS as Région du Grand Mékong. 6 Allusion to the “soft power” concept or benevolent power is invented by Nye, J. (2004). Soft Power: The Means to Success in World Politics. New York: Public Affairs. The concept was developed for the case of China by Kurlantzick, J. (2007). Charme Offensive, How China Soft Power is transforming the World. New Haven & London: Yale University Press.

b939_Chapter-07.qxd

172

7/15/2010

2:14 PM

Page 172

G. Faure

becoming its second largest debtor after Pakistan which has been a member since the beginning, and by being the main beneficiary of ADB’s financing and technological aid. ADB’s technological contribution to China has approximately covered 500 projects till 2005. — In 2006, China topped the list for loans to the government with nearly 1.6 billion US dollars; accounting for 25 percent of the total sum lent, and was placed second for loans to the private sector after India. But it is also a remarkable fact that today China has become a leading contributor to the financial institution and has been ranked third in its capacity as a shareholder with 6.45 percent of the share capital and 5.46 percent of the voting rights, just behind Japan and America. — China is equally present in terms of bank personnel, both highlevel officials and other staff. Half of the bank’s employees are Filipinos.They are followed by the Japanese with 122 representatives who hold key positions, followed by the Américains (110), and the Indians (95). The Chinese are ranked fourth with a total number of 87 employees and their ranks are increasing. Apart from the numerous young Chinese executives and brilliant experts in the bank, Chinese Vice President Liqun Jin is symbolic of the importance the People’s Republic places on the choice of its representatives. He was the Deputy Minister for the Budget within the Chinese Finance Ministry prior to joining the ADB. This places him at an equal level with the Japanese President of the ADB who had also held a similar position in his country. The case of the other vice presidents is different and their choice reflects different stakes. The American is a diplomat; the German vice president is a high-level government official from the Ministry of Economics of the Federal Republic and the last vice president was a senior executive from within the ADB. — In March 2005, China following in Japan’s footsteps on a more modest scale, created a 20 million US dollar fund directed at reducing poverty in developing Asian countries. — In the same year, in April, President Hu Jintao presented a threepoint proposal to Manila on the reinforcement of the cooperation

b939_Chapter-07.qxd

7/15/2010

2:14 PM

Page 173

The ADB and Chinese and Japanese Power Plays

173

between China and the ADB. The Chinese President indicated to the ADB’s President Haruko Kuroda that his country would give priority to its cooperation with international organisations. Three spheres in which the bank’s activities were to be stepped up were identified. Firstly, credit cover was to be extended to sectors such as construction of infrastructure, agriculture, healthcare, culture, education and environment protection. Secondly, regional and subregional cooperation in Southeast and Northeast Asia was to be enhanced. Lastly, cooperation for the fight against poverty was to be reinforced. Wen Jiabao, the Chinese Prime Minister, speaking at the second summit of the economic cooperation program of the GMS in Kunming in July 2005, mentioned the contribution of his country, which has participated more visibly in ADB’s major infrastructure projects like the Kunming autoroute in Bangkok, development of the upper course of the Mekong as well as training programs conducted in different domains ranging from agriculture to customs formalities He also referred to the ADB’s importance, given its loans and donations to his country. He also went on to say: “[the ADB] favoured our subregional cooperation and is an influential partner in the GMS countries… We hope that ADB will play a greater role in future cooperation”. see map of GMS p. 195 in Chapter 8”. In the field of development aid, China has changed sides, and instead of being a beneficiary, it has now become a donor who grants loans to Asian and African developing countries. The other ADB, the African Development bank convened its General Body Meeting in Shanghai on the 16th and 17th of May 2007 with the following theme, “Africa–Asia, development partners” because China is one of its 24 non-African members as against its 53 African shareholders and the Bank “wanted to benefit from the Asian experience of reducing poverty”. In October 2006 China loaned 200 million US dollars to Cambodia (after the one million US dollar debt was written off) to improve roads and construct bridges on the main rivers: one 1060 meter bridge on the Mekong and the other downstream of Tonle Sap measuring 957 meters. China is equally active in the

b939_Chapter-07.qxd

174

7/15/2010

2:14 PM

Page 174

G. Faure

railways. It has participated in the Pan-Asian railway network, in the first line of the China–Vietnam railway which links Kunming, Yunnan’s capital to the Vietnamese rail network via Hanoi. Thus, in less than a decade, China has succeeded in making a foray in the international system and its multilateral organisations, just as Japan has done. 3. The New Geopolitical “Great Game” Concerning the Mekong In the early 90s, the geographical concept of “region” or “subregion” of the Greater Mekong was still ambiguous. But the idea of bringing together the countries situated on the banks of the river Mekong, which had all been more or less involved in the Indochina war, took shape. However, the selection of the member countries of this new region came up for debate. There was no objection to Thailand due to its central position. Its membership was crucial for implementing the plan and no project could be conceived without it. Several factors worked in favour of China’s integration, such as its geographical and cultural7 proximity. It also fulfilled the criterion of being a country through which the Mekong flows. The diplomatic efforts of influential personalities, such as Cesar Virata, former Phillipines Prime Minister (1981–1986), and one of the founding fathers of ASEAN who envisaged China playing a crucial role in the region, also contributed to China’s presence being accepted, but fresh negotiations were held to determine the modalities. The idea of including a single province, Yunnan in this case, was retained, rather than permitting the whole of China to be a member, as Beijing preferred, or having other provinces such as Guangxi becoming members. This last proposition that was initially rejected was finally accepted in 2005. This surely constitutes a victory for Chinese diplomacy because the inclusion of this Chinese coastal region contradicts GMS’s founding principle of including the bordering countries of the river Mekong. 7

Because China is very influential in the very integrated diaspora of all strata of Thailand society.

b939_Chapter-07.qxd

7/15/2010

2:14 PM

Page 175

The ADB and Chinese and Japanese Power Plays

175

The operating model of the GMS was inspired by two different examples, namely: the Mekong River Commission or the MRC8 and ASEAN. Although, this international organization greatly contributed to the political stability of the region, its sucess was questionable as far as economic cooperation was concerned. Traditionally negotiations were held between Ministries of Foreign Affairs of the member countries, which often led to unproductive discussions during which the various participants took a very patriotic stand of defending their national interests to the detriment of regional interests. The Mekong Commission offers further insight on what should have been avoided. It not only confirms the difficulty of working with the foreign affairs administrations on water agreements, a textbook case of the complexity of régional9 “hydrodiplomacy”, but also the highly restrictive nature of the charter due to which the Chinese and Burmese decided to stay out of it and remain as observers in the MRC. On the positive side though, the Commission had the merit of being a fruitful forum of ideas on water issues, since the basin’s water represents a strategic resource for the region.10 In this difficult context, Japan has been maintaining diplomatic balance on a multilateral and bilateral level which enables it to remain very active in the region. Japan initiated regular meetings with the Ministries of economics of the countries in the peninsula, Cambodia, Laos, Myanmar, and Vietnam (CLMV). These meetings, followed by Japanese business circles for the region, offer interesting investment opportunities. But these Japanese initiatives were also prompted by the desire to counter the rapidly growing economic influence of 8

Taillard, C. (2005). Laos at the Crossroad of the Corridors of the Greater Mekong Subregion. In The Laos Sweet and Bitter, D. Gentil, P. Boumard (dir.), pp. 71–73. CCL: Karthala éditions. 9 See on this theme Affelstranger’s, B. (2008). Mekong, River and Territories. Hydropolitics in Southeast Asia. To be published by IRASEC. 10 Luc Lacroze thesis (1998). The Mekong River from Yunnan to the China Sea, Contributing to the Study of the Development of a Tropical River. In The Development of the Mekong River 1957–1997. The Failure of a Great Ambition? L’Harmattan, Paris, p. 254.

b939_Chapter-07.qxd

176

7/15/2010

2:14 PM

Page 176

G. Faure

China in this part of the world. Japan, which seemed to be resting on its laurels as it provided 60 percent of the aid to Southeast Asia in 2001, was forced to sit up and take notice. The country began to regain a part of the lost ground in terms of influence in the region with respect to China. It must be pointed out that in the begining of the new millenium China had adopted its 10 five-year plan in 2001. Amongst other measures, the plan included a development strategy for its poor “western” provinces in order to reduce the considerable gap that separates them from the more economically advanced coastal provinces. According to this new strategy, the development of the Mekong region is a priority for China which has taken various steps to improve relations with its neighbours in the developing world. Since 2002, China has reduced or abolished customs duties for Laos, Cambodia and Burma on more than 600 products. Along with five other GMS members, it signed numerous agreements covering transport, healthcare, trade, communications and environment protection. As far as the Mekong region is concerned, geography clearly favours China and not Japan.The Chinese Premier Wen emphasised this fact during the Kunming summit: “A distant relative is not as helpful as a near neighbour”.11 He also added that: “I firmly believe that China’s development not only benefits its more than one billion people, but also presents development opportunities to other countries, its neighbors in particular, thus contributing to prosperity and stability of the region and the world at large”.12 The Chinese involvement in the regional program has indeed contributed to the reversal in the regional strategy as Christian Taillard13 states, “These partnerships [ASEAN+3, and the China–ASEAN Free Trade Agreement for 2010] reinforce the cooperation in the Grand Mekong region ... they are a testing ground for the new Chinese regional strategy and constitute a departure from the previous foreign policy limited only to bilateral relations”. 11

China takes part in the GMS’s cooperation in a dynamic and pragmatic manner. www.China.org.cn [5 July 2005]. 12 Ibid. 13 Op. cit. Taillard (2005) p. 73.

b939_Chapter-07.qxd

7/15/2010

2:14 PM

Page 177

The ADB and Chinese and Japanese Power Plays

177

4. China–Japan: Towards a Diplomatic Convergence? Today the Chinese economic emergence may appear threatening by its sheer size and speed but one must not quickly discount the fact that in the past decades it was Japan that held this place of an agressive and predatory economic power. Because of its diplomacy, Japan was able to reassure its partners on its intentions of not conquering the world and in fact, its economic growth benefited the whole region. The development of China’s relations with ASEAN countries is on a very modest scale compared to other economic partners of the region. China’s visible and rapid progress has not jeopardised the relations and the positions of other suppliers or clients including the Japanese and the Europeans who have consolidated their presence and their trade at the same time. The Chinese wave heralded by the press must be put into perspective. Though Chinese investment is increasing, it represents less than 1.5 million US dollars, half of which is invested in Singapore, that is approximately 8 percent of Chinese FDI in the world as against 40 billion US dollars of ASEAN investment in China. The Chinese share of FDI in Southeast Asia is almost imperceptible with 0.3 percent of the total compared to 28.8 percent European, 17 percent American, and 13 percent Japanese. As far as development aid to Cambodia, Laos and Burma is concerned, it is still insufficient as compared to the Japanese FDI which represents 60 percent of the region’s aid, far ahead of the World Bank. China reserves more than a third of its aid for North Korea alone and also gives major aid to the African continent. Therefore there are no visible changes, either in investments or in aid, but only in Chinese trade with Southeast Asia, although for the moment the size of this phenomenon cannot be exaggerated. There is a sharp increase in trade from 20 percent annually in the 90s to 30 percent at the beginning of the following decade to reach and rapidly surpass 40 percent in 2004. This represents a total trade of approximately 109 billion US dollars. Extraordinary figures that need however to be viewed with moderation, bearing in mind that foreign companies in China constitute a determining part of exporters and importers (62 percent of the 500 leading importers and 77 percent of the leading 200 exporters of the country). In the case of ASEAN, foreign companies formed 60.6 percent of

b939_Chapter-07.qxd

178

7/15/2010

2:14 PM

Page 178

G. Faure

Chinese trade in 2005. In brief, Chinese companies are not the steamrollers they are thought to be. Most of them are small and medium enterprises and have difficulty competing with foreign companies already operating there. Moreover they do not have the knowhow and the networks in ASEAN markets. Finally, a large part of Chinese trade comes from Yunnan and Guangxi which are the most active regions of Southeast Asia; whereas the stronger and better organized Chinese companies of the coastal regions concentrate all their commercial efforts towards other markets, those of Northeast Asia, Korea, Japan and also North America and Europe. The Chinese companies are in direct competition with their Southeast Asian counterparts rather than the Japanese or western companies, because the products they export are often more similar than complementary to those made in the region. The other real fear is that the trade growth will fuel Chinese immigration into the peninsula. This phenomenon is very apparent in North Laos, Cambodia, and especially in Burma, and in a small measure in Thailand. Overall growth in China’s trade progressed in the same proportion as that of its neighboring southern region. The important factor is the opening up of China’s western provinces. In the same manner the effects of free trade between China and Japan were anticipated, these have not yet spoilt any relations with the other ASEAN14 partners. This reminder shows that the “Chinese threat” is more a bogey than reality,15 but it was perceived to be very real by the ASEAN countries and their partners starting with Japan. It is difficult to say that by being generous, reassuring and consensual, the Chinese have changed their diplomatic approach to the region, and their attitude in international organizations like the ADB due to their neighbors’ reactions, or whether they have adapted to this new environment thanks to a rather “fast learning curve”, which led them to take a “soft” approach in their negotiations. Is it tactics or reason? This is a question that should be addressed to the Chinese international relations specialists. 14

Sheng, L. (2006). China in Southeast Asia: The limit of Power. In Japan Focus. www.japanfocus.org/products/topdf/2184 [4 August 2006]. 15 Refer to Ravenhill, J. (2006). Is China an Economic Threat to Southeast Asia? In Asian Survey, No. 5, pp. 253–675.

b939_Chapter-07.qxd

7/15/2010

2:14 PM

Page 179

The ADB and Chinese and Japanese Power Plays

179

In this region China positions itself as exercising “soft power”, which concerns aspects of culture, linguistics and ethnic relations and does not venture into the more sensitive spheres of social and political systems. In this case it would seem that in the region, economic development has replaced all ideologies and it is the common point for all. The sharing of a certain vision of development, which sidelines the question of democracy or human rights, appears to be a common denominator in the zone. As a sub-regional bloc, the GMS has been less inclined than ASEAN to utilize economic and political sanctions to force Burma to implement reforms. The two main foreign investors in Burma are China and Thailand, ahead of Singapore and Japan. The situation illustrates the ambiguity of the position of ADB16 — like Japan’s — which ended up taking conservative measures vis-à-vis Burma, despite its being a member of the organization, by suspending loans to their country and thus compromising the fulfillment of its infrastructure development policy within the GMS East-West economic corridor. Many of its members including Thailand, China, and India did not follow suit, and took charge of the necessary financing for the implementation of the GMS’s program in Burma. The question of dams financed and constructed by China on the Upper Mekong and other tributaries are other challenges for the ADB which, following severe criticism from NGO’s and citizen movements, had laid down very strict specifications about the environment and protection of the population, particularly ethnic minorities, for these dams that it co-finances. China has new know-how, nearly half of the big dams on the planet are on Chinese territory, and considerable financial resources that make it possible for the country to dispense with its foreign partners and their technical demands, as well as their social concerns. There is also another debatable issue of the shared management of the Mekong Basin water.

16 Scortino, R. (2007). What to do with Burma? Imaging our Mekong. http://www. newsmekong.org/what_to_do_with_burma [5 June 2007].

b939_Chapter-07.qxd

180

7/15/2010

2:14 PM

Page 180

G. Faure

5. The Asian Monetary Fund Issue Just like the GMS, the Asian Monetary Fund (AMF) issue proposed in September 1997 by Japan as a remedy for the financial and monetary crisis comes back regularly to the negotiating table. AMF was immediatly rejected by the Americans, and more surprisingly, the Chinese offered little support to the Japanese proposal. Several years later, ADB is well poised to take this initiative. In 2005, a decision was made for the ADB to reinforce the surveillance system of the economic situation of ASEAN+3 countries. This would facilitate ADB to identify the blunders and act to prevent them. In addition the creation of a bureau of economic integration on the lines of the ADB was perceived as the beginning of a secretariat for a future Asian Monetary Fund.17 Considering the fact that China and Japan have a lot of common points on financial matters, large reserves and an undervalued currency rather than divergent points, it is very likely that there will be some progress in the direction of an Asian fund. Western countries have raised some objections against the idea, especially Americans who are not silent partners. The American representative is generally very active, even critical, at the meetings of the Bank’s governors. The fact remains that Washington does not always think very highly of the ADB, and following the Asian crisis in 1997, it proposed the merger of ADB and the World Bank, opining that it was duplicating the latter. This issue raises a sharp controversy. America’s justification against AMF can be summarized in two main points: a moral hazard18 and duplication.19 According to this argument, an AMF could encourage the Asian countries to postpone their reforms, and duplicate the IMF. For Eisuke Sakakibara,20 then deputy minister of the MOF, the

17

Pons, P. (2005). The idea of an Asian Monetary Fund is relaunched with Chinese and Japanese consensus (18 May 2005). Le Monde. 18 To explain the concept of moral hazard, economists refer to the theory of imperfect information or to the risks pertaining to asymmetrical information. 19 Lipsey, P. (2003). Japan’s Asian Monetary Fund Proposal. Stanford Journal of East Asian Affairs, Vol. 3, No. 1, pp. 93–104. 20 Lipsey, P. (2003). Ibid, p. 99.

b939_Chapter-07.qxd

7/15/2010

2:14 PM

Page 181

The ADB and Chinese and Japanese Power Plays

181

American reaction was explained by their perception that Japon was challenging American hegemony in Asia with the AMF.21 It is worthwhile to remember in passing that the idea of the fund was born in the Japanese finance ministry and that this initiative had been formulated and supported by Haruhiko Kuroda, who was director of the International Bureau of the MOF at that time. He later became the Deputy Minister of International Affairs and the 8th President of the ADB in 2005! Therefore it is probable that the AMF dossier is on the agenda all over again, which could create a hot issue within the bank. The American presence within the ADB constitutes a bigger obstacle to the options proposed by the Japanese than Chinese positions. The Americans are opposed to the idea that ADB can offer a serious alternative to the World Bank or IMF. Whereas there is an obvious consensus among the Asian members that ADB can adopt a more flexible position vis-à-vis Asian governments and can counterbalance or even replace the WB and IMF.22 By increasing their loans from the ADB, China (US1.6 billion dollars in 2006) and India (US2.5 billion in 2009), by the volumes of their prompt repayments, became the principal “treasurers” or fund generators of the institution, whereas they now have a modest share in the capital. The bank should be recapitalized in the short- or medium-term, and emerging countries could then ask for a larger share, which, taking into account the huge reserves accumulated by China (US1200 billion dollars) is distinctly possible. Conclusion: ADB — Consensual Protagonist of Regional Construction At present, of all the cooperation programs of regional development, the GMS clearly stands out because it is the only one to show visible results and concrete progress in terms of growth. The GMS is also

21

Ibib. Guttal, S. (2005). The Asian development Bank/a Problem Institution. Focus on Global South. www.socioeco.org/fr/documents 22

b939_Chapter-07.qxd

182

7/15/2010

2:14 PM

Page 182

G. Faure

different by its very pragmatic approach in which some will discern the Japanese “trade mark”, characterized by “soft”, discreet and consensual leadership. The first phase of the GMS program was completed in 2003 and now a new phase has begun (2004–2014). At the end of the program, GMS will probably become ADB’s regional development laboratory. Despite its numerous critics, the formula seems to have succeeded, because the cooperation in the peninsula functions better and at a more sustained pace as compared to cooperation in the southern part of Southeast Asia, where are found most of the founding members of ASEAN. It is clear that ADB has been more efficient than ASEAN, with its infrequent initiatives in the development of the peninsula consisting of endorsing the Bank’s programs. There is a very perceptible gap between the regional organization that has been slackening since the Asian crisis and the multilateral bank leading in the peninsula. If one could think or hope that the Asian Development Bank acts like the “bank of ASEAN”, it goes to show that it can surpass, with a certain degree of success, both in terms of development strategy and diplomacy, a regional organization as well established as ASEAN.23 We should make it clear that there is no rivalry as such between the two international organizations, ASEAN and ADB, as the latter plays the role of an auxiliary motor for the regional association. If the philosophy of development implemented by ADB in this part of the world is subject to debate, it must be acknowledged that the multilateral bank has the great merit of having concretely succeeded in uniting the main countries of the Indochinese peninsula as well as China around a common project. Lastly, should all the credit for the economic and diplomatic progress go to the ADB, or should this institution be seen as a smoke screen for Japan? If indeed there is a China-Japan rivalry for ADB’s leadership, it remains very discreet.

23

Kaplan, J. A. (2000). The Greater Mekong Subregion and ASEAN: From Backwaters to Headwaters. Phnom Penh: Cambodian Institute for Cooperation and Peace.

b939_Chapter-07.qxd

7/15/2010

2:14 PM

Page 183

The ADB and Chinese and Japanese Power Plays

183

Henceforth, it is very probable that Japan should reckon with a more active Chinese presence within the Asian Development Bank, which it can no longer consider its private domain. This probably marks the end of the Nippo-American condominium on the Bank which de facto allowed the Japanese partner to run it under the “vigilant attention” of the North American ally. The question today is: Will the new Sino-Japanese relations end up being a dynamic motor or a brake for this region? During the last decade, China has progressed considerably in its influence and presence in Southeast Asia in all domains in absolute terms, and also in relation to the Japanese position in the considered zone. Even if it were to take the lead, it would probably need a few more years or even a decade, but Japan will not be eliminated from the scene in any case. It is not about a one-sided game in which “the winner wins all”. To conclude, the regional integration of East Asia, and probably one day the whole of Eastern and Southern Asia, will probably come from the Indochinese peninsula. The irony of history is that the setting up of ASEAN+3, which acts as the starting point of the regional construction for an East Asian community, banks on the success of the Grand Mekong plan, ADB’s key program. If the Bank were to succeed in the challenging task of reconstructing the Indochinese peninsula and making it a nerve centre between Southeast and Northeast Asia or even South Asia, it would contribute, on the strictly economic front, as well as on the geopolitical front, to bringing together two (or even three) geographical entities. The success of this regional challenge depends on active support from its influential members beginning with Japan, China and now India, which is increasingly interested in its eastern neighbors. It also equally depends on the coherence of the visions of each regional Asian actor. A failure like that of the Asian Monetary Fund would be a revealing symptom of a profound discord between the main actors on the scene. Consequently, the ADB is one of the rare but privileged observation grounds, to understand the reality of the Sino-Japanese relations beyond the great diplomatic battles.

b939_Chapter-07.qxd

7/15/2010

184

2:14 PM

Page 184

G. Faure

References Affelstranger, B. (2008). The Mekong River and Territories. Hydropolitics in Southeast Asia. To be by published by IRASEC. Economy, E. (2005). China’s Rise in Southeast Asia: Implications for Japan and the United States. The Journal of Contemporary China. Faure, G. (2006). The Greater Mekong touchstone or stumling block to the community of East Asia? In Asia: Between Pragmatism and Wait. Edition 2006–2007 (No. 5239–5240), Etudes de la Documentation française, Paris, La Documentation française, Vol. 192, pp. 127–136. Faure, G. (2007). Asian Development Mekong Bank and Asia regional integration. Etudes internationales, Vol. 38, No. 2, pp. 229–249. Québec., Canada: Université Laval. Gaulier, G., Lemoine, F. and Unal-Kesenci, D. (2007). China’s emergence and the reorganisation of trade flows in Asia. China Economic Review, No. 18, pp. 209–243. Gilson, J. (2004). Complex regional multilateralism: Strategising Japan’s responses to Southeast Asia. The Pacific Review, Vol. 17, No. 1, pp. 71–94. Goh, E. (2006). Developing the Mekong, Regionalism and regional security, China-Southeast Asian relations, IISS. Gourou, P., Gironde, C. and Maurer, J. L. (2004). Vietnam at the down of the 21st century: Review and political perspective. Karthala éditions. Guttal, S. (2005). The Asian development Bank/a Problem Institution. Focus on Global South. www.socioeco.org/fr/documents. Kurlantzick, J. (2006). China’s Charm: Implication of Chinese Soft Power. Policy Brief, Carnegie Endowment for International Peace, No. 47. Lacroze, L. (1998). L’aménagement du Mékong 1957–1997. L’échec d’une grande ambition? Paris: L’Harmattan. Lincoln, E. J. (2002). The Asian Development Bank: Time to Wind it Up? In Reconfiguring East Asia regional institutions and Organisations after the Crisis, M. Benson (ed.), pp. 205–255. Londres: Routledge, Curzon. Masaki, H. (2005). China, Japan tug-of-war over Indochina (5 October 2005) Asia Times. Masaki, H. (2007). Japan Vies China for Dominance in Indochina and ASEAN, (22 May 2007) Asia Times. Ravenhill, J. (2006). Is China an economic Threat to Southeast Asia? Asian Survey, No. 5, pp. 653–674.

b939_Chapter-07.qxd

7/15/2010

2:14 PM

Page 185

The ADB and Chinese and Japanese Power Plays

185

Saito, T. and Ishida, K. (2007). ADB and Japan. NGO Forum on ADB, Manila. Scortine, R. (June 5, 2005). What to do with Burma? Imaging Our Mekong, www.newsmekong.org/what_to_do_with_burma Taillard, C. and Kermel Torres, D. (2004). The Greater Mekong Subregion, a Transnational Space in Mainland Southeast Asia. In Regional Integration in East Asia, C. Taillard (dir.) p. 495. Paris. Taillard, C. (2005). Laos at the Crossroad of the Corridors of the Greater Mekong Subregion. In The Laos Sweet and Bitter, D. Gentil and P. Boumard (dirs.), p. 342. CCL-Karthala éditions. ADB (2006). Annual report 2006. Manila. www.adb.org

b939_Chapter-07.qxd

7/15/2010

2:14 PM

Page 186

This page intentionally left blank

b939_Chapter-08.qxd

7/15/2010

2:14 PM

Page 187

CHAPTER 8

Corridor Linkages in the Greater Mekong Subregion: New Implications for Peninsular and Regional Powers Christian Taillard

By engaging in the regionalization process of globalization on the East Asian level, more specifically the Asian facade of the Pacific, the Asian Development Bank (ADB) has skillfully seized opportunities arising from a reversal in post-Cold War national territorial strategies. Between 1992 and 1994, it promoted the Greater Mekong Subregion (GMS) and has accompanied its development ever since, through the implementation of a regional integration initiative on the scale of continental Southeast Asia. Having emerged in the late 1980s in the context of growth triangles and other development quadrilaterals which moulded the Asian facade of the Pacific, the Greater Mekong Subregion today encompasses five nations in the Indochinese peninsula and two provinces of South China (Yunnan first and Guangxi at the end of 2004) and is the most dynamic ADBassisted transnational integration program in East Asia. It merits attention all the more because certain analysts had anticipated its failure, the late 1990s Asian crisis being a major contributing factor.1 However, far from succumbing to the crisis, regional integration has indeed found its second wind as the expansion of its territorial area with Guangxi has proven.

1

Evans, G., Hutton, C. and Kuah, K. E., ed. (2000). Where China Meets Southeast Asia: Social and Cultural Change in the Border Regions. Bangkok/Singapore : White Lotus and ISEAS. 187

b939_Chapter-08.qxd

188

7/15/2010

2:14 PM

Page 188

C. Taillard

The term transnational as deployed to describe this form of integration does not correspond to the first acceptation of the prefix trans: beyond (cf. transalpine), nor to supranational configurations such as the Mekong Commission, for instance. The term is deployed in its second acceptation: across (cf. transsiberian), and refers to emerging recompositions within the Greater Mekong Sub-region which integrate national constructions by blending two scales of the term “region”: “infra national” in French-speaking terminology and supranational for the Anglo-Saxons.2 These recompositions involve entire or partial networking of national territories entailing the emergence of new regional architectures, founded on converging interests between partner nations. These configurations enable them to recover, on this new scale, a part of national power lost in the whirlwind of globalization. The creation of spatial relationships of variable depths, which operate on proximal and territorial differentiations, on articulations or subordinations, recurring fractures or legacies of the past, provides opportunities for open cooperation that are less institutionalized than supranational organizations of the common market or regional union genre. The golden rule of this open regionalism is pragmatism so successful in the East Asia regionalization process. By taking spatial structures as an angle for analysis, we shall first recall the redefinition of state and regional territorial strategies in the post-Cold War era since it has significantly moulded the success of this transnational integration program whose specific features will be discussed later. The main part of the demonstration concerns the two-stage reconstitution of regional linkages through economic and development corridors which, in their new forms, have revitalised the old caravan route networks which traversed the peninsula in the precolonial era. These corridors have acquired such importance today

2

“Region” in English means continental spaces on a megascale, while subregion are middle-level sub-divisions, hence the ADB-styled term Greater Mekong Subregion, which explains its regional integration initiative, translated into French by the term ‘Région du Grand Mekong’ since the term “subregion” has no French equivalent.

b939_Chapter-08.qxd

7/15/2010

2:14 PM

Page 189

Corridor Linkages in the GMS

189

that they have become crucial in control strategies, indeed of domination, for peninsular powers (Thailand, Vietnam) as well as regional Asian powers (Japan, China and, in more recent times, India). 1. The Redefinition of Territorial Strategies in the Post-Cold War Era In the wake of the Cold War, communist nations made the transition from a centralized economy to a market economy. Thailand had to fit its integration model into the world economy after the 1997 Asian crisis. In this context, ADB’s strategic vision aims for regional integration through the expansion of trade in the peninsula, an activity severely disrupted first by colonization, then decades of war. This vision is also founded on the redefinition of territorial policies of five of the six partner nations so as to adapt to the new regional context. China, Laos and Vietnam operated a strategic reversal, while Myanmar and Cambodia were reappearing on the regional stage. Only Thailand has maintained its position: the peninsular center at the main entrance portal of the Greater Mekong Subregion.

Strategic reversals When the People’s Republic of China was founded in 1949, the provinces of Yunnan and Guangxi were cut off from precolonial and colonial networks which had earlier linked them to the Indochinese peninsula, through the French railroads of Hanoi–Kunming and Hanoi–Nanning. They found themselves even more marginalized in China’s nation-building when borders were sealed to arrest international exchange. This predicament of heavily controlled forsaken border provinces overwhelmed by domestic security issues was attenuated between 1964 and 1971, through the adoption of “the third front” strategy. Key industries established along the coast and considered vulnerable during the Cold War and the days of Sino-Soviet confrontation, were subsequently relocated in central and southwest China. The high technology corridor deployed for the industrial military complex, linking Yunnan to Sichuan, dates back to this historical

b939_Chapter-08.qxd

190

7/15/2010

2:14 PM

Page 190

C. Taillard

period. To cater to these isolated industrial units located in predominantly agricultural provinces, road and rail infrastructures were built to link Southwest China to Beijing, Shanghai and Canton, thereby reinforcing the country’s territorial integration. Land border security controls were relaxed in 1992, well after the creation of new economic zones and cities opened out along the coast. Kunming, five state-governed border cities and nearly 50 towns under provincial governance were commissioned in the Yunnan and Guangxi. Four of them were transformed into crossborder economic zones to attract foreign and Chinese investors from Guangdong and Hong Kong. Hereafter, Yunnan and Guangxi would enable China to revive tropism over the long term, of a free access to the southern seas. To do so, China invested heavily in its provinces, modernised transportation and reactivated commercial networks linking Kunming to border cities and the neighbouring countries: Burma, Laos, Thailand and, more recently, Vietnam. There has hence been a visible turnaround in China’s regional strategy with the establishment in 2002 of an ASEAN–China free trade agreement, supposed to be fully implemented by 2015. The reversal of Vietnamese territorial strategies took a direction opposite to that of the Chinese. For a quarter of a century, territorial stakes have been primordial, even as the French and American wars were waged. But since the implosion of the Soviet Union and the rapid reorientation of Vietnamese foreign trade toward East Asia, both strategic and economic implications have essentially focused on the maritime stakes. It had been forgotten that Vietnam is an advanced example of the global process of “coastal development” economy, whereby its people and resources remained concentrated in deltas interlinked in the central region by narrow landlocked basins between the Annam Mountains and the sea. Well-nurtured trade ties with East Asia, dating back to colonial days explain the quick reversal in 1989 of its foreign trade from COMECON toward East Asia. The present maritime tropism cannot, however, mask another vital long-term issue of territorial integration between the northern and southern regions of the country and the indispensable role the center plays in nation-building. By focusing solely on the national context, the center appears to be caught in a vice-like grip between the double

b939_Chapter-08.qxd

7/15/2010

2:14 PM

Page 191

Corridor Linkages in the GMS

191

metropolisation process commanded by Hanoi and Ho Chi Minh. But when regional scale is considered, the center looms out as the most international region in Vietnam. It could enjoy an autonomous development process from the two metropolises that it separates3 by the restoration of trade links with Thailand via the East-West corridor, and the capture of trans-Asian maritime traffic along its coastline. The creation of the key economic zones Hué–Danang–Dung Quat in 1997 (one of the three main regional key zone in Vietnam with Hanoi–Haiphong–Halong in the North and Ho Chi Minh city–Bien Hoa–Vung Tau in the South) allows it to better integrate implications of land and maritime skates. Moreover, this continental tropism has been reinforced by the revival of Red River road and rail networks toward Yunnan, which were implemented during the first decade of the GMS program. Laos too underwent a singular reversal of its position into the Indochinese peninsula during the 1980s.4 This is because it made the transition from being a simple “foothold” during the colonial era (separating Thailand from the “profitable” part of Indochina, Vietnam) and post-independence enclave (when it no longer enjoyed privileged links with maritime flows) to a condition of a “crossroads” connecting countries of continental Southeast Asia, including Yunnan. Laos has thus revived a condition that prevailed during the precolonial period when caravan routes crossed the Indochinese peninsula. Today, in a new political context, Laos is asserting its role as an intermediary location on the corridors of the Greater Mekong Subregion. It now intends to exploit this transition from confrontation between political systems (colonial and Siamese to begin with, followed later by communist and liberals) in which the buffer state separated potential adversaries in order to guarantee peace, to cooperation between

3

Vu, T. L. and Taillard, C. (1993). Atlas of Vietnam. Territory Dynamics series, Reclus-La documentation française. Paris. 4 Taillard, C., with the collaboration of Kermel–Torres, D. (2004). The Greater Mekong Subregion, a Transnational and Peninsular Area in Mainland Southeast Asia. In Regional Integrations in East Asia, C. Taillard (éd)., pp. 377–398. Paris: les Indes Savantes.

b939_Chapter-08.qxd

192

7/15/2010

2:14 PM

Page 192

C. Taillard

partners united in ASEAN. This reversal, described by ADB as a shift from a landlocked to land linked situation, will allow it to draw benefits from trade flows over its territory since neighboring countries now have a good reason to do business with one another.

Reintegration on the regional stage To these territorial strategic reversals of China, Vietnam, and Laos, may be added the progressive reintegration of Myanmar and Cambodia on the regional platform. Myanmar has abandoned its isolationist policy associated with the “Burmese path to socialism”, and engaged negotiations with armed separatist minorities in peripheral states which hamper nation-building process from decades since the military coup d’etat in 1962. International isolationism was symbolically suspended when Myanmar gained entry into ASEAN in 1997. Despite being marginalized by a military dictatorship which complicates its integration into the regional organization, Burma has managed to establish favoured ties with China that invested in the Kunming–Yangon highway long before the implementation of the Greater Mekong Subregion corridors. The tragic drama of the Khmer Rouge from 1975 to 1979 isolated Cambodia from the rest of the peninsula although it was the only one among the GMS countries which was fully located on the Mekong river basin. Vietnamese intervention ended this isolationism but it took two decades and intense rallying of the Khmer Rouge to reintegrate the country into the peninsula. Today, Cambodia is a vital link between its Thai and Vietnamese neighbors, rather than the battlefield which it was for a very long time, excluding the colonial period. Thus the corridor linking the major southern cities in the Greater Mekong Subregion has assumed remarkable importance.

Thailand, the only country in the region that has not modified its regional plans Thailand is the only country in the region which, during the last decade, has not redefined its territorial strategy at the center of the

b939_Chapter-08.qxd

7/15/2010

2:14 PM

Page 193

Corridor Linkages in the GMS

193

peninsula. This ancient centrality is owed to its modern sovereigns Mongkut and Chulalongkorn who fought British and French colonial forces during the 19th century, since they resorted to the same tactics as their powerful conquerors. They were driven to construct railroad networks traveling to the North, Northeast and South of the peninsula to defend the far-flung peripheries of the kingdom. Having done so, they unleashed an unrivalled centralism, unknown in the neighboring states concerned by the colonial process. Bangkok’s importance spread to its environs: 13 of the 76 provinces, constituting the center and immediate periphery, concentrate 65 percent of the total GDP, 85 percent of industrial GDP and 52 percent of the urban population. With a GDP totaling that of all its neighbors clubbed together, Thailand enjoys considerable economic and political influence within a zone corresponding approximately to the size of its former tributaries of the preceding centuries (in the early 19th century, these stretched from Laos to the Shan State and from Cambodia to southern Yunnan), with the addition nowadays of Vietnam. They became captive markets and boosted the liftoff of the Thai economy during the second half of the 20th century. The pace was accelerated during the second Vietnam War. With the help of the United States and international organizations as well as massive investments from Japan and newly industrialised Asian countries from 1985, Thailand now has a stronghold over several of its neighbour’s resources (wood and minerals) accompanied by the parallel existence of mafia-like networks (narcotics and precious stones). Today it imports its energy from its neighbors (Laotian electricity, Burmese gas) and exports manufactured goods and investments to China (since 1979), then to Laos, Burma and Vietnam.5 To sum up, the end of the Cold War witnessed far-reaching regional and economic geopolitical transformations: Communist nations shifted from a centralized economy to a market economy, Thailand readapted its model of integration in the world economy in the aftermath of the 1997 Asian economic crisis.

5

Kermel–Torrès, D. (éd.) (2004). Atlas of Thailand. Chiang Mai: Silkworm.

b939_Chapter-08.qxd

194

7/15/2010

2:14 PM

Page 194

C. Taillard

2. The Most Advanced Program for Transnational Integration in East Asia It was in this context that the ADB proposed to found regional integration on the revival of trade links earlier disrupted by colonization and war. The regrouping of the five peninsular nations in ASEAN and the opening of Chinese borders helped to unite, for the first time under the umbrella of this transnational program, all the 312 million people of the Greater Mekong Subregion.

Changes in the scale of integration: From river basin to peninsula The appellation of the new program, Greater Mekong Subregion, cites the name of the river, a fact merely symbolic since it does not refer to a river basin project like the International Mekong Committee (which became the Mekong Commission in 1994) but rather a strategic vision for transnational integration at the continental Southeast Asian level. The Asian Development Bank chose the emblematic Mekong for this initiative, even though the river, in the course of a century, has been predominately a divisive rather than unifying factor. Hence geographic terms have been avoided, such as Indochinese Peninsula, which is too evocative of colonial times, or neutral appellations such as continental Southeast Asia, which risks excluding China. Furthermore, with the addition of the qualifier “greater”, it shows that the project surpasses the ambit of the Mekong river basin, since the initiative spans the basins of Irrawady, Chao Phraya, Red River and now the Upper Zhinjiang (or Pearl River), citing here only the largest (Map 8.1). This reference has not been usurped because the Mekong, which has oriented the settlement of Thai and Laotian populations to the center of the Peninsula, is the most international of the major Asian rivers. Six riparian states share the 808, 500 km2 of its basin (Table 8.1). The first four, in terms of area: Laos, Thailand, China (autonomous region of Tibet and Yunnan province) and Cambodia are almost equal (with 25, 23, 21 and 19 percent respectively), and

b939_Chapter-08.qxd

7/15/2010

2:14 PM

Page 195

Corridor Linkages in the GMS

Map 8.1:

195

The transnational space of the GMS (Sources: Asian Development Bank).

Yunnan + Guangxi

Laos PDR

Myanmar

Thailand

Vietnam

Total GMS

630.7 1698

% 24.5 236.8 21 202.1

% 9.2 25

% 678.5 26.4 32.3 4

514.0 186.0

% % 20.0 329 .0 12.8 23 64.7 8

2570.6 808.5

% 100 100

14.1

4.5

395.5 235.2 92.3

15.3 9.2 29.6

1.8

50.6

16.2

66.5

20.9

312.0

100

5 400 371

1.6

75 360 23.1 3 200 1.0 702 456

8 700 107

2.6

180 600 55.5 52 100 16.0 325 360 100 2 523 568 795

6.0

11.4 436 17 2.231 10.9 1.095 7 978 2.6 1 268

2.9 556 0.660 5 428

4.5 8.4 6.7 3 437 2 400 11.500 56.0 3.468 17.0 20.376 100 215 169 71.0 66 742 22.0 302 990 100

6.9 2.1 20.1 40.0 24.5

1.2 1.8 1.9

5.9

7.0 5.4 0.4 63.3 66.8 67.8

Sources: Data from 2005, except Yunnan and Guangxi 2003–4, Exim Bank, Thailand.

3.2 1.8 23.4 17.5 35.6

2.8 4.6 8.9

83.8

26.7

4.7 8.9 13.9

5.7 7.4 12.6

Page 196

131 1.421 6 406

2:14 PM

% 7.1 19

181.0 153.6

7/15/2010

Cambodia

C. Taillard

Area (1000 km2) Including Mekong basin Incl. Yunnan Incl. Guangxi Population (millions) GDP (M$) Per capita income ($) Growth rate FDI (M$) Tourists (millions) Export-import Intra GMS trade 1992 1997 2002

Indicators showing the relationships between the nations of the GMS.

b939_Chapter-08.qxd

Country or Chinese Province

196

Table 8.1:

b939_Chapter-08.qxd

7/15/2010

2:14 PM

Page 197

Corridor Linkages in the GMS

197

far surpass the two others, Vietnam and Myanmar (8 and 4 percent). Moreover, the vast delta plain of the Mekong (nearly a million hectares) is the only one in East Asia to be shared between two states, Cambodia controlling 20 percent and Vietnam 80 percent of its area. Rarely has an international border traversed such a densely populated zone, just a few kilometers from the Cambodian capital and the metropolis of Southern Vietnam. Consequently, the basin barely represents 31.5 percent of the total area of the Greater Mekong Sub-region (2,570 million km2), which is on an entirely different scale. The territorial importance of the diverse elements is thus profoundly changed (Table 8.1). Myanmar, marginal in the Mekong, ranks first (26.4 percent of the area) and the Chinese share has increased, going from 17 percent only with Yunnan to 24.5 percent with the addition of the Guangxi, enabling China to surpass Thailand (20 percent). The other countries in the lower basin have declined in importance from 25 to 9.2 percent for Laos, from 19 to 7.1 percent for Cambodia while Vietnam’s importance has risen modestly from 8 to 12.8 percent. The twin expansion, from the Mekong river basin to the Greater Mekong Subregion and from one to two Chinese provinces, does not only modify regional equilibrium in demographic terms but also in economic terms. The Greater Mekong Subregion now contains 312 million people. The two Chinese provinces (29.6 percent) lead the file, having surpassed other peninsular countries such as Vietnam (26.7 percent), Thailand (20 percent) and Myanmar (16.2 percent). The importance of Cambodian and Laos is far lower (4.5 percent and 1.8 percent respectively). The regional GDP exceeds 325 billion US dollars, thereby reflecting altogether different power balance between partner countries. This is because Thailand is the leader with 55 percent of generated wealth, widening the gap with the two Chinese provinces and Vietnam (23 percent and 16 percent) while Myanmar, Cambodia and Laos have been sidelined (2.6, 1.6 and 1 percent). The per capita income is a more effective measure of developmental gaps, given the huge demographic differences between countries. Thai income (2523US$) is 3.6 times that of Yunnan and Guangxi, 5.5 times that of the Vietnamese and Laotians, and 6.8 times that of

b939_Chapter-08.qxd

198

7/15/2010

2:14 PM

Page 198

C. Taillard

the Cambodians (figures provided by the EXIM bank of Thailand appear abnormally low for Myanmar 107 US$). Lastly, Thailand (with 3437 million dollars) receives 1.4 times the foreign investment of Vietnam, 6.2 times that of Myanmar and 7.9 times that of the two Chinese provinces, these investments being deployed mainly in Chinese coastal regions. Thailand’s economic importance is hence for the present time uncontested at the regional level, even though the gaps will progressively decrease given its declining rate of growth (4.5 percent) as opposed to its principal partners (8.4 percent for Vietnam and 11.4 percent for the two Chinese provinces).

Sector-based and territorial components of integration during the first decade This is how the former president of the ADB, Mitsuo Sato, presented his strategic vision of regional integration in 1992: “The Mekong is no longer a divisive factor; it is rather a bridge symbolizing a new spirit of cooperation” (ADB, 1994). Since the implosion of the Soviet Union in 1989, the geopolitical context in the Indochinese peninsula has radically changed. The fracture over the Mekong between communist and free market countries established in 1975 has vanished. The Thai Prime Minister, Chatichai Choonhavan, was the first to realize this with his 1988 declaration that the moment was ripe to transform the battlefield into a market-driven integrated space. Thus, Vietnam in 1995, then Laos and Myanmar in 1997 and finally Cambodia in 1999 joined the ASEAN, thereby strengthening the Southeast Asian regional organization continental hub, hitherto dominated by the insular Southeast Asia. The chosen method merges the strategic vision of ADB with the six nations’ propositions which were discussed during three ministerial conferences held in 1992, 1993 and 1994. These meetings served to identify six key areas for cooperation (transport, trade, energy, tourism, environment and human resources) which are negotiated annually during sector-based forums to establish project financing plans with the principal international and bilateral institutions for cooperation. In contrast to the International Mekong Committee,

b939_Chapter-08.qxd

7/15/2010

2:14 PM

Page 199

Corridor Linkages in the GMS

199

this specific approach does not require any international founding agreement document between member countries by which potential partners could risk exclusion. Bureaucratic structures are absent since intergovernmental cooperation is highly valued. The strength of ADB’s commitment has generated trust and credibility for countries in the Asian region as well as worldwide bilateral or multilateral donors. To develop the Greater Mekong Subregion, the Bank opted for a territorial strategy at the outset, aiming for peninsular linkage via five economic corridors, meridian and transversal (Map 8.2),

Map 8.2: Two generations of economic corridors in the GMS (sources: GMSNESDB Economic Cooperation).

b939_Chapter-08.qxd

200

7/15/2010

2:14 PM

Page 200

C. Taillard

with priority for reconstruction of road transport infrastructure and to the reestablishment of trade affected by disruptive colonial compartmentalization, further degraded by the later decades of war.6 But the Australian-funded Bridge of Friendship on the Mekong near Vientiane, opened in 1994, revealed that transport infrastructure alone was not enough to encourage free trade.7 Moreover, after the Asian crisis, the ADB made it imperative to link the reconstruction of transport infrastructure to the signing of specific free trade agreements, corridor by corridor, which anticipates the global ASEAN Free Trade Agreement (AFTA). This clause will apply to new members of the peninsula only in 2015. It also encourages the creation of industrial and commercial zones at principal hubs along the corridors, particularly at the border crossings. The first free circulation agreements of the Greater Mekong Subregion, signed in November 1999, included counties of the EastWest corridor (Danang, Savannakhet, Mae Sot and Moulmein). Cambodia and Vietnam entered into an agreement in 2000 helping to start the reconstruction of the Phnom Penh-Ho–Chi Minh City section of the southern corridor to link up major delta cities. During the same year, another agreement between the four counties of the North development quadrilateral, aimed to develop river traffic on the Mekong between Simao in Yunnan and Luang Phrabang in Laos (Ref. Map 8.2). Then in 2004, a general agreement on crossborder transport in the GMS was followed by a series of bilateral agreements in 2005, which envisaged a single customs inspection to be carried out by a joint team at every border. It took five years to finalise these free trade agreements and eight years for them to become operational, with their effective application between 2006 and 2008. The same pragmatic approach was applied to river transport and tourism. Better navigation on the Mekong created a tourist route 6

ADB (1994), Economic Cooperation in the Greater Mekong Subregion: Toward implementation. 7 Taillard, C. (2005). Laos at the Crossroad of the Corridors of the Greater Mekong Subregion. In The Laos sweet and bitter, 25 ans de pratiques d’une ONG, under the direction of D. Gentil and Ph. Boumard, Comité de Coopération avec les Laos-Karthala, Paris, pp. 71–92.

b939_Chapter-08.qxd

7/15/2010

2:14 PM

Page 201

Corridor Linkages in the GMS

201

between Jing Hong in Yunnan and Luang Phrabang, the former royal capital of Laos. The opening to international traffic from newly commissioned airports stimulated the tourism potential of the GMS. From Chiang Mai, which had become an entrance hub to the North of the peninsula, carriers could now reach Jing Hong and Lijiang (via Kunming) in Yunnan, then Luang Phrabang and Pakse in Laos, Danang in Vietnam and Siemreap in Cambodia, thus avoiding a transit at national capital city airports. New regional tourist services are hence being promoted: the Mekong valley, visits to former royal capital cities and heritage sites in central Vietnam and lower Mekong. In the area of hydroelectricity, the GMS encourages private joint financing of dam constructions. Located for the most part in the middle Mekong basin in Laos, the dams will supply the Thai and Vietnamese markets. China is also developing a series of eight dams on the Upper Mekong, of which three have already been built to satisfy its massive energy requirements and long-term exports. With the Asian crisis past, and faced with its growing energy deficit, Thailand has signed an in-principle purchase agreement for Laotian electricity from 3000 to 5000 MW between 2006 and 2010, and from Vietnam, 1500 MW. ASEAN too is financing the interconnection of national grids for transport of high-voltage electricity within the context of its objective, Horizon 2020. Electrical power trade has indeed consolidated Thailand’s position in the regional construction as a leading customer and strategic hub within the network.

The choice for an integrated approach of economic corridors during the second decade Since 2002, integrated development of corridors has been the focus. Hereafter, the corridors will reap benefits of investments in transportation as well as sector-based assistance to develop and complete the six identified sectors within the first decade. The economic corridor is henceforth defined as a transnational integration strategy, concentrating activities within a certain strip (about 20 kilometers on either side of the principal artery), in which transport infrastructure financing is closely bound to developmental opportunities in production, trade and multisector-based investment. The second decade of

b939_Chapter-08.qxd

202

7/15/2010

2:14 PM

Page 202

C. Taillard

the GMS will be centered around 11 “flagship projects”, of which three territorial projects involve work on three sets of corridors (North-South, East-West and southern) to make the regional linkage stronger and more complex, as well as eight support sector based. Transport investments have diversified in comparison to the previous decade: along with road and bridges, feeder local roads linked to the corridors and ports connecting them to the main maritime routes. They also include the early railroads, airports and river navigation for industrial development and tourism. These investments also largely surpass the field of transport and extend to what may be termed interconnectivity, enclosing interconnections of electrical and telecommunication networks, construction of gas and oil pipelines and creation of crossborder free development zones. They also aim to make border crossing easier in order to develop trade and investment and encourage the private sector. In addition, human resource development (training and health) and environmental conservation (environment-friendly agriculture, management of water resources and wet zones) systematically go with the implementation of the corridors.

A sustained pace of investment despite economic and political unpredictability The 1997 Asian crisis slowed down program implementation during the first decade. However, the investments were revived at a sustained pace once the crisis was overcome. Between 1992–1997 and 2000–2006, ADB investments for the GMS, rose from 2.7 to 4.3 billion US dollars (Table 8.2). The cumulative amount touched US$ 6.9 billion; it exceeds US$ 10 billion when all ADB financial supports for the six countries are included. ADB’s efficiency in the financing setup increased since its own share fell between the two periods, from 32 to 27 percent while the shares of other foreign donors grew from 26 to 48 percent. This compensated substantially for low contributions from certain regional partner countries in the aftermath of the Asian crisis (42 to 25 percent). A change may also be observed in the distribution by sectors, prior to and after the crisis, even though the transport share remains predominant. Almost hegemonic during

b939_Chapter-08.qxd

7/15/2010

2:14 PM

Page 203

Corridor Linkages in the GMS Table 8.2: Resources Mobilised 1992–1999 Energy Tourism Healthcare Transport Subtotal Technological support Total 2000–2006 Energy Tourism Healthcare Transport Subtotal Technical support Total 1992–2006 Energy Tourism Healthcare Transport Subtotal Technical support Total

203

Source of financing mobilized since 1992 by the GMS. ADB M$

Governments %

112.0

M$

%

36.6

Other Donors M$

%

234.0

Total M$

%

382.6

712.0 824.0 28.5

31.9 31.5 62.0

1 086.3 1 122.9 5.5

48.6 43.0 12.0

435.0 669.0 12.1

19.5 25.5 26.0

2 233.3 2 615.9 46.0

100 100 100

852.5

32.0

1 128.4

42.4

681.1

25.6

2 661.9

100

166.3 35.0 30.0 866.0 1 097.3 44.7

34.7 26.4 62.0

61.4 12.1 7.8 978.3 1 059.6 10.0

39.3 25.5 12.0

0.9 648.2 1 999.4 54.2

26.0 48.1 26.0

1 578.0 47.1 38.7 2 492.5 4 156.3 108.9

100 100 100

1 142.0

26.8

1 069.6

25.0

2 053.6

48.2

4 265.2

100

278.3 35.0 30.0 1 578.0 1 921.3 73.2

33.’ 28.4 47.2

98.0 12.1 7.8 2 064.6 2 182.5 15.5

43.7 38.2 10.0

0.9 1 083.2 2 668.4 66.3

22.9 39.4 42.8

1 960.6 47.1 38.7 4 725.8 6 772.2 154.9

100 100 100

1 994.5

28.8

2 197.9

31.7

2 734.7

39.5

6 927.1

100

1 350.3

1 584.3

Source: Southeast Asia Regional Development Department, ADB, 2007.

the first period (83.9 percent of investment), the transport sector was reduced to 58.4 percent during the second period owing to diversification of investment projects. The investments planned for the integrated development phase of the three corridors for the period 2005–2010 rose to 31.5 billion

b939_Chapter-08.qxd

204

7/15/2010

2:14 PM

Page 204

C. Taillard

US dollars in the best case scenario including railroad projects. The distribution was as follows: 74.4 percent toward transport, a sector destined for gradual diversification as seen earlier, and 17.4 percent toward energy (Table 8.3). Excluding railroad projects, the total would be US$ 18.3 billion, at a pace of US$ 3 billion per year, which means sustaining rapid regional growth and diversification of foreign donors. A second scenario of lower estimates envisages an investment of a billion US dollars per year. A 2007 American study (Market brief GMS based on ADB’s regional cooperation strategy and program update), still upholds a less encouraging hypothesis, with only 1.581 billion US dollars for the period 2007–2009, of which 72 percent in transport and 20.3 percent in energy. The economic dynamics of five countries in the region are on the rise but Thailand is still suffering the consequences of its 2006 political crisis when the Thaksin Shinawatra government was brusquely ousted by the military and the situation deteriorated further. The economic growth of Thailand dipped from 6.5 to 4.5 percent and for the first time in 2005, it suffered a deficit in its balance of payments. High tourism revenues (also affected by SARS, avian flu and the tsunami) could no longer compensate for heavier imports. Moreover, the political crisis forced a freeze in the wide-ranging infrastructure plan, fixed at 34 billion euros over five years. This plan has aimed to help the country catch up with its lag since the Asian crisis, which had slowed down its profitability compared with the top regional contenders (China, Malaysia, Singapore) and others emerging in the Peninsula (Vietnam, Yunnan, Guangxi). Thailand, the leading regional economy, would drive the pace of investment in the GMS during the second decade. 3. The Two-Stage Reconstitution of Regional Linkage Through the Corridors From one decade to the next, there was a visible change in scale of the networking of the GMS as the ADB map of regional strategy for transport shows (Map 8.2). The first five corridors, meridian and transversal, are shown in red. They have a pilot role during the first

b939_Chapter-08.qxd

7/15/2010

2:14 PM

Page 205

Corridor Linkages in the GMS

205

phase of the strategy for regional integration. In blue is shown the extension in progress of the network during the second phase.

Corridors focused on the Mekong and Chao Phraya during the first decade A preliminary comment for review later in this article must now be made: the layouts of the five corridors proposed in the first phase of (Map 8.3) the GMS are not new; they have retraced the ancient caravan networks which nourished the peninsula during precolonial times. Severely disrupted by colonization and war, they have now re-emerged, under more conducive political conditions, in the aftermath of the Cold War, and have opened new fresh perspectives for regional integration.

— The meridian North-South corridor: Kunming–Bangkok With China having already invested in the highway linking Kunming to Yangon, for quick and easy short-term access to the Burmese market, the Asian Development Bank suggested the development of a second vying meridian highway linking Yunnan to Bangkok through the Chao Phraya basin. This was more promising in the mediumterm since it offered to open a predictable market for a rapidly expanding range of Chinese consumer goods fromYunnan and Sichuan (mainly motorcycles and pickup trucks). Moreover, SinoThai entrepreneurs are recognized partners and top ASEAN investors in China and especially in Yunnan. As for the ADB, this North-South Bangkok–Kunming corridor is seen on a much broader scale as a section of the Singapore–Beijing trans-Asian highway, nearly doubling maritime traffic along the Asia eastern continental façade. The North-South corridor, the most populated (30.4 million inhabitants) of all planned infrastructure at the regional level, traverses the “development quadrilateral” which between Jing Hong and Chiang Rai, has replaced the former “Golden Triangle” and links Yunnan to Thailand through Myanmar and Laos (Map 8.3).

b939_Chapter-08.qxd

206

7/15/2010

2:14 PM

Page 206

C. Taillard

Map 8.3: From caravan route networks to corridor networks in the GMS (sources: Ch. Taillard, 1989 and 1998).

b939_Chapter-08.qxd

7/15/2010

2:14 PM

Page 207

Corridor Linkages in the GMS

207

This explains Thai domination (Table 8.3) (53 percent of the population) over that of Yunnan (29 percent) and Myanmar (17 percent), with Laos trailing far behind (1 percent). The western branch of the quadrilateral had taken a lead since it was completed in 2004 on Burmese financing (Map of 8.3). It links Chiang Rai to Jing Hong in Sipsong Panna, via Mae Sai and Kentung in Burma, with a two-lane 375 km-long asphalt road. The eastern branch through Huay Xai and Luang Nam Tha in Laos is more fascinating, since it is far shorter, only 280 km, and also because the travel time between Kunming and Bangkok, despite a border overlap will be shortened from five days to only one day. The Laotian branch was based on tripartite financing, which is quite frequent nowadays in the GMS. Thailand, China and Laos invested 30 million US dollars each for this section, Laos’ contribution being an ADB loan. The money was deployed to build a three-lane highway,8 commissioned in 2007 for heavy vehicles, while the Burmese branch will be dedicated to light transport vehicles and tourism. China and Thailand, too, made a joint decision to finance the fourth bridge on the Mekong between Chiang Khong and Huay Xay, completing the Laotian branch from 2010, with a contribution of 1.5 billion baht each. This branch has also been integrated in the program for linking the electrical grids. It will be extended later in the future with a highvoltage line which will allow the Jing Hong dam (1500 MW), the fourth constructed on the Mekong in Yunnan, to export electricity to Thailand from 2015. Laos is a safer option for this line than Myanmar since it has provided uninterrupted electrical supply for over 35 years from the Nam Ngum dam near Vientiane, even when the border between the two nations was sealed off when the Lao People’s Democratic Republic came into power in 1975.

8

This route has a variable standard. It has two lanes and two lateral strips for emergency (equivalent of a third lane). It has been increased to three lanes without lateral strips on the steepest slopes and reduced to two lanes only (without lateral strips) in some sections of narrow valleys.

Thailand

East-West

%

7 843

51.1

834

5.4

16 123

53.0

283

1.0

34.7

9 717

39.2

Population % Population

283 5 648 5 527 4 571

0.6

Vietnam

Yunnan

%

Population

%

4 247

27.7

2 412

15.7

5 061

16.7 11 209 11 209

52.4 23.8

9 432

38.0

5 061

10.8

22.8 97.8

Population

8 935 10 192 14 179

GMS %

29.3 47.6 30.1

100

204

5.4

845 175

22.3 6.4

9 921

28.5

10 142

29.1

25 812 63 400

29.0 24.8

10 142 11 438

11.4 4.5

1 117 5 679

1.3 2.2

9 308 52 171

10.5 20.4

2 742 2 578

72.3 93.6

14 752

42.4

28 373 79 727

31.9 31.2

14 179 43 331

N. B. The subtotals do not correspond to the sum of the components since the corridors can cover the same provinces. Source: ADB review.

15.9 16.9

Population % 15 336

100

30 402 21 401 47 055

100 100 100

24 797 5 648

100 100

4 571

100

3 791 2 753

100 100

34 815

100

88 932 255 776

100 100

Page 208

Total corridors Total country or province

Population

16 323

%

Myanmar

C. Taillard

South Vungtau–Bangkok Phnom Penh– Banteay Kampong Cham– Sihanoukville Camau–Trat Quy NhonStung Treng Subtotal

Population

Laos PDR

2:14 PM

North-South Kunming–Bangkok Kunming–Hai Phong Subtotal

Cambodia

7/15/2010

Corridors Millions of People

Population served by the GMS corridors.

b939_Chapter-08.qxd

208

Table 8.3:

b939_Chapter-08.qxd

7/15/2010

2:14 PM

Page 209

Corridor Linkages in the GMS

209

— The Upper Mekong river course to complete the North-South corridor As the corridor was taking shape, an agreement was signed in 2000 to develop river traffic on the Mekong between Simao in Yunnan and Luang Phrabang in Laos. It offered a new means of transport to China to export its manufactured goods to countries in the peninsula and to Yunnan to export production to the West. It also helped link by boat to Luang Phrabang North Thailand, the former royal capital of Lane Xang, at present on the UNESCO heritage site list and a main tourist river route. The upper stream part of the project was highly controversial and sparked off debate over the ecological impact of desalting and dredging activity required to make the waterways navigable. It is often forgotten that colonial powers and later the International Mekong Committee undertook such work without causing serious damage to the riparian environment in the middle course of the river now navigable, and which had much fewer rapids than the upper course. Oddly, Thai ecologists were supported by military forces who demanded, for security reasons, an agreement with Laos to redefine river border limits. They contested the Franco-Thai treaty signed in 1893 which declares all Mekong islands to be sovereign property of Laos, regardless of their proximity to the Thai river bank. Dredging was likely to displace the talweg that the Thai military wanted to be recognized as the international border between the two countries. This rationale masked yet another tacit motive: to protect their country from the eventuality of a Chinese marine incursion which the river development could facilitate. In light of the public outcry downstream, aggravated by recurrent drought and probably with the retention in the three dams built in the upper course in China, and growing doubts harbored by state governments of the lower basin, the Mekong Commission entrusted an Australian academic specialist with the preparation of an impact study. The discouraging conclusions of this study led the Chinese government to stop dredging works in 2003 at the end of the first phase allowing 150-tonne boats to navigate between Simao and

b939_Chapter-08.qxd

210

7/15/2010

2:14 PM

Page 210

C. Taillard

Chiang Saen, the section which opens the Thai market to China. Against all expectations, China refused to commit itself to the two other phases which would have allowed the navigation of 300-tonne and, later, 500-tonne boats. The progress of the two road branches of the North-South corridor explains this unusual decision since China had to invest five million US dollars toward dredging operations in the adjacent section of the river between Myanmar and Laos, a superfluous and less profitable investment compared to financing of the road corridor.

— The Kunming–Hanoi–Haiphong eastern meridian corridor Running a few years late on the meridian North-South corridor, the GMS undertook, at the end of the first decade, the Kunming– Hanoi–Haiphong corridor, which was of significant regional strategic importance. A 470 million US dollar loan was sought in 2007 and an additional 7 million US dollars were approved for 2008. This corridor offers Yunnan a third maritime prospect, this time toward the South China Sea, by road as well as rail. The revival of the Hanoi–Lao Cai–Kunming colonial railway was included as a link in the meridian line at the Southeast Asian level suggested by ASEAN. It will soon link Singapore to Kunming via Bangkok, Phnom Penh, Ho Chi Minh and Hanoi. This line has a major advantage over vying projects studied by the Thai government (either the lengthening of the former railway along the river Khwai toward Moulmein via the Three Pagodas Pass, or a connection to the Chinese rail network through an entirely new line to create a Chiang Rai–Jing Hong–Kunming link), since it uses existing railways that need to be overhauled, and only a single section to be constructed between Phnom Penh and Ho Chi Minh City. The multimodal nature of this corridor has been all the more strongly asserted as, in addition to road and railways, there is also navigation on the Red River that will be improved. Moreover, this corridor serves 21.4 million people and is almost equally distributed between Vietnam and Yunnan (52, and 48 percent). It is ranked third in the region, after the meridian North-South corridor discussed

b939_Chapter-08.qxd

7/15/2010

2:14 PM

Page 211

Corridor Linkages in the GMS

211

earlier and before the East-West corridor (Table 8.3). It may be observed that investments are heavily concentrated in transport infrastructure (92.5 percent) and this is what characterizes the two, North-South and eastern meridian corridors (Table 8.4).

— The East-West corridor The East-West corridor is a 1450-km link between the two East and West maritime facades of the Peninsula. Among the three routes under ADB scrutiny between Khon Kaen, the capital of Northeast Thailand, and Vinh, Danang or Qui Nhon in Vietnam, finally the median route through the Lao Bao Pass, the lowest in the Annam mountain chain, was chosen. For Thailand, this option has the advantage of providing Khon Kaen the much needed radial road toward Savannakhet in the east to consolidate the rising regional power of the new capital of the Northeast. For Vietnam, it reinforces the Hué–Danang hub and restores importance to Central Vietnam, currently threatened by the twin metropolisation of Hanoi and Ho Chi Minh City. West of Khon Kaen, the corridor reaches the central plains and connects to the North-South corridor at Phitsanulok, now an important logistical hub, before arriving at the Burmese border through Mae Sot. It finally touches the Andaman Sea at Moulmein. This corridor is the biggest challenge for the GMS since it does not cater to any of the peninsular capitals although it travels across provinces in which 15.3 million people live (Table 8.4). It is dominated by Thailand (51 percent) followed by Myanmar and Vietnam (28, and 16 percent), surpassing Laos (5 percent). However, it is the most advanced corridor and is expected to be ready before the end of 2009. Japan is the top donor, financing the eastern section of the East-West corridor (700 million US dollars in a total of 1.5 billion US dollars allocated to the GMS over the period 2004–2007). It has financed the Danang port modernization, the tunnel under the Hai Van pass (cloudy pass) between Danang and Hué (a project of national interest for Vietnam totaling 150 million US dollars located on Highway 1 linking Hanoi to Ho Chi Minh City), and the

East-West Corridors

South Corridors

Total of Three GMS Corridors

%

M$

%

M$

%

3 557 12 423 1 377 4

18.9 66.0 7.3 0.02

1 200

6.4

240

1.3

2 900 728 754 23 115 1 059 3 617 19.7 179 31 518

29.1 7.3 7.6 0.23 1.1 10.6 36.3 0.2 1.8 0.3 5.2

7 590 13 151 2 605 84 338 1 309 4 817 29 445 43 1 042

24.1 41.8 8.2 0.3 1.1 4.1 15.3 0.1 1.4 0.1 2.3

Roads and bridges Railroad Ports Airports Power network Gas pipelines Power plants Telecommunications Tourism Housing Industrial zones

1 133

41.8

474 57 223 250

17.5 2.1 8.2 9.2

9.2 26 12 524

0.3 1.0 0.4 19.3

Total

2 708.2

100

18 801

100

Source: Economic Corridors Transport and Energy Infrastructure in the GMS, ADB.

9 943.7

100

31 450

100

Page 212

M$

C. Taillard

%

2:14 PM

M$

North-South Corridors

7/15/2010

Investments 2005–2010 (Scenario 2)

Investments planned over the period 2005–2010 in the GMS corridors.

b939_Chapter-08.qxd

212

Table 8.4:

b939_Chapter-08.qxd

7/15/2010

2:14 PM

Page 213

Corridor Linkages in the GMS

213

construction of a bridge on the Mekong between Savannakhet and Mukdahan (75 million US dollars). The ADB, World Bank and Japan have jointly financed the reconstruction of Highway 9 linking Quang Tri to Savannakhet and the section of National Highway 1 linking Danang (460 million US dollars). Thailand on its part has invested $23 million to improve road linkage between Khon Kaen and Mukdahan. It is jointly financing with Laos the transformation of the Savannakhet airport into a shared international airport to serve the two twin cities on the Mekong river banks (1.2 billion baht), a first for the GMS. It is equally keen to develop the free development zones of Savannakhet and Seno, a former French military base situated at the crossroads between EastWest corridor and National Highway 13, the meridian backbone of Laos. This free zone is likely to evolve in the future into a transnational zone including the Mukdahan city on the Thai bank. Thailand is also investing in the western section of the corridor that it finances between Mae Sot and Moulmein, providing a link to Yangon through the Burmese road network. It is also developing a logistical hub at Mae Sot and working on a free development zone planned on the other side of the Burmese border. Japan is studying the construction of a new coastal port along the western extremity of the corridor, near Moulmein. Given the diversity of active financing sources and the number of countries concerned, four out of six within the GMS, the East-West corridor is the most international of all planned. It is also the corridor which allocates the maximum financing to crossborder industrial zones (19 percent), with 20 million US dollars for the first phase from Savannakhet–Seno in Laos, US$ 30 million for Mae Sot in Thailand and US$ 25 million for the Lao Bao in Vietnam (Table 8.4). A slightly lower proportion has been allocated to interconnection networks (18 percent) while the transport infrastructure share (61 percent) is the lowest compared to the other GMS corridors (Table 8.3). For this pilot corridor, the Thai body, the National Economic and Social Development Board, has undertaken a study to identify investments for the private sector having 74 projects totaling 364 million US dollars.

b939_Chapter-08.qxd

214

7/15/2010

2:14 PM

Page 214

C. Taillard

— The Southern corridor: Bangkok–Phnom Penh–Ho Chi Minh City–Vung Tau A second transversal corridor links the three southern peninsular capitals: Bangkok, Phnom Penh and Ho Chi Minh City, with Japan and ADB as the principal financing parties. It is likely to be extended during the second stage, to the west up to the Andaman Sea along the gas pipeline which transports Burmese gas to Bangkok. A new road from Ratchabury to Tavoy, with Thai financing, will serve to link it to the fourth capital Yangon. This corridor will connect the two maritime façades of the Peninsula, by traversing four countries, much like the East-West corridor. The corridor is highly populated with 24.8 million people excluding its extension to Myanmar (Table 8.3), nearly equally distributed between Thailand and Vietnam (39, and 38 percent) and has the maximum potential for trade revival, given the importance of the cities and deltas covered. At the interconnection of the power networks will be added the production of thermal energy and a proposed Bangkok–Phnom Penh gas pipeline. This explains why 48 percent of the investments are in the energy sector (Table 8.4). Like the East-West corridor, it is under completion and is being tested for a single border customs inspection. Industrial zone projects are mushrooming on both sides of the Cambodian and Vietnamese border, while casinos have sprung on Cambodian territory close to the Thai border. In addition, in the context of the trans-Asian meridian railway link between Singapore and Kunming, the existing but dilapidated line between the Thai border, the Cambodian capital and the Sihanouk city port is being refurbished for a committed investment of 40 million US dollars and additional approved outlay of US$ 42.5 million. The missing link of 225 km between Phnom Penh and Ho Chi Minh is to be financed shortly since it is critical to the completion of the first trans-Asian meridian railway.

— The emergence of a second East-West corridor: Oubon–Pakse–Danang A fifth and last corridor figures on Map 8.3 among projects for the first decade: the southern corridor of the North linking

b939_Chapter-08.qxd

7/15/2010

2:14 PM

Page 215

Corridor Linkages in the GMS

215

Poipet–Siemreap–Stung Treng in Cambodia to Pleiku and Quy Nhon in Vietnam. It is the only corridor planned and not commissioned during the first decade of the GMS. However, a new transversal corridor was constituted without the “regional” label. It takes the southern variant studied for the East-West corridor, linking Oubon in Thailand, via Pakse and Attopeu in Laos, to Danang in Vietnam via a section of the new Ho Chi Minh road linking the Southern capital to the Central capital through central highlands. The new corridor was constituted after the construction of a new bridge on the Mekong at Pakse, with Japanese financing, and road investments to open out the Bolovens plateau, using bilateral aid. Hence it traverses the entire zone of border plateaus between Laos and Vietnam. Apart from trade in these highlands (mainly top cash crops such as coffee and tea), the new corridor provides access to the hydropower dam locations identified on the perimeter of the Bolovens plateau. These dams are of increasing interest to Vietnam that is facing serious energy shortages for its rapid development, particularly in the center which is experiencing severe deficits.

The extension and densification of regional linkage during the second decade The second decade of the GMS witnessed a diversification of the corridors with the creation of new ones to complete the meridian and transversal corridors of the first period, and an extension of the network since the introduction of a second Chinese province, Guangxi, late 2004, thereby modifying the initial linkage (Map 8.3).

— The addition of three meridian corridors To the integrated approach by corridor of the first period is added an integrated approach of the regional linkage. The new sector-based transport plan will also open out to the corridors commissioned in the context of national programs and bilateral aid, starting with the Chinese-financed corridor linking Kunming to Yangon, discussed earlier. Strangely, this was shown on Map 8.2 in two sections, southern

b939_Chapter-08.qxd

216

7/15/2010

2:14 PM

Page 216

C. Taillard

and western, even as it forms a whole that has operated for a long time. This anomaly probably translates the Chinese vision that anticipates a second vital implication beyond the GMS. In fact, Beijing is quickening the pace of completion of the railroad between Lashio in Myanmar and Dali in Yunnan, so as to link Kunming to Mandalay (1.9 billion US dollars have been committed for the Yunnan section). For China, this is a first stage of an important trans-Asian project which will serve in the second stage to link Yunnan and Assam in the context of a Sino-Indian partnership (Map 8.4). Moreover, the Mandalay–Kunming section of the corridor is of considerable interest since it will ensure oil supply security for China which imports 40 percent of its requirements from the Middle East. A pipeline is under construction to transport oil to Yunnan from Sittwe port on the Bay

Map 8.4: Spatial structure related to corridors linkage in the GMS (sources: Ch. Taillard, 2007).

b939_Chapter-08.qxd

7/15/2010

2:14 PM

Page 217

Corridor Linkages in the GMS

217

of Bengal, via Mandalay where it reconnects with the corridor up to Kunming, thereby avoiding the risk of any closure of the Straits of Malacca. The plan also includes a corridor linking Kunming to Phnom Penh and Sihanouk city. It branches out in the north on the North-South corridor and arrives at Luang Phrabang and later Vientiane. The unpredictable character of this section, and its two-lane structure prevent it from vying with the North-South corridor for heavy traffic. It then follows the Mekong valley to the Cambodian border, today a dead end. This Laotian section, along the National Highway 13, has been completed, having enjoyed various international collaborations, bilateral (Australian, Japanese and Swedish) as well as multilateral (World Bank and ADB). The new element is the missing infrastructure on Cambodian territory from the Laotian border to Kratie to be financed by Chinese loans, and Japanese financing for the bridge crossing the Mekong and for reviving the Sihanouk city port. An important omission is evident on Map 8.2. There is no sign of the coastline highway, known as Mandarin, to connect the two deltas and their metropoles in Vietnam, and offer access to Guangxi in the North and toward Cambodia in the South, nor the Ho Chi Minh highway which overtakes it partially in the western highlands, as it stretches along the Cambodian and Laotian border, an alternative to prevent the cutoff in the event of typhoons of the coastal Mandarin road. This first omission is all the more astonishing as the railroad which runs parallel to the coastline route is an important component of the ASEAN-promoted meridian Singapore–Kunming railroad, covering a distance of nearly 1800 km in the GMS.

— The duplication of the southern corridor To strengthen its central position on the southern corridor and in the context of bilateral relations with Cambodia, Bangkok has studied the duplication of the southern corridor whith a new transversal link along the coastline between the deltas of the Chao Praya and Mekong. A four-lane road already links Bangkok to Trat through Chanthaboury. The extension is underway in Cambodia, via Sihanouk

b939_Chapter-08.qxd

218

7/15/2010

2:14 PM

Page 218

C. Taillard

city and Kampot, deploying highly diversified financing that includes Thai, Korean, World Bank and ADB sources. The extension has been planned for 2010 in Vietnamese territory via Rach Gia up to Ca Mau with ADB financing. This new coastal corridor will also help reinforce the urbanization tropism of Bangkok toward the southeast, already underway, in the direction of the three deep water ports of the Eastern Sea Board and the new Suvanabhumi airport inaugurated in 2006.

— The integration of Guangxi by way of new economic corridors The most remarkable change in the new decade is undoubtedly the integration of Guangxi. It is part of the Chinese strategy to turn the two southwestern provinces of Yunnan and Guangxi, bordering the Indochinese peninsula, into a crucial instrument in developing relations with ASEAN, in the light of the free trade treaty signed with this regional organization in 2002 which must be gradually implemented until 2015. It is striking to note that this schedule corresponds to the second decade of the GMS. Initially, the Chinese government decided to make Kunming, the capital of Yunnan, a regional road, rail and air hub for GMS, to link the three main economic centers on the Chinese coastline (Beijing, Shanghai and Canton–Hong Kong) with countries in the south (Myanmar and Thailand) as well as in the southwest (India). As we have already seen, this explains the top priority given to the railway connection, Kunming–Mandalay. It offers access to India by connecting the Burmese northern railway terminus, Myiktylha, to the Indian terminus Ledo (Likhapani) in Assam. Furthermore, Beijing has equipped Kunming with a business and financial centre controlling a network of border free zones and crossborder zones (with the twin cities: Ruili–Muse in Myanmar, Hekou–Lao Cai in Vietnam and Chiang Saen at the Laotian-Thai border on the Mekong) which are excellent tools to develop trade between Yunnan and other countries in the GMS. Beijing has also created a research center within the

b939_Chapter-08.qxd

7/15/2010

2:14 PM

Page 219

Corridor Linkages in the GMS

219

university, dedicated to this transnational program, and has constructed an international conference center to make Kunming a metropolis at the regional level. A new airport has been planned 22 km northeast of the city for an investment of 1.6 billion US dollars. In the second stage, the Chinese government called for the integration of Guangxi in 2004 into the GMS to make Nanning an exchange hub with ASEAN countries. An annual China–ASEAN fair has been created. The city has been equipped with a logistical platform, like a dry port, 22 km south of the city and around 100 km from the three ports of the Beibu Gulf (Gulf of Tonkin): Fangcheng, Quinzhou and Beihai, all under a single authority, which handles annually 50 Mt of freight and 2.1 M containers. Nanning hence has facilities for maritime trade with ASEAN countries, despite stiff competition from the ports network of Hong Kong harbour, extending its storage facilities along the Pearl River delta. Nanning can vaunt its position as a hub in the new Kunming–Nanning corridor which stretches up to Canton (shown on Map 8.3 as the fourth meridian corridor). Two billion US dollars invested on road transportation and additional financing dedicated to the improvement of navigation on the Zhinjiang between Nanning and the Pearl River delta demonstrate the potential of this new multimodal corridor. The GMS offers a second advantage to Nanning: the North-East Nanning–Bangkok corridor via Hanoi and Vientiane (Map 8.3) for an investment of 455 million US dollars. This is strategic for China since it will connect Singapore to Canton and Hong Kong by road and rail. At the crossborder scale, this Nanning–Hanoi corridor is duplicated into two other routes, to the east along the southern China Sea coast, and to the west via Cao Bang. Nanning will then have, like Kunming, three pairs of twin cities at the border: Pingsang–Lang Son on the main corridor, Dong Xing–Mong Cai on the coastal highway and Jingxi–Cao Bang on the western highway to develop business relations with Vietnam and enjoy the benefits of unfettered traffic. The financing of the development corridors will benefit, like Yunnan, from the Chinese development strategy to the West in order to narrow the disparities between coastal and hinterland China. This strategy is served by a tripartite financing agreement between the ADB, the

b939_Chapter-08.qxd

220

7/15/2010

2:14 PM

Page 220

C. Taillard

central government and the two provinces (of a size comparable to that of the largest countries in the Peninsula) which have an investment capacity, even though they are among the poorest in China. In Vietnam, financing is only bilateral between the government and the ADB. The absence of Chinese investment is worth noting, unlike the corridors traversing Myanmar and Laos. The latest North-East corridor has equal strategic importance for Laos since it can replace Vientiane on an international highway. The Laos PDR atlas9 had suggested the addition of this diagonal, overlooked in the first ADB transport plan to link Bangkok to Hanoi. This corridor extends the Friendship Highway, a strategic road built by Thailand in the 1960s between Bangkok and Nongkhai to protect the North-East from communist threat and support the Royal Laotian government which was controlling at the time only the eastern part of the Mekong river plain. In 1994, the friendship bridge in Nongkai, the first ever to be built on the Mekong in Laos, thanks to Australian financing, provided an uninterrupted connection between Bangkok and Vientiane. The Laotian capital is however a dead end and Bangkok is now keen to trade overland with Hanoi via Laos, as it does with Yunnan. With the unfolding of economic reforms in Vietnam since 1986, the Northern metropolis is catching up with Ho Chi Minh City to become a credible business center at the peninsular level. The congestion of the Haiphong and Bangkok ports should also propel development of overland exchange. Moreover, the new corridor will open up in Laos the Xieng Khouang plateau which, like the Bolovens, is among the last agricultural pioneer front of the peninsula and has massive hydropower potential. Lastly, Xieng Khouang has large open cast iron mines. The working of these mines will demand investments which largely surpass the financing capacities of the peninsular powers but feasible for China which is facing an acute shortage of ores. 9

Sisouphanthong, B. and Taillard, C. (2000). Atlas of the People’s Democratic Lao Republic, Territoral Structures of Economic and Social Development. Paris: CNRSLibergéo/La Documentation Française. (French, Laotian and English editions).

b939_Chapter-08.qxd

7/15/2010

2:14 PM

Page 221

Corridor Linkages in the GMS

221

The missing section, between Vientiane and Xamnea, was included in the perspective of the Bangkok–Hanoi diagonal, and now integrated into the Bangkok–Nanning corridor. The financing and of this project has taken precedence today. Now that the East-West corridor is complete, Japan, the top donor of the transversal corridors, can participate in the investment. The Japan Overseas Development Corporation (Ministry of Economy, Trade and Industry, METI) also cites since 2004 this corridor among the integrating peninsular highways. Moreover, as Ishida Masami10 has mentioned, this corridor provides a road linking the three preferred destinations of Japanese financing in continental Asia: Hong Kong–Canton, Hanoi and Bangkok. This corridor may also be of interest to China since it offers open access to new and substantial mining resources at its doorstep. It may hence be foreseeable for China and Japan to jointly finance the same corridor, as each well-understood pragmatic interest could finally supercede their regional rivalry. Thailand and France which are already jointly financing the extension of the Nongkai railroad to Vientiane (US$ 5 million for 3 km of railroad crossing the Friendship Bridge and US$ 4.6 million for the remaining 25 km up to the Laotian capital) may also contribute, thereby facilitating the coexistence of the two main regional powers.

A new regional integration within a network The GMS, despite the mountainous shape of remote boundary confines between China and the peninsular countries, is no longer an isolated region today. This vast region was never isolated even during the precolonial era11 (Map 8.3). Located on the hydrographic network 10 Shinoda, K. (2004). Regional Economic Cooperation: EU and GMS Development Strategy. Center for European Studies : Regional conference 2004. p. 57. Bangkok: Chulalongkorn University. 11 Doré Amphay (1987). The Sources of the Lao Civilization: Ethnohistorical Contribution to the Culture of Luang Prabang. Metz, Cercle de culture and de recherches laotiennes, 984 p. Taillard Ch. (1989), In Le Laos, stratégies d’un Etat tampon (Laos, a Buffer State Strategies). GIP Reclus-La Documentation Française, Paris, 200 p.

b939_Chapter-08.qxd

222

7/15/2010

2:14 PM

Page 222

C. Taillard

fanning out from the Himalayan mountain, Yunnan takes up a linkage position for long-distance trade, connecting the ancient Silk Route between China and India with the network of caravan routes which reached ports in the great deltas of the peninsula: Pegou on the Sittang (succeeded by Yangon on the Irrawady during colonial times) and Moulmein on the Salouen in Burma, Ayuthaya and then Bangkok on the Chao Phraya in Siam, and Hanoi on the Red River. To this first bundle-like network (seen on Map 8.3), were added two adjacent networks in which trading activity was far less intense. These networks connected respectively the Red River delta and the coast of Central Vietnam to the Mekong basin where the eastern road branched out from the meridian bundle at Korat, the present Nakhon Ratchasima. Further south, the southern highlands of the peninsula were linked to the ports of Cholon (which later became Saigon), PhnomPenh and Bangkok. The colonial partitioning by the hydrographic basin during the colonial era and the closing of the Chinese border during the communist revolution interrupted for nearly a century these bundlelike networks which had moulded the peninsula for ages. The permanence of the caravan networks was underestimated for a long time by researchers who always highlighted the importance of the maritime trans-Asian routes. However, goods were traded on these caravan routes, with a simultaneous diffusion of civilizations which, when assimilated with native civilisations, served to forge the cultures of this “Indo-China”, enjoying relative autonomy with respect to these two continental states. Since the end of the Cold War which paved the way for the GMS, these networks have been reconstituted in a new context of transnational integration within East Asia, which is itself part of regionalization dynamics related to the process of globalization. The first difference rests in linkage today: various corridors no longer form networks that juxtapose; they are integrated into a singular reticular organization (Map 8.3). They all originate however from the periphery, regardless of whether this involves port or hinterland cities. The second difference arises from the position of these metropolises which, previously isolated from one another, are now found on the main axis of integration: transnational for the corridor

b939_Chapter-08.qxd

7/15/2010

2:14 PM

Page 223

Corridor Linkages in the GMS

223

linking the southern capitals in the peninsula, and national for the corridor connecting the provincial capitals in South China. The number of economic corridors commanded by the metropolises provides a measure of each one’s structuring role. Kunming and Bangkok detach themselves with the command of four and five corridors respectively; the meridian North-South corridor which links them constitutes the anchor for regional architecture. Hanoi, with four corridors and Nanning, with three, will shortly form with Bangkok a second main meridian axis. Together these two structural axis will delimit a central meridian zone arranged in two beams, each corresponding to a trans-Asian itinerary connecting Singapore and Bangkok, on one side to Central China and the North through Kunming and Chongqing, and on the other to Southeast China through Nanning and Canton (Map 8.4). The southern metropolises, on the west (Yangon with relay to Moulmein) and on the east (Ho Chi Minh city with relay to Phnom Penh), with two commanded corridors, are well away from the central meridian zone. The principal hubs of the regional reticular arrangement are found at the main intersection of the economic and development corridors based on three situations. They can be first found at diverging points on the two central bundle, not far from their command centers; Jing Hong and Chiang Rai south of Kunming on the meridian NorthSouth corridor, Nakhon Ratchasima north of Bangkok on the North-East corridor. They also indicate the main junctions between the meridian and transversal highways: Phitsanulok and Khon Kaen on the North-South and North-East corridors, Mandalay and Haiphong on the western and eastern corridors. Lastly, Phnom Penh in Cambodia and Vientiane in Laos will soon detach themselves from the secondary hubs to join this group as new corridors develop. With the linkage of meridian and transversal corridors, the Peninsula will operate once more as an integrated network, in which transnational axis structure a polycentric arrangement spreads out from the coastal or continental periphery, where the command centers are situated. We point out, on the one hand, the persistent character of the meridian structure forced by the division of the hydrographic basins and by the east and west coastal faces of the

b939_Chapter-08.qxd

224

7/15/2010

2:14 PM

Page 224

C. Taillard

Peninsula, and, on the other, by the intermediary position occupied by the GMS between China, India and insular Southeast Asia. This meridian compartimentalisation and this in-between situation at the Angle of Asia, to borrow an expression by Elisée Reclus rendered famous by Paul Muss, forbids the development of polarized models. The presented multipolar reticular configuration is therefore well fitted in the geographical configuration of this regional area. 4. New Implications for Economic Corridors The dynamics set in motion by the GMS economic corridors have whetted the appetite of major peninsular and Asian powers to assume control or leadership on these transnational integration dynamics acting within the East Asia regionalisation process.

Rivalry between Thailand and Vietnam The first sign of competition between the peninsular powers, Thailand and Vietnam, is manifested by the blooming of peninsular organizations of varying geometries to strengthen or establish preferred relationships. Thus Prime Minster Thaksin Sinawatra, wishing to assuage Thailand’s neighbours’ resentment related to the country’s central position and economic domination (as attested by anti-Thai riots in 2003 at Phnom Penh), launched the Irrawady–Chao Praya– Mekong Economic Strategy (ACMES) with an annual investment of 9 to 10 billion baht controlled by the Export-Import Bank (Exim), open to foreign donors. As we have seen, it finances solely or with other regional donors (China or the ADB), road, bridges and border business zones in Myanmar, Laos and Cambodia, enabling deployment by Thai companies and Thai foreign investment, by relocating their low cost labour industries. This organization, piloted by Thailand, briefly excluded and then included Vietnam. Hanoi, reviving its regional ambition and ready to compete with Thailand, suggested to its Indochinese partners, with the support of Japan, the creation of a Cambodia–Laos–Vietnam development triangle. Initially a limited area, this triangle was eventually extended to all

b939_Chapter-08.qxd

7/15/2010

2:14 PM

Page 225

Corridor Linkages in the GMS

225

provinces in the south-eastern plateau of the peninsula: Kontoum, Gia Lai, Dac Lac and Dac Nong in Vietnam (only the Lam Dong, integrated in the eastern plain, is excluded); Stung Treng, Rattanakiri and Mondunkiri in north-eastern Cambodia; Saravane, Sekong and Attopeu in southern Laos. Vietnam later chose a series of projects for which sources of financing were approached, for, unlike China and Thailand, Vietnam has not yet financing capacity. Within the GMS, these projects aimed to develop hydropower resources and transportation. The financing of the section between Attopeu and the Ho Chi Minh highway, the new East-West corridor traversing the plateaus, has provided it access to the Xe Kong basin and mainly to the Xe Kaman 3 dam (250 MW), to be built on one of its tributaries. This dam costing 273 million US dollars and to be completed in 2009 is being financed for the first time in Laos by the Vietnamese firm Song Da Construction which will hold a 25-year concession. It is the biggest Vietnamese investment overseas. The bilateral agreement signed with Laos in 2003, for the supply of 1500 MW from 2010, will require the construction of several more dams in the same basin. This agreement will loosen a 30-year Thai monopoly over the purchase of Laotian electricity. Laos, for its part, will attempt to negotiate better power prices for future dams with its top customer. To avoid leaving an open playing field to Vietnam and develop the Friendship bridge built on the Mekong river at Pakse with Japanese financing, Thailand proposed to its Laotian and Cambodian partners in 2001 the creation of an Emerald triangle clubbing tourist site in proximity to the three countries: Phimay in Northeast Thailand, Phreak Vihar in Cambodia on the steep slopes overlooking the Great Lake Plain and Vat Phou in Laos on the bank of the Mekong river, and further down, the natural sites of the four thousand islands of the Mekong (Si Phan Done) and the Khong–Papheng falls, the most impressive in Southeast Asia, at the Laotian-Cambodian border. This tourist triangle is at present dominated by Thailand since it can be accessed through Ubon Ratchasima from Bangkok. However, the new East-West corridor traversing the plateaus connects two important tourist basins: on the one hand, the aforementioned sites of the Mekong basin and, on the other hand, the heritage sites in Central

b939_Chapter-08.qxd

226

7/15/2010

2:14 PM

Page 226

C. Taillard

Vietnam (citadel and imperial tombs at Hué, Sino-Japanese trade post at Hoi An and the Cham temples of My son). Thailand will thus lose its privileged access to the Emerald triangle, and will find itself once again competing with its eastern rival. Rivalry between the two countries is gaining in momentum. By expanding its logistical and economic infrastructure, and taking advantage of its central location, Thailand intends to sustain profitable exchange with Vietnam and Myanmar, two former rivals, now left behind. But Vietnam, having embarked on economic reforms since 1986, boosted by strong growth could well catch up with its main rival by taking advantage of the problems Thailand has been facing due to its political crisis since 2006.

The competition between Chinese hegemony over the meridian corridors and Japan’s dominance over transversal corridors While China has made the Yunnan and Guangxi platforms for developing exchanges with ASEAN, the GMS has also become a test of confidence of the new Chinese strategy activated by the ASEAN– China free trade agreement signed in 2002. With its proposal of multilateral negotiation instead of strictly traditionally bilateral relations imposed on its neighbours according to the adage “divide and rule”, China has sent a strong message to its neighbours. Its recent decisions to freeze the second and third phases of dredging operations in the upper course of the Mekong to ease mercantile traffic, and its willingness to negotiate with ASEAN for joint harnessing of marine resources in the South China Sea, have been well-received by its partners. Hence the GMS has become a vital mutual interest for both sides. Under such propitious conditions, Thailand and China are expanding their partnership in Laos with the joint financing of the Laotian branch of the quadrilateral linking Jing Hong to Chiang Rai, as well as in Thailand up to Chiang Saen. Thailand has built a new riparian port to receive Chinese boats and has snapped up China’s offer to establish a Sino-Thai economic zone to broaden bilateral

b939_Chapter-08.qxd

7/15/2010

2:14 PM

Page 227

Corridor Linkages in the GMS

227

business exchange. This offer was made in partnership with the National High-tech Industrial Development Zone of Kunming, including a free industrial zone, a logistics park, a business park and a cultural center, modeled on those that Yunnan has constructed in Ruili at the Burmese border.12 For China, it is a crossborder zone of a new kind since it has been relocated on the Thai-Lao border. The Thai planning authority, the National Economic and Social Development Board, has prepared a study identifying 112 projects for an investment potential of 476 million US dollars at Chiang Saen, and also Mae Sai and Chiang Khong on each branch of the quadrilateral. Lately, this authority decided to relocate the Sino-Thai Economic Zone project in Chiang Khong closed to the bridge under construction on the Mekong river completing the Lao branch of the North-South corridor. Thailand is trying to extend the model of the first crossborder zone to the outlets of the other corridors on its territory. It is taking this opportunity to consolidate its dominating position over its close neighbours (Map 8.5 prepared by the Thai Export-import bank, EXIM). Japan was slow to develop ties with ASEAN, unlike China. It only signed an in-principle agreement with the regional organisation in 2002, Japan convened its partners on two occasions at Tokyo in 2004 and 2005 (Hisana Makasi, 2007). It signed is 2008 the Asean-Japan comprehensive Economic Partnerships planned with the six first members of the association for 2012 and with the four last members (Cambodia, Laos, Myanmar and Vietnam) for 2017. However, it is the top foreign donor in the GMS. Leaving China an open field on the meridian North-South corridor, it had very early supported the Cambodia–Laos–Vietnam triangle. It has invested mainly on transversal corridors, the East-West and Southern ones. It could also become an important financing partner for the Vientiane–Xamneua section of the new North-East corridor. But Japan will have to contend with China who has recently reserved 20 million US dollars 12

Center for European Studies (2004). Regional Economic Cooperation: EU and GMS Development Strategy: Regional conference 2004. Bangkok: Chulalongkorn University.

b939_Chapter-08.qxd

228

7/15/2010

2:14 PM

Page 228

C. Taillard

Map 8.5: Thailand and the cross-border free zones (sources: GMS-NESDB Economic Cooperation Banque Exim, Bangkok).

through the ADB to develop the three countries of this triangle. For the moment there appears to be a geographic division of tasks between China and Japan which will impact their own regional strategies as they compete for leadership in the GMS and also in East Asia. Lastly, India, which has also made its entrance on the GMS stage, cannot be ignored. To counterbalance the strong partnership with China to complete the meridian North-South corridor, Thailand responded positively in 2002 to the Indian offer to forge a similar partnership in the framework of the Mekong–Ganga Cooperation Initiative. The main project involves the extension of the East-West corridor to Indian Territory, with Thailand financing the Mae Sot–Moulmein section on the Andaman Sea in Myanmar and India, the section linking the state of Manipur to Mandalay. The implications

b939_Chapter-08.qxd

7/15/2010

2:14 PM

Page 229

Corridor Linkages in the GMS

229

go way beyond Thailand and Myanmar, since China has already envisaged a partnership with India to develop a rail link between Yunnan and Assam via Mandalay (Map 8.4). As this analysis draws to a close, it is clear that the GMS holds major strategic implications for the three leading Asian as well as other main peninsular powers. In this transnational regional integration, the various corridors and crossborder free development zones are ideal sites for observation, both on the peninsular and Asian scales. Located at converging points of state players, central and territorial administrations, national as well as local businesses, international donors and diverse transnational collaborations, they make pertinent subjects for study to unravel the complex dynamics operating in the GMS. They also allow us to track the emergence of new centralities in the peripheral regions or in intermediate positions within their respective national constructions, and thus offer new opportunities to cities and provinces hitherto marginalized. How they harness these opportunities will expose the sustainability of the dragging effect born of the ADB-initiated strategy. This is why these themes are at the core of a collective multidisciplinary French research program implemented in 2008–2010: Transnational Dynamics and Territorial Changes, A Comparative Approach between central America and Southeast Asia. A regional workshop is planned in Vietnam on December 14–17, 2010 to conclude the Southeast Asian part of this program.13 References Asian Development Bank (1994). Economic Cooperation in the Greater Mekong Sub region : Toward Implementation. Manila: ADB. Asian Development Bank (1999). Economic Cooperation in the Greater Mekong Subregion: An Overview. Manila: ADB.

13

The conclusion of this regional workshop: Transnational Dynamics and Territorial Redefinition in Southeast Asia, Economic Corridors in the Greater Mekong and the Strait of Malacca in 2011, will be compiled in a book edited in English by the National Economic Research Institute of Laos (NERI) and the Centre for Southeast Asian Studies of France (CASE).

b939_Chapter-08.qxd

230

7/15/2010

2:14 PM

Page 230

C. Taillard

Center for European Studies (2004). Regional Economic Cooperation: EU and GMS Development Strategy. Chulalongkorn Unniversity, Regional conference 2004: Bangkok. Chang, T. (2006). China participation in the GMS: A Review and Analysis of Chinese News Media. Henry L. Samson Center. Comité pour la coordination des études sur le bassin inférieur du Mékong (Committee for Coordination of Investigations of the Lower Mekong Basin.) (1968). Atlas of Physical, Economic and Social Aspects of Lower Mekong Basin. The Mekong River International Committee. Doré. A. (1987). Sources de la civilisation lao: contribution ethnohistorique à la culture louangprabanaise (The Sources of the Lao Civilization: Eethnohistorical Contribution to the Culture of Luang Prabang.), Metz, Cercle de culture and de recherches laotiennes (Lao Studies and Culture Circle). Evans, G., Hutton, C. and Kuah, K. E. (ed.) (2000). Where China Meets South-East Asia: Social & Cultural Change in the Border Regions. Bangkok/Singapore: White Lotus and ISEAS. He, S. D. (2006). Friendly and Wealthy Neigbours, Stable Nation: Yunnan Participation in the GMS. In The Mekong Arranged and Rearranged, M.S.I. Diokno and Nguyen V. C. (eds.), pp. 89–120. Chiang Mai: Mekong Press. Ishida, M. (2007). Toward a Single Market of the GMS: The Potential of the Three Economic Corridors. Institute of Developing Economies, Japan External Trade organization. Kaosa-ard, M. and Dore, J. (2003). Social Challenges for the Mekong Region. Social Research Institute, Chiang Mai: Chiang Mai University. Kermel-Torrès, D. (éd). (2004). Atlas of Thailand, Chiang Mai: Silkworm. Kwan, C. H. and Yasuda, O. (1997). The Indochina Economic Zone. In Asia’s Borderless Economy: the Emergence of Sub-regional Zones, Chen, E. and Kwan, C. H. (ed.) St Leonards: Allen & Unwin. Makasi, H. (2007). Japan vies with China for Dominance in Indochina and Asean. Asia Times. Sisouphanthong, B. and Taillard, C. (2000). Atlas of the Peolple’s Democratic Lao Republic, Territorial Structures of Economic and Social Development. Paris: CNRS- Libergéo / La Documentation Française. Taillard, C. (1989). Le Laos, stratégies d’un Etat tampon (Laos a Buffer State Strategies.) Paris; GIP Reclus-La Documentation Française. Taillard, C. and Kermel-Torres, D. (2004). The Greater Mekong Subregion, a Transnational and Peninsular Area in Mainland Southeast Asia. In

b939_Chapter-08.qxd

7/15/2010

2:14 PM

Page 231

Corridor Linkages in the GMS

231

Regional Integrations in East Asia, C. Taillard (éd.), pp. 377–398, Paris les Indes Savantes. Taillard, C. (2005). Laos at the Crossroad of the Corridors of the Greater Mekong Subregion. In The Laos Sweet and Bitter, 25 years of Practice of an NGO. Comité de Coopération avec le Laos (Cooperation Committee with Laos), Karthala, Paris, 2005, pp. 71–92. Taillard C. (2009). Un example réussi de transnationale en Asie orientale, les corridors de la Région du Grand Mékong, L’espace géographique, No 1, pp. 1–16. Taillard C. (2010). La Thaïlande au centre de la Région du Grand Mékong, in Les annales de Géographie, Paris, Armand Colin, pp. 1–16. US Commercial Services Liaison Office of the ADB (2007). Market Brief GMS Based on ADB’s Regional Strategy and Program Update 2007–2009. Manila. Vatthana Pholsena and Ruth Banomyong (2004). Le Laos au XXI siècle: les défis de l’intégration régionale. Laos in the Twenty-first Century: the Challenges of Regional Integration. IRASEC, Bangkok, 237 p. Vu Tu Lap and Taillard Ch. (1993). Atlas of Vietnam, Territory Dynamics series, Reclus-La documentation française, Paris, 422 p. Zhao, G. (1996). A Model of Decentralized Development: Border Trade and Economic Development in Yunnan. Issues and Studies, pp. 85–108. Institute of International Relation.

b939_Chapter-08.qxd

7/15/2010

2:14 PM

Page 232

This page intentionally left blank

b939_Chapter-09.qxd

7/21/2010

11:02 AM

Page 233

CHAPTER 9

Evaluating Effectiveness of GMS Economic Corridors: Why More Focus on Bangkok–Hanoi Road than East-West Corridor? Masami Ishida

Since the inauguration of the Greater Mekong Subregion (GMS) Economic Cooperation Program in 1992, road infrastructure projects have played a most important part. Their economic significance has been especially highlighted after the introduction of the concepts of the three economic corridors in 1998; East-West Economic Corridor, North-South Economic Corridor and Southern Economic Corridor (Figure 9.1). We could say that the completion of the Second International Mekong Bridge between Mukdahan, Thailand and Savannakhet, Laos was an epoch-making event for the development of the East-West Economic Corridor. The business community, however, has paid more attention to the Bangkok–Hanoi Road instead of the East-West Economic Corridor. This study examines the reasons why the former has received more attention than the latter by using criteria such as population density and the economic scale of the provincial or state level. The effectiveness of the other economic corridors is later examined by applying the same criteria. 1. Higher Expectations for EWEC in Japan Among the three economic corridors, the government of Japan seems to have top priority for the East-West Economic Corridor (EWEC), second priority for the Southern Economic Corridor (SEC), while the government of China seems to have top priority for the North-South 233

b939_Chapter-09.qxd

7/21/2010

11:02 AM

Page 234

M. Ishida

234

Figure 9.1:

Three economic corridors of the greater Mekong Subregion.

Source: ADB (2002).

b939_Chapter-09.qxd

7/21/2010

11:02 AM

Page 235

Evaluating Effectiveness of GMS Economic Corridors

235

Economic Corridor (NSEC). The government of Japan provided a yen-loan to construct the Hai Van Tunnel on National Road No. 1 (NR1) of Vietnam and the Second Mekong International Bridge between Savannakhet and Mukdahan and a grant for paving some part of NR9 of Laos. It dicided to give an assistance for constructing a Mekong River Bridge at Neak Loeang on SEC, while the governments of China and Thailand announced its support for Laos in constructing a Mekong River Bridge at the border of Huay Xai, Laos and Chiang Khong, Thailand on the NSEC. As a matter of fact, newspapers in Japan would often mention the phrase, “East-West Economic Corridor (EWEC)”. The most important reason behind this is, not that the government of Japan has provided a lot of official development assistance (ODA) as that several logistic companies in Japan have found new businesss opportunities. The number of Japanese affiliated companies in Thailand is 1,575 as of November, 2006 (Toyo Keizai Shimposha, 2007).1 It is the largest among ASEAN-10 countries. Recently, Japanese affiliated companies producing parts and components have built industrial clusters near Bangkok and the Eastern Sea Board Area. The thickness of layers from upstream to downstream of the industrial clusters in Thailand is well-rated by the business community in Japan. On the other hand, Vietnam has also been attracting the interest of companies in Japan. Since the risk of investing in China is felt to be high because of the prevalence of severe acute respiratory syndrome (SARS) in 2003 and anti-Japan demonstration in China in 2004, Vietnam has gained the most from the concept of “China plus One.”2 Japanese affiliated companies in Vietnam, however, have faced shortage of domestic supply of parts and components; consequently, they are forced to import more expensive parts and components from Japan, Korea, Taiwan and China. 1

Database of Japanese affiliated companies abroad of Toyo Keizai Shimposha is a major one, but it does not cover all the Japanese affiliated companies abroad. The real number is at least more than the published number. 2 It is typical of Japanese companies which invest in an ASEAN country as a substitutable production point for China instead of concentrating in China.

b939_Chapter-09.qxd

236

7/21/2010

11:02 AM

Page 236

M. Ishida

The completion of the Second Mekong International Bridge has enabled them to procure parts and components from Thailand. Moreover, it has shortened the time needed for traveling from Bangkok to Vietnam from 10–15 days by ship to just three days by road.3 The logistics business from Guangzhou, China to Hanoi has also been started and the distance is about 1,200 km, shorter than the 1,500 km between Bangkok and Hanoi; yet the business has not been popular partly because the logistics cost is relatively higher.4 Even though, several Japanese logistics companies have adopted a bolder approach. First, Sumitomo Corporation started a regular logistics service between Hanoi and Southern China once a week in August 2007, and increased it to two times a week in September 2007.5 Japan Logistics System Corporation built a joint venture company, Logitem Laos GLKP Co. Ltd. and started the operation of a transfer point at Savannakhet from October 1, 2007.6 Nippon Express also started an order-based logistic service in April, 2008 and a regular service in November 2009.7 Actually, Nippon Express have become able to give a 7,000 km logistic service between Shanghai and Singapore. As a matter of fact, the number of Japanese affiliated companies are 1,709 in Shanghai City, 740 in Jiangsi Province, 231 in Zhejiang Province, 69 in Fujian Province, 721 in Guangdong Province, 1,135 in Hong Kong, 9 in Guangxi Zhuang Autonomous Region, 759 in Malaysia and 991 in Singapore as of November 2007. The summarized number of Japanese affiliated companies on the route in China (not including Hong Kong) is 3,479 and accounts for 71.3 percent of all Japanese affiliated companies in China. The

3

Jetro (2006). JETRO Censor. There are few direct cargo lines from Bangkok to Hanoi; a ship loaded in Laem Chabang, Thailand is usually unloaded in Hong Kong, then another ship of feeder line conveys to Hai Phong after loading again in Hong Kong. 4 JETRO (2007). ASEAN Butsuryu Network Map (ASEAN Logistic Network Map), JETRO. 5 Press release of Sumitomo Corporation (13 September 2007). 6 Press release of Logistic System Japan, Co. Ltd. (18 June 2007). 7 Press release of Nippon Express (April 14, 2008 and 25 November 2009).

b939_Chapter-09.qxd

7/21/2010

11:02 AM

Page 237

Evaluating Effectiveness of GMS Economic Corridors

237

summarized number of Japanese affiliated companies in Singapore, Malaysia, Thailand, Cambodia, Laos, Myanmar and Vietnam is 3.705 which accounts for 77.8 percent of all Japanese affiliated companies in 10 ASEAN countries.8 2. Comparison Between EWEC and BHR with Population and GRP In this way, the word “East-West Economic Corridor (EWEC)” has been well-recognized by the business community investing in Asian countries. However, the duplicated part of EWEC and the Bangkok– Hanoi route is just about 406 km from Kuchi Narai, Thailand to Dong Ha, Vietnam, and accounts for 27.9 percent of EWEC (1,453 km). The part attracting focus should not be called EWEC but “Bangkok–Hanoi Road (BHR)”. Thus the route of Bangkok–Hanoi is called “Bangkok– Hanoi Road (BHR)” in this chapter. 2.1 Measuring by simply summarized or averaged indicators along EWEC and BHR Why BHR attracts more focus than EWEC is examined by several statistical indicators composed of population, population density, gross regional product (GRP), and GRP per capita. Previously,9 we compared the effectiveness of three economic corridors by summarized population and GRP, and GRP per capita of provinces along each economic corridor by country and the whole route. For this study, summarized distances, area, population and GRP of provinces and states along EWEC and BHR by country and the whole routes, and population density, given by summarized area and population and GRP per capita, given by summarized GRP and population, are 8

Ishida, M. (2009). Ishida, M. (2006). Effectiveness and Challenges of Three Economic Corridors of the Greater Mekong Sub-region. I.D.E. Discussion Paper No. 35, Chiba: Institute of Developing Economics (available at http://www.ide.go.jp/English/Publish/ Download/Dp/index2005.html)

9

b939_Chapter-09.qxd

7/21/2010

11:02 AM

Page 238

M. Ishida

238

shown in Table 9.1 and Table 9.2, respectively. The ratio of indicators of BHR to EWEC is shown in Table 9.3. The ratio in Laos is 1.0 because the parts are duplicated. The gap of population, density and GRP is relatively larger in Thailand, but the level of GDP per capita is higher in provinces along EWEC than BHR unexpectedly. However, the population, population density, and GRP are clearly larger in provinces along BHR compared with those along EWEC and it illustrates why BHR attracts more focus than EWEC. 2.2 Measuring by weighted summarized and averaged indicators The ratio of the economic indicators of BHR to EWEC might be overestimated. The population of Bangkok is 5844.6 thousand and its GRP is 42173.4 and they account for 17.6 percent and 64.0 percent of the summarized values of provinces along BHR, respectively, but the length of BHR in Bangkok City is just 7.6 km and it accounts for only 0.5 percent of the summarized values. The weighted economic indicators10 by length of the BHR part in each province along EWEC and BHR are calculated and the ratios of BHR to EWEC of the summarized and averaged values as shown in Table 9.3 except populations of Thailand are shown in Table 9.4. The ratios become lower compared with those of Table 9.3, except population of Thailand but the values show that the economic indicators of BHR are still higher than those of EWEC except GRP per capita in Vietnam. 2.3 Application of gravity model The effectiveness of BHR and EWEC can be compared in another way. The gravity model which is usually used to illustrate the value or quantity of trade between two countries is expressed between the distance, income levels, populations and GDP.11 That is to say, the 10

n Ê

Weighted Value = Â ÁVi i =1 Ë

n ˆ ¥ Li / Â Li ˜ i =1 ¯

where Vi is an economic indicator’s value of

Province i and Li is length of road in province i. Trade amount = f (Distance, Incomei, Incomex, Populationi, Populationx) where i is an importing country and x is an exporting country.

11

b939_Chapter-09.qxd

7/21/2010

11:02 AM

Page 239

Evaluating Effectiveness of GMS Economic Corridors Table 9.1: 2003.

Economic indicators of east-west economic corridor by country as of

Length (Km) Vietnam

271.0

Laos

238.0

Thailand

802.3

Myanmar

103.8

All

239

1,415.1

Total Area (Km2)

Population (Thousand Persons)

Population Density (Persons Per Km2)

GRP (Million US$)

GRP/Cap. (US$)

11,055.2 (3.5) 21,772.8 (9.2) 86,729.5 (16.9) 42,659.6 (6.3)

2,457.3 (3.0) 833.9 (14.7) 8,227.7 (12.9) 4,342.0 (8.1)

222.3 (87.9) 38.3 (159.8) 94.9 (76.5) 101.8 (128.8)

849.7 (2.1) 250.9 (12.3) 6,857.8 (4.8) 1,145.7 (11.9)

345.8 (70.8) 300.9 (83.5) 833.5 (37.1) 263.9 (147.0)

162,217.2 (7.0)

15,860.9 (6.1)

97.8 (87.8)

9,104.1 (4.0)

574.0 (61.5)

Remarks: (1) Values in parentheses are the percentage ratio to the summarized or averaged national values. (2) Data of GRP, GRP per capita and distance are very rough ones, especially GRP and GRP per capita obtained in the following processes: 1) GRP in Vietnam is obtained by multiplying monthly per capita income based on household surveys in 2003–2004 of population in the provinces and over 12 months. 2) GRP in Laos is deflated values as of 2005, by dividing the GDP per capita ratio of 2005 by 2003 based on ADB’s Key Indicators. 3) GRP in Myanmar is based on inflated values of monthly household expenditure surveyed in 2001 by multiplying the GDP per capita ratio of 2005 by 2003 based on ADB’s Key Indicators. Annual expenditure per capita is obtained by dividing GDP per households by the value of the average household size and multiplying by 12 months.

Sources: Distances: — Vietnam: Giao Thong Duong Bo Viet Nam, Tap Ban Do, Thong Duong Bo Viet Nam. — Laos: Measurement by author in 2006. — Thailand: Road Map of Thailand 2005–2006, Bangkok: think net. — Myanmar: Global Travel Map, Myanmar, Bangkok: Asia Books. Area, Population and Income — Vietnam: General Statistics Office (2004). Statistical Yearbook 2003. General Statistics Office (2006). Results of the Survey on Households Living Standards. — Laos: collected from all the provincial government offices Laos. — Thailand: National Statistical Office (Various Years). Statistical Yearbook Thailand. — Myanmar: Central Statistical Organization (2002). Statistical Yearbook 2002. Exchange Rates: — Countries except Myanmar: IMF (Various Years). International Financial Statistics. — Myanmar: averaged value of daily exchange rates of Foreign Exchange Certificate (FEC) Exchange Center in 2001 from Tokyo Mitsubishi Bank.

b939_Chapter-09.qxd

7/21/2010

11:02 AM

M. Ishida

240 Table 9.2:

Economic indicators of Bangkok–Hanoi road by country as of 2003.

Total Area (Km2)

Population (Thousand Persons)

Population Density (Persons Per Km2)

GRP (Million US$)

GRP/Cap. (US$)

65,481.8 (12.8) 21,772.8 (9.2) 51,805.8 (16.2)

15,922.9 (25.0) 833.9 (14.7) 16,515.6 (20.4)

243.2 (196.0) 38.3 (159.8) 318.8 (126.0)

60,287.9 (42.1) 250.9 (12.3) 5,349.9 (13.5)

3,786.2 (168.4) 300.9 (83.5) 323.9 (66.3)

139,060.5 (6.0)

33,272.4 (12.9)

239.3 (214.7)

65,888.8 (28.7)

1,980.3 (223.5)

Length (Km) Thailand

684.7

Laos

238.0

Vietnam

652.7

All

Page 240

1,575.4

Remarks: See Table 9.1. Sources: See Table 9.1.

Table 9.3: EWEC.

Ratio of economic indicators of Bangkok–Hanoi road to those of

Length (Km)

Total Area

Population

Population Density

GRP

GRP/Cap.

Thailand Laos Vietnam

0.9 1.0 2.4

0.8 1.0 4.7

1.9 1.0 6.7

2.6 1.0 1.4

8.8 1.0 6.3

4.5 1.0 0.9

All

1.1

0.9

2.1

2.4

7.2

3.4

Sources : Calculated from Tables 9.1 and 9.2.

shorter the distance and the larger the income levels, populations and GDP are, the larger value or quantity of trade between two countries are. The concept of the gravity model is applied although the dependent variable, the data of the value or quantity of trade is not available. GRP, GRP per capita, population and population density of major cities of both edges of economic corridors are used. In other words, the route which connects larger cities is more effective than at which connects smaller cities. The economic indicators of major cities on the

b939_Chapter-09.qxd

7/21/2010

11:02 AM

Page 241

Evaluating Effectiveness of GMS Economic Corridors

241

Table 9.4: Ratio of weighted economic indicators of Bangkok–Hanoi road to those of EWEC. Length (Km)

Total Area

Population

Population Density

GRP

GRP/Cap.

Thailand Laos Vietnam

0.9 1.0 2.4

1.0 1.0 1.8

1.7 1.0 2.2

1.7 1.0 1.2

2.7 1.0 1.8

1.6 1.0 0.9

Myanmar All

1.1

0.9

1.6

1.7

2.0

1.3

Sources: Calculated from data in Table 9.1.

Max of income & Population Left End

Max of income & Population Middle Point

Figure 9.2:

Right End

The application of the gravity model.

Source: Author’s drawing.

left and the right sides of the route are used after dividing the left side and right side by the middle point as shown in Figure 9.2. The biggest city on each side is decided by the maximum value of each economic indicator along the road by respective economic indicators. Table 9.5 shows the economic indicators of the major cities of EWEC and BHR and also the ratios of the latter to the former. For EWEC, the major cities are different for different economic indicators and the highest values on each side are underlined. For instance, the city with the maximum value of population on the Vietnam side is Thua Thien Hue and that of population density, Danang. The province with the highest GRP per capita and GRP is Kalasin at the middle point of EWEC. On the Myanmar and Thailand side, the province with the highest values is Khon Kaen near the middle point of EWEC. Mon state of Myanmar is the state to which Mawlamyine belongs. On the other hand, Bangkok is the major city on Thailand’s side and Hanoi is the major city of Vietnam of BHR for all indicators.

b939_Chapter-09.qxd

7/21/2010

11:02 AM

M. Ishida

242 Table 9.5:

Page 242

Comparison of economic indicators of major cities of EWEC and BHR. Population (Thousand Persons)

East-West

Density (Persons/ km2)

GRP/Cap. (US$)

GRP (Million US$)

Danang Thua Thien Hue Kalasin

747.1 1,101.7 994.6

595.1 218.0 143.2

514.7 293.0 627.2

384.5 322.8 623.8

Khon Kaen Mon

1,770.6 2,735.0

162.6 222.5

1,143.4 237.1

2,024.4 648.6

Hanoi Bangkok

3,007.0 5,844.6

3,264.9 3,734.1

619.6 7,215.8

1,863.2 42,173.4

(Bangkok–Hanoi Road)/(East-West Corridors) Vietnam Side (Danang − Kalasin) 2.7 Thailand or Myanmar Side 2.1 (Khon Kaen − Mon)

5.5 16.8

1.0 6.3

3.0 20.8

Bangkok–Hanoi

Source: Author’s calculations.

The gap is very clear, between the major cities of BHR and EWEC, especially for population density and GRP in Thailand or Myanmar. Based on simply averaged or summarized values, even with the weighted values and indicators of major cities on both sides, BHR is more effective than EWEC, especially, with the great significance connecting Hanoi and Bangkok. BHR can be even more effective if it is extended to Southern China. On the other hand, EWEC is sometimes called the poverty corridor. But is EWEC ineffective? Considering that it connects the Pacific Ocean and the Indian Ocean, crosses the North-South Economic Corridor (NSEC) and can be used as the Bangkok–Yangon Road instead of Bangkok–Hanoi Road, it cannot be so. It is said that the business community of Northeast Thailand has made contact with the middle part of Vietnam such as Danang,12 and the EWEC Corridor 12

Ishida, M. and Kudo, T. (2007). Dai Mekong Ken Keizai Kyoroku: Jitsugen Suru 3tus no Keizai Kairo (Greater Mekong Economic Cooperation Program: Realizing Three Economic Corridors). Chiba: Institute of Developing Economies.

b939_Chapter-09.qxd

7/21/2010

11:02 AM

Page 243

Evaluating Effectiveness of GMS Economic Corridors

243

tour covering World Heritage sites such as Hue and Hoian has become popular in Thailand. 3. The NSEC and SEC 3.1 Comparison between NSEC and BHR The gravity model is similarly applied to the North-South Economic Corridor (NSEC) by using BHR. Table 9.6 shows the economic indicators’ ratio of Bangkok–Kunming Road (BKR) and Kunming– Haiphong Road (KHR) to BHR. The population and population density for BKR are lower than BHR, but the GRP and GRP per capita are higher, thus it would be as effective as BHR. As for KHR, the values are all less than 1.0 with simply averaged or summarized values, but they become higher than BHR with weighted values by length of load in each province, except GRP per capita. Thus it might be as effective as BHR. The results of using the maximum values of indicators on both sides of the corridors are shown in Table 9.7. The BKR and BHR have Bangkok as a common city. Thus by simply comparing Kunming and Hanoi, the population, GRP and GRP per capita of BKR are higher than BHR. Only for population density, is Kunming smaller than Hanoi. Considering that BKR would be as effective as BHR with respect to averaged or summarized indicators, BKR can be said to be effective enough. On the other hand, KHR shares, Hanoi as a common city with BHR. Thus by simply comparing KHR with BHR, the Table 9.6:

Ratio of weighted economic indicators of NSEC to BHR. Length Total Population GRP/ (Km) Area Population Density GRP Cap.

Bangkok–Kunming

Simple Weighted

1.24 1.24

1.40 1.44

0.74 0.85

0.53 0.59

1.10 1.50 3.37 3.98

Kunming–Haiphong Simple Weighted

0.53 0.53

0.66 1.64

0.64 1.85

0.97 1.13

0.30 0.47 1.85 1.10

Sources: Calculations from the statistical data of respective countries.

b939_Chapter-09.qxd

244 Table 9.7:

7/21/2010

11:02 AM

Page 244

M. Ishida Comparison of economic indicators of major cities of NSEC and BHR. Population Density (Thousand (Persons/ Persons) km2)

Bagkok– Bangkok Kunming Kunming (compared with Hanoi)

5,844.6 5,008.0 (1.7)

Kunming– Kunming 5,008.0 Haiphong (compared with Bangkok) (0.9) Hanoi 3,007.0

GRP/ Cap. (US$)

GRP (Million US$)

3,734.1 7,215.8 42,173.4 232.0 1,963.8 9,834.6 (0.1) (3.2) (5.3) 232.0 1,963.8 (0.1) (0.3) 3,264.9 619.6

9,834.6 (0.2) 1,863.2

Sources: Calculated based on the statistical data of respective countries.

economic indicators of Hanoi are seen to be less than those of Bangkok. KHR might be as effective as BHR but less effective than BHR. But it should be more effective than EWEC. 3.2 Comparison between SEC and BHR The Southern Economic Corridor (SEC) is composed of the central subcorridor which connects Bangkok, Phnom Penh and Ho Chi Minh City, southern coastal subcorridor which goes along the Eastern Sea Board Area, Trat, Koh-kong, Sihanoukville, Nam Can and northern subcorridor which connects Siem Reap and Quynhon by way of Stung Treng. Table 9.8 shows the ratio of each subcorridor to BHR’s economic indicators. The GRP and GRP per capita are averaged or summarized variables for provinces in Thailand and Vietnam along each subcorridor because the data of GRP of provinces in Cambodia are not available while the data of population and population density include the provinces in Cambodia. First, Central subcorridor is more effective than BHR from population density and GRP per capita. Southern Coastal Subcorridor would also be more effective than BHR except for the value of population. On the other hand, Northern Subcorridor is less effective than BHR for all indicators.

b939_Chapter-09.qxd

7/21/2010

11:02 AM

Page 245

Evaluating Effectiveness of GMS Economic Corridors Table 9.8:

245

Ratio of weighted economic indicators of SEC to those of BHR. Length Total Population GRP/ (Km) Area Population Density GRP Cap.

Central Subcorridor Simple Weighted

0.70 0.70

0.66 0.52

0.81 0.79

1.23 1.51

0.95 1.17 3.61 4.56

Coastal Subcorridor Simple Weighted

0.62 0.62

0.39 0.50

0.41 0.55

1.07 1.09

1.08 2.61 3.09 5.61

Northern

Simple

0.59

0.59

0.14

0.23

0.01 0.15

Subcorridor

Weighted

0.59

1.14

0.39

0.34

0.30 0.76

Sources: Calculations from the statistical data of respective countries.

Table 9.9:

Comparison of economic indicators of major cities of SEC and BHR. Population Density (Thousand (Persons/ Persons) km2)

Central Bangkok Subcorridor Ayutthaya

GRP/ Cap. (US$)

GRP (Million US$)

7,215.8 7,840.3

42,173.4 5,890.1

5,844.6 751.3

3,734.1 293.8

Phnom Penh Ho Chi Minh (Compared with Hanoi)

1,283.0 5,554.8 (1.8)

4,805.2 2,651.2 (0.8)

894.5 (1.4)

4,968.8 (2.7)

Coastal Bangkok Subcorridor Rayong Kien Giang (Compared with Hanoi)

5,844.6 556.7 1,606.6 (0.5)

3,734.1 156.7 256.3 (0.1)

7,215.8 13,726.8 394.3 (0.6)

42,173.4 7,642.2 633.4 (0.3)

Northern Siemreap Subcorridor (Compared with Hanoi) Binh Dinh (Compared with Bangkok)

843.0 (0.28) 1,530.3 (0.26)

55.2 (0.02) 254.0 (0.07)

321.3 (0.04)

491.8 (0.01)

Sources: Calculations from the statistical data of respective countries.

Table 9.9 shows the maximum values of economic indicators on both sides of the subcorridors. It is interesting that GRP per capita of Ayutthaya and Rayong are both higher than that of Bangkok and population density of Phnom Penh is highest in the GMS area. As for Central Subcorridor and Coastal Subcorridor, Bangkok is the

b939_Chapter-09.qxd

7/21/2010

11:02 AM

246

Page 246

M. Ishida

common major city in BHR. Thus comparing Hanoi and Ho Chi Minh Cith or Phnon Penh, all the indicators of Central Subcorridor is higher than those of BHR. Thus coupled with the results of Table 9.8, it should be clear that Central Subcorridor is more effective than BHR. The advantages of road conveyance, however, is lower than BHR. It takes only two–three days by ship and two days by road from Bangkok to Ho Chi Minh City, while it takes three days by road and 10–15 days by ship from Bangkok to Hanoi.13 With the completion of the Mekong River Bridge as planned in 2012 at Neak Loeang, the time needed for travel by road should be shortened. In the Southern Coastal Subcorridor, GRP per capita of Rayong Province is higher than that of Bangkok and the corridor passes a productive area in Thailand. But on the Vietnamese side, the indicators of Kieng Giang are lower than those of Hanoi. This means that the Vietnamese side of the subcorridor is not balanced with Thailand side. The relatively higher values of GRP and GRP per capita of Southern Coastal Subcorridor in Table 9.8 reflect the higher values of the provinces of the Eastern Seaboard Area of Thailand. Considering all the indicators so far, it is hard to believe that Southern Coastal Subcorridor is more effective than BHR. It should be noted, however, that the government of Thailand has given assistance for constructing four bridges between Koh Kong and Srae Ambel, and from Srae Ambel to Phnom Penh and a wellpaved road in Cambodia, the NR4, can be used. That is to say, connecting Bangkok and Phnom Penh by way of the Eastern Seaboard Area justifies its effectiveness, considering the population density of Phnom Penh. On the other hand, all the economic indicators of Siem Reap and Bin Dinh to which Quy Nhon belongs, are even lower than those of Bangkok and Hanoi. Coupled with the results of Table 9.7, connecting Siam Reap and Quy Nhon will not be worthwhile.

13

JETRO (2006). JETRO Censor.

b939_Chapter-09.qxd

7/21/2010

11:02 AM

Page 247

Evaluating Effectiveness of GMS Economic Corridors

247

Conclusion Averaged or summarized indicators of population, population density, GRP and GRP per capita and the maximum values of these indicators on both sides of the corridors explain well why BHR is more focused than EWEC. By applying these measures to NSEC and SEC, it is clear that Central Subcorridor of SEC is more effective than BHR and Bangkok–Kunming Road would be as effective as BHR. And Kunming–Hai Phong Road and Bangkokm–Phonom Penh Road by way of the coastal area are also effective, although these are less effective than BHR. On the other hand, Northern subcorridor is ineffective from all the indicators. Although EWEC is less effective than BHL, as mentioned at the end of section 2, it is still effective. This is especially since the duplicated part with BHL is effective and the duplicated part of Bangkok–Yangon Road can also be effective. The remaining part of EWEC can also be developed by utilizing the logistics of the duplicated parts. As a matter of fact, the business community of Northeastern Thailand has established a close relation with the business community in the middle part of Vietnam. These actions can promote the development of the remaining part of EWEC. In the same way, the part of the Southern Coastal Subcorridor between Nam Can and Srae Ambel can also be developed after the frequency of logistical services between Bangkok and Phnom Penh increases. New economic corridors have been added in the mid-year plan of GMS. A future challenge would be to examine their effectiveness. The data used would also have to be improved. References Asian Development Bank (2002). Building on Success; A Strategic Framework for the Next Ten Years of the Greater Mekong Subregion Economic Cooperation Program, Manila: Asian Development Bank. Ishida, M. (2006). Effectiveness and Challenges of Three Economic Corridors of the Greater Mekong Subregion. I.D.E. Discussion Paper No. 35,

b939_Chapter-09.qxd

248

7/21/2010

11:02 AM

Page 248

M. Ishida Chiba: Institute of Developing Economies (available at http://www.ide.go.jp/ English/Publish/Download/Dp/index2005.html)

Ishida, M. and Kudo, T. (2007). Dai Mekong Ken Keizai Kyoryoku: Jitsugen Suru 3tsu no Keizai Kairo (Greater Mekong Economic Cooperation Program: Realizing Three Economic Corridors). Chiba: Institute of Developing Economies. —— (2009). Dai Mekong Ken Keizai Kyoryoku Puroyuramu to Nikon no Yakuwari (Greater Meony Economic Cooperation Program and Rolls Played by Japan). Nikon Bowhihai Geppon. Ida, K., Sukegawa, N., Fukuda N. and Takemoto N. (2006). Tokushu Mekong Kaihatsu ga Indochina no Butsuryu wo Kaeru (Special Issue, Mekong Region Development Will Change the Logistics in Indochina) in JETRO Censor, February, 2006, pp. 8–25. Tokyo: JETRO. JETRO (2007). ASEAN Butsuryu Network Map (ASEAN Logistic Network Map). Tokyo: JETRO. Toyo Kezai Shimposha (2007). Kaigai Sinshutsu Kigyo Soran 2007: Kuni Betsu Hen. (Overseas Japanese Affiliated Companies 2007: by Country). Tokyo: Toyo Keizai Shimposha.

b939_Chapter-10.qxd

7/15/2010

2:15 PM

Page 249

CHAPTER 10

Myanmar and Japan: How Close Friends Become Estranged? Toshihiro Kudo

Introduction When the residence of Ne Win, former Myanmese strongman throughout the socialist period, was surrounded by a military squad on March 4, 2002, he told his favorite daughter Sandar Win to call the Japanese ambassador in Yangon for help. Eventually, an alleged plot to overthrow the State Peace and Development Council (SPDC)1 by Sandar Win’s husband was uncovered. Ne Win was put under house arrest and died nine months later. The anecdote implies an extremely close relationship between Ne Win and the Japanese government. In contrast, the SPDC reproached the Japanese government for its vote together with the United States, the United Kingdom and others in favor of putting Myanmar issues2 on the United Nations Security Council’s (UNSC) agenda on September 15, 2006. The Myanmar state-run newspaper furiously condemned the Japanese government by referring to human rights abuses by the Japanese army during World War II.3 So-called historical issues were rarely raised by the Ne Win regime. Even when the Japanese Ministry of Education issued revised guidelines for modern history textbooks in the 1980s, the Ne Win 1

The military took power in a coup in September 1988 and established the State Law and Order Restoration Council (SLORC), which was reconstituted as the SPDC in November 1997. 2 Myanmar issues include the military government’s violation of human rights, including the detention of Aung San Suu Kyi, and a delay in democratization. 3 Myanmar Alin (19 September 2006). 249

b939_Chapter-10.qxd

7/15/2010

2:15 PM

250

Page 250

T. Kudo

regime did not join China, South Korea and other Asian countries in criticizing the guidelines for whitewashing Japan’s wartime outrages in Asian countries.4 The bilateral relations between Myanmar and Japan seem to have currently reached an all-time low for the last five decades. Furthermore, not only political and diplomatic relations but also economic ties have become relatively weaker since 1988. The birth of the military government in Myanmar and the Japanese response to it apparently marked a watershed in their relations. Japan was then believed to be the only country that possessed sufficient meaningful influence on Myanmar to encourage a move toward national reconciliation between the newly born military government and the opposition party led by Aung San Suu Kyi. However, Japan failed to exert such an influence successfully on either side due to its reduced leverage in a new political and economic reality. Why and how have the close friends, Myanmar and Japan, become estranged? This paper examines factors that have contributed to putting a distance between them since 1988. The first section reviews the history of relations between the two countries in the post-World War II period with special reference to Japan’s official development assistance (ODA) provided to Myanmar. The provision of Japanese ODA had cemented the close ties between Ne Win and the Japanese government throughout the socialist period. The second section reviews the new international and regional reality surrounding Myanmar. The Cold War ended almost at the same time as the military government took power in Myanmar. The birth of the military government itself perhaps simply coincided with the end of the Cold War. However, the end of the Cold War brought about a new international and regional reality, and events that eventually kept Myanmar at a distance from Japan occurred in this new environment. The third section examines four events and/or factors that resulted in an estrangement of the relationship between the two countries. The four events include changes in Japanese ODA policy, Myanmar’s open door policy and the attendant regionalization of trade, China’s rise as an economic partner and increased revenues from natural gas extraction. In conclusion, the 4

See Seekins (1992: 246–262).

b939_Chapter-10.qxd

7/15/2010

2:15 PM

Page 251

How Close Friends Become Estranged?

251

author envisages a prospect of the relationship between the two countries in the future, and deliberates on a new role for Japan in international society, which would promote national reconciliation and economic development in Myanmar. 1. The Era of Close Friends Myanmar and Japan had long held strong ties in the post-World War II period, and they were often known as having a “special relationship” or a “historically friendly relationship”.5 Such a relationship was established through the personal experiences and sentiments of Ne Win and others in the military and political elite of independent Myanmar. Aung San, Ne Win and other leaders of Myanmar’s independence movement were members of the “Thirty Comrades”, who were educated and trained by Japanese army officers.6 The personal ties between the national leaders of the Myanmar and Japanese army officers were certainly instrumental in the formation of favorable bilateral relations between the two countries, in particular during the Ne Win era (1962–1988). Throughout the critical economic periods following the military coup of 1962, only the Japanese ambassador out of the whole diplomatic corps had continuous access to Ne Win.7 In addition to the “Thirty Comrades”, many ministers and higher-ranking government officials in the Ne Win regime were also educated by Japanese army officers and civilians, and spoke Japanese to varying degrees. For example, Sein Lwin, who succeeded Ne Win in July 1988 and took the office of president for only 17 days, also spoke Japanese to a fair degree. On the Japanese side, there was what had been informally called a “Burmese lobby” in Tokyo.8 The Burmese lobby included such figures 5

See Nemoto (1993:12–14) and (2007:100–103) for details on the special relationship between Myanmar and Japan. Takashi Suzuki, former Japanese ambassador to Myanmar from January 1971 to June 1974, also wrote in his book that Japan had a sort of special historical relationship with Burma (Suzuki, 1977:214). 6 See Tanabe (1990) for details of the “Thirty Comrades”. 7 See Steinberg (1990:57) and Nemoto (2007:103). 8 See Steinberg (1990:57) and Nemoto (2007:103).

b939_Chapter-10.qxd

252

7/15/2010

2:15 PM

Page 252

T. Kudo

as Nobusuke Kishi, a former prime minister; Shintaro Abe, a former foreign minister; Watanabe Michio, successor to the Nakasone faction of the ruling Liberal Democratic Party (LDP); and Yoshiko Yamaguchi, an LDP member and close friend of Ne Win. Four Japanese prime ministers officially visited Myanmar in the 1960s and 1970s, while Ne Win visited Japan several times (Table 10.1). In reality, the huge ODA provided by the Japanese government to Myanmar cemented this special relationship which was based on the personal sentiments of political elites in the two countries. ODA played a leading role in both economic and diplomatic relations between the two countries. Japanese economic assistance to Myanmar began in the form of war reparations in 1955.9 Japan paid US$200 million (equivalent to 72 billion yen at the then exchange rate of 360 yen per US dollar) in Japanese goods and services over a period of 10 years from 1955 to 1965. At the same time, Japan provided technical assistance, the value of which was US$50 million (equivalent to 18 billion yen). In 1963 Japan decided to provide another US$140 million (equivalent to 50.4 billion yen) to Myanmar in economic and technical cooperation, which was actually quasi-reparations. In 1968 Japan provided for the first time a yen loan of 10.8 billion yen as more genuine economic assistance. Since then, Japan has introduced more diversified modes of economic assistance to Myanmar, such as general grants in 1975, cultural grants in 1976, grants for increased food production in 1977, and debt relief in 1979. Japan’s ODA to Myanmar rapidly increased from the latter half of the 1970s, when the Ne Win government relaxed its strict neutralist foreign policy and opened up to more official overseas assistance in order to overcome the country’s economic and political crisis of the mid-1970s. In 1976 the Burma Aid Group10 met for the first time in Tokyo, where the Ne Win government requested an annual aid of US$200 million based on its proposed five-year economic development 9

See Steinberg (1990) and Kudo (1993) and (1998:161–169) regarding Japan’s ODA policy and performance toward Myanmar. 10 Japan, then West Germany, the United States, the United Kingdom, France, Canada, Australia and major international development banks and organizations held the first donors’ meeting in Tokyo in 1976 under the auspices of the World Bank.

b939_Chapter-10.qxd

7/15/2010

2:15 PM

Page 253

How Close Friends Become Estranged? Table 10.1:

VIP visits between Myanmar and Japan.

Date May 1961 September 1966 November 1967 April 1970 April 1973 November 1974 August 1977 April 1981 March 1983 July 1984 October 1991 October 1992 June & October 1993 June & October 1994 October 1995 November 1995 May 1996 June 1998 June 1999 June 2000 August 2002 December 2003 May 2005

253

Name and Position Prime Minister Hayato Ikeda visits Myanmar Chairman of the Revolutionary Council Ne Win visits Japan Prime Minister Eisaku Sato visits Myanmar Ne Win visits Japan Ne Win visits Japan Prime Minister Kakuei Tanaka visits Myanmar Prime Minister Takeo Fukuda visits Myanmar President Ne Win visits Japan Foreign Minister Shintaro Abe visits Myanmar President San Yu visits Japan Foreign Minister Ohn Gyaw visits Japan Ohn Gyaw visits Japan Ohn Gyaw visits Japan Ohn Gyaw visits Japan Vice Chairman of the SLORC Maung Aye visits Japan Ohn Gyaw visits Japan Ohn Gyaw visits Japan Deputy Prime Minister Maung Maung Khin visits Japan Foreign Minister Win Aung visits Japan Secretary-1 of the SPDC Khin Nyunt visits Japan Foreign Minister Yoriko Kawaguchi visits Myanmar Khin Nyunt and Win Aung visit Japan Foreign Minister Nyan Win visits Japan

Source: IDE, Yearbook of Asian Affairs; Sakuma (1993); Myanmar Alin; New Light of Myanmar and Japanese newspapers.

plan. Following the donors’ meeting, official inflows to Myanmar increased sharply (Figure 10.1). Between 1978 and 1988, Myanmar received US$3712.3 million in assistance, a sum equivalent to 15.1 percent of Myanmar’s total imports for the same period.11 It is widely believed that without such huge aid the Ne Win regime could not even have survived the several economic crises of the 1970s and 1980s. Japan’s aid, especially ODA yen loans, contributed most to this rapid increase. Table 10.2 shows the provision of yen loans to 11

See Kudo and Mieno (2007:5).

b939_Chapter-10.qxd

7/15/2010

2:15 PM

Page 254

T. Kudo

254 (US$ Millions)

500

Military Coup in Sept. 1988

450 Multilateral Bilateral excl Japan Japan

400 350 300 250 200 150

1st Donors' Meeting at Tokyo

100

Total ODA Received

50

05

04

03

20

02

20

01

20

00

20

99

20

98

20

97

19

96

19

95

19

94

19

93

19

92

19

91

19

90

19

89

19

88

19

87

19

86

19

85

19

84

19

83

19

82

19

81

19

80

19

79

19

78

19

77

19

76

19

75

Figure 10.1:

19

74

19

73

19

72

19

71

19

70

19

69

19

68

19

67

19

66

19

65

19

64

19

19

19

19

63

0

Japanese ODA received by Myanmar.

Source: MOFA, Japan’s ODA, various numbers. Note: Total figures only for 1963–1970. Japan’s ODA only for 2005.

Myanmar. Until 1975, yearly provision of yen loans ranged from 5 to 10 billion yen; in 1976 it showed a jump to almost 30 billion yen; in 1982 it reached 40 billion yen; in 1984 it recorded a peak of 46 billion yen. It remained over 30 billion yen in 1985 and 1987 and faced an abrupt suspension in 1988. Japan’s ODA accounted for 66.7 percent of the total bilateral ODA received by Myanmar between 1976 and 1990. Myanmar had also long been one of the largest recipients of Japanese ODA. It consistently ranked within the top 10 recipients and often ranked within the top five.12 Thus, Japan’s ODA strengthened its bilateral relations with Myanmar.13 12

Myanmar’s ranking in Japan’s ODA recipients is as follows: 9th in 1976; below 10th in 1977; 4th in 1978, 1979 and 1980; 6th in 1981, 1982 and 1983; 7th in 1984; 5th in 1985 and 1986; 8th in 1987 and 7th in 1988. 13 It is an anomaly that such a huge amount of Japanese ODA was provided to an underdeveloped economy with little Japanese commercial interests. There are several reasons for this besides the “special relationship”. See Steinberg (1990). Seekins (1992) and Kudo (1998) for these reasons.

b939_Chapter-10.qxd

7/15/2010

2:15 PM

Page 255

How Close Friends Become Estranged? Table 10.2:

Japan’s ODA loans to Myanmar.

FY 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988–present Total

255

Total (Billion Yen) 10.80 0.00 0.00 8.22 6.65 4.62 0.00 6.50 29.95 28.54 16.25 26.96 31.50 34.52 40.25 43.02 46.14 36.15 0.00 32.90 0.00 402.97

Source: MOFA, Japan’s ODA, various numbers. Note: FY stands for Fiscal Year.

2. The New International and Regional Landscape The birth of the military government in 1988, however, drastically changed this favorable relationship between Myanmar and Japan. Japan suspended its ODA to Myanmar on account of the junta’s poor human rights record and delay in democratization. Moreover, the open door policy adopted by the military government strengthened Myanmar’s economic relations with its neighboring countries including China, Thailand and India, while reducing the importance of those with former major donor countries such as Japan and West Germany. All these events occurred in the new international reality following the end of the Cold War.

b939_Chapter-10.qxd

256

7/15/2010

2:15 PM

Page 256

T. Kudo

In the midst of the Cold War, the Ne Win government had long pursued a strict neutralist foreign policy, and refused to ally itself with any bloc.14 The United States was of course unhappy about Ne Win’s xenophobic policy. However, his visit to Washington in September 1966, presumably to counterbalance his trips to Beijing and Moscow in the previous year, improved their relations.15 Myanmar had never been a major object of the United States’ attention since the establishment of formal diplomatic relations between the two countries in 1948.16 Nevertheless, the United States government regarded the nationalist Myanmar armed forces led by Ne Win as a countervailing power against Communist China.17 Such recognition by the United States was then enough for Japan, West Germany and international development banks to support the Ne Win regime on behalf of the Western bloc. The United States had tolerated the Ne Win government, as it had many other authoritarian, repressive and corrupt regimes, simply because the leaders of those regimes were willing to oppose the communist allies. However, the end of the Cold War dramatically changed the international and regional political landscape surrounding Myanmar just as the military government was coming into power. First of all, the United States ceased to prop up allied authoritarian governments in order to spur on democratization in less developed countries.18 In 1992 Japan also adopted the ODA Charter, which placed a greater emphasis on universal values of human rights and democracy. Second, China relented on its dual track foreign policy toward Myanmar, in which it had formerly endorsed party to party relations between the China Communist Party (CCP) and the Burma 14

See Liang (1990) and Sakuma (1993) for Myanmar’s foreign policy after independence. 15 See Liang (1990:164). 16 See Liang (1990:233). 17 China also regarded the Myanmar armed forces as anti-communist (Sakuma, 1993:185). 18 Cingranelli, D. L. and Richards, D. L. (1999). Respect for Human Rights after the End of the Cold War. Journal of Peace Research, Vol. 36, No. 5, p. 515.

b939_Chapter-10.qxd

7/15/2010

2:15 PM

Page 257

How Close Friends Become Estranged?

257

Communist Party (BCP) in addition to state to state relations.19 The BCP, which was deployed alongside the border areas between Myanmar and China, had long fought against the Myanmar army since independence. However, having lost Beijing’s backing, the BCP collapsed and split into four ethnic armed groups in 1989. Khin Nyunt, then Secretary One of the SLORC, wasted no time in going to the Chinese border, successfully achieving a ceasefire with these groups.20 This event paved the way for a later strengthening of political and economic relations between Yangon and Beijing. Third, Thailand also strengthened its ties with the newly born military government, by abandoning its secret strategy of using the Karen and other ethnic insurgents deployed alongside the border areas as a buffer against the Myanmar army and the BCP. Just before the end of the Cold War, Chatichai Choonhavan, then Thai Prime Minister, stated before the Foreign Correspondents’ Club in December 1988 that Indochina must be transforwmed from a war zone to a peace zone linked with Southeast Asia through trade ties, investment, and modern communications.21 “Change the battle field to a commercial field” had become a Thai vision for regional cooperation in mainland Indochina. Thus, two big neighbors, China and Thailand, welcomed the birth of the military government in Myanmar. Fourth, the SLORC initiated an open door policy by liberalizing external trade, legalizing cross border trades with neighbors22 and accepting foreign direct investment on Myanmar soil, and officially abandoned the “Burmese Way to Socialism”. Myanmar opened its door to the rest of the world in the midst of globalization, which was one of the direct effects of the end of the Cold War.

19

See Kudo (2006:5). See Lintner (1990), (1994) and (1998) and Smith (2005) for details. 21 See Buszynski (1989:1059). 22 Insurgent ethnic minorities, in particular Karen rebels, had played a major role in smuggling through cross border transactions between Myanmar and Thailand during the socialist period. The legalization of cross border trade between the two countries was made possible by the Thai government’s policy shift in favor of Yangon over ethnic rebels in border areas. 20

b939_Chapter-10.qxd

258

7/15/2010

2:15 PM

Page 258

T. Kudo

3. How Close Friends Become Estranged? The new international and regional reality following the end of the Cold War was responsible for such events as changes in Japan’s ODA policy, Myanmar’s open door policy, strengthened economic ties with its neighbors and China’s emergence as an economic partner. All of these events, however, eventually impaired the special relationship between Myanmar and Japan. How did these events cause the estrangement of these two close friends?

3.1 Changes in Japan’s ODA policy Japan suspended its foreign aid to Myanmar following the military coup in March 1988, as other major donors did. Since Japan had been by far the largest donor during the socialist period, the suspension of Japanese aid had also by far the most serious impact on the Myanmar economy. Even though Japan resumed small-scale humanitarian and basic human needs assistance, it did not provide new yen loans, the previous main channel of ODA money to Myanmar. Japanese aid was provided to Myanmar at the average annual amount of US$154.8 million for the period from 1978 to 1988. The average annual amount of Japanese aid declined to US$86.6 million for the period from 1989 to 1995, and further to 36.7 million for the period from 1996 to 2005. Why did Japan not resume fully fledged foreign aid to Myanmar? Some say that the Japanese government did not have freedom to act independently and had no choice but to suspend its ODA provision to Myanmar under pressure from the Western allies, in particular the United States, which had persistently opposed any measures that appeared to benefit the military government. This must be at least partly true. For example, when the Japanese government decided on its own in May 2002 to provide a 628 million yen grant for the repair of the Baluchaung hydropower plant, a symbolic Japanese ODA project, in response to the release of Aung San Suu Kyi from house arrest, this move was severely criticized by not only Aung San Suu Kyi but also the United States government. Whenever the Japanese government

b939_Chapter-10.qxd

7/15/2010

2:15 PM

Page 259

How Close Friends Become Estranged?

259

tried to send a positive message to the military government by a partial resumption of ODA, such an effort was often interrupted by the United States, rendering it ineffective.23 However, Japan is not simply a visionless follower of the United States. The Japanese ODA policy has also changed in the post-Cold War era to be more sensitive to so-called universal values such as human rights, freedom, the rule of law, democracy and the market economy. The ODA Charter was approved by the Cabinet in 1992, stating that ODA shall be provided in accordance with the principles of the United Nations (especially sovereign equality and non-intervention in domestic matters), as well as, a) environmental conservation; b) avoidance of military usage of ODA funds; c) attention to the recipients’ military expenditures and production and export/import of arms and weapons; and d) consideration of recipients’ democratization, basic human rights and market economy.24 The suspension of Japanese ODA to Myanmar was one of the earliest applications of the ODA Charter. Japan suspended the ODA provision to Myanmar of its own accord based on the new policy. The newly born military government, which was ignorant of such a policy shift on the Japanese side, must have hardly comprehended in their early days why Japan would not resume aid to Myanmar.25 In fact, so far as human rights conditions in Myanmar were concerned, the actual situation may not have significantly deteriorated following the military coup, although this is perhaps arguable. The military’s atrocities against the minority insurgencies were even more dreadful before the SLORC initiated the ethnic ceasefire policy in 1989.26 What had changed more than the actual human rights conditions in Myanmar

23

See Oishi and Furuoka (2003:906). The ODA Charter was revised in August 2003. The English translation is available at the website of the Japanese Ministry of Foreign Affairs. http://www.mofa.go.jp/ policy/oda/reform/charter.html. 25 Personal communication with a Japanese diplomat with responsibility for Myanmar on 2007 June 21. 26 See for example Smith (1999). 24

b939_Chapter-10.qxd

260

7/15/2010

2:15 PM

Page 260

T. Kudo

were the international and Japan’s criteria on human rights. Of course, there exist many political prisoners in Myanmar and Nobel Prize Laureate Aung San Suu Kyi has long been under house arrest. This is surely a salient violation of human rights. However, during the Ne Win regime, there existed no opposition forces and figures to be put in prison or kept under house arrest. Recently, the Japanese Ministry of Foreign Affairs has coined some new slogans, namely, “value-oriented diplomacy” and “the arc of freedom and prosperity”, by which Japanese diplomacy has put even more emphasis on universal values, including human rights and democracy.27 Thus, the “special relationship” between Myanmar and Japan was replaced by a more basic principle based on universal values. 3.2 Myanmar’s open door policy and regionalization of trade The open door policy adopted by the military government substantially increased Myanmar’s external trade throughout the 1990s and the first half of the first decade of the 21st century. Its exports increased by 14.4 times for the period between 1985 and 2006, imports growing by 13.8 times over the same period. As Myanmar’s trade volume grew, its geographical trade pattern changed. Myanmar has strengthened its trade relations with neighboring countries, in particular China and Thailand. During the socialist period, donor countries such as Japan and West Germany were Myanmar’s major trading partners due to aid-driven trade. However, it is natural that given the distances involved, Myanmar should trade with its immediate neighbors rather than with far-off western countries. Myanmar shares long borders with five neighboring countries, namely China (a border of 1357 miles), Thailand (1314 miles), India (857 miles), Bangladesh (152 miles) and Laos (128 miles). Among these 27 See the speech “Arc of Freedom and Prosperity: Japan’s Expanding Diplomatic Horizons” by Mr. Taro Aso, then Minister for Foreign Affairs, at the Japan Institute of International Affairs Seminar on 2006 November 30. The text of the speech is available at the website of the Japanese Ministry of Foreign Affairs. http:// www.mofa.go.jp/announce/fm/aso/speech0611.html.

b939_Chapter-10.qxd

7/15/2010

2:15 PM

Page 261

How Close Friends Become Estranged?

261

various countries and regions, there are differences in natural resource endowments and in industrial development stages. Such economic and industrial complementarities have contributed to the enhanced trade between Myanmar and its neighbors. For their part, neighboring countries welcomed Myanmar’s open door policy, as mentioned above. The trade shares of the four neighboring countries of China, Thailand, India and Bangladesh accounted for 56.5 percent of Myanmar’s exports and 52.7 percent of its imports in 2003, compared with only 20.4 percent and 2.7 percent respectively in 1985 (Table 10.3). Myanmar also joined in regional cooperation schemes such as the Greater Mekong Subregion (GMS) Economic Cooperation Table 10.3: Myanmar’s trade with neighboring countries: Exports and Imports 1985–2003. 1985

1990

1995

2000

2003

Exports China Thailand India Bangladesh Four Neighbors USA Japan Germany

0.0% 9.5% 7.9% 3.0% 20.4% 3.6% 8.8% 2.8%

20.9% 26.5% 0.0% 0.3% 47.7% 4.8% 8.3% 2.1%

11.3% 16.9% 12.3% 2.0% 42.5% 6.6% 7.1% 2.0%

6.4% 13.3% 9.4% 0.0% 29.1% 25.9% 6.1% 4.4%

6.2% 33.0% 14.9% 2.4% 56.5% 10.9% 5.1% 3.8%

Total (US) $ Million

399

498

1,319

1,958

2,721

Imports China Thailand India Bangladesh Four Neighbors Singapore South Korea Malaysia

0.0% 2.2% 0.1% 0.3% 2.7% 11.5% 3.1% 2.5%

20.8% 4.7% 0.0% 0.1% 25.6% 25.0% 4.3% 5.8%

25.0% 14.2% 1.2% 0.2% 40.6% 25.8% 3.5% 9.3%

19.5% 19.8% 2.1% 0.0% 41.3% 17.1% 11.4% 9.1%

33.3% 16.1% 3.2% 0.1% 52.7% 23.8% 6.7% 5.1%

Total (US) $ Million

524

913

2,484

2,677

2,904

Source: UN Comtrade.

b939_Chapter-10.qxd

7/15/2010

2:15 PM

Page 262

T. Kudo

262

in 1992, the Association of Southeast Asian Nations (ASEAN) and the Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation (BIMSTEC) in 1997, and the Ayeyawady, Chao Phraya, Mekong Economic Cooperation Strategy (ACMECS) in 2003. As Myanmar’s trade relations with neighboring countries have strengthened, Japan has receded into the background.28 3.3 China’s rise as economic partner Among the neighboring countries, China is by far the most important to Myanmar. China now is awarded the special status that was previously enjoyed by Japan. For example, China has replaced Japan as a supply source of imports for Myanmar. During the socialist period, Japan constituted nearly 40 percent of Myanmar’s total imports, while China accounted for less than 5 percent (Figure 10.2). Since the open door 50% 45%

Imports from Japan (%)

40% 35% 30%

Imports from China (%) 25% 20% 15% 10%

Figure 10.2:

2006

2005

2004

2003

2002

2001

2000

1999

1998

1997

1996

1995

1994

1993

1992

1991

1990

1989

1988

1987

1986

1985

1984

1983

1982

1981

0%

1980

5%

Myanmar’s imports from China and Japan, share (%).

Source: IMF, DOT.

28

As bilateral trade relations have weakened, the number of Japanese-affiliated firms in Myanmar has also declined. The membership of the Japanese Chamber of Commerce in Yangon has decreased from about 80–90 firms in the latter half of the 1990s to less than 60 firms as of August 2007.

b939_Chapter-10.qxd

7/15/2010

2:15 PM

Page 263

How Close Friends Become Estranged?

263

policy was introduced, the Chinese share of Myanmar’s imports has shot up, reaching nearly 35 percent in 2006, while that of Japan dramatically declined to less than 5 percent in 2002 and thereafter. Another example is the Chinese provision of huge economic cooperation to Myanmar.29 China’s economic cooperation with Myanmar seems to have expanded around 1997 when the United States government imposed the first economic sanctions that banned new foreign investments by United States firms. Moreover, Senior General Than Shwe’s state visit to Beijing in January 2003 seemingly marked the beginning of another epoch, when China offered Myanmar a preferential loan amounting to US$200 million and a RMB 50 million grant (equivalent to US$6.25 million). Just after China’s commitment, the so-called “Black Friday” of May 30, 2003 occurred and this event provoked the United States to impose a second round of sanctions in July 2003, including an import ban on all Myanmarmade products. Thus, China stepped into and filled the vacuum that was created by Western sanctions and Japan’s suspension of ODA. 3.4 Gas money Myanmar’s natural gas exports brought huge foreign currency revenues to the military government in the early years of the 21st century. The two large gas fields named Yadana and Yetagun in the Gulf of Martaban have been developed, and gas from these fields is exported to Thailand by pipelines. The value of gas exports to Thailand increased from US$114.2 million in 2000 to US$1497.4 million in 2005 and further to US$2062.2 million in 2006, and accounted for 88 percent of Myanmar’s exports to Thailand. All the revenues go into the national treasury since the gas reserves have been explored and exploited in the form of production sharing between the Myanmar Oil and Gas Enterprise (MOGE), a state-owned 29

China does not disclose its economic cooperation programs. The information here is based on news and press reports. Note also that some Chinese economic cooperation programs are merely commercial-based businesses. See Kudo (2006:12–17) for more on Chinese economic cooperation in Myanmar.

b939_Chapter-10.qxd

264

7/15/2010

2:15 PM

Page 264

T. Kudo

economic enterprise (SEE) under the jurisdiction of the Ministry of Energy, and foreign developers. Due to the gas exports, the public sector of Myanmar recorded a trade surplus of 7675 million kyat (equivalent to US$1321 million at the official exchange rate) in FY 2005. Supposing that one fourth of the total export value is claimed by MOGE for its share, more than US$500 million went to the Myanmar treasury in 2006. This amount of money is more than comparable with foreign aid given during the Ne Win regime.30 The military government thus obtained an alternative revenue source in lieu of foreign aid. Conclusion: The Role of Japan The birth of the military government in 1988 drastically changed the traditionally friendly relationship between Myanmar and Japan. In the new international and regional reality following the end of the Cold War, such events as changes in the Japanese foreign aid policy, Myanmar’s open door policy and attendant enhanced trade relations with neighbors, China’s emergence as supporter of the Myanmar economy and huge gas revenues eventually resulted in an estrangement between the two counties. On one hand, the military government of Myanmar is no longer dependent on Japan’s ODA for its survival. They have the alternative financial resources of Chinese economic cooperation and gas money. On the other hand, the Japanese government is no longer willing to provide foreign aid to the military government under the new ODA guidelines that place a high value on human rights, democracy, the rule of law and the market economy. Myanmar’s open door policy significantly increased trade between Myanmar and its neighbors, in particular China and Thailand, while reducing the importance of Japan as a supply source of imports. Under the new hostile international environment, the Myanmar economy has become more and more dependent on China and Thailand. 30 The Ne Win government received an annual average of US$337.5 million for the period between 1978 and 1988, the most active period for foreign donors providing aid to Myanmar.

b939_Chapter-10.qxd

7/15/2010

2:15 PM

Page 265

How Close Friends Become Estranged?

265

What prospects can we then envisage for a future relationship between Myanmar and Japan? Unfortunately, there is little expectation that the military government will change their authoritarian attitudes in favor of a more democratic policy and more respect for human rights and political freedom. Unless the military government changes, Japan’s foreign policy toward Myanmar will not change either. The bilateral relationship between the two countries, therefore, may not dramatically improve in the foreseeable future. Worse still, Japan seems to be losing its influence on Myanmar issues in international society, as it has occupied a vague position between the sanctionist allies such as the United States and the European Union and the constructive and economic engagement allies such as China, India and Thailand. Japan tried to bridge the gap between them. However, Japan was caught in the gap rather than filling it. Instead of acting as a mediator, the Japanese government sometimes wavered from one camp to the other. For example, the Japanese government apparently objected to the United States and United Kingdom’s motion to put the Myanmar/ Burma issues on the UNSC’s agenda by saying at the second UNSC’s unofficial briefing on May 31, 2006 that Myanmar’s situation will not pose a serious threat to international peace and security. Nevertheless, as mentioned at the beginning of this chapter, Japan voted in favor of the motion less than four months later on September 15, 2006. Such a change in the Japanese attitude on the motion is believed to be attributable to United States pressure. Under such circumstances, Japan will not be able to take a leading role in either the Western allies or the Eastern allies. However, this does not mean there is no role for Japan in international society. On the contrary, Japan has its own important role to play, that is, to provide accurate information on Myanmar’s politics, economy, society and history to international society. The Japanese government, business circles and academics have accumulated knowledge on Myanmar studies since as early as the pre-World War period. Such knowledge will definitely contribute to a better understanding of Myanmar issues, and may moderate some extreme opinions and policies.

b939_Chapter-10.qxd

7/15/2010

2:15 PM

266

Page 266

T. Kudo

For example, the import ban of the United States against Myanmar appears to be an anomaly in my eyes. As discussed in my previous paper, the United States sanctions not only failed to change the behavior and attitudes of the military government, but also had a disproportionately greater impact on the people than it did on the military regime.31 On the other hand, the Chinese economic cooperation bailed the military government out of an economic predicament and allowed them to forgo economic reforms, which were necessary for a long-term and broad-based economic development of Myanmar. For instance, many of the SEEs were revived, rather than privatized, by Chinese economic cooperation funds.32 Two extremes, that is, economic sanctions and economic cooperation without considering the governance of the recipient, promoted neither economic development nor national reconciliation. Japan can provide rich and objective knowledge to both extremes, and possibly moderate them. The role of Japan is therefore to function as an information source and to contribute to producing a moderate, constructive and consistent policy consensus on Myanmar issues in international society. Last but not least, human, cultural, sports and academic exchanges should be continuously encouraged, even though the relationship between the governments is not particularly smooth. The Myanmar people are still very friendly to the Japanese. The Japanese language is one of the most popular languages for Myanmar people to learn. Japanese products from Toyota cars to TV dramas are well favored by Myanmar consumers. Such friendship between the populations is a precious asset for the two countries, in particular Japan. References

English Buszynski, L. (1989). New Aspirations and Old Constraints in Thailand’s Foreign Policy. Asian Survey, Vol. 29, No. 11, pp. 1057–1072. 31 32

See Kudo (2005:24–26). See Kudo (2006:15–16).

b939_Chapter-10.qxd

7/15/2010

2:15 PM

Page 267

How Close Friends Become Estranged?

267

Cingranelli, D. L. and Richards, D. L. (1999). Respect for Human Rights after the End of the Cold War. Journal of Peace Research, Vol. 36, No. 5, pp. 511–534. Kudo, T. (1998). Political Basis of Economic Policies under Burmese Socialism. Southeast Asian Studies, No. 4, pp. 139–177, Tokyo University of Foreign Studies. ——— (2005). The Impact of United States Sanctions on the Myanmar Garment Industry. IDE Discussion Paper Series No. 42, Institute of Developing Economies, JETRO, http://www.ide.go.jp/English/ index4.html. ——— (2006). Myanmar’s Economic Relations with China: Can China Support the Myanmar Economy? IDE Discussion Paper Series No. 66, Institute of Developing Economies, JETRO, http://www.ide.go.jp/ English/index4.html. Kudo, T. and Mieno, F. (2007). Trade, Foreign Investment and Myanmar’s Economic Development during the Transition to an Open Economy. IDE Discussion Paper Series No. 116. Institute of Developing Economies, JETRO, http://www.ide.go.jp/English/index4.html. Liang, C. (1990). Burma’s Foreign Relations: Neutralism in Theory and Practice. New York: Praeger Publishers. Lintner, B. (1990). The Rise and Fall of the Communist Party of Burma (CPB). Ithaca: Southeast Asian Program, Cornell University. ——— (1994). Burma in Revolt: Opium and Insurgency since 1948. Boulder, San Francisco, Oxford and Bangkok: Westview Press and White Lotus. ——— (1998). Drugs and Economic Growth: Ethnicity and Exports. In Burma: Prospects for a Democratic Future, R. I. Rotberg (ed.). The World Peace Foundation and Harvard Institute for International Development. Washington D.C.: Brookings Institution Press. Ministry of Foreign Affairs (MOFA) (2003). Japan’s Official Development Assistance Charter (Unofficial Translation), http://www.mofa.go.jp/ policy/oda/reform/charter.html. Nemoto, K. (2007). Between Democracy and Economic Development: Japan’s Policy toward Burma/Myanmar Then and Now. In Myanmar: State, Society and Ethnicity, N. Ganesan and Y. H. Kyaw (eds.). pp. 96–108. Singapore: ISEAS Publishing. Oishi, M. and Furuoka, F. (2003). Can Japanese Aid Be an Effective Tool of Influence? Case Studies of Cambodia and Burma. Asian Survey, Vol. 43, No. 6, pp. 890–907.

b939_Chapter-10.qxd

268

7/15/2010

2:15 PM

Page 268

T. Kudo

Seekins, D. M. (1992). Japan’s Aid Relations with Military Regimes in Burma, 1962–1991: The Kokunaika Process. Asian Survey, Vol. 32, No. 3, pp. 246–262. Smith, M. T. (1999). Burma: Insurgency and the Politics of Ethnicity. Dhaka, Bangkok and London: The University Press Ltd., White Lotus and Zed Books. ——— (2005). Ethnic Politics and Regional Development in Myanmar: The Need for New Approaches. In Myanmar: Beyond Politics to Societal Imperatives, Y. H. Kyaw, R. H. Taylor, and M. M. T. Tin (eds.). pp. 56–85. Singapore: Institute of Southeast Asian Studies (ISEAS). Steinberg, D. I. (1990). Japanese Economic Assistance to Burma: Aid in the “Tarenagashi” Manner? Crossroads, Vol. 5, No. 2, pp. 51–107. Center for Southeast Asian Studies, Northern Illinois University.

Japanese [ ] . Institute of Developing Economies (ed.), Year Book of Asian Affairs, various numbers. Tokyo: Institute of Developing Economies. [1993] ( 79 . . . 1993 ). Kudo, T. (1993). Japan’s ODA Policy toward Myanmar: Changes and Challenges, Tsushin. Research Institute for Languages and Cultures of Asia and Africa (ILCAA), Tokyo University of Foreign Studies (TUFS). ——— [1998j] ( 37 . . 42~50 ). Kudo, T. (1998). Japan’s ODA to Myanmar: Present Situation and Problems. IDE World Trend, No. 37, pp. 42–50. Institute of Developing Economies, JETRO. [1993] ( ) ( ) . . Sakuma, H. (1993). Political History of Modern Burma/ Myanmar (Revised Version), Study Series of the Third World. Tokyo: Keiso Shobo. [1977] . Suzuki, T. PHP (1977). A Country Called Burma: Its History and Memoir. Tokyo: PHP Research Institute. [1990] . Tanabe, S. (1990). General Aung San and Thirty Comrades: Burma Independence Army and Japan. Tokyo: Chuko-Shinsho. [1993] ? ( 77 . . . 1993 ).

b939_Chapter-10.qxd

7/15/2010

2:15 PM

Page 269

How Close Friends Become Estranged?

269

Nemoto, K. (1993) Special Relationship between Japan and Burma: An Influence on Japan’s Diplomacy toward Burma? Tsushin. Research Institute for Languages and Cultures of Asia and Africa (ILCAA), Tokyo University of Foreign Studies (TUFS).

Newspapers Myanmar Alin (the state-run daily Burmese newspaper). New Light of Myanmar (the state-run daily English newspaper).

Statistics Central Statistical Organization (CSO). Selected Monthly Economic Indicators (SMEI). Central Statistical Organization (CSO). Statistical Yearbook (SY ). International Monetary Fund (IMF). Direction of Trade (DOT ).

b939_Chapter-10.qxd

7/15/2010

2:15 PM

Page 270

This page intentionally left blank

b939_Chapter-11.qxd

7/15/2010

2:15 PM

Page 271

CHAPTER 11

The Chinese in Burma: Traditional Migration or Conquest Strategy? Guy Lubeigt

Introduction Protected by its mountain ranges, thick jungles, marshy shores and a harsh tropical climate, Burma’s territory has, from the very beginning, evaded the influence of its powerful neighbors. Firstly India, which, in the early Christian era, infused a part of its culture to the native elite; then China, which feared the torrid climate of Central Burma and never really sought to conquer it. For two thousand years, the inhabitants who live in the Irrawaddy basin and the surrounding highlands, have been creating their own history and preserving their own culture. The Burmese State took shape in the 19th century from a confederation of city-states led by indigenous chiefs,1 and gradually took on the dimensions of an empire under the reign of a series of conquering emperors who wanted to keep their control over the entire territory and the trade relations of what has now become the Union of Burma.2 Sandwiched

1

According to the chronicles and legends surrounding the foundation of the site, the chiefs of the 19 city states of the Pagan plain were subjected to the authority of a “Great-King” (Min–Gyi) at the very beginning of the 9th century, two centuries before the founding of the Pagan empire by King Anoratha (1044–1287). Cf: Aung Thwin (1985), Luce (1970), Than Tun (1978) and Lubeigt, (1998; 74–80) and (2005; 64–70). 2 In June 1989, the Junta that ruled the country from 18 September 1988, renamed the Union of Burma. This has become officially “Union of Myanmar”. The new name was recognized by the United Nations Organisation, but Western democracies have rejected this change imposed by the military regime. 271

b939_Chapter-11.qxd

272

7/15/2010

2:15 PM

Page 272

G. Lubeigt

between India and China, Burma shares a land border with the two Asian giants: 1600 kilometers with China and 1400 kilometers with India. This exceptional geographical situation, which makes Burma the only Indochinese country in Indochina, gives it a crucial geostrategic dimension. This position has been strengthened by the rapprochement between Burma and China since the late eighties, and has enabled Burma to play a fundamental role in the geopolitical arena of the East and the Far East. By virtue of its policy supporting the Burmese junta, China has succeeded, in just a few years, in establishing control over natural and energy resources vital to its industrial development, and in opening up its southern provinces to gain access to the Indian Ocean. In return, the Burmese army, which traditionally fought against the ambitious Chinese for centuries, generally opened the doors of the Union to Chinese investment, and along with it, Chinese immigration. Its intention was to thwart the real or alleged designs of Western countries. Thus was accelerated a generations-old movement: “the thrust toward the south”. When we follow the evolution of this massive immigration against the background of the Union of Burma, we are led to envisage what could be, eventually, the consequences of this movement for the Burmese state and its people.

1. Chinese and Burmese: Ancestral but Conflicting Relations 1.1 The historical background From the beginning of the Christian era, the Chinese recognized Burma for its mineral wealth, especially its jade mines. In the 7th century, two Chinese pilgrims, Hiuen Tsang and I–tsing, spoke of Burma. They described the kingdom of Sriksetra (Prome), calling its people “P’iao” (Pyu). Apparently the king (Tai?) of Nanchao (Yunnan?) destroyed one of the Pyu kingdoms in 832, which led the survivors to settle in Pagan. In any case, Pagan entered Southeast Asian history in 1004 when the Chinese chronicler Chao ju–kua recorded in his book titled Chu-fan-chih, that the envoys of the P’u–kan kingdom visited the Sung capital in 1004.

b939_Chapter-11.qxd

7/15/2010

2:15 PM

Page 273

The Chinese in Burma

273

In 1253, Kublai Khan’s Tartar armies occupied North Yunnan after conquering North China. As the Mongols’ stranglehold on Yunnan tightened, they continued expanding their empire toward the South. They thus came into contact with Burma, which the Chinese called “Kingdom of Mien”. However, the Pagan kings considered Yunnan a vassal kingdom that had been paying them tribute from the time of King Anoratha (1044–1077). For the Burmese, the missions sent to the Court of China were merely simple embassies received with the honors due to sovereign states. On the contrary, according to Chinese protocol, the gifts that the Burmese brought were tributes paid to the emperor, which is why these missions ensured that Pagan recognized suzerainty. In fact, under the entire Burmese empire (1044–1287), the city of Pagan maintained permanent relations with all its Indochinese, Indian and Chinese neighbors. The splendors of the city caught the eye of Chinese priests and merchants who took the Irrawaddy route, and were talked about even in China. In the early 12th century, Kyanzittha, the king of Pagan, reestablished relations with the Chinese and was believed to have sent two trade and diplomatic missions to the Court of the Sungs of Kai–Feng. The inscription on the Mingalazedi pagoda tells us that the first Mongol ambassadors sent by Kublai Khan arrived in Pagan towards the middle of the 13th century and arrogantly demanded a tribute for the emperor of China. They were apparently massacred by the Burmese. This act signaled the onset of hostilities between the two empires. It is believed that in 1277, Narathihapati, the king of Pagan (1254–1287), tried to launch a military expedition against the Tai–Shan who had become vassals of the Mongols. Defeated at Ngasaunggyan, he had to retreat to Pagan and abandoned the town, while the Mongols seized the Bhamo region. According to later chronicles, this flight would have earned him the nickname Tayokpyemin (the king who fled from the Chinese). In 1284 North Burma became the Chinese province of “Chiang Mien”. In 1287, the Mongols took control of Pagan peacefully, without destroying it, and created another Chinese province “Chung Mien”, which was

b939_Chapter-11.qxd

274

7/15/2010

2:15 PM

Page 274

G. Lubeigt

abolished 10 years later when the Mongols abandoned Central Burma once and for all.3 After the fall of Pagan, the beginnings of the first Ava kingdom (1364–1597) were marked by great political instability caused by an endless succession of crises. However, the Yunnan Chinese were still interested in maintaining trade relations with continental Indochina through Burma. But Burma was dominated by the Shan settled in the Ava region. From 1441 to 1446, Shan and Burmese resisted Chinese armies intent to subjugate them. In the next two centuries, troubles rocked the country and severely jeopardised relations with China, and the Shan continued to control the Irrawaddy trade route. During the second Ava dynasty (1597–1752), Chinese influence was felt once again and continued under the Konbaung dynasty (1752–1885) until the end of the 18th century.4 In 1658, during the reign of King Pindale (1648–1661) Yung Li, the last emperor of the Ming dynasty, driven out by the Manchu, sought asylum in the kingdom. His plea was granted and the Chinese refugees settled down in Sagaing in a camp situated opposite the Ava capital, on the other bank of the Irrawaddy.5 This settlement encouraged contacts among the Chinese and Burmese traders, educated classes and artists of the two imperial courts, but it led once again to instability. Gangs of Chinese marauders pillaged the countryside on the Mandalay–Kyaukse plain. A century later, during the reign of Hinbyushin (1763–1776), commercial relations between China and Burma were again interrupted by a series of disagreements on the 3

Huber, E. (1909). La fin de la dynastie de Pagan. Bulletin de l’Ecole française d’Extrême Orient, Vol. 9, pp. 633–680. A part of these events are narrated by Marco Polo in his book. See also Lubeigt (1998: 173–180) and Aung Thwin (1998: 63–92) who has unraveled the myth and the history of the city’s fall. 4 Chew (2005). The Chinese presence was strong enough during this period to influence the evolution of Burmese art. Thus the sculptures and paintings of the remarkable religious complex of Po Win Taung (970 temples excavated, of which 350 were decorated with wall paintings, and 5000 statues of the Buddha sculpted in sandstone) perfectly reflect the Chinese influence on Burmese artistic expression of this period. 5 Hall (1956: 67–68).

b939_Chapter-11.qxd

7/15/2010

2:15 PM

Page 275

The Chinese in Burma

275

border regions and their people. From 1767 to 1769, the Chinese tried once more to invade Burma. Four Chinese armies entered its territory, but were repulsed by Burmese troops. The Burmese incurred heavy losses, which weakened their empire just when it was fighting against the Ayutthaya Tais.6 But commercial relations with the Yunnanese were not in any way affected. 1.2 Colonization and immigration After the three Anglo-Burmese wars (1824–1826, 1852 and 1885), the Burmese kingdom7 was annexed to the British Crown and the Indian Empire on 1st January 1886. From this date, Burma was exposed to a continuous influx of immigrant Indian and Chinese workers, with the approval of the colonial authorities. The British then had to face a double demand that the new colony could not satisfy: specialized staff and a sufficiently large workforce to take care of its administration and development. The Indian Empire, which had Indian civil servants educated in the University of Calcutta (the nearest to the Burmese province), lacked equivalent staff for service in Burma. Consequently, educated Indians were called to the rescue and help the colonizers. At the same time, the British encouraged Tamil workers to participate in the cultivation of fertile but untended lands in the Irrawaddy delta. For their part, the Chinese who had been supplying labor needed for working the tin mines of Tenasserim from the 15th century, had also understood the prospects thrown open to their enterprises by colonization. They came in hordes to work in all the sectors of the economy of the empire’s new province and make massive investments, like the Indian Chettiyars, in developing the lands of the Delta. Rice cultivation, transport, paddy processing factories, and 6 The Siamese capital fell into the hands of the Burmese in 1767. A part of its population, the artisans and the Court were brought back as slaves in Ava. 7 Burma was then known to the world as the Kingdom of Ava, but its capital had been in Mandalay from 1857, date of the inauguration of this city by King Mindon (1852–1878), last but one king of the Konbaung dynasty (1762–1885).

b939_Chapter-11.qxd

276

7/15/2010

2:15 PM

Page 276

G. Lubeigt

commercialization of raw materials turned out to be particularly profitable for these new entrepreneurs whose families gradually settled down in the new city of Rangoon founded by the British.8 From 1852, and for almost a century, millions of Indian and Chinese immigrants thus settled down in Burma, particularly in the Delta regions, where their communities prospered with the blessings of the colonizers, but under the envious eye of the Burmese. With the independence of the Union of Burma (4 January 1948), Burmese nationalists came to power.9 As reprisals against those who had served the British, various legislative and administrative measures were taken to force the Indians and Chinese to leave the country: refusal of National Registration Cards for those whose parents were not born in Burma; vernacular language as medium of instruction; refusal of University admission to those who did not speak Burmese fluently, all sorts of red tape in the administrations, etc. Consequently, right from the early 50s, Indians, Chinese and Europeans, and also gradually the “Anglos” (mixed population of diverse origins), began to leave Burma as exiles, or returned to their country of origin. With the support of family or ethnic groups, those who were better off quickly settled in Anglo-Saxon countries (Great Britain, United States, Australia, Hong Kong, Taiwan and Singapore), unlike the modest Tamil migrants, who were mostly born in Burma, and took a longer time to emigrate. Staying on after the British left, they continued to do

8

Lubeigt (1975: 115–119) and (1986: 123–178). For further details on these questions, see Smith (1991). 9 The conditions for obtaining independence were negotiated in London between young Burmese nationalists led by General Aung San, and Clement Attlee’s Labour government. According to the London Agreement (27 January 1947) the birth of the new State based on a Union of nationalities that made up Burma was envisaged. On 12 February 1947, the leaders of the main nationalities (Burmese, Chin, Kayah, Kachin and Shan) signed the Panglong (Shan state) agreement that sealed the foundation of the Union of Burma. Aung San, who had won the confidence of the nationalities, was designated head of the provisional government. Charged with the responsibility of paving the way for independence, he was unfortunately assassinated with all his ministers by a jealous rival. The Union of Burma has never recovered from this fateful tragedy.

b939_Chapter-11.qxd

7/15/2010

2:15 PM

Page 277

The Chinese in Burma

277

menial work that the Burmese shunned. But, being uneducated, they had neither the financial means for their integration, by buying National Registration Cards, nor to pay their passage back to India. After the socialist military led by General Ne Win seized the power (2 March 1962), a campaign for nationalization of lands, banks and companies (1962–1969) was launched.10 All lands now belonged to the state. Deprived of income, foreigners were forced to leave the country. The exile or repatriation of Indians and Chinese was hastened. In 1967–1969, ships were chartered by the Indian authorities to facilitate the departure of those who did not have the means to pay their journey back to South India. On its side, the Chinese community gradually sent its most active members abroad, but in very different conditions. The airlines of the companies that served Rangoon regularly took away Chinese families into exile. This diaspora led a number of Chinese to the West coast of the United States where the youngest members first settled before sending for their families. 1.3 Repercussions of Chinese events in Burma The collapse of Chang Kai–Shek’s Nationalist Army and the creation of the People’s Republic of China (1949) had deep repercussions in Burma. The Union of Burma was the first state to recognize the new People’s Republic, just as it had done when Israel was created in 1948. To escape Communist troops that were pursuing them, the remaining Chinese Nationalist armies (Koumintang)11 supported and armed by the United States, took refuge with their families in the forests and mountains of the Shan states. This invasion and the threat 10

Lubeigt (1975: 59–62). These troops comprised two divisions commanded by General Li Mi (Lao Mi) for the 93rd, and General Lao Tuan, who wanted to invade Yunnan from Burma. Driven out by the Burmese, the Chinese nationalists were forced to take refuge in Thailand where they developed a base in Mae Salong where they set up their headquarters. To generate finance, these troops began to guarantee the protection of mule caravans transporting opium produced by the mountain people. They then organized opium traffic for themselves in the Golden Triangle area.

11

b939_Chapter-11.qxd

278

7/15/2010

2:15 PM

Page 278

G. Lubeigt

of intervention by the Chinese People’s army led the Burmese leaders to seek support from the international community to get rid of the Chinese Nationalists. But the appeals and protest of Prime Minister U Nu went unheeded by the UNO and the Burmese army independently engaged costly operations in men, materials and financial means from 1950 to 1953, to eliminate the Chinese occupants from national territory. Nonetheless, Burmese (U Nu, Ne Win) and Chinese (Mao Tse-Dong, Chou En-Lai) leaders continued to meet regularly. This undesired Chinese presence, and the long war it brought in its wake, contributed to the birth of an anti-Chinese feeling and the rejection by the Burmese of the Chinese in Burma. The Burmese suspicion of the Chinese, British collaborators and brutal invaders was deepened by the after-effects of the Chinese “cultural revolution”. In 1966–67, badges displaying the head of Mao were distributed among the Chinese youth in Rangoon. Their ideology lay in Mao’s little Red Book. Some pro-Maoist demonstrations in the capital sparked off a violent nationalist reaction by the socialist authorities who were most likely the perpetrators of a Chinese manhunt and the pillaging of their apartments in central districts of the city. These events caused the last big wave of Chinese emigration from Burma. Those who remained were obliged to merge with the Burmese community to the extent of losing, apparently, a large part of their cultural identity. From 1968 to 1988 the leaders of the two states continued to meet frequently during official and private visits. But the relations between the two countries remained tense because of the presence of a large number of rebel nationalist groups in the border regions and the centre of Burma. Some were supported and armed by Beijing (Kachin, Was, Kokang and a part of the Karen), like the procommunist rebellion of the “White Flag”,12 while a score of other movements were essentially nationalist or democratic (Parliamentary Democracy Party founded by U Nu in 1970). In 1987–88, these rebellions collapsed, defeated as much by their lack of unity and their particularities as the presence of the government army on the spot. Consequently, the Burmese military leaders were able to plan a new pro-Chinese foreign policy. 12

Its leader was Thakin Than Tun, Aung San’s own brother-in-law, who was killed in 1968.

b939_Chapter-11.qxd

7/15/2010

2:15 PM

Page 279

The Chinese in Burma

279

2. Chinese Penetration and Settlement in Burma 2.1 A traditional economic presence In the early 19th century, there was a strong community of Chinese traders in the Burmese capital. They apparently traded only with China, and seemed to have enjoyed certain trade monopolies from which the king derived considerable income. At the same time, the king did not attempt to establish commercial relations with other countries. “At that time, Burma had no external trade: the only trade worth mentioning was traditionally with China”,13 relates Henri Gouger, a young British merchant, who visited the capitals of the Ava kingdom in succession.14 The Chinese were then exporting large quantities of cotton through the Irrawaddy to cater to the needs of their southern provinces. In return, they imported many consumer goods that came by boats, mule and oxen caravans and on elephants to a village called Medai situated a few kilometers north of Amarapura. Interested by this commerce, Gouger went there himself. The Chinese held an annual fair in Medai where their caravans arrived after the end of the rainy season and before the monsoons set in. The Chinese merchants imported gold foil, produced in the Kachin country, to decorate Burmese pagodas, for at that time, the Burmese did not produce their own gold foil. The main item of value transported by these caravans was raw silk, much in demand in the Burmese capital. Upstream of Amarapura was another market reserved for barter with the Chinese. The Burmese exported only teak while the metal and precious stone mines were leased to Chinese entrepreneurs who worked them, as the Burmese lacked technical expertise. Put together, these commercial relations between China and Burma bear witness to long-standing relations and lead us to believe that there 13

Gouger (1860: 60–61). Gouger first lived in Amarapura (1822); then, after a year’s stay in India; in Ava (1823), that had once again become the capital in the meanwhile. He was then imprisoned in Amarapura and near what would later be Mandalay, until the end of the first Anglo-Burmese war (1824–1826).

14

b939_Chapter-11.qxd

7/15/2010

280

2:15 PM

Page 280

G. Lubeigt

were well-established middlemen. In the second half of the 19th century, these relations were also based on a caravanserai controlled by a Shan prince, a vassal of the king of Burma. Situated north of the new Royal Palace in Mandalay, this caravanserai received caravans and served as a hub for the departure and arrival of goods from China and the Shan states. Gouger mentions that after the transfer of the capital to Ava, ordered by the king, the court had abandoned the site.15 However, there still remained “several thousands of Chinese” in Amarapura. In fact the Chinese residents of the former capital did not want to leave the place (where they had built a temple) because the costs of this displacement turned out to be prohibitive for their businesses. The Chinese community of the capital, comprising mainly traders, was economically strong and independent enough to be able to oppose the royal will successfully. Thus, right from the early 19th century, we see that the Chinese had already succeeded in integrating with the local population and played a basic economic role, but no political role whatsoever. 2.2 Urban development and sinonization: The Junta’s new policy From 1962 the military had not launched any major housing construction projects. Most city central districts lacked efficient transport systems for workers and had been occupied by squatters despite the absence of water supply, sewerage and garbage disposal systems. These difficult living conditions were compounded by the threat of devastating fires every year (Sagaing in 1968, Mandalay in 1984, Meikthila in 1985). After each disaster, the discontent of the city dwellers, forced to relocate at their own costs to peripheral areas far from the centre, was at boiling point. The peaceful and democratic demonstrations of 1988 (March–August), mostly in cities, had shown the danger of letting the discontent of city dwellers grow. With the new Junta, the city centers were fast rid of their over-population. 15

Gouger (1860: 91).

b939_Chapter-11.qxd

7/15/2010

2:15 PM

Page 281

The Chinese in Burma

281

Urban townships were reorganized and “new cities” (myo-thit) established in the extension of the old city to the east. They were created “ex-nihilo” in the rice and cotton fields in the Mandalay basin. But the plots made available to badly housed (or non-housed) Mandalayans were not given free of cost. All the displaced people were obliged to officially buy their plots from the sole proprietor of Burmese lands — the state, and hence the military who incarnate the state. With the Junta, urban construction was restarted in all the regions. In the beginning, the aim of this policy was to free the city centers where people who could not find housing had become squatters in a large number of buildings, including monasteries, for which the socialist regime had encouraged the “tenants” not to pay rent to the owners. As a consequence, these owners, ruined and frustrated (they were sometimes forced to repair the accommodation occupied by those who had never paid any rent) just could not carry out the maintenance work and added to the general deterioration of the heritage buildings of the city centers.16 At the same time, from end September 1988, the new Junta, free of communist rebellions at the northern borders, came closer to China, which immediately provided them logistical (massive supply of military equipment), economic and financial support. The opening up to China was all the stronger because the No.1 Secretary of the Junta, General Khin Nyunt had long entertained cordial relations with the Chinese. In return for Chinese support, the generals, in the framework of their new urban development policy, gradually and discreetly removed all legal and administrative hurdles that prevented Chinese nationals from entering, and particularly settling in Burma. The inhabitants of the Shan state who were of Chinese descent, and Sinonized ethnic minorities, grown rich through decades of illegal transborder trade (Was, Kokang), were the first to come and settle down in Burma, first in Mandalay, then in Rangoon. The Yunnanese came close on their heels and took advantage of the favorable economic and political climate to acquire Burmese National Registration Cards 16

For want of maintenance, several brick buildings in the centre of Rangoon collapsed in the heavy monsoon rains in the early 90s.

b939_Chapter-11.qxd

282

7/15/2010

2:15 PM

Page 282

G. Lubeigt

(according to the Mandalayans, some of them did not speak a word of Burmese). They bought land in the city centers and started many businesses (above board or mere fronts), and took control of them in all sectors (construction, transport, hotels, tourism, handicrafts, jade and precious stone mines). 2.3 The Chinese thrust and the new wave of migration Chinese migration to Burma, as to other countries of Indochina is not new. It is the same “thrust to the south” phenomenon that has been going on for two thousand years, and which led various tribes and people of China to slowly descend the high valleys of the huge Indochinese rivers to their fertile alluvial plains. In our times, it is the victory of Chinese communists who drove the remnants of the nationalist army to settle in various Shan states from where they maintained regular contacts with Yunnan China. However, with the new Junta’s coming to power, Chinese penetration has accelerated to reach hitherto unknown levels in continental Southeast Asia. China has the advantage of huge manpower, resulting from its population growth, which cannot always find employment in the poor rural regions of the interior provinces (Guizou, Yunnan, Guangsi and Guangdong). This excessive manpower engendered a large migratory movement to areas with high employment rates, especially in the coastal regions of the China Sea. But a part of the workers also made for the south to Yunnan, which is increasingly seen as a kind of El-dorado. Since the opening of passage points to Burma, the Chinese are attracted by the many economic opportunities that are now presented to them. The porosity of the long border, along regions rich in natural resources (teak forests, jade and precious stone mines)17 and energy resources (water potential, dams), is also seen as a major source of profits. It allows easy access to the Burmese hinterland and the immigrants can settle down in these zones to start new enterprises, the main purpose of which is to cater to the needs of the 17 Timber is felled illegally in Burma, especially in Kachin country, while the sawmills are established in Chinese territory (Yunnan).

b939_Chapter-11.qxd

7/15/2010

2:15 PM

Page 283

The Chinese in Burma

283

Chinese market. Their establishment enables tie-ups with the members of the Diaspora who participate in the economic development of their motherland. The multiplication of these enterprises, which generate considerable profits, also enables the opening up of Yunnan, and facilitates China’s access to the Indian Ocean. Within a few years, encouraged by the generals, Chinese immigration has assumed massive proportions, particularly with the Junta’s policy of building “new cities” (Myo-Thit). In Mandalay (city of traditions and repository of traditions), the application of this policy has led to the forced displacement of the Burmese population from central overpopulated districts (Zegyo, Malun, Chanthagyi) to newly created peripheral districts, south (Chan Aye Tharzan, Chan Mya Thazi, Maha Aung Myay and Pyi Gyee Tagon) and east of the old city, but far away and lacking basic amenities. The streets of the new districts are yet to be tarred, while the inhabitants splash through muddy puddles during the rainy season. Moreover, the lands that were vacated to the south of the former Royal Palace (Chan Aye Tharzan Township) were systematically sold (by their Burmese owners or the municipality) to new Chinese immigrants greedily eyeing realty investments. The first newcomers had capital for which they were no longer obliged to reveal the source. 2.4 The penetration process and the stages of settling in + Acquisition of Burmese Registration Cards.

As soon as they arrive in the country, immigrants begin by obtaining identity papers that authorize their stay in their new country of adoption. All those interviewed affirm that the Chinese in Mandalay have no difficulty in getting Burmese nationality and identity papers which enable them to have a Burmese name, even if they do not speak one word of Burmese. Our sources of information say that these procedures are not costly. To get these documents, all they have to do is state that they belong to non-Burmese ethnic minorities who live in the Shan state (Shan, Kachin, Maru, Wa, Kokang, Akha, Lahu, Taungthu et Palaung). To support their statements, they can produce

b939_Chapter-11.qxd

284

7/15/2010

2:15 PM

Page 284

G. Lubeigt

residence certificates established by the headman of the village in which they are supposed to have lived with their parents, or by the superior of the monastery that the family usually frequented. These documents are sold easily and the divisions of the Interior Ministry which check them in Mandalay don’t make too much of a fuss when their work is made easy.* + Buying real estate

With their Burmese nationality and limitless capital, all the immigrants have acquired land and are constructing haphazardly in the city and its surrounding areas. At first, the Burmese who sold real estate thought they were getting fabulous sums of money from the sale of their lands. In reality, the weak Burmese currency allowed the newcomers to pay for the lands with currency they could not deposit in state-owned banks without having to show the source of their funds. As soon as they had disposable capital, the border people, just like the rich Burmese, bought gold and gems to protect their profits. Burmese currency, permanently devalued, did not prove to be costly for them, and brought them huge amounts when they sold their gold and gems. “The Kokang Chinese began to enter Burma right from the late 70s. They had a lot of money and wanted to buy land to set up their businesses in the Zegyo (commercial centre in the old city). We did not want to sell our land or houses or the shops that were already there, since this was all we had for our livelihood. But one day a shopkeeper in the city centre who had a financial problem agreed to sell out to a modest Chinese who had Burmese nationality for a long time (which entitled him to buy land). The seller demanded an exorbitant price from his prospective buyer, thinking that he could not pay such a large sum. But the buyer agreed without batting an eyelid, and three days later, he came in a handcart laden with bags of Burmese currency notes. For the delighted seller, this was a windfall”. A few months later, he was crestfallen when Ne Win’s *Note: In 2006–2007 the cost of a NRC (National Registration Card) was in the range of 100/200 US dollars. In 2010 Chinese could/buy one in Rangoon around 1000 US dollars.

b939_Chapter-11.qxd

7/15/2010

2:15 PM

Page 285

The Chinese in Burma

285

military government suddenly demonetized the notes in circulation for the third time (1964, 1985, 1987), without the least compensation. But the transaction had been completed and the Burmanised Chinese, who was acting as a front for a smuggler from the Shan state, remained the official owner of the property.18 + Religion and education: tools of integration

In the early 90s, the immigrants were received by Burmanised Chinese families with whom they stayed for a certain period of time. They quickly joined religious and cultural associations of faithful Burmese followers of Theravada Buddhism.19 By belonging to such associations, they were able to rapidly integrate with the community, showing that they were Buddhist followers. They were all the more welcomed as they showed great generosity to the sociocultural undertakings of the Burmese monks (construction of stupas, multipurpose religious buildings or hospitals reserved for monks). For their part, the Burmese monks were very happy to welcome these new donors whom they introduced to the Burmese community as great devotees. Later on, they were even able to establish certificates for the benefit of the new members of the community they controlled. When the Chinese made particularly large donations, to the order of million kyats (1000 dollars), they were officially given donation certificates that they could frame and display in their living room. These certificates, that are even now being issued, are similar to good conduct certificates. Amongst Buddhists, a big donor (Dagagyi) cannot possibly be a bad individual since he is wealthy. Afterwards, all the doors of society are open to him. The new Buddhist attends all religious meetings and makes business contacts by showing the right kind of piety. Using the Buddhist tool is therefore fundamental for the successful integration of the Chinese in Burma.

18

The author has been following the urban development of Mandalay since 1970. Verbal communication of a Mandalayan in February 1987. 19 The Chinese, who lived for 40 years under an atheist government, are generally followers of Mahayana and not Theravada (the teaching of the Elders) Buddhism.

b939_Chapter-11.qxd

286

7/15/2010

2:15 PM

Page 286

G. Lubeigt

Many immigrants, who struggle to express themselves in Burmese, use yet another recourse — education — to secure their future as well as their integration. They send their children to the University of Mandalay where they learn especially Western foreign languages. The fees being very low, the young Chinese thus acquire, at the cost of the Burmese state lacking the wherewithal to educate its own nationals, a specialized education for a very small fraction of what they would have to pay in China for the same courses. Some years ago, Burmese lecturers in the French Department of the University were astonished at the number of young Chinese who came to study French — 10 times the number of native students! We see the same trend amongst the immigrants settled in Rangoon. The father of a Burmanised family explained the reasons for this predilection: “For us, Burma is just a stepping stone. We want to go to Europe, which is why we send our children to learn western languages et the Rangoon University of Foreign Languages. My eldest son studies German, the second, Italian and my daughter, French.20 + Display of cultural identity

The Chinese members of religious associations are well-accepted by faithful Burmese. Recognized as wealthy men,21 they no longer have to participate directly in the numerous religious activities in which Burmese families find enjoyment. But, as soon as possible, they 20 Verbal communication on 16 March 2007. The master of the house introduced himself as a trader in gems. His residence is decorated in unique ornamental style (Chinese teak furniture, wooden sculptures, curtains, calendars) and Chinese electrical appliances. We also saw a huge map of Burma with Chinese legends. The house, built in a rich residential neighborhood where just 20 years ago there were Burmese and Karens, has a peculiar feature. The plot on which it is built is connected to half a dozen other houses built in adjacent plots apparently independent and separated by hedges and fences. However, all of them have a maze of lobbies, living rooms and corridors running through them that are not seen from outside. If they are observed closely, it can be understood that they house illegal immigrants and one or more manufacturing units. 21 Amongst Buddhists, this fact implies an increased consideration for wealth which is irrefutable proof of good karma. A source of information clearly expresses this phenomenon that is found in Thailand: “We have a cultural problem. People respect wealth. Whoever has a lot of money has all rights and can do anything.”

b939_Chapter-11.qxd

7/15/2010

2:15 PM

Page 287

The Chinese in Burma

287

resume their cultural identity. Even if they are apparently Burmanised (Cf note 22), they insist on emphasizing their identity, often disregarding the feelings of the collectivities in which they live. With the growing strength of their community, the Chinese affirmation of their identity becomes deeper. From the early 2000s, immigrants have been able to found their own cultural associations (Myanmar Chinese Culture and Arts Association; Myanmar Guandong Music Band; Local Fuzhou Native Culture and Arts center). There are now scores of them, and in their turn, they collect funds for building Mahayana temples. As a result, the Chinese now give the cold shoulder the Theravada monks who no longer can benefit from their largesse. This phenomenon is very well explained by the Theravada monks themselves: “Earlier, we used to go around for alms in the streets in which we knew the residents for generations. But when the Burmese sold their lands to the Chinese, we stopped getting enough food from these rounds. In many localities, we were obliged to change our routes by giving up certain streets”.22 Deprived of donors, certain monks fell back on localities having a large Burmese population. The big Chinese traders reserve most of their donations for Mahayana temples that they have built on lands acquired by them. A simple visit to one of these temples shows that outside of festival periods, these buildings are multipurpose (huge warehouses on the ground floor, meeting rooms, shrines on the upper floors, night schools for teaching the Chinese language) As for the annexes, in which one can expect to find Mahayana monks, they house vast kitchens in which workers cook bowlfuls of beans, which are then dried and exported to China. 3. Economy and Geopolitics: A Strengthened Chinese Presence 3.1 The change in the urban landscape of Mandalay and Rangoon Mandalay’s traditional urban landscape has radically changed since the arrival of Chinese immigrants. Small one- or two-storied houses made of wood, often built on stilts, which lent charm to the former royal 22

Verbal communication by the Abbot of a Mandalay monastery, 2 April 2007.

b939_Chapter-11.qxd

288

7/15/2010

2:15 PM

Page 288

G. Lubeigt

capital, gradually disappeared, making way for big concrete buildings with typical Chinese architecture, hotels, warehouses, shops, condominiums, luxurious bungalows with all modern conveniences, Chinese schools, hospitals, temples, industrial and commercial enterprises, private banks, supermarkets. The movement is so strong that Mandalay’s city centre is losing its Burmese character and taking on the appearance of a Chinese city. In Mandalay alone, some Burmese citizens indicate a figure of two million inhabitants. The residents say that 60 percent of the population of the five districts of the city is now Chinese. In the early eighties, Shan families of Chinese origin, grown wealthy mainly through various illegal traffic that existed between China and Burma, were the first to come down from the Shan plateau. They began to buy lands in the heart of the city of Mandalay. In the nineties, these semi-Burmanised Chinese families were followed by the Yunnanese who settled in the city in huge numbers. To such an extent that VIP Chinese quarters were established by the Burmese authorities. These first neighborhoods, situated south of the Royal Palace, were followed by the construction of vast condominiums (neighborhood of the Yadanabon market — between the 78th and 33rd streets).* Consequently, the urban landscape of the capital of the last Burmese dynasty (1760–1885) changed drastically, like that of certain Rangoon wards (Pansodan Street). This settling of the Chinese is now visible in urban landscapes. It is attested to by the presence of a large number of shop signs and trade names in Chinese characters, which have made their appearance since a few years now. The social fabric of Mandalay is becoming denser as parcels of waste land and wooden houses are being bought. As wood makes way for concrete, the city’s face keeps changing. From the nineties, the arrival of the Chinese may be distinguished in three waves of migration in quick succession. Each of these waves engendered a specific kind of dwelling. The first were established *Note: On 25 February 2008, the main market, a three-storey concrete building which occupied a vast perimeter, was mysteriously burnt down. A company run by a Chinese tycoon living in the ward is rebuilding it on a wider scale.

b939_Chapter-11.qxd

7/15/2010

2:15 PM

Page 289

The Chinese in Burma

289

discreetly in what remained of the former Chinese quarter, between the Zegyo market and the station (80th and 81st streets). The others acquired, in the heart of the Burmese city, semidetached houses comprising only a small garage and a mini-garden on the ground floor and a living room on the first floor. On the contrary, the members of the second wave settled in a VIP neighborhood specially created for them by the Burmese authorities, away from prying eyes. Situated on the side of the Mandalay–Lashio road, around two kilometers east of the central station, this ward is made up of luxurious independent bungalows on large plots, on which are also found garage-cum-warehouses large enough to accommodate the big trucks that link Mandalay and the big Chinese cities through Yunnan.23 A third kind of dwelling, which is not directly connected to commercial operations, completes the other two. It consists of imposing condominiums (Yadanabon neighborhood southeast of the central station) having several hundreds of lodgings. This category can be illustrated by the big Shwe–Phyu complex situated near the Yadanabon market. The Burmese do not like this type of collective dwelling very much, and prefer the small individual house made of wood. On the contrary, the Chinese give more importance to security and so they live in groups as close as possible. It is rumored that, just as in the Zhenzhen region, these condominiums are the private residences of innumerable Chinese wheeler-dealers, who buy this kind of dwelling to install their Chinese or Burmese wives. The proximity of the big Yadanabon market, in which there are many retailers of Chinese goods (foodstuff, citrus fruits and textiles), provides work or distraction for the women. Those who acquired land around this market lost no time in constructing on their property storied concrete buildings which, according to traditional arrangement, are used for businesses, warehouses and residences. Some built hotels that have become ipso-facto temporary accommodation for Chinese visitors and immigrants. One of these hotels (Pacific Hotel facing the central station) was closed for a short period in 2007 because it accommodated too many friendly young women who were working in the bars and Karaoke bars that 23

Situated on the China road, this neighborhood is next to the Chinese Consulate.

b939_Chapter-11.qxd

290

7/15/2010

2:15 PM

Page 290

G. Lubeigt

were in the backyard. They came in minibuses, stayed for some days in the hotel waiting to be smuggled to Rangoon and Thailand by road. Other hotels, such as Nylon Hotel much more discreet, put up several migrant male workers who share a room, and wait to leave for the south. It appears that Mandalay has become simultaneously the hub for human trafficking and a transit point for emigration to Thailand, Southeast Asia and the West.24 In any case, the arrival of the immigrants has led to profound changes in the urban landscape.* The city is growing vertically as the old wards of wooden houses are destroyed to be replaced by concrete buildings in keeping with the needs of Chinese businessmen. The central station and the Yadanabon market are thus at the centre of the reconstruction of the city and its surroundings. From the early 2000s, the inflow of migrants and their settling in the three townships situated south of the Royal Palace has been continuous. To such an extent that the near totality of the area is now occupied by Chinese. Their residences can be easily recognized by the good luck characters that adorn their front walls. Chinese language symbols abound in street corners. Hotels, shops overflowing with Chinese products stocked in their frontages, luminous signs, hoardings, banks, big schools in which Chinese teachers take classes in Mandarin, big concrete temples such as Shwe Yin Htaing in the 77th street. The Sinonization of Mandalay is not complete, but is well underway. In Rangoon, the new immigrants have resumed contact with the Burmanised Chinese of the central districts. These have served as middlemen for the newcomers who buy the old brick buildings of the old colonial city where they have settled. Their arrival has allowed the “renaissance” and extension of traditional Chinese neighborhoods (Townships of Lanmadaw, Latha and Pabedan) situated near the port. But these townships are overpopulated and the newcomers needed more space for their businesses. Consequently, the luckier merchants set up shops, like the banks, in Pansodan Street, in the centre of the 24

Studies carried out in Mandalay in March–April 2006. *Note: The same phenomenon has been observed in Chiang Mai (Thailand), Lubeigt, 1994.

b939_Chapter-11.qxd

7/15/2010

2:15 PM

Page 291

The Chinese in Burma

291

business districts, between the bridge that straddles the railway and the sea front. Despite the sanctions imposed by the westerners to force the Junta to be more liberal, the buildings housing two major Chinese banks are now completed. At the end of it all, the consequences of the Chinese settlement and the setting up of their enterprises is as visible in the urban landscape of Rangoon as that of Mandalay. 3.2 Economic perspectives China’s influence has deep repercussions on the Burmese economy. With the Burmese-Chinese rapprochement, economic exchanges have multiplied. In addition to military equipment supplied by China (1.5 to 2 billion US dollars from 1988), 53 state undertakings, as well as roads, bridges and railways have been developed with Chinese assistance. China is Burma’s main trade partner (1.27 billion US dollars of official exchanges in 2007) and border trade (562 million US dollars in 2006) remains vital for the Burmese, even if it is more profitable for the Chinese.* Gradually, barter agreements were organized in the border areas and official passage points set up. The main border towns that had made a fortune through smuggling (Muse), commenced legal trade to supply cheap products sought after by Burmese consumers, which the authorities had refused till then. The legalization of border trade had another good effect: the profits of new Chinese traders and habitual smugglers can now be openly shown in both the countries that have jettisoned their socialist ideology. The large-scale arrival of immigrants awakened a languishing Burmese economy, revived real estate markets, provided employment to craftsmen and their workers, stimulated productive investments, and favored the creation of new enterprises to answer the pressing demands of the Chinese market. Traditional Burmese shops, such as the those of the stone sculptors of Amarapura (township of West Chan Mya Thazi), now display their trade name in Chinese, which *Note: Xinhua, April 30th 2007. The external trade of Burma was 7.4 billion dollars in 2006–2007.

b939_Chapter-11.qxd

292

7/15/2010

2:15 PM

Page 292

G. Lubeigt

was unthinkable two decades ago. This is explained by the fact that the main customers of these craftsmen, who work on alabaster from the quarries of Sagyin (20 km north of Mandalay), are Chinese. The development of trade relations between the two neighbors helped wholesalers to take control of the consumer goods distribution network. They facilitate large-scale import of products (clothes, textiles, household electrical appliances, television sets, computers, utensils, fruits) that their retailers sell in the Burmese markets. For a population plagued by shortages created by 25 years of socialist planning, China’s supplies to the markets are a boon. The new economic process however has its downside. It leads to Chinese control over every economic activity in the region, and over the natural resources of North Burma — the jade mines of the Uyu river basin (Mogaung in the Kachin state), precious stones (Mogok in the Mandalay Division), ores such as nickel (Kachin state, Shan state, Sagaing division). While China has become the world’s leading teak supplier, the Burmese have completely lost control of their famous forests (Kachin state and Sagaing division). The Chinese exploit their dominating position in Burmese industry: thus they can get whatever they want manufactured at low cost and then send it to China (furniture, sculptures). In this way, the alabaster sculptures of Mandalay are delivered by truck everywhere in China.* For example, it can be seen that a truck laden with alabaster sculptures (Kwan Yin, Burmese buddhas, kneeling monks) takes one week to reach Xian, in the Northeast of China.25 The development of Yunnanese industry has led to the elimination of certain traditional industries in Burma (village weaving, textiles, enameled ceramics, etc.) But, on the other hand, it has given a boost to certain sectors neglected by the authorities (agriculture,26 tourism, road transport, hotels). The construction and opening of many hotels, which replace demoded 25

Survey conducted in Xian (Northeast China) in June 1998. The system of lease contracts of arable lands to neighboring countries is now widespread in continental Indo-China. In the border areas, where state control is non-existent, this system can eventually favor the Chinese hold over agricultural land (Cf : the new rubber plantations in Laos). *Note: A central bus and truck station has been established in Pyi Gyee Thagon in the southern part of the city. 26

b939_Chapter-11.qxd

7/15/2010

2:15 PM

Page 293

The Chinese in Burma

293

guest houses, meet the requirements of travelers. But these hotels have also become passage points for migrants and way stages conducive to the transit of various illegal activities including prostitution and human trafficking. Burma is thus becoming the service entrance for China and seems to be increasingly dependent on China in terms of economy. 3.3 Burmese reactions facing Chinese immigration The feelings of the Burmese people confronted with this large-scale immigration cannot be ignored. Needless to say, the reactions of the people of Mandalay vary greatly. Some are clearly grateful to the Chinese who provided them work. Their new jobs helped them come out of the poverty they had known because of the socialist military. Many of them keep repeating the official formula, “The Chinese help. Burma develop”. But some others, mostly in business circles, are resentful and loudly protest against the privileged position given by the Junta to the Chinese after fighting them for such a long time. The collusion between Burmese soldiers and the new Chinese immigrants is bitterly criticized, even by those who have stood to gain from the regime: “So many of them are at the border waiting to come in. They try and grab whatever they can. They scorn Burma. They are cheats and robbers, and things are going from bad to worse”. And our interlocutor goes on to say, tapping his chest: “You see, my shirt has only one pocket, but the soldiers have many pockets, at the top, down below, in front, at the back, on the sides …It’s disgusting. They’ve grown so rich. They sell residence permits to the Chinese who then settle wherever they want. What will become of us? There are more and more Chinese tourists. Of course, some of them stay behind because Burma is very comfortable for them. Back home, they pay a manservant 150 dollars per month. Here, it’s 20 dollars or less.”27 3.4 Towards the conquest of Burma? In principle, the Chinese thrust (see map p. 294) is not political. Nevertheless the influence of China and the Chinese is permanent. It 27

Verbal communication of a Rangoon businessman on 27 March 2007.

b939_Chapter-11.qxd

7/15/2010

2:15 PM

Page 294

G. Lubeigt

294

Map 11.1:

The Chinese thrust in Burma.

b939_Chapter-11.qxd

7/15/2010

2:15 PM

Page 295

The Chinese in Burma

295

is exerted in the entire country and in all areas. Burma, ostracized from western democracies, seems to have been pushed into the arms of the Chinese who settle in the Union for economic reasons. But for the People’s Republic, geopolitical considerations, which lead it to support Burma against westerners, go hand in hand with geostrategic realities which are just as fundamental. The opening of a Chinese window on the Indian Ocean allows the control of the Malacca Straits, protects the supply channels of energy and raw material needed for the development of the Chinese economy, and assures access to Africa’s natural resources. To secure its energy resources, China must be able to have permanent access to the Indian Ocean and its ports, which will open up Yunnan and the other southern provinces. The ongoing construction of gas pipelines (gas from Arakan) and oil pipelines (petroleum from Middle East) which will link the petrochemical complex of the port of Kyaukphyu to Yunnan (Dali), is a result of this strategy. In this perspective, we can wonder whether China is intelligently using its human surplus as a potential weapon. The normalization of relations with Burma encourages the Yunnanese to emigrate in large numbers to the South where new economic opportunities are being offered. But Chinese immigration in Burma has now taken on the semblance of a migration wave that leads us to start thinking about its significance. What is very clear is that the migrants are seeking a better life. But the Chinese power can also consider this migration a prelude to the definite settling in Burma of a strong Chinese community that is a vassal of Beijing. At the end of the day, we cannot but feel that the Chinese diaspora serves its own interests as well as those of the Chinese state. Emigration to Burma, just as to Tibet and Sinkiang, could work in favor of the geopolitical and geostrategic designs of the People’s Republic. Whatever it is the Burmese Military does not presently seem to pay attention to the economic social and political consequences of a massive Chinese immigration of the future of Burma. Conclusion The Chinese thrust to the south is a very old phenomenon which, based on a large-scale emigration, traditionally continues towards

b939_Chapter-11.qxd

7/15/2010

296

2:15 PM

Page 296

G. Lubeigt

continental Indochina, the Indian Ocean and India. It is now seen in the major Burmese cities, especially Mandalay and Rangoon, where the urban landscape has undergone great change. In the Royal city of Mandalay recent urban development observed leads to a conclusion: this traditional Burmese city, last capital of the native dynasty is being rapidly transformed into a typical “Chinatown”. This first “Chinatown” in Burma is no doubt not the last, given that some arterial areas of Rangoon, the last but one capital of the Union of Burma, seem to be undergoing the same kind of sinonization. We can wonder if the Chinese intend to stop with that, but it is difficult to imagine the contrary. In which case, what means can the Burmese have to oppose a more permanent settling of the Chinese migrants? It seems difficult to imagine this possibility, as we cannot shake off the impression that the Chinese diaspora is serving its own interests as much as those of the People’s Republic.28 In any case, the rapid sinonization of Mandalay gives us an inkling of the modalities of what the future assimilation of Burma by China could be. The northern part of the Union of Burma (Kachin state) is already strongly influenced by the Chinese; Nay Pyi Taw is aware of it, and eventually, the rest of the Union cannot but follow suit. The creation of the “24th Chinese province” is now on its way in Burma. References Aung, M. H. (1967). A History of Burma. New York, London: Columbia University Press. Hawai Aung Thwin, M. (1985). Pagan — The Origins of Modern Burma. University of Hawaii Press. ———- (1988). Myth and History in the Historiography of Early Burma. Paradigms, Primary Sources, and Prejudices. Singapore: ISEAS,

28

The recent (April 2008) avatars of the Olympic torch have provided rich insights. Thousands of Chinese waving flags of the People’s Republic appeared in the countries through which it was taken. Their aim was to support the Olympic Games and oppose the pro-Tibetan and pro-Human Rights demonstrations that took place on the Torch’s route. Such a mobilization could not have happened without an effective control by Beijing over its natives, students or expatriates.

b939_Chapter-11.qxd

7/15/2010

2:15 PM

Page 297

The Chinese in Burma

297

published by Institute of Southeast Asia, Studies, Singapore. In: Monographs in International Studies, Southeast Asia Series no. 102. ——— (2003). The Legend that was Lower Burma, In: Proceedings of Texts and Contexts in Southeast Asia Conference (12–14 Dec. 2001), pp. 153–196. Universities Historical Research Centre, Yangon, Part III. Boucaud, L and Boucaud, A. (2006). A 24th province for China. Le monde Diplomatique. Paris. Boontharm, D. (2005). Bangkok formes du commerce et évolution urbaine. Bangkok: Edition IRASEC. Chew, A. (2005). The Cave-Temples of Po Win Taung, Central Burma. Architecture, Sculpture and Murals. Bangkok: White Lotus. Cohen, P. and Richard, L. (2005). La China sera-t-elle notre cauchemar? Les dégâts du libéral-communisme en China et dans le monde. Paris: Edition Mille et Une Nuits. De Vienne, M. (2003). La Burmanie en quête de rois. Collection OutreTerre, Asies tiers du monde, pp. 127–140. Bangkok: Edition IRASEC. Gouger, H. (2003). Two Years Imprisonment in Burma (1824–26). A personal Narrative of Henry Gouger. Bangkok: White Lotus. Hall, D. G. E. (1956). Burma. London: Hutchinson’s University Library. Harvey, G. E. (1967). History of Burma from the Earliest Times to the Beginning of the English Conquest. London: Longmans. Hloing Maw Oo. (2007). Heritage Sites of the Colonial Period in Yangon City of the Future. International Urban Studies Conference. Living Capital: Sustaining Diversity in Southeast Asian Cities. Phnom Penh. Manuscript Hsue Hgnet, H. (2003). The Straight Lines of Mandalay. Mandalay: Kyipwarye Press. Leveau, A. (ed.) (2007). Investigating the Grey Areas of the Chinese Communities in Southeast Asia. Occasional Paper No. 1. Bangkok: IRASEC. Linter, B. (1996). Land of Jade : A Journey From India Through Northern Burma to China. Bangkok: White Orchid Press. ———— (1994). Burma in Revolt. Opium and Insurgency Since 1948. Bangkok: White Lotus, Westview Press. Lubeigt, G. (1994). Traditional and Recent Aspects of the Urban Development of Chiang Mai (Thailand) In: Cultural Identity and urban change in Southeast Asia. Interpretative Essays. Deakin University Press Australia, pp. 117–134. Lubeigt, G. (2007a). Industrial Zones in Burma and Burmese Labour in Thailand. In: Myanmar: The State, Community and the Environment. Australian National University. Canberra, pp. 161–191.

b939_Chapter-11.qxd

298

7/15/2010

2:15 PM

Page 298

G. Lubeigt

Lubeigt, G. (2007b). Notes on the Chinese communities in Burma and Thailand. In: Investigating the Grey Areas of the Chinese Communities in Southeast Asia. Ed. by Arnaud Leveau. IRASEC, Bangkok, pp. 143–150. Luce, G. H. (1970). Old Burma — Early Pagan. New York: Ascona, Artibus Asia. ———— (2005). La Birmanie: l’Âge d’or de Pagan. Paris: Les Belles Lettres. ———— (2000). La Birmanie: un pays modelé par le Bouddhisme. Essai de Géographie Religieuse et Politique. Thèse Sorbonne-Paris I. ———— (1998). Pagan : histoire et légendes, Contribution à la géographie historique d’une capitale indochinoise. Paris: Kailash. ———— (1986). Développement et urbanisation de Rangoun: Aspects du marché foncier et immobilier dans la capitale de la République Socialiste de l’Union de Burma. In Développement rural dans les pays tropicaux, CNRS-CEGET, Travaux et Documents de Géographie Tropicale, No. 55, pp. 123–178. Bordeaux. ———— (1979). Le Palmier à Sucre (Borassus flabellifer) en Burma Centrale. Publication du Département de Géographie de l’Université de Paris-Sorbonne. ———— (1975). La Buimanie. Que Sais-je? No. 1620. Presses Universitaires de France. ———— (2005). Introduction of Western culture in Myanmar in the 19th century: From Civilian Acceptance to Religious Resistance. In Essays in Commemoration on the Golden Jubilee of the Myanmar Historical Commission, pp. 380–409. Rangoon. Myanmar Historical Research Centre. ———— (2007). Trade, Culture and Traditions in Mandalay (Burma). International Conference on Urban Studies on Living Capital: Sustaining Diversity in Southeast Asian Cities. Phnom Penh. ———— (2007). Mandalay la première “Chinatown” de Burmanie. Communication au 3ème Congrès du Réseau Asie. Paris. ———— (2008). Crises et violences en Buimanie: 44 ans de pouvoir militaire. In Crises et violences en Asie-Pacifique. Presses Universitaires de Paris-Sorbonne. pp. 19–59. Metford, B. (1935). Where China Meets Burma. London: Blackie & Son Limited. Murari, K. (1985). Cultural Heritage of Burma. New Delhi: Inter-India publications.

b939_Chapter-11.qxd

7/15/2010

2:15 PM

Page 299

The Chinese in Burma

299

Maung, M. (1994). On the Road to Mandalay: A Case Study of the Sinonization of Upper Burma. Asian Survey, Vol. 34, No. 5, pp. 447–459. Phayre, A. (1967). History of Burma. London: Susil Gupta. Skidmore, M. and Wilson, T (eds.). (2007). Myanmar. The State, Community and the Environment. Canberra: Asia Pacific Press. Searle, H. F. (1928). The Mandalay District, Vol. A. Rangoon: Burma Gazetteer. Smith, M. (1991). Burma Insurgency and the Politics of Ethnicity. London: Zed Books. Shway Yoe (1963). The Burman, His Life and Notions. New York: Norton & Company. Thant Myint, U. (2007). The River of Lost Footsteps. A Personal History of Burma. New York. Saber and Saber. Than Tun (1978). History of Buddhism in Burma A.D. 1000–1300. Journal of the Burma Research Society. Rangoon. ——— (1988). Essays on the History and Buddhism of Burma. Kiscadale Publication, Hamilton Asia.

b939_Chapter-11.qxd

7/15/2010

2:15 PM

Page 300

This page intentionally left blank

b939_Chapter-12.qxd

7/15/2010

2:15 PM

Page 301

CHAPTER 12

Thailand’s Economic Relations with China and Japan Suthiphand Chirathivat

1. Introduction Thailand has made tremendous progress in developing its economic relationships with most countries, including China and Japan, the two major economic powers in East Asia. Still, numerous challenges, both longstanding and emerging, confront Thailand’s security, prosperity, well-being and national economic interests with all these countries. Postures that have served Thailand well may neither be sufficient nor suitable today as newer and more complex challenges arise. In particular, the rise of China has become so dominant which Thailand, like most countries, is actually facing. The likely impact of such changes is tremendous as it competes with the traditional economic role-playing by Japan. Recent experiences and renewed economic interests with China and Japan serve well to remind how Thailand is sensitive and starting to adjust herself within a new given reality. Strategically speaking, both China and Japan have accommodated the Thai government following the military coup that took up place in September 19, 2006. It is during times like these that China extends further the substance of future ties between the two countries and Japan has also done so with the signing of the Japan–Thailand economic partnership agreement. China and Japan know what are Thailand’s strengths and weaknesses and what they need from Thailand and how they could contribute to the future of economic development of Thailand. It is in Thailand’s interests to deepen and nurture such relationships that 301

b939_Chapter-12.qxd

302

7/15/2010

2:15 PM

Page 302

S. Chirathivat

will serve to balance against other major influences like the US and the EU, for instance, without interrupting or competing among themselves. Both China and Japan are much greater in size and in its economy than Thailand. Also, they appear to be less dependent on Thailand. As long as they value the interdependent relationships, Thailand could stand to benefit from both. Geographically, Thailand is just next to China but not with Japan. Historically, China has strong influence on Thailand’s history, culture, and its people. Economically, Japan has developed a much stronger economic relationship up to the present; however, China is catching up quickly. Of their formal relationships, Japan and Thailand are celebrating 120 years of relations, while Thailand–China diplomatic relations were established only in 1975. It is clear that China and Japan want to be active players in shaping the future of Asia. Thailand, as an integral part of the Southeast Asian region, now formalised as ASEAN, has no choice but to act accordingly with the right balance between, the two major economic powers. This paper looks at their current bilateral economic relationships through trade, investment and other areas of cooperation. 2. Current Bilateral Economic Relationship The outward orientation of the Thai economy has always been the driving force behind Thailand’s economic progress. Trade and FDI performances have considerably increased since the second half of the 1980s, even accounting for the sluggish period around the 1997 financial crisis. Economic ties with East Asian countries have been strengthened with the extension to the South Asian region, in particular, India. The structure of trading and investment partners has also much deepened and expanded. 2.1 China and Japan’s trade with Thailand Japan remains the most important trading partner for Thailand’s imports with a share relatively higher than 20 percent since the 1990s

b939_Chapter-12.qxd

7/15/2010

2:15 PM

Page 303

Thailand’s Economic Relations with China and Japan

303

and continuing even after the financial crisis. It still ranks second after the USA for Thailand’s exports. Although the USA remains Thailand’s most important export market, its share has substantially reduced from 22.3 percent in 1998 to only 15.4 percent in 2005. The European market has also become less important, especially the Netherlands, the UK, Germany, France, Belgium and Italy. The ASEAN markets have continually grown well again, except for Singapore. China and Hong Kong combined are becoming increasingly important for Thailand’s exports. For instance, the share of exports to China has increased by ten-fold since the mid 1990s. The same is also true for Thailand’s imports from China which has dramatically gained an almost ten-fold share for the same period. It is for this reason that the rise of China provokes differential changes in trade patterns and increasing economic interdependence between the two that requires closer observation. This overall trade trend suggests that China will surpass Japan in its trade with Thailand in the coming years. This will give China a dominant role in discussing future trade opportunities with Thailand when compared to the past. The emergence of China as a major trading partner has also dramatically affected the world and even more so, the East and Southeast Asian region. Thailand, like many other countries, is facing a new kind of economic interdependence centered upon China’s own economic growth. Even Japan since 2004 has been trading more with China than with the United States. For Thailand, it is a matter of time that China’s continuing growth will translate this prospect for trade between them but not without vulnerabilities. When it comes to the trade balance, Thailand is still suffering a trade deficit with both. Of course, Thailand trade deficit’s with Japan is nothing new, but reflects a longstanding relationship between the two as Thailand has always been a platform for the Japanese multinationals, medium and smaller firms as well as providing resources and materials for some major parts and components that Japan still needs. For one thing, Thailand’s export capabilities in sectors like automobile and electrical and electronic products have been closely linked to Japanese firms established in Thailand and this explains the structural trade relations between the two. Of course, one of the

b939_Chapter-12.qxd

304

7/15/2010

2:15 PM

Page 304

S. Chirathivat

usual complaints for the huge trade deficit with Japan is often related to difficulties in market access and stringent regulatory framework. In that context, economic cooperation has often helped to address the issues whenever it needs to be discussed. Thailand’s trade deficit with China is of a different origin. Indeed, Thailand continues to import a number of manufactured products from China, ranging from cheap consumer products to machinery to other intermediate products like parts and components needed for Thai industry. Thailand’s exports to China are more likely to concentrate on commodities and intermediate inputs like parts and components needed by firms in China for the production of exports to third party markets. Only more recently has China started to look for more products for the domestic market as the country starts to liberalize its own economy, given its access as a WTO member which allows more Chinese consumers to appreciate more products from abroad. Still, the trade gap, for the manufacturing sector, has not been reduced. This figure shows how Thailand’s manufacturing sector is more dependent for its trade with China. The trade deficit of this sector alone is still standing at least two billion US dollars per year. Since the size of China is enormous, with 22 provinces and almost 1.4 billion population, one might also ask where all this China– Thailand trade goes. From recent trade statistics, one could estimate that around 40 percent of Thailand’s total trade with China is with Guangdong province, then followed by other coastal provinces where major cities like Shanghai, Beijing, Shenyang, etc. are located. On the other hand, other provinces neighboring Thailand, like Yunnan, Sichuan, Guangxi, Chongqing, still have little bilateral trade. Border trade with these provinces is growing and might not have been properly registered. 2.2 China–Thailand trade dynamics When asked to provide a framework on trade patterns between China and Thailand, it would be appropriate to look at the selected traded goods that might reflect the overall changes in trade patterns and

b939_Chapter-12.qxd

7/15/2010

2:15 PM

Page 305

Thailand’s Economic Relations with China and Japan

305

industrial adjustment. The top items of Thai manufactured exports to China are as follows: Electronic products, parts and components, electrical products, parts and components, rubber, plastics, iron and steel, metal, paper. China’s share of Thailand’s total exports on these selected traded items has also increased rapidly. These items are iron and steel (20.8 percent), plastics (12.5 percent), paper (9.6 percent), electrical products, parts and components (4.6 percent) in 2003. Not surprising, Thailand’s trade with China on these selected manufactured items is mostly raw materials and intermediate inputs. It is a fact of China’s rise and its need for manufactured components for final assembly and re-exporting to the major markets. In this setting, there is a clear tendency toward an increasing intraindustry trade between China and Thailand in some sectors. Obviously, electrical and electronic products, parts and components are the case in point. Trade in these products between the two is part of the regional and global production networks of local and foreign firms. These operations are well placed and managed at the regional and global level. Thailand’s trade also shows a stake China has in its total imports. For most selected manufactured imports, Chinese market share of Thailand’s imports are clearly gaining ground since 1998. Major import items are electrical and electronic products, parts and components, silk yarns, textiles and clothing, furniture, ceramics, carpet, iron and steel. This is consistent with the view of China being the world’s factory of these products and exports to other countries like Thailand. The Chinese make cheap products to increase access to Thai consumers. There are also other Chinese products that encourage Thai manufacturers to import like silk yarns, special woven fabric, furniture, ceramics, etc. This is apart from some sectors in the intra-firm trade like electrical and electronic parts and components as there is a greater tendency as well to expand to other sectors. 2.3 Japan–Thailand linkages through Japanese FDI It is obvious that strong economic ties between Japan and Thailand reflect clearly on FDI from Japan. For a long period, Japan remains the first international investor in Thailand. Since the mid 1980s,

b939_Chapter-12.qxd

306

7/15/2010

2:15 PM

Page 306

S. Chirathivat

Japanese firms have played a strong role in helping Thailand to be one of the major manufacturing bases in ASEAN. Japanese firms, like automobile and electrical and electronic industries, use Thailand as a base for their regional production networks in East Asia. In fact, Japan’s role is key to Thailand’s economic growth and development over the past two to three decades. It has not diminished even with the financial crisis of 1997 although it has weakened in the last few years due to the repositioning of Japanese firms with regard to the emergence of India and, more recently, the economic surge of Vietnam. One of the facts about Japanese firms is that Japanese suppliers in the automobile industry tend to undertake FDI in those locations where other Japanese automobile assemblers are already located. This also happens for the electrical firms from Japan which tend to undertake FDI in the country when other Japanese electrical firms (members of the same “Keiretsu” group) have already established production plants. For these reasons, it is interesting to explore industry linkages on the cross-industry pattern of Japanese FDI in Thailand’s manufacturing sector which, however, this paper will not properly address. Also, it is interesting to explore the increasing links between Japanese firms in Thailand and those established in emerging production sites like China, India and new ASEAN member countries like the CMLV, in particular Vietnam. One interesting reason for Japanese firms undertaking FDI in Thailand is to supply intermediate parts and components to Japanese firms already there in connection with their home-based operations which have helped to create closed links, within intraindustry and intrafirm trade and investment. Studies have found that Japanese firms in Thailand tend to carry out intermediate transactions with each other than with local Thai firms. The argument for such behavior is that the quality and reliability of local intermediate supplies may not meet the standards required by Japanese firms although the host government seeks to forge links between foreign producers and indigenous suppliers by imposing local content requirements. Japanese firms with domestically related manufacturing activities would tend to follow one another overseas. However, differences in

b939_Chapter-12.qxd

7/15/2010

2:15 PM

Page 307

Thailand’s Economic Relations with China and Japan

307

the nature of technology and the length of value-added chain will affect the degree of linkage in different manufacturing industries (Milner, Reed, Talerngsri(2005):193–195). Overall, such relationships between the extent of FDI undertaken by Japanese firms in Thailand and the intensity of the industrial linkages between those same firms in Japan is positive for both in the longer run. 3. Formal Bilateral Economic Partnerships More recently, Thailand is actively taking part in a number of regional and bilateral trade agreements. In addition to the ASEAN Free Trade Area or AFTA, Thailand is exploring, after the financial crisis and especially by the turn of the century, a number of bilateral trading arrangements. This situation is quite different from the past when Thailand used to adhere strongly to the multilateral process of the WTO with each country unilaterally reducing its tariff barriers as evidenced by the fall in average applied tariff rates. However, with the stalled trade negotiations under the Doha Development Round, there is an increasing expectation of a difficult conclusion. Evidently, like many countries in the region, Thailand has moved ahead to sort out its market access and economic opportunities by launching regional and bilateral arrangements seemingly more suitable to a new competitive trade and investment environment. In between, the government also implements trade and investment promotion programs such as the provision of financial facilities and bilateral financial arrangements, establishment of overseas export promotion offices, and the launching of investment privileges such as export processing zones, special economic zones, and industrial estates. As a result, Thailand has a very high potential to be a hub for trading and production networks for a number of industries such as automobile, chemical products, textile and jewelry products, and electrical and electronic products. These trading and production networks have helped to widen and deepen the economic relationships with Japan, China, ASEAN and India, to name a few. In order to understand better the scope for bilateral economic partnerships with China and Japan, it is interesting to investigate the

b939_Chapter-12.qxd

308

7/15/2010

2:15 PM

Page 308

S. Chirathivat

recent bilateral economic agreements signed by both sides. Of course, the China–Thailand economic partnership has been expressed mainly in the ASEAN–China Economic Cooperation Agreement. Thailand’s trade liberalization and economic cooperation with China has been concluded and implemented within that regional umbrella. The Japan–Thailand Economic Partnership Agreement, however, is of a different nature. Although Japan would like to conclude a regional agreement with most ASEAN countries, politics back home makes it difficult to do such a thing. For this reason, Japan prefers to conclude a bilateral agreement with single countries, including Thailand more recently as the fourth agreement after Singapore, Malaysia and the Philippines. 3.1 China–Thailand trade liberalization and economic cooperation The China–Thailand formal economic partnership is better understood under the ASEAN–China Economic Cooperation Partnership. The agreement was initiated by Chinese premier Zhu Rongji during the ASEAN Summit in 2000. It was signed at the ASEAN Summit in 2002 as part of the framework agreement on comprehensive economic cooperation. This framework agreement provided the groundwork for the establishment of an ASEAN–China Free Trade Agreement (ACFTA) by 2010 for the original ASEAN members plus Brunei, and 2015 for the newer members including Cambodia, Laos, Myanmar, and Vietnam. The next ASEAN Summit in 2003 saw the joint declaration on “Strategic Partnership for Peace and Prosperity” in which ACFTA became a pillar in ASEAN–China economic cooperation as distinct from political, social, security, and regional cooperation. The 2004 ASEAN Summit saw the need to strengthen ACFTA implementation with an agreement on trade in goods with sections on tariff reduction and elimination under normal and sensitive tracks, enhanced rules of origin, and the establishment of a dispute settlement mechanism. From the start, both sides agreed to a flexible framework agreement with special and differential treatment for the new ASEAN members. The leaders also agreed that the framework should provide

b939_Chapter-12.qxd

7/15/2010

2:15 PM

Page 309

Thailand’s Economic Relations with China and Japan

309

for an “early harvest” in which the list of products and services to be liberalized would be determined by mutual consultation. The framework contains six major elements spanning trade and investment facilitation measures, such as provisions of technical assistance and capacity building — particularly for new ASEAN members — to the expansion of cooperation in various areas and the establishment of appropriate institutions to support the framework and implementation of ACFTA. Implementation of the ACFTA is separated into three phases with the first involving an “early harvest” program from 2004 to 2006 for ASEAN-5 and up to 2010 for the new members including the Philippines; the second including the list of “normal track” items not covered by the “early harvest” program; finally followed by the last, concerned mainly with “sensitive” items which are to be kept at a minimum. In principle, the FTA provisions aim to extend beyond tariff reductions to cover reduction and elimination of non-tariff barriers, liberalization of trade in services, and investment. However, it will take time to negotiate all these issues in the process of establishing a FTA. For instance, two agreements on trade in goods and on dispute settlement mechanism have been put in place since January 2005 with sections on tariff liberalization and rules of origin. In addition, ACFTA has a target to increase cooperation and reduce development gaps with the establishment of a “Strategic Partnership for Peace and Prosperity”. Under the ACFTA, Thailand and China reached a bilateral agreement to accelerate the tariff reduction for products under the HS chapters 07 and 08,with items mainly related to fruits and vegetables, in October 2003. As for the normal products, the two have started tariff reduction program since June 2005. However, concerns about non-tariff barriers remain especially for the exports of Thai products under the early harvest program. It was found that Chinese products have a better market access to Thailand at the expense of the Thai agricultural products facing more competition from similar Chinese exports. Meanwhile, Thai exports of these items face more difficulties to make inroads into China due to stringent sanitary and phyto-sanitary measures, border controls and inter-province regulations. All these prevent Thailand from enjoying the potential benefits of a large

b939_Chapter-12.qxd

310

7/15/2010

2:15 PM

Page 310

S. Chirathivat

market in China. At present, Thai officials and businessmen are busy working to overcome these obstacles with the hope of being able to meet their objectives in due time. The shape of things to come under the ACFTA is still much speculated in different studies (Chirathivat and Mallikamas, 2004; Eichengreen and Tong, 2006). Since it is too early to know exactly the results of such an agreement, the present paper will look at the context of Thailand’s country positioning in the face of its trade liberalization and industrial adjustment with China. In order to illustrate these implementations, a micro-specific study at the industrial level might help to understand better the future outcome of this policy option. Selected manufactured trade between China and Thailand has been chosen in this regard. Using the intraindustry trade (IIT) index, this approach explains the trade intensity of particular items exchanged among the countries involved. The results clearly show that most selected manufactured items have an increasing trend of IIT index from 2001 up to present. Those topping the list are HS 87: vehicles, parts and components; HS 74: iron and steel; HS 85: electrical and electronic products, parts and components; HS 39: plastics, HS 48; paper and paper products; HS 58: textiles. This change brings one to investigate further implications at the industrial level: — Plastic products represent the top item of Thailand’s net gainer. Thailand is doing well for its HS 39001–3; plastic raw materials to supply Chinese demand. Thailand could continue to supply the Chinese market until it becomes self-sufficient. China has advantage of economy of scale and can produce cheaper products than Thailand. There is also FTA implications for labor-intensive plastic market penetration for bags, kitchenware, furniture from China that local industrial players have to undeniably adjust from fierce competition in the medium term. — Paper products also reflect the demand of the Chinese market due to insufficient domestic supply. China will continue to import raw materials from major sources like Indonesia and Brazil.

b939_Chapter-12.qxd

7/15/2010

2:15 PM

Page 311

Thailand’s Economic Relations with China and Japan

311

Unfortunately, Thailand is not the best candidate in this regard as Chinese producers continue to improve the quality and price of goods. Thai manufacturers might gain from trade liberalization in the near term. However, they need to be more specialized in the longer term in a cost-competitive improvement. — Rubber is a clear-cut case for resource-rich regions like ASEAN to export more of its products to China. Thailand might be ahead of its ASEAN neighbors, but the competition for the Chinese market is catching up rapidly. For the moment, the country’s extensive rubber plantation program might help to extend its production capacities to supply China. But such response needs to carefully weigh its dependence in the longer run. — Electrical and electronic products, parts and components are part of the whole complexity of production networks and response to the global demand. Both China and Thailand are developing economies, thus their upstream capabilities have still to be further developed. However, for downstream industries, both succeed, to a certain extent, to find its competitive edge for parts and components, and finished goods for consumers. By size, China has more cost advantages and this reflects on Thailand’s trade with China as well, as Thailand suffers a trade deficit for a number of products in this industry. Thus, a more defined specialization is needed for Thailand as well as import controls in terms of product quality and standard from China to be strengthened for the interests of local producers and consumers. — Vehicles, parts and components, are still small for both sides of the exchange, but potentially, will increase with the rise of regional production networks. China seems to be more attractive again due to its size and demand and supply side response like wages, land and infrastructure. With an ASEAN–China FTA, multinational firms from Japan and the EU, for instance, are likely to adjust its strategy in order to suit the new advantages given which could be “China Plus One” rather than “ASEAN Plus China”. It remains to be seen how far policy changes could affect foreign firms’ behavior and regional production networks between China and Thailand, one of the leading players in the ASEAN region.

b939_Chapter-12.qxd

312

7/15/2010

2:15 PM

Page 312

S. Chirathivat

3.2 Japan–Thailand economic partnership agreement Both Japan and Thailand are facing challenges to boost economic competitiveness and vitality in the face of the fast changing economic environment in East Asia and the world. The rise of China in particular represents for both threat and opportunities so it is important to look at alternatives in policy options. For Japan, the economic decline since the 1990s gives her no choice but to embark on a third country opening to revitalize herself. For Thailand, it has to do with alternatives for market access following the financial crisis and also to catching up with the Chinese competition in many aspects — trade and investment included. For this reason, a desire for deeper integration between the two should also provide what they need. Japan expressed its intention to form an EPA with ASEAN when former Prime Minister Koizumi visited Singapore in January 2002. The Joint Declaration on the CEP, including elements of a possible FTA, was followed in November 2002. It was at the ASEAN–Japan Summit in Bali in October 2003 that both ASEAN and Japan signed a framework agreement for CEP. The framework agreement for CEP addresses some important principles that are worth mentioning. It includes a broad range of sectors focusing on liberalization, facilitation and cooperation with respect to the rules and disciplines of the WTO. It will respect ASEAN integration with special and differential treatment to ASEAN new members. For Japan, technical cooperation and capacity building programs will be considered for ASEAN. Japan has insisted that the agreement should be a single undertaking. The negotiations began in 2005 with a timeframe as both sides wish to realize the agreement by 2012. The issue is that Japan has a bilateral FTA with Singapore since 2002, and has concluded the accords with Malaysia and the Philippines before the recent conclusion with Thailand in April 2007. This dual strategy with regard to FTA agreements with ASEAN as a group and selective countries suggest that the ASEAN–Japan EPA will essentially be an umbrella agreement for separate FTAs. Thailand’s bilateral FTAs have become more apparent on the agenda development under the former Thaksin government

b939_Chapter-12.qxd

7/15/2010

2:15 PM

Page 313

Thailand’s Economic Relations with China and Japan

313

(Chirathivat and Mallikamas, 2004). From a timid beginning, Thailand has become a strong advocate of bilateral FTAs in East Asia. Thailand has actively taken part in these FTAs with the hope that closer economic alliances could help to enhance country competitiveness, attract FDI, create more opportunities for industry as well as restructure the domestic industry. The main strategy in initiating FTA with Japan is to have better market access as well as to upgrade Thailand’s business practices and to cooperate in various useful areas in order to strengthen the country’s relationship with Japan. The signing of JTEPA in April 2007 allows both sides to further implement the substance of their economic cooperation beginning from September 2007. A wide range of economic activities are covered, essentially under two areas: — The five major topics related to the FTA are trade in goods, rules of origin, trade in services, investment and movement of natural persons. — Another 17 major topics related to cooperation include enhancement of the business environment; intellectual property; cooperation in agriculture; forestry and fisheries; trade and investment promotion; information and communication technology; science, technology, energy and environment; small and medium enterprises; tourism; financial services; energy conservation; value-creation economy and public-private partnership. Cooperation will also include special projects to support Thailand’s desire to be a regional hub in the automobile industry and the “Kitchen of the World”. For the purpose of an analysis, this study will discuss mainly the scope of FTA that would cover trade in goods, rules of origin, trade in services, investment and movement of natural persons:

Trade in industrial products Essentially, Thailand will reduce tariffs on steel products imported from Japan over the next eight to 10 years, tariffs on cars and engines

b939_Chapter-12.qxd

7/15/2010

314

2:15 PM

Page 314

S. Chirathivat

of 3,000 cubic centimeters or more will drop to 60 percent from the current 80 percent by 2009. Also, Thailand has agreed to eliminate import tariffs on automobile parts deemed sensitive by the Thai authorities between 2011 and 2013. Japan, on the other hand, will reduce tariffs on textiles and apparels imported from Thailand with immediate effect. There are also other products like articles of jewelry, wood products other than plywood, particle board and some petroleum and petrochemical products, with immediate tariff elimination. Japan has also listed a number of items like footwear and leather products whose present the tariffs of 2.7 to 30 percent will be eliminated within 7 to 10 years and present tariffs of 2.5 to 21.3 percent petroleum and petrochemical products will be eliminated within 5 years.

Trade in agricultural, forestry and fishery products Thailand offered a list of items including apples, pears and peaches with immediate tariff elimination and fishes, within 5 years except for herring and cod with immediate effect. There are items considered as exclusion of renegotiation (mackeral, tabacco, raw silk, bird’s egg, dried egg and yolks and some designated items for fish). For Thailand’s exports to Japan, tariffs on 1,400 out of 2,300 agricultural and marine products will be abolished. For example, tariffs will be abolished immediately on shrimp, which accounts for 14 percent of Thailand’s marine product exports to Japan in 2004. Over five years, Japan will also cut tariffs on Thai boneless and cooked chicken imported into Japan and immediately abolish tariffs on tropical fruits, including mango, mangosteen, durian, papaya and coconut.

Rules of origin Thailand is much concerned with Japan’s strict regulations which could pose problems for its exports, especially agricultural and fishery products. With its four digits of trade classification, there are 229 categories of Thai products that fall under strict rules of origin. Tuna for example, would qualify for reduced traiffs if Thai fishermen comprised at least 75 percent of the crews.

b939_Chapter-12.qxd

7/15/2010

2:15 PM

Page 315

Thailand’s Economic Relations with China and Japan

315

Trade in services Japan’s liberalization plan covers still standing commitments in 138 subsectors. As for specific commitments, it has a comprehensive coverage of 65 sub-sectors including GAT commitments like hotel and restaurant, health, education, business and the professions, distribution, maintenance and repairs, entertainment, etc. Thailand also makes specific commitments in addition to GATS commitments which cover the following important sub-sectors like advertising, logistics, maintenance and repairs, wholesale and retail, computer and related services, management consulting services, etc.

Investment Liberalization in investment will be based on MFN principles with a positive list approach on both sides. Japan’s offer includes all nonservice sectors with some exceptions. Thailand’s offer is specified for equity participation for manufacturing of automobiles.

Movement of natural persons Specific commitments have been made on the positive list approach. Japan’s offer includes easing application for a permit to stay for Thai cook (with five years’ experience), granting entry and temporary stay for instructors of Thai classical dance, music, cuisine, boxing and language, clarifying graduation from university or college under Japanese immigration law, certified caretaker, spa service. Thailand’s offer includes, among others, permit to stay and work permit for short-term business, criteria for insurance and renewal of work permit, restriction on the number of foreign employees, procedures and requirements regarding work permit and visa application. 4. Concerns for Implementation and Regional Response As ACFTA and JTEPA have become an integral part of the future course of Thailand’s economic relations with China and Japan, one

b939_Chapter-12.qxd

316

7/15/2010

2:15 PM

Page 316

S. Chirathivat

might ask where these agreements might lead to, what would be the potential economic benefits and costs, and whether these pacts are realistic in its goals in implementation and timeframe. Of course, there are strategic interests for both sides with China being the precursor and Japan the follower. At stake are the ways and means to carry out bilateral trade and investment liberalization including elements of cooperation between them. As seen from the commitments made from both sides, tariff and non-tariff reduction will be the first part of the implementation. However, for non-tariff barriers, Thailand’s non-tariff measures seem to be generally applied across different sectors while China’s and Japan’s non-tariff measures are more sector-specific and very precise in some cases. In principle, abolishment of trade barriers in specific sectors will allow trade expansion, which could be realized through trade creation and trade expansion. As Thailand, China and Japan are all well adjusted to the regional and global competition with its low costs and sufficient efficiency, it is expected that costs of trade diversion will be low as compared to benefits gained from trade expansion. Things could go the same way for investment creation as linkages through regional production networks will create scale and efficiency effects across sectors and industries involved. Of all these exercises, greater adjustments could vary from sector to sector as liberalization seems to be target-specific. In principle, the removal of trade barriers will help to lower costs, expand bilateral trade and increase economic efficiency much further along the way to free and open trade areas. For the least efficient producers, this means more adjustment to cost and other kinds of competition, if unrealized, would translate into exit from the market. For consumers, in general, there would be more access to differentiated products and services, whether of low or high quality. For other ASEAN countries such as Indonesia, Malaysia, the Philippines, Singapore and Vietnam which have similar pacts with China and Japan, they might engage in more trade and investment which will lower the leverage gains of Thailand. This means Thailand will have to widen its market to reap regional economies of scale in the face of intensified competition.

b939_Chapter-12.qxd

7/15/2010

2:15 PM

Page 317

Thailand’s Economic Relations with China and Japan

317

A modeling exercise of the likely impacts of both ACFTA and JTEPA shows explicitly potential gains and adjustment for both sides. Of course, with regard to ACFTA which involves Thailand–China trade liberalization, China will look increasingly at Thailand as an alternative source of input for natural resource-based and intermediate products. China still needs sources of imported input to satisfy the needs of its manufacturing sector which domestic suppliers may not able to meet. With continuing growth in China, Thailand will be in a position to play a crucial role in supplying China’s demand for such products. However, Thailand has to hedge against any slow down of the Chinese economy which could impact its exports to China. Also, Thailand’s industries might be increasingly diverted from other markets while facing increasing competition from the lower costs of Chinese imports, and its exports focused mainly on China could weaken its own integration with ASEAN under AFTA. As for JTEPA, the agreement is designed to be more targetspecific so gains to be made are quite numerical in the short run. However ,when it comes to a longer term, this sector-specific liberalization and facilitation has to cater to the need for industrial adjustment on both sides. For example, the most potential gains for Thailand will involve automobiles, parts and components, textiles and clothing, iron and steel products. As for Japan, the products’ gains are automobiles, parts and components, electrical and electronic products. For Japan, its agricultural sector has to adjust to market opening for a number of Thai products for both the short- and long-term. In principle, abolishment of trade barriers in specific sectors have to fit with in a broader perspective that gives a positive sum game for both sides to allow more trade expansion, investment creation and efficiency gains through cost reduction and economy of scale. As Japan and Thailand are well adjusted to the regional and global competition with its low costs and sufficient efficiency, it is expected that costs of trade diversion will be low as they could both gain from a linkage of production networks. Overall, Japan will look at Thailand as an alternative source of its industrial production networks and input for natural resource-based and intermediate products. Japan still needs Thailand’s partnership for the leading products it represents in the

b939_Chapter-12.qxd

318

7/15/2010

2:15 PM

Page 318

S. Chirathivat

regional and global markets like automobiles, electrical and electronic products. Thailand, on the other hand, could play a crucial role in supplying Japan’s demand for consumer goods and input for Japanese industries. In order to enhance FTA benefits, there is also other issues related to its implementation. Bilateral FTAs typically revolve around tariffs, quotas, SPS by which the details for market access have to be worked out. In other words, an even more crucial component, where attention is usually called for, is rules of origin. In the end, an agreement without clear, practical and fair rules is nothing but a paper with no value. On the surface, both China and Japan have agreed to cut down barriers for a wide range of agricultural products. However, rules of origin remain a thorny issue that could undermine the benefits that Thai exporters expect to have gained once the implementation of these agreements are assumed. As time goes by, there is still the question of how this implementation would take its own course and what the renegotiation process would look like. There is also the other side of FTA adjustments that should be taken into consideration. Although the benefits from liberalization appear to be greater than its costs, this opening up to free trade will have real impacts on the sectors and people involved. For example, an “early harvest” liberalization program for fruits and vegetables between Thailand and China has caused much concern for the overall agricultural sector inside Thailand as China is a major producer of these products with lower costs that could be easily dumped into the Thai market once market access results from the implementation. Regarding Japan, the Thai concern is still the difficulty of penetrating the Japanese market with Thai products and the advantages the Japanese could take form the biodiversity that Thailand is still well endowed. These issues including using Thailand as a dumping ground for industrial wastes are still subject to much debate in the country. Thus, these changes should be managed to cater to the need for human adjustment. Thailand is still new to the changes of the structural shift. The question of how the government will measure the readiness, or lack thereof, of change

b939_Chapter-12.qxd

7/15/2010

2:15 PM

Page 319

Thailand’s Economic Relations with China and Japan

319

management to harvest the benefits and cushion the costs of free trade for each sector in the near and medium term remains. Thailand’s economic partnerships with China and Japan may have missed the opportunity of their real impact because of excessive concentration on bilateral FTAs away from the broader regional and multilateral framework. Thus, Thailand should use ACFTA or JTEPA to enhance the scope of economic activities as part of regionalization rather than create unnecessary diversion from bilateralism. For example, Thailand expects China to show a clear sign of its economic transition and integration in East Asia so that trade and investment could be much further expanded and deepened. As for Japan, Thailand expects her to play an increasing role of an investment shift and also in technology transfer. On the other hand, while the liberalizing knitty-gritty is important the broader picture of efficiency gains and better resource pooling apart from market-sharing should not be missed. 5. Consideration of Upcoming Challenges The end of the Cold War has brought about deeper globalization and broader changes in a number of dimensions, whether economic, political or social in the world as much as in East Asia. The rise of China and the declining role of Japan make it necessary that all countries adjust accordingly to the new reality. Thailand, a smaller country in terms of population and economy compared to China and Japan, has no choice but to manage wisely its economic interdependence between the two major economic powers. Simply put, economic interdependence means mutual economic dependence. But, Thailand is certainly more dependent on China and Japan rather than the other way round. So the politics of economic interdependence, whether involving benefits or costs, will put Thailand in a much more complex situation from the past. As seen from the present and formal bilateral economic relationships, major economic issues between them will exist in intensive and formal ways. One should, however, not forget history and the upcoming challenges

b939_Chapter-12.qxd

7/15/2010

2:15 PM

320

Page 320

S. Chirathivat

that are as much the substance of the economic framework that might take place in future. 5.1 History not forgotten Recent history, has shown Thailand’s relationship with China turning quite rapidly from enmity to friendship before firmer economic and political ties. Only after the Thai-Chinese diplomatic relationship was established in 1975 did Thai leaders successfully press for an end to the Chinese assistance for the Communist Party of Thailand. The Vietnamese occupation of Cambodia in December 1978 gave Thailand great concern; and China and Thailand recognized their mutual interest in resisting the expansion of Vietnamese influence in Indochina. A convergence of security interests between the two was born which resulted in a strategic partnership. The economic relations on the other hand started in the late 1970s and have become more substantial after the end of the Cold War. China is also an ASEAN dialogue partner. Once the financial crisis erupted in 1997, China promised not to devalue its currency to further aggravate the regional hardship, besides offering a package of financial help to offset Thailand’s difficulties. By the turn of the century, the economic rise of China is becoming a clear threat to Southeast Asia which China turns into greater opportunities for regional trade. In Thailand’s case, trade expansion and economic cooperation are instrumental in over-coming her fear of a threat from China’s rise. Japan, until recently, has been much admired for its industrial development and progress throughout East Asia and the world. Thailand, like other Asian economies, has certainly benefited from the phenomenal economic growth of Japan in the last four decades or so. Through trade, FDI, official development assistance (ODA), people to people encounters and dissemination of management expertise and skill, the forces that drive the economic development of Japan have also worked at different intensities in the rest of East Asia. Thus, since postwar bilateral relations between Thailand and Japan were normalized, it is no accident that economic matters have dominated bilateral relations. During the Vietnamese occupation of Cambodia, Japan

b939_Chapter-12.qxd

7/15/2010

2:15 PM

Page 321

Thailand’s Economic Relations with China and Japan

321

began to play a guarded political role in Southeast Asia. At the time, Japan’s top priority was to give “strategic aid” to Thailand. Bilateral trade relations are generally characterized by a deficit on Thailand’s side, thus such imbalances, given the changes in Thai politics, caused the anti-Japanese goods movement in 1972 and culminated in the anti-Japanese riots in 1974. Later, the Thai government initiated the so-called “White Paper” with calls for Japan to reduce its trade barriers, but to no effect. Thailand realized later that these imbalances resulted from the Japanese FDI and Thailand’s need to import parts and components from Japan which would ultimately increase Thailand’s export capabilities and income. The late 1980s saw a new wave of Japanese FDI in Thailand and the region as a result of the Japanese currency appreciation. Since the 1990s, even with the Japanese economic slowdown, Japan still focuses its economic interests in Thailand based on the Miyazawa plan to alleviate the Thai financial crisis with Japan’s support for a regional monetary arrangement like the Chiengmai Initiatives (CMI) and regional currency bonds to continue in the current regional policy framework. At the other end, Thailand cannot neglect the role the country has played over the past 40 years or so. This year marks ASEAN at 40th since the Bangkok Declaration. Thailand with countries in the region has fostered a loose but effective multilateral cooperation in the shape of the Association of Southeast Asian Nations (ASEAN). The grouping has moved from solely prevention of regional disputes toward economic integration with its realization of the ASEAN Free Trade Area (AFTA) and its plan for an ASEAN Economic Community (AEC). However, the ASEAN spirit of consultation and consensus appears to have weakened. In part, this is due to the size of ASEAN growing to 10 countries by the late 1990s and the framework for regional cooperation has expanded as economies boomed during the same period. Of course, Japan’s role has been much appreciated for making ASEAN an attractive trade- and investment-driven area. But much of the early part of the new century has seen the focus of attention swinging away from growth in ASEAN toward growth in China which has weakened ASEAN’s own position to bond as a region. In this sense, Thailand, as an active ASEAN member, is having a hard

b939_Chapter-12.qxd

7/15/2010

2:15 PM

322

Page 322

S. Chirathivat

time and, more so since the financial crisis, to sort out the kind of integration and cooperation desired as the arena for linkages has greatly expanded and ASEAN is now part of a greater East Asian whole. This includes the new mechanism of ASEAN plus three or the East Asia Summit involving all these countries. 5.2 Complex tasks ahead It is undeniable that in the coming years that Thailand has to play an instrumental role in strengthening economic relationships with China and Japan among other countries as the country seeks to benefit from the current trends of globalization and regionalization. Improvements in relations between China and Japan will help tremendously to loosen tensions in the region. Now there are new prospects for the future of East Asian economic integration, in which both countries play a leading role. Beijing’s attitude toward Tokyo’s efforts to rewrite Japanese history is most imperative. It is indicative of whether Japan’s review will be problematic or not. But increasing economic interdependence between Japan and China is a good sign of whether both are better off economically rather than allow past politics to determine their future relationship. Being less dependent can be a source of power. In this case, both China and Japan can seek to dominate Thailand and put the country into difficult positions. It is advantageous for practical purposes for members of ASEAN to accept the rise of China as a fact and to work with Japan’s aspiring regional role. More so than they would want to admit, Japan will play a large role in helping to balance China’s powerful influence. For instance, it looks like the new East Asian regionalism could not be established only with the major powers like China or Japan alone, but has to increasingly demand a prominent role for ASEAN in order to cater to regional interests. Thus this may include the involvement of other major powers like India, the EU, the US and Russia. The ongoing ASEAN plus three or the East Asian Summit is part of the new steps taken by the region in laying the future direction of regionalism.

b939_Chapter-12.qxd

7/15/2010

2:15 PM

Page 323

Thailand’s Economic Relations with China and Japan

323

Still vulnerability exists in the short- and longer term. Thailand’s dependence on China and Japan has to be recognized and analyzed more thoroughly. With trade dependence already up to a certain degree, the country needs to hedge against China’s eventual economic downturn. The soft landing of China’s strong growth might help Thailand to adjust accordingly. However, a hard landing scenario of the Chinese economy can provoke an economic and financial crisis with widespread impact on countries and regions that China has strong linkages with. It is more prudent for Thailand to prepare against these impacts like fluctuations of the Chinese currency that have already affected most countries. Also, with the replenishing of currency reserves in China as a result of yearly huge trade surplus, China will start to invest increasingly in all sorts of economic activities as far as there are possibilities to do so. China’s industrial upgrading in the regional production networks will likely go much faster than Thailand and other ASEAN countries. China will likely have much more surplus capability, which it has little use for but to export to the Southeast Asian region in exchange for much needed energy and resources. It is no surprise that mainland Southeast Asia or the Greater Mekong Subregion (GMS) will see China expand its economic interests putting Thailand and other countries like CMLV (Cambodia, Myanmar, Laos, and Vietnam) in a new position at the receiving end. Clearly, the rise of China and its increasing economic role in Thailand and the rest of Southeast Asia will put Thailand in a difficult position as the country has to keep its neutrality between China and Japan as well as other major powers. Thailand’s economic performance thus far is firmly linked to economic relationships she has with Japan. Without Japan, Thailand’s economic development will be quite a different picture. So, the economic interests of both sides have been very much appreciated as long as they continue to expand and deepen their relationships. But the future outlook is less certain. More recently, Japan has to compete with the rise of China in a number of economic areas. For the same reason, Japan sees itself confronting China on its economic domination in Southeast Asia. China’s geographical

b939_Chapter-12.qxd

7/15/2010

324

2:15 PM

Page 324

S. Chirathivat

proximity to mainland Southeast Asia and Thailand probably makes Japan anxious about its future economic role as it is expressed through a new division between the two in the GMS, especially in the areas of economic corridors, infrastructure, trade, investment, human resources, energy, environment, education, and so on. Already from the US government perspective, Thailand is now closely allied with Beijing along with many other ASEAN countries. The new defining picture is all there. It now depends on Thailand to act properly in a new context of her economic relationships and many more different complexities she has been managing. References Abe, S. (2003). Potential Declining Importance of Japan’s Role in East Asia and the World and the Emergence of China in the Global Economy: What Implications for the ASEAN Region. Paper presented at the seminar on ASEAN–Japan: Partners in Regional Integration. Ministry of Foreign Affairs and the Faculty of Economics, Chulalongkorn University, Bangkok. Abeysinghe, T. and Lu, D. (2003). China as an economic powerhouse: Implications its neighbors, China Economic Review, Vol. 14, pp. 164–185. Adams, F. G., Gangnes, B. and Shachmurove, Y. (2006). Why is China so Competitive? Measuring and Explaining China’s Competitiveness. The World Economy, pp. 95–122. Bhagwati, J. (2005). Not a Flat World. 4 August 2005. The Asian Wall Street Journal. Chirathivat, S. (2002). ASEAN-China FTA: Background, Implications and Future Development. Journal of Asian Economics, Vol. 13, pp. 671–686. Chirathivat, S. (2005). Building ASEAN-China FTA: Opportunities, Modalities and Prospects. In ASEAN-China Relations: Realities and Prospects. S. H. S. Lijin, and Chin, K. W. (eds.), Singapore: Institute of Southeast Asian Studies. Chirathivat, S. (2006). Japan–Thailand EPA: Problems and Future, Asian Economy and Social Development, Vol. 1, December, published by the Mainichi Newspapers, Tokyo, Japan. Chirathivat, S. (2007). Japan–Thailand EPA: Problems and Future. Paper presented for the JSPS–NRCT Core University Program Conference 2006 on Emerging Developments in East Asia FTA/EPAs.

b939_Chapter-12.qxd

7/15/2010

2:15 PM

Page 325

Thailand’s Economic Relations with China and Japan

325

Chirathivat, S. (2007). The Rise of China and Its Impact on China-ASEAN Trade Relations. To be published by Routledge. Chirathivat, S. and Mallikamas, S. (2004). Thailand’s FTAs Strategy: Recent Trend and Future Development. ASEAN Economic Bulletin. Chirathivat, S and Mallikamas, S. (2004). The Potential Outcomes of China–ASEAN FTA: Politico-Economic Implications for Participating Countries. In China and Southeast Asia: Global Changes and Regional Changes, Ho K. L. and S.C.Y. Ku (eds.)., Singapore, Institute of Southeast Asian Studies. Dobson, W. (2006). Japan in East Asia: Trading and Investment Strategies. Singapore: Institute of Southeast Asian Studies. Eichengreen, B. and Tong, H. (2006). How China is Reorganizing the World Economy. Asian Economic Policy Review, Vol. 1, pp. 73–97. Lee, H., Roland-Holst, D. and van der Mensbrugghe, D. (2004). China’s Emergence in East Asia under Alternative Trade Arrangements. Journal of Asian Economics. Vol.15, pp. 679–96. Lloyd, P. J. (2002). New Bilateralism in the Asia Pacific. The World Economy, Vol. 25, pp. 1279–1296. Milner, C., Reed, G. and Talerngsri, P. (2006). Vertical Linkages and Agglomeration Effects in Japanese FDI in Thailand. Journal of the Japanese and international Economies, Vol. 20, Issue 2, June, pp. 193–208. Kitamura, T. (2006). Japan’s New Deal for Asia. Far Eastern Economic Review, pp. 41–44. Okamoto, J (ed). (2003). Whither Free Trade Agreements? Proliferation, Evaluation and Multilateralization. Japan External Trade Organization: Tokyo. Zhang, Y. (2002). East Asian Regionalism and China. Issues and Studies, pp. 213–23.

b939_Chapter-12.qxd

7/15/2010

2:15 PM

Page 326

This page intentionally left blank

b939_Chapter-13.qxd

7/15/2010

2:16 PM

Page 327

CHAPTER 13

Vietnam’s View of China: An Intimidating Partner Matthieu Salomon and Doan Kêt Vu*

Vietnamese history remains marked by the deep impact of the inescapable and disturbing presence of the Central Kingdom (literally “Trung Quô´c” in Vietnamese).1 A direct presence and influence: the Chinese dominated Vietnam for more than 10 centuries from 1 BC until the symbolic year of 939, the beginning of the era of independence; another period of domination lasted for some 20 years during the 15th century. Vietnam never obliterated, and can never obliterate the Chinese element when it comes to its development. Vietnamese politics, economy and culture, are all under its pressure, under its influence. This is the present-day scenario, but this has also been the case over a long period, particularly in a historical context. For Vietnam, China appears as a power with expansionist drives and an economic attraction at the same time. Having been part of Vietnam’s daily life, so to speak, for centuries, the Chinese presence remains simultaneously real and inescapable. It has engendered ambivalent and conflicting relations, of love and hate. Model or threat, China, more than ever, is still perceived as both by Vietnamese leaders from an instrumentalist point of view of a primary * The views in this paper are those of the author and do not necessarily reflect the views of DAV or Paris Institute of Political Studies. 1 Vietnam (Viê· t Nam) means the “country of the south Viets” in Sino-Vietnamese, as obviously opposed to Phuong Bac (the North); Bac Trieu, the north imperial court, which was used to describe “China” in the past. There were also numerous pejorative terms used in Vietnamese to describe the Chinese : Tàu, Tàu Khua, Ba Tâu, Ngô, Khách, Chêt.   327

b939_Chapter-13.qxd

7/15/2010

2:16 PM

328

Page 328

M. Salomon and D. K. Vu

political legitimization. Be it a simple peasant or the general secretary of the Communist Party of Vietnam (CPV) party, the Chinese dilemma is present in the mind of every Vietnamese citizen. From Enemy to Partner How can we characterize Sino-Vietnamese relations in this early 21st century, less than 30 years after the 1979 war — the result of major disagreements between the two communist parties in power?2 And, as a result, what is Hanoi’s official view of its great northern neighbor? The end of the Cold War and the collapse of the USSR, leaving the “communist brother countries” club deserted, seem to have ushered in a new era, marked by pragmatic rapprochement.3 Since 1999, the two countries have been defining their relationship in terms of “longterm stability, future-oriented, neighbor-friendly, comprehensive cooperation”4 and they refer to each other as “good neighbor, good mate, good friend (and ), good partner” (2002).5 Thus, since the early

2

Especially during the Sino-Soviet “split”, communist Vietnam aligned itself with Moscow, a power historically less intimidating and less present as it is farther away. 3 Our work is primarily based on “China–Vietnam Relations Moving Towards Pragmatism”, a paper presented by Gu Xiaosong, Director, the Institute of Southeast Asian Studies of the Guangxi Academy of Social Sciences and Director of the journal, Across Southeast Asia (Dongnanya Zhongheng), during the “Vietnam Update 2004. Strategic and Foreign Relations” conference, 25–26 November 2004, ISEAS Institute of Southeast Asian Studies, Singapore. 4 Interesting fact: the order of the terms change according to whether it is the Chinese version or the Vietnamese one here which states: “friendly neighbors, comprehensive cooperation, long-term stability, oriented towards the future” (láng giêng huu nghi, hop tác toàn diên, ôn dinh lâu dài, huóng tói tuong lai).     5 During the visit of Chinese President Jiang Zemin to Hanoi in February 2002, he stated that “If both China and Vietnam want to maintain friendly neighborhood relations, it is necessary that they remain forever a good neighbor, good friend, good mate, good partner…”. He stressed on “mutual trust” which is “basic” and stated that “long-term stability is a prerequisite for trusting and friendly neighborly relations, comprehensive cooperation cornerstone and co-development objective”. Refer to Nguyen, V. T. (2007) Khuôn khô quan hê dôi tác cúa Viêt Nam, (The Vietnamese partnership   relations framework), p. 90. Institute for International Relations, Hanoi.

b939_Chapter-13.qxd

7/15/2010

2:16 PM

Page 329

Vietnam’s View of China

329

90s, these official slogans have been promoting the reestablishment and development of these neighborly relations and quasi-familial partnership. Putting an end to a period of strained relations between the two countries, the secretary of the Communist Party of Vietnam (CPV) Ðô˜ Muòi and Prime Minister Võ Va n Kiêt made a joint visit to China  in November 1991, in an internationally troubled context. During this visit, Jiang Zemin declared, “An end to the past and a start into the future”.6 Since then, an increasing number of visits and meetings have been taking place between the top leaders.7 All this leads us to believe that beyond this normalization, China has (re)established itself as a model and an external political, economic and social driving force.8 Today, China is officially an integral part of the Vietnamese global vision, an integral part in terms of proximity and model, friendship and partnership of utmost importance. In any case, this is what the Vietnamese leaders repeatedly state and claim in their speeches.9

6

The joint declaration of 10th November 1991 laid down five principles according to which the development of friendly relations between the two countries should be continued: mutual respect of territorial sovereignty and integrity; non-aggression; non-interference in internal affairs; equality of interests; peaceful coexistence. When it comes to the normalization of relations between the two communist parties, Chinese and Vietnamese, it is based on four principles: independence and autonomy; total equality; mutual respect; non-interference in internal affairs. 7 The visit of the top leaders takes place almost annually in both directions. At the same time, the exchanges at the governmental and ministerial levels take place very frequently. On an average, each side makes more than 700 visits every year, that is to say, two visits per day (!). 8 To keep abreast of recent developments with regard to the stages of evolution of Vietnamo-Chinese relations cf. notably Nguyen, V. T. (2007). op.cit., Vuving, A. (2006) “Strategy and evolution of Vietnam’s China Policy”; Asian Survey, pp. 805–824, Vol. 46, 6; Womack, B. (2006) China and Vietnam: The Politics of Asymmetry. Cambridge, U.K.: Cambridge University Press. 9 For the Vietnamese view of the rapprochement with China, cf. notably: Trâ`n, Q. C. Hô`i ú’c và Suy ngh˜ı : 1975–1991. (Memoirs and reflections: 1975–1991), (2003). Hanoi, Unpublished.

b939_Chapter-13.qxd

330

7/15/2010

2:16 PM

Page 330

M. Salomon and D. K. Vu

In the political and economic spheres, the fact that the Chinese have not only succeeded in retaining power, but have also implemented major economic reforms has become the apparent guiding principle of the CPV which has similar ambitions. For nearly three decades, the ability of the Beijing authorities to simultaneously modernize and control Chinese society (with the exception of Tian’anmen)10 is too good an example from Hanoi’s point of view. If the sixth Congress of CPV officially launched the Ð i m
i (renewal) in 1986, it was primarily for internal reasons. However, given that the Kremlin reformers lost control of the Soviet process, the only example that Vietnamese leaders have is the Chinese one. The relations have been officially normalized since 1991, and at the same time, the Chinese model was “re-instated”. The interest of a small country like Vietnam is evident: pacification of the immediate environment, similar political model, cultural links…, Hanoi can also act as a mediator between the Association of Southeast Asian Nations (ASEAN), of which it has been a member since 1995, and China. As far as China is concerned, evidently, the willingness to support a peaceful environment in order to strive for economic development is also crucial. China is also trying to earn international respectability. Beijing has an interest in Vietnam’s success and stability. Hence the two partners have a mutual interest in the progressive resolution of border issues (land and maritime), an extremely strong sign of the normalization and development of Sino-Vietnamese relations.11 Hanoi is thus paying special attention to Chinese trends, which often serves as a model (even though this is not necessarily claimed) in the political, economic and social spheres. Vietnam is importing certain political concepts, like that of “peaceful development” (Diên biên Hòa 10

Tian’anmen is clearly a lesson that often haunts the Vietnamese during reforms. In 1991, the two countries signed a preliminary accord on the management of border zones; in 1993, they agreed on the principles for the resolution of the land border disagreements. In 1999, the negotiations resulted in an accord on land borders and in 2000, an accord on the maritime borders of the gulf of Tonkin was concluded (ratified in June 2004 by both the National Assemblies). Nevertheless, there are still litigations relating to the South China Sea (Biên Ðông: East sea of Vietnam), particularly the case of Paracel and Spratly islands. 11

b939_Chapter-13.qxd

7/15/2010

2:16 PM

Page 331

Vietnam’s View of China

331

bình). Likewise, Vietnamese specialists are studying with interest the Chinese experiences in political reforms, especially the progress of local elections.12 China’s institutional modernization is observed, analyzed and hailed as a model by a number of Vietnamese officials having conducted observation missions from the other side of the border. Thus, for example, the deputies and members of the administration of the National Assembly of Vietnam who prepared the new law on the organization of local government councils in 2003–2004, took note of the fact that the efficiency of the administrative departments in China depended on the local assemblies.13 Since the early 90s, theoretical politics exchanges between Beijing and Hanoi have increased in an extremely significative manner: joint conferences, publication of reference books.14 12

Cf. Theoretical review published by CPV, Tap chí Công sn (Review of Communism),   No: 1–2/2003, 20/2003, 36/2003, etc., and the monthly published by the ministry , , of internal affairs, T chú c Nhà nu
c (Organization of the government), of which every issue out of two presented the Chinese experience in 2003. On 7th July 2003, the Vietnamese government published decree No: 79/2003/NDD–CP on democracy at the communal level. 13 It is also interesting to observe that a similar mission was undertaken by the Chinese. During the 10th CPV congress held in 2007, the Chinese press widely covered and reported the new aspects of the Vietnamese political and administrative reforms: the public debate before the congress, the election of the secretary general, the debates and questioning sessions involving the ministers at the national assembly. Cf. among others Ci cách c a Quô c hôi Viê t Nam tác dng t
i Trung Quô c; (The   reforms in the midst of the Vietnam’s National Assembly and the impacts , on China), (17 March, 2007), Tín báo, TTXVN; Ci cách chính tri: Viêt Nam có thê, Trung Quô c   không thê; Khai Phóng [Kaifeng, Hongkong]. (Political reforms: what is possible in Vietnam, and impossible in China), 9/2006, (12 September 2006) TTXVN. 14 Indeed, a series of conference articles have been published recently: Socialism: ordinary characteristics and special characteristics (Peking, 2000); Socialism: the experiences of China and Vietnam (Hanoi, 2000); Socialism and market economy: the experiences of China and Vietnam (Peking, 2002); Creation of the ruling party: the experiences of China and Vietnam (Hanoi, 2004). A joint research project by the Vietnamese Academy of Social Sciences and the Guangxi Academy of Social Sciences, which was launched in 2002, resulted in the publication of the book A comparative study of Chinese and Vietnamese reforms in two languages. Moreover, the Vietnamese publishing house, Thê´ gi
i, is working on the English and French versions.

b939_Chapter-13.qxd

332

7/15/2010

2:16 PM

Page 332

M. Salomon and D. K. Vu

Beyond that, the Chinese attraction, in terms of pure economic success, speaks for itself. In this regard, the Chinese images are fascinating. Beyond the political and economic experimental models, the Vietnamese people envy the Chinese their access to modern mass production/consumption. The Chinese products that flood the national market are sold at extremely low prices. Indeed, although the investments made by the citizens of the People’s Republic of China have increased 250 times between 1991 and 2003, they are still relatively low: with 500 million US dollars, China was placed 15th among the foreign investors in Vietnam in 2003; however, bilateral trade increased by 190 times between 1991 and 2005, reaching 7.2 US billion dollars.15 The increase of trade links with China and the development of “Chinese” tourism16 (this largely holds true for Hong Kong and Taiwan) have given (back) Chinese language teaching an immense economic value. In the North, it is the second most preferred language of students after English. In 2003, China was placed fourth among the foreign educational destinations most sought after by Vietnamese students (after South Korea, Japan and United States).17 In the city of Ha Long, on the famous bay, there is a proliferation of  hotel signs bearing Chinese ideograms. Thus, Chinese culture in itself and its new products complete the modern image of economic success; these new “products” have been having a very strong influence on Vietnam since the 90s: not just highly successful historical television series, music, kung fu stories and 15

It amounted to 10.42 billion US dollars in 2006; the Chinese investment in Vietnam was more than 800 million US dollars over the same period. The two countries have fixed the bilateral trade target to be achieved in 2010 as 15 ,billion US dollars (instead of US$10 billion as agreed initially). Cf. Trung Quô c thê hiên thu’c   lu’c mê m ti Viêt Nam (The Expression of the Chinese Soft Power in Vietnam), Ða   chiê’ u (Hongkong, 3 January 2007), TTXVN (6 January 2007). 16 The record noted in 2004 was 778400 visits per year. 17 Cf. paper presented by Professor Gu Xiaosong cited earlier. There are around 5000 Vietnamese students in Chinese in China (2006), which gives Vietnam third place. Cf. The expression of the Chinese soft power in Vietnam, Ða chiê`u, (Multidirectional). Hong Kong. (3 January 2007), TTXVN (6 January 2007).

b939_Chapter-13.qxd

7/15/2010

2:16 PM

Page 333

Vietnam’s View of China

333

films,18 but also Chinese language and chess, etc. Exchanges between youths of these two countries are incidentally featured among the priorities of both China as well as Vietnam, and have progressed in a spectacular manner (tours organized by Hô Chi Minh Youth League, annual youth meetings). A large number of Vietnamese identify with the Chinese culture and believe that their country is duty bound to turn towards China and strengthen their rapprochement.19 A sense of belonging, but also realism and fatalism: Vietnam does not have any other choice but to be on neighborly terms with “the North”! But Behind these New Images In moving towards normalization and strengthening of relations, the official image of China as an archenemy from 1979 to until the 1980s20 has changed. However, apart from apparent strategic reasons such as proximity between the regimes or strong cultural links, it is the fear of the increasing power of the great Chinese neighbor that has acted as the primary driving force behind Vietnam’s opting for rapprochement.21 18

The new Chinese cinematographic super-productions, such as Hero, Tiger and Dragon, Banquet were a huge success in Vietnam cinemas. 19 On this subject, cf. “The expression of Chinese soft power in Vietnam”, op. cit. 20 Speaking of a hegemonic China with expansionist drives, “treacherous and reactionary”, cf. notably Su thât ba muoi nam quan hê Viêt Trung (The truth about     Vietnamo–Chinese relations over the past 30 years), condensed text of Foreign Affairs Ministry-White Paper, published in October 1979 in Hanoi; also Tønnesson, S. (2006) “Le Duan and the Break with China: Introduction to a Document Translated by Christopher E. Goscha” in Priscilla Roberts ed., Behind the Bamboo Curtain. China Vietnam, and the World Beyond Asia. Stanford, CA: Stanford University Press (453–467). The Vietnamese have gone to the extent ,of describing China as “immedi, ate and dangerous enemy” (ke thù tru’c tiê´p nguy hiêm) in the preamble of the 1982 Constitution and in the CPV resolutions during that time. For a more recent view, cf. Duong, D.D. (2006) “Ðôi diê u suy nghı vê Trung Quô c” (Some reflections on China), Tap chí Thói dai mói (New Contemporary Review). Duong Danh Dy is an   eminent ex-researcher of the MEA. He worked several terms at the Vietnamese Embassy in China. The last post held by him was consul general in Guangzhou. 21 Thayer, C. A. (2002). Vietnamese Perspectives of the “China Threat”, In Storey, I; Yee, H. (Ed.) (2002), The China Threat: Perceptions, Myths and Reality, Routledge, pp. 265–287.

b939_Chapter-13.qxd

334

7/15/2010

2:16 PM

Page 334

M. Salomon and D. K. Vu

If most Vietnamese leaders agree that rapprochement with China must take place as soon as possible, it is because, with the passage of time, Beijing’s power will grow! Thus the progressive resolution of border issues has been hailed as successful. Waiting meant an eventual negotiation with a more powerful, and thus more “overpowering and greedy” China. The Vietnamese, convinced of the certainty of China’s success and its future status as a “superpower”, has charted out the following strategy: normalize relations and build, despite the ulterior motives, the image of a friendly relationship. This gives Vietnam the opportunity to act as an “intermediary” and to benefit as much as possible from the dynamism and the allure of Chinese development, and at the same time protect itself by using restraining accords to bind China as much as possible and which it (still) needs.22 Vietnamese power has not much leeway between strategic realism which involves negotiation, rapid compromise with China and possibly following in its footsteps on one hand, and heightened nationalism created and maintained by its own government on the other: Vietnam and Vietnamese culture, in existence before the Chinese occupation, aim to remain autonomous and independent for historical reasons. This ethnic nationalism, which is created and fueled intentionally “by top leaders” through official propaganda and influencing of the masses (schools, organizations, press), always involves the typical risk of losing power of control. Certain events that can be compared, albeit on a lower scale, to the anti-Japanese outbursts in China, demonstrate this point.23

22

Interview with a former senior official of the Vietnamese diplomacy, Hanoi, June 2003. 23 The incident which took place on 8th January 2005 is an excellent example. Nine Vietnamese fishermen were killed by the Chinese coast guard and, in response, the national press raised a hue and cry, thereby adding oil to the nationalist fire; only to fall back in line again and calm the tensions at the special request made by the government. The first reaction, coordinated, not to say orchestrated, had provoked the immediate formation of an anti-Chinese movement, mainly comprising youths and students (particularly those who were residing abroad). A group of students even wanted to stage protests in front of the Chinese embassy in Hanoi, an initiative that

b939_Chapter-13.qxd

7/15/2010

2:16 PM

Page 335

Vietnam’s View of China

335

Behind the image of the Chinese model, there are numerous rumors of Chinese conspiracies : not only invasion of Chinese products (often of bad quality)24 that flood the Vietnamese market and ruin national companies, the case of Chinese bikes being frequently brought up by the press or by important officials in the National Assembly or elsewhere; trafficking of Vietnamese women; but also corruption of young students on Chinese campuses.25 The vox populi goes to the extent of spreading rumors of conspiracies aimed at starving Vietnam26: Chinese rice seeds which do not grow, invasion of yellow gastropods (ôc buou vàng) which destroy their environment, etc.! In the press, the Vietnamese intelligentsia never misses an opportunity to criticize the omnipresence of the products of Chinese culture, which threaten to undermine the national cultural identity.27 China is worrying and, especially, beyond the fears of a new invasion of this “soft power”, does not inspire any trust. Chinese power is real,

was similar to the recurrent Chinese protests made in front of the American and Japanese embassies in Beijing. After rapid negotiations between the authorities and the youth, the protest was finally called off. The role of the public press in this incident, particularly that of the very popular (populist) ones, Tu i Tr , Thanh Niên, Lao Ðông, Vietnamnet, raised some questions.  24 Recently (June–July 2007), the national television organized a live debate on the toxicity of products made in China and the risks on the health of consumers. Several times, the participants pointed fingers at the Chinese manufacturers by accusing them of causing harm intentionally (!). 25 In 2003–2004, there were rumors that the Chinese universities had become dens of “iniquity” and corruption for the Vietnamese students in terms of gambling, alcohol, drugs. These rumors were circulating especially in Vietnamese diplomatic circles. 26 A recent incident evoked memories of past tensions: Chinese traders tried to buy various parts of tea plants — leaves, branches, roots of any quality — at very good prices. This provoked massive destruction of tea plantations in the border provinces, the farmers having lacked long-term economic vision. During several consecutive national television news bulletins, Vietnamese specialists accused the Chinese traders of practicing “sabotage trade” with reference to the historical purchase of buffalo hooves and cinnamon roots in the past. 27 The historian and member of parliament Duong Trung Quô c deplored that young Vietnamese know the heroes of Chinese kung fu series better than the history of their country. Cf. Lao Ðông (Labour), (22 January 2005). 

b939_Chapter-13.qxd

336

7/15/2010

2:16 PM

Page 336

M. Salomon and D. K. Vu

and so is the instinctive Vietnamese distrust. This dimension of the Chinese image is fundamental, and, for the moment, inescapable; it reflects deeply rooted beliefs. The relations of friendship and partnership described in official speeches do not give a hint of the fears and suspicions that the Vietnamese harbor with respect to both politics and the economy. A Deep-Rooted Distrust At present, the complex relations and images that involve the Vietnamese and their northern neighbors cannot be understood without looking back at ancient history and the creation of long-time national imageries. Indeed, there is a fundamental nationalist dimension to Vietnamese power and identity.28 Vietnam is a young nation-state and its progress has been impeded for a long time by different invaders and internal divisions; in this sense, it was in the year 1975 that Vietnam truly emerged as a modern unified nation. And the Vietnamese authorities, expanding on a traditional identity of which the “resistance” (khò’i nghıa) was elevated to a fundamental value status, created a modern national identity based on primary ethnos. According to this view of the national identity, the Vietnamese and their culture have existed forever and without “mixing”, so to speak. China is the other par excellence, the invader as well as the role model, which the Vietnamese want to emulate.29 The Chinese social, cultural and political legacy is largely underestimated, or simply ignored, or at least partially so. However, it is strongly present in all spheres, from politics to culture.30 Cf. Salomon, M. and Vu, D. K. (2007). “Ðô´ i m
i, education and identity formation in contemporary Vietnam”, In Compare, Vol. 37, No. 3, pp. 345–363. 29 Cf. for example the Tho Thân of the generalissimo Lý Thuòng Kiêt (1019–1105),  long considered the first proclamation of independence of Ðai Viêt (Great Viet) in   ˜ 1077. In Nguyên ˜ K. V. (1993) “Vietnam — A Long History”, ed. Thê′ gi
i (1933) pp. 42–43. 30 Cf. the classic Woodside, A. (1971). Vietnam and the Chinese Model: A Comparative Study of Vietnamese and Chinese Government in the First Half of the Nineteenth Century. Cambridge: Harvard University Press. 28

b939_Chapter-13.qxd

7/15/2010

2:16 PM

Page 337

Vietnam’s View of China

337

The historical symbol of this ambivalent relation is without doubt the advent of the contemporary Vietnamese written language, the quôc ngu’. For centuries, Vietnamese literates were taught in Chinese, using Chinese as the written language. During the 13th century, educated nationalists elaborated the chu’ nôm as a claim to Vietnamese identity. The current Romanized script, which is a transliteration introduced by Father Alexandre de Rhodes during the 17th century, was properly imposed only in the beginning of the 20th century — a result of joint efforts taken by French colonists and Vietnamese nationalist modernists, who wanted to use this to fight against French colonialism and to turn their backs on thousand year-old Chinese influences. The modern Vietnamese nationalism was created per se at odds with the traditional Chinese culture, also a symbol of the “Old Regime”. The contemporary education system reinforces this view and accentuates the differentiation. The school textbooks are used to create these images of the “Vietnamese nature” and of China, the imperial power.31 Even though the reestablishment of good relations with Beijing requires a certain “political correctness” with respect to national education, the silences and the real speeches remain. The distrust towards China is recreated unconsciously (or consciously) like a natural condition.32 While the nationalist and identity discourse of the longtime official history and the oral tradition of tales and legends have strongly influenced the outlining of the Vietnamese nation-state, the contemporary period, marked by the impact of socialism, has reinforced these images. The renaissance of a unified Central Kingdom, independent and eager to wipe off the disgrace of decades of “decadence”, revived the fears of Chinese expansionism soon after the Second World War. Although China played a primary supporting role in the insurrection of Vietnamese revolutionaries who fought for their independence, the 31

Cf., on the particular subject of school text books and national education in Vietnam, Salomon, M. (2005). “Viêt-nam: le royaume dans les têtes… la faucille et le marteau sur les épaules”, Outre-Terre, no. 12, Enseigner la nation. Géopolitique des Manuels, pp. 277–288; Salomon, M. and Vu, D. K., op. cit. 32 Salomon, M. and Vu, D. K. (2007), op. cit.

b939_Chapter-13.qxd

338

7/15/2010

2:16 PM

Page 338

M. Salomon and D. K. Vu

Vietnamese nevertheless truly feared that the Chinese would take advantage of the post war (1945–1949) reconstitution and of a situation marked by the beginnings of the Cold War to once again invade their country.33 The fraternal relations between these two socialist Asian neighbors, which officially began in 1950 after Mao’s victory over the nationalist regime in 1949, were never easy, and the rapprochement with Moscow largely gave rise to these doubts: the farther away the mentor, the better! If the Chinese and Vietnamese socialisms have a lot in common, it is because they both share a heavy history of resentment; and in case of the Vietnamese, of fear. The years between 1950 and 1991 only further nurtured this instinctive distrust (“natural”, cultural) that the Vietnamese harbored towards the Chinese (and vice versa, no doubt), instead of a socialist fraternity devoid of ulterior motives.34 The brief 1979 war was to mark the apotheosis of an extremely violent antiChinese rhetoric. That is not all: representations of China were likewise a source of legitimization for the Vietnamese power, whichever it was. Of course, this legitimization demanded that a victory be achieved over the Chinese invaders. However, according to the logic of legitimization (internal and external), the Emperors, once the enemy was driven out, had to execute an “act of allegiance” and imitate the Chinese power: customs, imperial rituals, political doctrines, administrative organization, were thus “imported”. It is in the context of this tradition that the contemporary period must be understood. 33

Cf. Forbes, A. (2007). Why Vietnam loves and hates China. Asia Times http:// www.atimes.com, [15th June 2007]. 34 With regard to the distrust of Vietnamese leaders towards China during the period of socialistic friendly relations from 1950 to 1979, cf. particularly: “The truth about Vietnamo-Chinese relations over the past thirty years”, condensed text of Foreign Affairs Ministry White Paper, published in October 1979 in Hanoi; Tønnesson, S. (2006) “Le Duan and the Break with China: Introduction to a Document Translated by Christopher E. Goscha” in Priscilla Roberts ed., Behind the Bamboo Curtain. China Vietnam, and the World Beyond Asia. Stanford, CA: Stanford University Press (453–467). Vol. 12, No. 13, pp. 273–288.

b939_Chapter-13.qxd

7/15/2010

2:16 PM

Page 339

Vietnam’s View of China

339

Conclusion Respect and fear are both inspired by the mentor. Vietnam’s national identity, vietnamity, “natural” and “ethnic”, are primarily created “in relation” to China: by being different from China, and at the same time opposing it. Vietnamese nationalism, young and virulent, instinctively remains either a-Chinese or anti-Chinese. The fear of the Vietnamese as a nation is primarily caused by the ghost of imperialism and expansionism of the northern neighbor. Thus Trâ n Quang Co, the ex-Vietnamese deputy minister of foreign affairs, wrote in his memoirs, “China is the main source of challenges which threaten the sovereignty and integrity of our territory as well as the security and development of Vietnam”.35 The diplomatic art of the Vietnamese can be characterized by the pursuit of alliances to counterbalance the Chinese presence; and the same time by the quest to strengthen relations with this “great neighbor” and its insertion into its sphere of dynamic influence, forced by realism, political and economic calculation as well as cultural proximity. The leaders of both countries themselves acknowledge the lack of trust and understanding between the citizens of both the countries (and between themselves?). They lay emphasis, like Jiang Zemin in 2002 in front of the students of Hanoi National University, on the necessity of “educating the people”36 and of improving this trust and understanding. However, to fight against the images, conceptions

Trâ n, Q. C. (2003). Hô’i ú’c và Suy ngh˜ı : 1975–1991, (Memoirs and reflections: 1975–1991), Hanoi, unpublished. 36 We often find, in the joint Sino-Vietnamese declarations, the expression: “Educate the young generations from both the countries in the tradition of friendly relations between citizens of both the countries” ( giáo duc thê hê tre’ hai nu,
c vê truyên tho’ng   quan hê hu’u nghi giu’a nhân dân hai nu’
c); “Pho’ng vâ´n ông Du’o’ng Danh Dy” It   was the Chinese who had insisted on the inclusion of this phrase. Cf. interview, June 2003, op. cit. Regarding this, cf. notably “Phòng vâ´n ông Duong Danh Dy nhân chuyên tha m Trung Quô´c c a Ch tich nuóc Nguyê n Minh Triêt” (Interview with  Duong Danh Dy about the visit of the President Nguyê n Minh Triêt in China, BBC, 15 May 2007). Text and audio interview http://www.bbc.co.uk/vietnamese/vietnam/ story/2007/05/070515_triet_duongdanhdi.shtml [20 June 2007]. 35

b939_Chapter-13.qxd

340

7/15/2010

2:16 PM

Page 340

M. Salomon and D. K. Vu

and propaganda created by history is not easy. Especially because, for nations like Vietnam (and China), the substitution of conceptions cannot be ordered overnight. The official speeches and the reality of the perceptions are entirely two different things. Incontrovertible fact, model to be emulated, source of legitimization, power, expansionist strategy to be feared: China is an indispensable partner but also an intimidating one. The Vietnamese images of China are complex and ambivalent. But then, so is politics.

b939_Index.qxd

7/15/2010

2:12 PM

Page 341

Index

1997 crisis 118

65, 77, 90, 100 105,

Abdullah Badawi 82 ADB (Asian Development Bank) 131, 133 Advanced weapons 56, 58 Africa-Asia 173 Agriculture 76, 113, 166, 169, 173, 202, 292, 313 Aircraft 58, 60, 61 Airport 201, 202, 212, 213, 218, 219 Allied countries 132 AMF (Asian Monetary Fund) 81, 118, 180, 181, 183 Anti-communists 45, 126, 128, 132, 256 Anti-Japanese 16, 19, 20, 21, 38–41, 44, 46, 47, 321, 334 Anti-Japanese demonstrations 16, 20, 44, 46 Anti-militarism 29 APEC (Asia Pacific Economic Cooperation) 3, 40, 117, 149 APT 130 Armed forces 11, 49, 52, 57, 63, 86, 134, 256,

Armed rebellions 126 ASEAN 6, 28, 34, 52, 65, 91, 125, 174, 190, 235, 262, 302, 330 ASEAN+3 6, 34, 80–82, 117–119, 130, 142, 150–152, 155, 176, 180, 183 ASEAN enlargement 128, 129, 139, 158 ASEAN Regional Forum 52, 53, 117 Asian crisis 79, 95, 105, 109, 110, 115, 116, 180, 182, 187, 189, 200, 201, 202, 204 Asian Miracle 79, 95 Aung San Suu Kyi 249, 250, 258, 260 Australia 6, 82, 116, 117, 119, 130, 133, 149–151, 167, 252, 276 Bangkok 7, 8, 132, 138–140, 145, 160, 164, 173, 187, 193, 205, 207, 208, 210, 214, 217–223, 225, 227, 228,233, 235–247, 321 Bangkok-Hanoi Road 233, 237, 240–242 BCP 257 341

b939_Index.qxd

7/15/2010

2:12 PM

Page 342

342

BHR 237, 238, 241–247 Bilateral Trade 22, 262, 304, 307, 316, 321, 332 Bilateralism 156, 157, 319 Bridge 15, 18, 35, 46, 135, 144, 145, 153, 157, 173, 198, 200, 202, 207, 212, 213, 215, 217, 220, 221, 224, 225, 227, 233, 235, 236, 246, 265, 291, 329, 336 British Crown 275 Brunei 82, 97–99, 102–104, 308 Buddhism 98, 285 Buddhists 258, 286 Burmese Junta 110, 114, 272 Cambodia 6, 7, 75, 76, 78, 97–104, 113, 114, 125–129, 132, 135–142, 144, 146–148, 154–156, 160, 173, 175–178, 182, 189, 192–198, 200, 201, 208, 214, 215, 217, 223–225, 227, 237, 244, 246, 308, 320, 323 Cambodian Conflict 75, 125, 127, 135, 136 Cao Gangchuan 49 Caravan route 188, 191, 206, 222 CCP 15, 37, 43–45, 50, 256 Central Asian Security 55 Chatichai Choonhavan 198, 257 Chiang Mai Agreement 117 China Sea 13, 25, 27, 28, 43, 60, 82, 83, 89, 125, 152, 175, 210, 219, 226, 282, 230

Index

“China threat” theory 62 Chinese diasporas 70 Chinese Enterprises 113 Chinese Firms 92–96, 105, 106, 108, 120 Chinese Navy 50, 60 Chinese Origin 94, 103, 288 Class A war criminals 41 Cold War 11, 15, 16, 19, 21, 26–28, 30, 33, 42, 45, 47, 48, 89, 108, 110, 126, 128, 129, 131, 133, 135, 149, 156, 187–189, 193, 205, 222, 250, 255–259, 264, 319, 320, 328, 338 Colonization 68, 72–74, 84, 189, 194, 205, 275 Common identity for East Asia 70 Communism 21, 72, 89, 108, 115, 331 Communists 282 Confucian 36, 85 Continental Southeast Asia 125–129, 141, 145, 153–155, 160, 187, 191, 194, 282 Continuous revolution 37 Counter-terrorism 49, 52 Cultural revolution 128, 278 Democracy 56, 87, 90, 127, 179, 256, 259, 260, 264, 278, 331 Demonstrations 16, 20, 34, 39, 41, 43, 44, 46, 278, 280, 296 Diasporas 70 Doi Moi 9, 99, 136

b939_Index.qxd

7/15/2010

2:12 PM

Page 343

Index

Donor 11, 92, 113, 114, 118, 158, 161, 167, 169, 173, 199, 202–204, 211, 221, 224, 227, 229, 252, 253, 255, 258, 260, 264, 285, 287 Drugs 335 East Counter-terrorism 2006 52 East/West confrontation 74 Ecological 159, 169, 209 Economic assistance 133, 252 Economic crisis 193 Economic growth 43, 51, 66, 128, 143, 145, 158, 168, 177, 204, 303, 306, 320 Economic interdependence 16, 21, 80, 303, 319, 322 Economic reconstruction 78 Economic vitality 67 EEZ 28, 204, 226 Electrical power 201 electricity 193, 201, 207, 225 Energy 3, 8, 25, 33, 84, 86, 113, 117, 140, 148, 193, 198, 201, 203, 204, 212, 214, 215, 264, 272, 282, 295, 313, 323, 324 Environment protection 168, 173, 176 Environmental 30, 168, 202, 259 Ethnicity 36–38 European Union 3, 58, 105, 117, 265 EWEC (East-West Economic Corridor) 140 FDI (Foreign Direct Investments) 29, 91–96, 99, 100, 102–110, 112, 113, 115, 120, 121, 177,

343

196, 302, 305–307, 313, 320, 321 Financial crisis 66, 80, 81, 130, 131, 140, 148, 152, 158, 302, 303, 306, 307, 312, 320, 321, 322, 323 First Gulf War 56 Free trade zone 78, 82, 83, 87, 88, 111, 117, 118 French colonies 126 French Union 132 FTA (Free trade agreements) 110, 111, 118, 152, 160, 200, 309–313, 318 Fukuda doctrine 135, 138, 157 Gap between rich and poor 43 gas 28, 134, 137, 138, 150–152, 188, 193, 202, 212, 214, 250, 263, 264, 268, 273, 295, 335 Gas/oil rivalry 28 Global security issues 51, 53, 55 Globalization 36, 39, 67, 72, 78, 89, 115, 187, 188, 222, 257, 319, 322 Golden triangle 205, 277 Good governance 168 Good-neighbor 50 Great Chinese 36, 333 Guangxi 125, 174, 178, 187, 189, 190, 196, 197, 204, 215, 217–219, 226, 236, 304, 328, 331 Guo Shun 52 Hanoi 7, 127, 131, 134–137, 145–147, 160, 174, 189, 191,

b939_Index.qxd

7/15/2010

2:12 PM

Page 344

344

Index

210, 211, 219–224, 233, 236, 237, 240–246, 328–331, 333, 334, 338, 339 Haruhiko Kuroda 166, 167, 181 Highway 145, 192, 205, 207, 211, 213, 217, 219, 220, 221, 223, 225 Historical distrust 13, 21, 26 Historical issue 20, 24, 47, 249 Hong Kong 4, 7, 21, 22, 39, 40, 46, 61, 109, 190, 218, 219, 221, 236, 276, 303, 332, Hu Jintao 5, 29, 40, 41, 43, 48–50, 172 Hub 12, 28, 43, 51, 55–57, 198, 200, 201, 211, 213, 218, 219, 223, 274, 280, 290, 307, 313 Human rights 8, 24, 39, 45, 56, 75, 179, 249, 255, 256, 259, 260, 264, 265, 296 Human trafficking 290, 293 hydroelectricity 201

279, 283, 295, 296, 302, 306, 307, 322 Indian Empire 275 Indochina 6, 108, 125–132, 134–136, 138, 139, 142, 143, 146, 148, 156–158, 174, 191, 257, 272, 274, 282, 296, 320 Indonesia 40, 70, 71, 74, 75, 79, 89, 96, 98–105, 111, 119, 136, 310, 316 Inflows 67, 82, 83, 94, 95, 100, 103–107, 113, 253 Infrastructure building 140, 143, 161 Infrastructures 129, 140, 190 IO (International organization) 129, 137, 163, 169, 170, 175, 178, 182, 193 Iraq War 57, 59 Irrawady 194, 222, 224 Islam 98

IMF (International Monetary Fund) 81, 169, 180, 181, 239, 269 Immigration, immigrants 156, 178, 272, 275, 276, 282–287, 289–291, 293, 295, 315 Imperial war 20 Imperialist Powers 39 India 1, 2, 6–8, 14, 54, 66, 67, 69, 82, 88, 96, 102, 114, 116, 117, 119, 125, 130, 151, 158, 164–167, 170, 172, 179, 181, 183, 189, 216, 218, 222, 224, 228, 229, 242, 255, 260, 261, 265, 271–273, 275–277,

Jakarta 40, 78, 116, 136 Japanese militarism 27 Japan-Vietnam Joint Initiative 146 Java 127 Jiang Zemin 17, 34, 50, 57, 328, 329, 339 JICA (Japan International Cooperation Agency) 147 Joint Declaration of ASEAN and China on Cooperation in the Field of Nontraditional 52 Joint exercises 63 Joint Military Exercises 51, 52

b939_Index.qxd

7/15/2010

2:12 PM

Page 345

Index

Joint-2003 52 JSDF (Japan Self-Defense Force) 137 Junichiro Koizumi 14, 17, 20, 26, 34 Karens 286 Karl Marx 37 Khmer Rouge 110, 114, 192 Kiichi Miyazawa 138 Korea 1, 4, 12, 15, 16, 20, 25, 33, 34, 38, 41, 42, 47, 65, 70, 73, 76, 79–84, 89, 109, 113, 116, 117, 118, 130, 132, 150, 156, 158, 177, 178, 218, 235, 250, 261, 332 Korean reunification 80 Kuala Lumpur 34, 83, 140, 151 Laos 6, 7, 52, 76, 78, 97–100, 102, 103, 111–114, 125–128, 132, 136, 138–142, 144, 146–148, 155, 160, 175–178, 189–194, 196, 197, 198, 200, 201, 205, 207–211, 213, 215, 220, 221, 223–227, 229, 233, 235, 236–241, 260, 292, 308, 323 Leadership 2, 3, 11, 12, 14, 15, 17, 23, 26, 30, 55–57, 60, 67, 85, 86, 88, 90, 93, 116, 118, 119, 149, 152, 164, 171, 182, 224, 228 Li Zhaoxing 40, 53 Liberalization 77, 308–312, 315–318 Macao

46

345

Malaysia 6, 34, 74, 80–82, 89, 96, 98–104, 111, 114, 117, 119, 204, 236, 237, 261, 308, 312, 316 Mao Zedong 37 Maritime interests 25, 26 Maritime law 52 Market economy 43, 90, 97, 107, 112, 129, 169, 189, 193, 259, 264, 331 Mekong region 131, 138–140, 142, 144, 153, 154, 176 Mekong river 129, 159, 175, 192, 194, 197, 209, 213, 220, 225, 227, 235, 246 Mekong subregion 7, 125, 129, 138, 144, 148, 153, 154, 155, 157–160, 171, 175, 182, 187–189, 191, 192, 194, 197, 199, 200, 233, 234, 247, 261, 323 Migration 8, 156, 178, 271, 272, 275, 278, 282, 283, 288, 290, 293, 295, 315 Military 5, 11, 34, 49, 73, 127, 189, 249, 271, 301 Military cooperation 24, 25, 51, 53, 57, 59 Military coup 128, 192, 251, 258, 259, 301 Military diplomacy 5, 49–51, 53, 56, 57, 62 Military exchanges 49 Military government 249, 250, 255–260, 263–266, 285 Military technology 56, 57 Missile threat 15, 25 Missiles 16, 58, 59, 61

b939_Index.qxd

7/15/2010

2:12 PM

Page 346

346

Index

Modernization of its armed forces 63, 86 Multilateral 13, 17, 27–29, 50, 52, 53, 73, 88, 110, 142, 143, 148, 156, 157, 163–165, 168, 171, 174, 175, 182, 199, 217, 226, 307, 319, 321 Multilateralism 7, 28, 29, 88, 156, 170, 181 Multinational Firms 91, 93, 99,100, 107, 311 Muslims 78 Narcotics 193 National Congress of the Communist Party of China 50 National pride 47 Nationalism 4, 5, 15, 16, 21, 27, 29, 33–39, 43–48, 71–73, 85, 88, 89, 334, 337, 339 NDPO (National Defense Programme Outline) 26, 27 Ne Win 26, 249–253, 256, 260, 264, 277, 278, 284 Neighboring diplomacy 50 New concept of security 51 New Zealand 6, 82, 116, 117, 119, 130, 133, 149, 151 NGO 26, 28, 53–55, 77, 114, 117, 134, 147, 148, 166, 168, 169, 179, 192, 205, 213–215, 222, 223, 242, 247, 249, 257, 262, 273, 274, 276–278, 281, 284, 286–288, 290, 291, 293, 295, 296, 314, 322, 327 Nixon 17, 19, 133, Nobutaka Machimura 40 Normalization 86, 87, 134, 295, 329, 330, 333

North Korea 15, 16, 25, 47, 76, 83, 117, 177 North Vietnam 127, 133, 134 Nuclear 12, 15, 16, 59, 60, 83, 87 ODA (Official development aid) 11, 22, 126, 137, 142–148, 155–158, 235, 250, 252–256, 258, 259, 263, 264, 268, 320 oil 28, 78, 109, 128, 178, 202, 216, 257, 263, 279, 280, 295, 334 Okuma doctrine 73 ONUB 54, 55 Pacifism 87 Pan-Asianism 149 Patriotic state-ism 37 Patriotism 36, 38, 45 Peace Mission 2005 52 Peaceful ascendancy 112 Permanent Member of UN Security 23, 35, 42, 53, 87 Philippines 71, 74, 96, 98–104, 111, 114, 119, 148, 149, 308, 309, 312, 316 PLA (People’s Liberation Army) 5, 25, 49–51, 55–63 Plaza accord 127 Population 4, 8, 70, 98, 169, 179, 193, 194, 196, 207, 208, 233, 237–247, 266, 275, 276, 280, 282, 283, 287, 288, 292, 304, 319 Post-Cold War 11, 15, 16, 21, 27, 126, 128, 129, 187–189, 259 Poverty 140, 141, 143, 148, 168, 172, 173, 242, 293

b939_Index.qxd

7/15/2010

2:12 PM

Page 347

Index

PRC 23, 35, 39, 84 Prostitution 293 Qiao Zonghuai

40

Railroad 42, 189, 193, 202, 204, 212, 216, 217, 221 Red Book 278 Refugees 76, 156, 163, 274 Regional construction 4, 66, 67, 73, 77, 89, 121, 181, 183, 201 Regional hegemon 92, 93, 115, 117, 118, 171 Regional hegemony 92, 115, 118, 171 Regional integration 6, 66, 77, 78, 90, 97, 115–117, 121, 129, 140, 142, 155, 158, 183, 187, 188, 189, 191, 194, 198, 205, 221, 229 Regional leader 2, 17, 88, 93, 118, 119, 152 Regionalism 65, 68, 78, 88, 130, 131, 137, 148, 149, 150, 151, 152, 158, 159, 188, 322 Regionalization 6, 66, 79, 82, 115, 187, 188, 222, 250, 260, 319, 322 Resources 3, 8, 30, 53, 54, 72, 86, 110, 113, 129, 159, 165–168, 179, 190, 193, 198, 202, 203, 221, 225, 226, 264, 272, 282, 292, 295, 303, 323, 324 Russia 24, 25, 51, 52, 58, 59, 60, 62, 63, 69, 72, 84, 117, 322

347

San Francisco Peace Treaty 132 SARS (Severe Acute Respiratory Syndrome) 50, 204, 235 Satellites 59 SCO (Shanghai Cooperation Organization) 28, 51, 52, 55, 63 Sealanes 25 SEC (Southern Economic Corridor) 140 Second World War 69, 89, 109, 337 Security Issues 4, 13, 22, 23, 51–53, 55, 75, 189 Senkaku/Diaoyu Islands 24, 27, 28 Sex slavery 34, 42 Shanghai 7, 28, 39, 46, 51, 173, 190, 218, 236, 304 Shinzo Abe 25, 26, 145 Sichuan 189, 205, 304 Siemens 42 Singapore 1, 3, 6, 74, 79, 81, 95, 96, 98–104, 111, 112, 114, 119, 127, 129, 135, 136, 137, 141, 145, 152, 177, 179, 187, 204, 205, 210, 214, 217, 219, 223, 236, 237, 261, 276, 303, 308, 312, 316, 328 Sino-Centralism 36 Sino-Nationalism 37 SLOC 26 Socialism 36, 37, 43, 45, 46, 192, 257, 331, 337, 338 Socialist Bloc 36, 110 Socialist countries 37, 42, 97, 105, 133–135, 136

b939_Index.qxd

7/15/2010

2:12 PM

Page 348

348

Index

Socio-Economic inequality 38, 43 Soft Power 118, 171, 179, 332, 333, 335 South Korea 1, 20, 33, 34, 41, 42, 47, 65, 76, 79–83, 109, 113, 117, 118, 130, 150, 250, 261, 332 Sovereignty 23, 27, 39, 46, 66, 72, 75, 77, 83, 84, 116, 329, 339 Soviet threat 19, 26 Soviet Union 9, 19, 34, 37, 128, 190, 198 Sphere of co-prosperity/Co-prosperity sphere 69, 73, 131, 150 Sukarno 72 Sun Yat Sen 72 Taiwan 1, 4, 13, 23–28, 36, 43, 46, 59, 60, 73, 79, 84, 87, 109, 235, 276, 332 Takeo Fukuda 135, 253 Takeshi Watanabe 165, 166 Telecommunication networks 202 Textbooks 4, 84, 152, 249, 337 Thaksin Shinawatra 204 The reform 36, 37, 43, 45, 46, 55, 99, 114, 331 Three Represents Theory 43 Tiananmen 24, 36, 37 Tibet 24, 194, 295, 296 Timor 54, 78 Toshiki Kaifu 137 Tourist 196, 200, 201, 209, 225, 293

Trade balance 303 Trade imbalance 22 Trading partner 8, 21, 22, 260, 302, 303 Transnational crime 89 Transparency 22, 24, 62, 63 Triangular Support Mechanism 147 U.S. 12, 127 U.S.-Japan 127 UN (United Nations) 23, 35, 39, 42, 53–56, 78, 87, 128, 134, 137, 152, 164, 169, 249, 259, 271. See also I.O. (International organizations) UN peacekeeping operations 53, 55 UNIFIL 54 Unity of East Asia 70 UNO (United Nations Organization) 170, 278 USSR 33, 110, 328 Vietnam 4, 74, 97, 125, 165, 189, 235, 306, 327 War crimes 84 Wartime atrocities 34 Wartime outrages 250 Water issue 175 Wen Jiabao 26, 34, 54, 83, 113, 154, 173 Westernization 72 White power 80 World Bank 97, 100, 164, 169, 177, 180, 181, 213, 217, 218, 252 WTO (World Trade Organization) 111, 118, 170, 304, 307, 312

b939_Index.qxd

7/15/2010

2:12 PM

Page 349

Index

Yasukuni Shrine 17, 20, 34, 35, 39–42, 44, 47, 84, 152 Yen 11, 22, 81, 95, 109, 127, 132, 137, 143–145, 155, 157, 235, 252–255, 258, 328, 329

349

Yunnan 125, 174, 175, 178, 187, 189–191, 193, 194, 196, 197, 200, 201, 204, 205, 207–210, 216, 218–220, 222, 226, 227, 229, 272–275, 277, 281–283, 288, 289, 292, 295, 304

b939_Index.qxd

7/15/2010

2:12 PM

Page 350

This page intentionally left blank

b939_Last_Page.qxd

7/15/2010

2:16 PM

Page 1

This publication was funded by the Research Institute on Contemporary Southeast Asia (Irasec), Bangkok.* *IRASEC, based in Bangkok, Thailand, calls on specialists from all academic fields to study the important social, political, economic and environmental developments that affect, together or separately, the eleven countries of the region (Brunei, Burma, Cambodia, Indonesia, Lao, Malaysia, The Philippines, Singapore, Thailand, Timor-Leste and Viet Nam). www.irasec.com