Cambodia's in the bag, who's next?

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East Sea stakeholders fear money will talk as Beijing showers economic largesse and extracts diplomatic mileage

US Secretary of State Hillary Clinton (L) and Chinese Foreign Minister Yang Jiechi arrive for a bilateral meeting on the sidelines of the Association of Southeast Asian Nations (ASEAN) regional forum at the Peace Palace in Phnom Penh on July 12.Photo: AFP

As it acts to thwart the US's bid to gain Southeast Asian influence, China has been wielding its economic and military clout more overtly than usual in one of the world's fastest growing regions.

The question several analysts are asking is: How many Association of Southeast Asian Nations (ASEAN) members, some of which are among the world's poorest, will rise to Beijing's bait?

Cambodia has recently come under fire for blocking the customary joint statement at a regional summit ending last week in Phnom Penh - the first time it has happened in ASEAN's 45-year history.

China described the meeting as "productive" but the Philippines said it "deplores" ASEAN's failure to address the aggravating squabble over the East Sea, also known as the South China Sea. The Philippines also chided host Cambodia, which is holding the rotating ASEAN chairmanship this year, for its handling of the issue.

The Philippines had insisted ASEAN refer to an armed stand-off with China last month over a rocky outcrop known as the Scarborough Shoal in the joint statement. But Cambodia recipient of billions of dollars of loans and investment from China resisted the move.

Reuters on Wednesday quoted a diplomatic source which described Cambodia as "the worst chair" of ASEAN. The source said China had effectively bought its loyalty and that of some other states with economic largesse.

Cambodian Prime Minister Hun Sen has vehemently protested suggestions that China has "bought" Cambodia's support over the East Sea dispute.

Cracks appear

Analysts said rifts over the wording of the joint communiqué reveal the "worst fears" of ASEAN's founding members that if they do not maintain their unity external powers will intervene in Southeast Asia's internal affairs.

"ASEAN stands for the defense of Southeast Asian autonomy from external power intrusion and pressure. This is the first major breach of the dyke of regional autonomy," said Carl Thayer, a Canberra-based maritime security expert.


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"China has now reached into ASEAN's inner sanctum and played on intra-ASEAN divisions," Thayer said.

ASEAN's divisions are threatening the setting up of a regional economic community by 2015 that would remove barriers in trade, labor and financial markets, analysts said.

The absence of such a diplomatic communiqué would also stall progress on a separate code of conduct aimed at easing tensions in the East Sea, diplomats and analysts said.

China and four ASEAN members Vietnam, the Philippines, Malaysia and Brunei all claim territory in the resource-rich East Sea, which hosts about a third of the world's cargo traffic and has rich fishing grounds.

China is staking the largest claim, covering most of the sea's 648,000 square miles (1.7 million square km). International scholars have emphatically rejected this claim as have the other stakeholders.

Regional tensions have risen recently, with both Vietnam and the Philippines accusing Beijing of aggressive behavior in the East Sea.

The code of conduct (COC), which would be legally binding, is seen as a way of reducing the chances of a spat over fishing, shipping rights or oil and gas exploration tipping into an armed conflict. The US has expressed its support for the COC.

It was expected that ASEAN and China would start formal negotiations on the code in September, and finalize a deal by the next ASEAN summit in November.

But analysts said it is likely that the friction over the wording of the joint statement will spill over and contaminate the negotiating process.

"Cambodia is showing itself as China's stalking horse," Thayer said. "This will make negotiating a final COC with China more difficult."

ASEAN has more hurdles to overcome in hammering out the long-sought sea code given that its leadership lineup "” Cambodia this year, low-profile Brunei next year and China-dependant Myanmar and Laos in the following years are unlikely to stand up to pressures from the regional economic and military superpower.

Irresistible charm

Analysts said other than its close economic ties to Singapore and Malaysia and its aggressive attempts to lure Thailand, China has been courting Cambodia, Myanmar, and Laos ASEAN's least developed states by providing them with no-strings loans, infrastructure development projects and military support.

This has always been part of China's strategy to embed itself within the larger ASEAN region, the analysts said. Though Laos and Myanmar have been relatively quiet about the East Sea dispute, there is no such thing as a free lunch and China would expect something in return, they added.

"On multilateral platforms, countries use all kinds of resources available to sway other countries' positions for their own desired result," said Yun Sun, a Washington-based China foreign policy expert and a former analyst for the International Crisis Group in Beijing.

"It's particularly common for big powers to do so with small countries," Sun told Vietweek.

"It's just part of the reality we have to deal with."

China has invested nearly US$14 billion in Myanmar, equal to 35 per cent of the country's total foreign investments, eclipsing Thailand to become Myanmar's No. 1 investor, according to government statistics.

Most of the $14 billion investments are being pumped into the sectors of hydropower energy, oil and gas and mining, according to a report in Eleven News in Rangoon. Until 2008, Chinese investment in Myanmar was around $1 billion, but it jumped to nearly $13 billion by 2011, the report said.

Beijing can extract leverage for the economic and military advantages that Myanmar derives from its relationship with its giant neighbor, analysts said.

"The closer economic ties with China are more likely to benefit Myanmar, rather than pose worries," Aekapol Chongvilaivan, a Myanmar expert at the Institute of Southeast Asian Studies in Singapore, told Vietweek.

Myanmar has a strategic location that links China and India with Southeast Asia. Several deep sea ports and highways in Myanmar have already been initiated to facilitate the flow of goods between the Pacific and Indian oceans without passing through Singapore. Its rich natural resources and huge economic potential also present investment opportunities for Chinese companies.

"Yes, Myanmar will be increasingly more important to China," Chongvilaivan said.

But increased investment has not earned Beijing a warm welcome in Myanmar, formerly known as Burma.

"The people are skeptical"¦assuming that Chinese companies do not care for anything other than profits for themselves," said Sai Latt, a political commentator at the Simon Fraser University in Canada.

"This assumption is legitimate because the ways Chinese companies operate are environmentally and socially costly," Latt told Vietweek.

But as the country, which is coming off decades of sanctions, is pushing for reforms and opening up to foreign investment, the Chinese charm offensive is proving irresistible.

"Most Burmese are unhappy with Chinese businesses," said Zayar Hlaing, a local freelancer who covers political issues in Myanmar.

"But"¦ Burma can't stay away from China because we are neighbors," he added.

China has also seen Laos as its gateway to Southeast Asia's 600 million people and $2 trillion GDP, and bilateral trade with Laos has grown 40 percent to $1.1 billion annually since 2009, a Reuters report said recently.

Chinese banks have offered loans to Laos to hire Chinese firms to build infrastructure, including $3 billion from the China Development Bank alone, the report said.

Laos shares a long land border with Vietnam and enjoys an abundance of natural resources. By boosting trade with Laos, China is looking to develop its own, more impoverished Southwestern provinces, which have long been remote outliers to the Chinese economic miracle. Beijing has been actively courting younger elements of Laos's leadership by inviting them over for exchange visits and training programs.

Vietnamese Prime Minister Nguyen Tan Dung said during a Laos visit last year that Vietnam would step up efforts to regain its position as leading investor in the land-locked country. At present, it is third, behind China and Thailand.

Analysts said Laos has sought to maintain close and cordial relations with both Vietnam and China. It tries to balance the interests of both Hanoi and Beijing, deriving benefits from both.

"Laos has benefitted from foreign investment, and needs more," said Martin Stuart-Fox, a Laos expert at the University of Queensland in Australia.

"The only way Laos has of maintaining a degree of flexibility in its international relations is to be on good terms with all its powerful neighbors, and so strike a balance between them."

US muscle

The US has so far maintained it will play a neutral role in the East Sea dispute. It has announced a "pivot" toward the economically resilient Asia-Pacific region.

Analysts said this is an effort to allay concerns of some ASEAN members as China flexes its economic and military muscles.

But skeptics say the US "pivot" toward Asia in foreign and defense policy has already rattled the region and increased tensions between the two superpowers.

China perceives the US move as an attempt to constrain its "rise". Some ASEAN nations do not want to have to choose between the two individually or collectively. While some welcome the US policy shift, others are a bit wary.

"Indeed, some are outright worried that US-China rivalry will dominate regional political affairs, increase instability and erode ASEAN political and security centrality," said Mark Valencia, a Hawaii-based expert on the East Sea dispute.

The US has sought to downplay such fears.

"Too often in ASEAN there's a concern that this that Southeast Asia or other parts of Asia will become some area of dangerous strategic competition between the United States and China," Kurt Campbell, the State Department's Assistant Secretary for East Asia and the Pacific, said at a conference in Washington last month.

"It is our determination strong determination, to make clear that we want to work with China," Campbell said.


Indonesia's top diplomat began a Southeast Asian tour on Wednesday to try to patch up an internal rift within the ASEAN group over territorial disputes in the East Sea, also known as the South China Sea, saying the split represented a critical moment for the regional bloc.

The 10-nation group could not agree on a concluding joint statement at a ministerial meeting last week, riven with discord over how to address China's increasingly assertive role in the strategic waters of the East Sea. It was the first time in almost half a century it has failed to deliver a communiqué.

The Association of Southeast Asian Nations' reputation for harmony and polite debate was left in tatters by the Phnom Penh meeting. One ASEAN diplomat accused China of buying the loyalty of Cambodia and some other states with economic largesse.

Indonesia, the region's biggest country and one seen as a neutral given it has no claim to the disputed waters, has taken on the role of mediator - tasked with drawing up a code of conduct to prevent any acts of brinkmanship spilling over into conflict.

"Unfortunately last week there were some difficulties but I believe... what took place in Phnom Penh was an exception, it's not the rule," Indonesia's Foreign Minister Marty Natalegawa said in Hanoi, the second stop on his regional tour after Manila.

"Let's keep it that way, let's keep it as an exception," he said, adding that the divide represented a "critical moment" for the group's unity.

Natalegawa said he received the backing of both the Philippines and Vietnam on Wednesday to push ahead with a code of conduct, and also expressed hopes of producing a statement of unity at the end of his trip this week.

"The end product is having a common ASEAN position on the South China Sea," Natalegawa told reporters in Manila.

"That's why I am now in ASEAN capitals identifying core issues of the South China Sea. I believe we can find other means to ensure there is no vacuum in ASEAN."

Reuters, Thanh Nien News

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