H.E. Ong Keng Yong
Secretary General of ASEAN
Keynote Address at the ASEAN-China Forum 2004
Developing ASEAN-China Relations: Realities and Prospects
Singapore, 23 June 2004
Introduction
1. I wish to thank the Institute of Southeast Asian Studies for inviting me to this ASEAN-China Forum 2004. It is indeed a timely event since China is affecting everyday life in Southeast Asia and the world in all spheres -- political and security, monetary and finance, economic and business, and cultural and social.
2. Let me begin by defining the word “win-win partnership” in the context of ASEAN-China dialogue relations. As the Chinese saying goes, “benevolent government and friendship with neighbouring countries are the good fortune of a country”, ASEAN and China are tapping the opportunities and complementarities offered by each other and acting as catalyst for one another to achieve higher development goals while maintaining peace, security and stability crucial for economic growth and prosperity. It means forging substantive cooperation based on the principles of mutual trust, respect, equality and mutual gains to create conditions that will benefit the people of both regions. The Joint Declaration on Strategic Partnership between ASEAN and China signed by the Leaders of ASEAN and China in October 2003 called for the securing of such a partnership in the political and security, economic, social and cultural, and regional and international cooperation fields.
Repositioning Chinese Policy vis-à-vis ASEAN
3. ASEAN-China relations in the last decade have not always been easy. In fact, the relationship has seen its ups and downs. Before ties between ASEAN and China were formally established in 1991, they were marked by mutual suspicion, mistrust and animosity largely because of China’s support for the communist parties in ASEAN countries.
4. The normalisation of relations with China in 1990 by Indonesia and then Singapore and Brunei Darussalam acted as a catalyst to set the path for China’s admission into the ASEAN Regional Forum (ARF) in 1994 and eventually the granting of ASEAN dialogue partnership in 1996. Since then, the partnership grew from strength to strength resulting in the expansion and deepening of cooperation in the economic, political and security, social and cultural and development cooperation areas.
5. My Chinese friends have often said to me, “a close neighbour means more than a distant relative”. ASEAN recognised that it would have to work with China, its most populous neighbour in East Asia, to address the issues and challenges in the region.
6. On the other hand, China was receptive to the friendly initiatives of ASEAN. This was largely due to the reorientation that the Chinese foreign policy went through. The Chinese foreign policy underwent changes giving way to more pragmatic and proactive strategies. The result is more focused, nimble and engaging policy on Asia involving enhanced diplomatic, economic, and military exchanges; increased Chinese participation in regional and multilateral mechanisms (APEC, ACD, FEALAC); and tactical flexibility on bilateral disputes.
7. This Asia Policy is premised on the “calculative strategy” of China to build a strong foundation for a vibrant and modern State. The key elements of this strategy are to promote market economy for economic growth; to refrain from the use of force while pursuing military modernisation; and to expand international political influence. At the same time, China generally avoids explicit competition with the US or its allies, notably Japan.
Strengthening ASEAN-China Cooperation
8. Even though ASEAN-China cooperation was formalised in 1996, substantive cooperation only picked up pace in 2001 when the Leaders of ASEAN and China endorsed a proposal for a framework on economic cooperation and to establish a free trade area (FTA) in 10 years as well as identified 5 priority areas to move cooperation. This was in the areas of agriculture, information technology, human resource development (HRD), mutual investments and Mekong cooperation.
Political and Security
9. In the political and security realm, China is an active participant in the ARF. It is also a key member of many of the regional processes that ASEAN has been instrumental in initiating, particularly the ASEAN Plus Three process.
10. ASEAN and China have concluded a number of agreements ensuring the peace and security of the region and establishing a tranquil regional environment to pursue economic development. ASEAN and China signed the Declaration on the Conduct (DOC) of Parties in the South China Sea in November 2002 in Cambodia, which signalled the mutual desire to promote trust and confidence to establish a regional code of conduct in the area. Discussions will be intensified in the coming months between ASEAN and China to move forward the implementation of the declaration.
11. ASEAN and China concluded a Memorandum of Understanding (MOU) in the Field of Non-traditional Security Issues in November 2002 in Cambodia, which sets the stage for substantive cooperation in the field of combating transnational crime, including terrorism, drug trafficking, sea piracy and trafficking in persons. An annual plan to implement the declaration was agreed to by both sides in January 2004 and efforts are underway to implement concrete cooperation activities.
12. In 2003, a milestone was achieved in ASEAN-China relations, when China became the first Dialogue Partner to accede to ASEAN’s Treaty of Amity and Cooperation (TAC) in Southeast Asia. By acceding to the TAC, China provided further reassurance to the peace and security of the region and for the treaty to become eventually a code for inter-state relations in the region. China is now keen to sign with ASEAN the Protocol to the Treaty on Southeast Asia Nuclear Weapon Free Zone (SEANWFZ).
13. Another milestone was the signing of the Joint Declaration on the Strategic Partnership for Peace and Prosperity in Bali last year. This formal document elevated the ASEAN-China relations to new height: we are now partners. An extended range of activities will bring ASEAN and China closer and more substantively. Both sides are now working on a 5-year plan of action to implement the Declaration.
Economic
14. ASEAN-China cooperation in the economic field has grown rapidly since the signing of the Framework Agreement on Comprehensive Economic Cooperation in November 2002. Both sides have targeted to realise the Free Trade Area in 2010 for the ASEAN-6 and 2015 for Cambodia, Laos, Myanmar and Viet Nam. The “early harvest” plan under the FTA commenced in January 2004. Negotiations for the trade in goods component of the ASEAN-China Free Trade Area is expected to be concluded by end June 2004. The negotiations for services, investment, and the dispute settlement mechanism (DSM) have commenced.
15. Trade between ASEAN and China had grown by double digits since 1995. In 2003 alone, it grew by 43 percent to a new high of US$ 78.2 billion in which China imported US$47.3 billion from ASEAN, which is a 50 per cent increase. ASEAN and China are targeting to hit the US$100 billion mark in two-way trade by 2005 and this benchmark seems achievable given the current dynamics in the ASEAN-China trade ties.
16. Bilateral trade cooperation between ASEAN countries and China are intensifying. For example, Thailand and China had initiated a zero tariff for vegetables and fruits in October 2003 through the China-Thailand Early Harvest Programme Acceleration Agreement resulting in a 143 per cent increase for Thai exports to China. Thailand is now actively pushing for zero tariffs for fish and milk products for 2004 and industrial products for 2005.
17. Similar trends are witnessed in bilateral investments between ASEAN and China. In 1999, two years after the financial crisis, total foreign direct investment (FDI) into ASEAN from China stood at US$78 million and this has doubled to US$ 150 million in 2001. The potential for the inflow of Chinese investments is promising due to the Chinese Government’s policy of encouraging its businesses to go global with priority given to its neighbouring countries. On the other hand, ASEAN continues to be an even more important source of FDI for China. In 2003, contractual FDI flows into China amounted to US$ 6.5 billion and the actual paid-up capital was US$ 2.9 billion. By the end of 2003, accumulated contractual FDI from ASEAN was US$64.3 billion and the actual paid-up capital was US$32.3 billion.
Development Cooperation
18. Development cooperation with China now covers an expanded and intensified number of areas, apart from the five priority areas mentioned earlier. These include science and technology, tourism, public health, youth, and culture. MOUs have been concluded in the areas of agriculture, non-traditional security issues and information and communications technology. More are being planned, including one in transport cooperation and another in cultural cooperation. More than 40 projects have been implemented since 1999 supported by the ASEAN-China Cooperation Fund.
19. China continues to assist ASEAN in narrowing the development gaps through the Initiative for ASEAN Integration and other sub-regional programmes such as the Mekong Basin cooperation and the Brunei Darussalam-Indonesia-Malaysia-Philippines East ASEAN Growth Area (BIMP-EAGA).
Securing a Win-Win Strategic Partnership
20. What do we mean by securing a strategic partnership in the context of the ASEAN-China dialogue relations? Some may say that “strategic” means ASEAN and China are developing a defence alliance or a military pact. Let me assure you that this is not what both sides are looking for. Both sides are determined not to characterise their relationship as exclusive and aimed against any particular country. It is and will be based on trust, understanding, neighbourliness and a mutually beneficial and comprehensive partnership premised on the underlying philosophy of “prosper thy neighbour”, a notion very much shared by the Leaders of ASEAN and China.
21. Why does ASEAN and China need to develop a strategic partnership? I cannot speak for China. For ASEAN, we see ASEAN and China as part of a contiguous geographical landscape in East Asia. China shares common borders with ASEAN and has historical and cultural linkages with many ASEAN countries. Both face similar challenges and opportunities and share aspirations, as developing countries, to achieve economic prosperity and higher living standards for their people. At the same time, they want to tackle the emerging transnational issues, which may have an adverse impact on their economy and society. Putting it another way, ASEAN and China must co-exist and share the responsibility of making our region a better place and be better global citizens.
22. Most analysts have forecasted that ASEAN will grow by 5-6 percent a year up to 2008 with Viet Nam tipped to be the fastest growing with a 7 per cent annual expansion. The Chinese economy is expected to grow between 8 and 9 per cent. Thus, there is a huge potential to tap. Our "prosper thy neighbour" philosophy is not based on an illusion.
23. China is weighing more and more on the world economy. Let us review some facts and figures. China is now the fourth largest trading nation in the world. With the accession of China into the WTO, its share of foreign trade in 2003 was almost 5 per cent of world trade or about US$ 620 billion. In terms of FDI, China now receives more than two-thirds of all FDI flowing into East Asia compared to the beginning of the 1990s. It is predicted that FDI will reach an annual utilised rate of US$ 100 billion in 2005. In international finance, China has become a major player, as it possesses more foreign exchange reserves than any country, except Japan. It is a creditor to the US holding billions of dollars in US government securities.
24. ASEAN has been watching the developments in China and has taken the prudent step of engaging China instead of treating it as a competitor. While China is a competitor in one sense, it also shares complementarities with ASEAN, which have to be capitalised by both sides. At the same time, ASEAN’s services industry is developing faster than that of China, and therefore could help to support the Chinese economic boom. If Saudi Arabia is for oil and Brazil for coffee, China is certainly the world’s factory and ASEAN can be the service support for this global factory.
25. How do take this partnership between ASEAN and China forward? I have six proposals to share with this ASEAN-China Forum.
26. One, ASEAN and China will have to intensify cooperation in the political and security arena, starting with cooperation in less sensitive non-traditional security issues while building confidence in sensitive areas. For example, implementation of the DOC in the South China Sea. Also, ASEAN and China should implement the annual plan to implement the MOU on cooperation in non-traditional security issues without further delay.
27. There should also be a conscious effort to promote security dialogue so that both sides can understand each other’s positions on issues of common interest in the region and in the world. ASEAN should use the opportunity to encourage China to play a more active role in regional issues through existing multilateral processes. China, being a strategic partner of ASEAN and a member of the UN Security Council could help to represent the views and concerns of ASEAN to a wider audience.
28. China is a key player in the Six-Party Talks and it could use the ARF to discuss issues concerned. The DPRK is also in the ARF.
29. Second, ASEAN and China should continue to promote high-level exchanges and visits and people-to-people contacts. This is crucial to develop a better understanding among government leaders, top policy makers, bankers, and bureaucrats as well as experts in the various fields. As for people-to-people contacts, tourists, students, and general workers from China have already started to fan out in Southeast Asia bringing about new opportunities and revenue for ASEAN countries. Promising youths from ASEAN must also be given more opportunities to study and stay in China to better understand the “friendly giant” so that a crop of future leaders who are well versed in China, not only in terms of language but the mindset and nuances, will be ready to further the mutually beneficial partnership.
30. Both sides should strengthen the soft side of cooperation such as arts and culture. The “soft power” will provide the gel to bring ASEAN and China even closer together, which will be necessary to building a sustainable partnership as ASEAN and China enhance their relations in a comprehensive manner. This could include the promotion of arts and culture, cuisine, cinema, curios, calligraphy, acupuncture, herbal medicine and fashion fads.
31. Third, ASEAN and China should place emphasis on strengthening the economic partnership by keeping within the timelines for the realisation of the FTA and ensuring that a high standard FTA, covering not only commodities but also services and investments, is achieved to serve as a benchmark for other FTAs being negotiated in the Asia Pacific region. Both sides should be flexible and accommodative in the negotiations towards the FTA due to the different level of economic development and readiness of ASEAN countries to embrace the FTA. Creative ways to resolve outstanding issues in the negotiations should be considered.
32. China can do more in terms of investments into ASEAN. The flow of FDI from China is low compared to the size of its economy. In terms of investments, the EU, the US, and Japan continue to be the top three investors in ASEAN. China could invest in the manufacturing sector in ASEAN as well as the services sector since the services industry in ASEAN is more matured, and will be able to support the buoyant manufacturing sector in China, and the overall Chinese economy. Clustering of industries between ASEAN and China could also be considered to tap on the comparative advantages in manufacturing or undertaking certain services with the participation of the private sector. This will provide a wider choice of goods and services at competitive prices, which will benefit the consumers from ASEAN and China.
33. Fourth, ASEAN and China cannot ignore the deepening cooperation in addressing transnational issues such as combating terrorism, communicable diseases, trafficking in drugs and women and children, and protecting the environment.
34. Fifth, ASEAN and China should increase the collaboration in helping ASEAN integrate. China's prominent participation in the Initiative for ASEAN Integration (IAI) will be inspiring and catalytic. When ASEAN narrows the gaps in national development, a bigger market for Chinese goods and services will consolidate. China could be actively involved as a strategic partner in supporting the successor plan to the Ha Noi Plan of Action to implement the ASEAN Vision 2020 to be adopted by the ASEAN Leaders this November in the Vientiane Summit.
35. Finally, ASEAN and China should work towards the realisation of the East Asian community in the long run by actively driving the ASEAN Plus Three process with Japan and the ROK. Implementing the East Asia Study Group’s 17 short-term measures by 2006 will be crucial as well as strengthening the sectoral cooperation in the fields of monetary and finance cooperation, energy, public health and so on. Both sides should also start looking at possible ways to implement the other 9 medium-to-long term measures. This will not only help to speed up East Asia cooperation but also bring China closer to Japan and the ROK.
36. The initiation of a tripartite cooperation among China, Japan and the ROK, as a part of East Asia cooperation last year in Bali through their joint declaration, had helped to generate new momentum in cooperation among them. The Plus Three countries could use the new momentum to come together and implement joint activities with ASEAN to assist in ASEAN’s economic integration and narrowing the development gaps crucial for promoting greater East Asia economic integration. Perhaps, as a start, the Plus Three Countries could pool their resources in implementing more IAI projects.
Ensuring a Great Future
37. ASEAN and China have established a more fruitful partnership ensuring the peace and stability as well prosperity of the region. However, new challenges and problems are emerging that will continue to test the resolve of the partnership. ASEAN and China should take them in their stride as they move forward together in the new millennium. The challenges may impact the cooperation but both sides will steadily endeavour for the common good as wise friends from China would say “be not afraid of growing slowly, be only afraid of standing still".
38. As you can see, there is so much in the ASEAN-China partnership. But the one essential element for this partnership to endure and be even more mutually beneficial is to ensure a healthy and open environment where ASEAN is able to continue its dynamic relations with other dialogue partners, namely Australia, Canada, the EU, India, Japan, New Zealand, the ROK, Russia and the USA. This is especially so since ASEAN continues to be an outward-looking organisation and inclusive in its approach to economic cooperation and external relations. The strengthening of relations with the ASEAN dialogue partners will secure a peaceful, prosperous and vibrant Southeast Asia.
Thank you.
????????
