Maritime Security and Economic Architecture of the Indo-Pacific-A Correlational Study

The Asian continent consists of some of the fastest growing economies that have already acquired the reputation of being among the largest economies as well. Although Asia is the largest continent in the world, it is only a handful of countries that have shown unprecedented economic development. Considering the colonial legacies in a majority of regional countries and their status post World War II, the region gained prominence in the international arena in a phenomenally short time. The Asian continent, due its vastness, could be divided into sub-regions viz. West Asia, Central Asia, South Asia, Southeast Asia and the East Asia. Of these sub-regions, three are of prime concern in this paper while one contemplates as to what constitutes the Indo-Pacific region?

Although the India ocean stretches out till the eastern coast of the African continent our concern here begins from the western borders of India till the South China sea region, which marks the confluence of the two oceans. Therefore, the south, southeast and the east Asian sub-regions and their respective countries are what the paper would be concerned about. To talk of the Pacific countries, this paper considers only three countries viz. The United States of America, Australia and the New Zealand. It is these countries that the paper would be considering as the Indo-Pacific.

The article specifically talks of this region owing to its rising relevance in the international realm and an ever rising competition prevailing in the region. The Indo-Pacific consists of some of the strongest as well as the fastest growing economies in the world. Apart from this it is believed to be a storage of natural resources and minerals, while also consisting the most strategic chokepoint around the world, i.e. the ‘Malacca Strait’. Owing to the importance of the region, its contestation should be unquestioned.

It is this economic architecture and contestations that the paper intends to put forward while providing some key solutions to the prevailing challenges. The paper proceeds by explaining the meaning and relevance of the Indo-Pacific while also explaining the importance of the usage of the term. The paper then explains the nascent economic architecture of the region by shedding some light upon the sub-regional economies and their trade patterns. While the paper explains the economic architecture, it also highlights the prevailing maritime security challenges that the region is facing while carrying out trade in the regional water bodies. Moving further the paper presents its main argument by linking the declining trade in the region to its contemporary maritime challenges. In the concluding part the paper puts forward some of the key recommendations to deal with the maritime security threats which would lead to a prosperous region.       

The Indo-Pacific

The term Indo-Pacific is generally used to denote the geographical imagination, stretching from the western coast of India to the eastern coasts of the American continent. The region was formerly known as the Asia-Pacific which was apparently coined by the US after the second world war for the common purpose of locating and distinguishing this important region from the rest of the world. It is evident that the region had always possessed the qualities to attract foreign powers which may be one reason for all the conflicts it had seen in the past. However, it is also important to link its exploration with the declining post World War II Europe. The formulation of this region was one necessary step for the US in order to extend its allies and its markets beyond devastated Europe and towards another shore of the USSR. The region undoubtedly played a vital role in the cold war by not only grabbing the attention of both the superpowers viz. USA and USSR, but also in terms of conflicts and skirmishes of that era, for instance, the Korean War or the Vietnam conflict etc.

Then how did the narrative change to the Indo-Pacific?

The term Indo-Pacific was first used by Commander Gurmeet Khurana in one of his papers. The word Asia-Pacific denoted a wider term while practically it always consisted of area starting from Chinese subcontinent till USA (India came in later). Therefore, the term Indo-Pacific was used to denote the region between the Indian and Pacific Ocean. The recent emphasis of USA over the term Indo-Pacific takes a different turn altogether. The rising Chinese might (economic and military) has once again put US under a fear of losing its influence, that it once experienced during the Cold War era. The US holds that Chinese military modernisation tends to undermine the regional stability and protect its regional dominance. Therefore, in order to counterbalance China, the US wants to pose India as a possible contender against its dominance in the region, and it thus presses for greater use of the Indo-Pacific narrative. Having discussed this evident and widely known fact, it is important to analyse that while the term Indo-Pacific denotes the region between the Indian and the Pacific Oceans, the aggrandisement from the part of US can be explained by looking at the first word, i.e. “Indo”. The term Indo, although standing for Indian ocean, having its origin from India has a frustrating effect on China. Considering the bitter ties between the two Asian giants, China does not want India to become yet another obstacle in realising its “Old Chinese Dream”. Besides its significant military power, the unprecedented rise of the Indian economy has already made it an alternative of China for big investment companies. This phenomenon can certainly explain US emphasis and China’s avoidance of the term Indo-Pacific.

Trade and Economics in the Indo-Pacific

Since the paper considers Indo-Pacific as the region comprising territory from the western borders of India till the western coast line of the United States, it is important that one can consider Asia as comprising of three sub regions, viz.- South Asia, Southeast Asia, and East Asia. The distinction becomes important to avoid confusions while making an in-depth study of the region as a whole. Countries within South Asia are India, Pakistan, Sri Lanka, Nepal, Bangladesh and Bhutan, while countries such as Laos, Vietnam, Singapore, Malaysia, Thailand, Indonesia and Philippines make up South East Asia. The East Asian region comprises of countries like- Japan, South as well as North Korea, China, Taiwan and Hong Kong. The trio sub regions vary in terms of environment, issues, challenges, threats and opportunities and require different approaches while dealing with problems. While some deal with neighbouring rivalries, yet others face civil unrests and domestic issues. Nevertheless, once the “poor man” of the world has now risen to become the ultimate economic and investment hotspot. While the developed western countries witness a gradual fall in their economies, the region has been reporting high levels of economic growth since the beginning of twenty-first century. Asian countries are serving as global growth engines by means of their trade, investment opportunities and vast markets, and also aspire to become leading economic powers. Even during the global economic crisis of 2008, Asian economies took a moderate downfall while growing faster than many other countries in the world (Sharma, 2013). It should be noted that the countries aforementioned in the South East Asian bloc largely comprise of the member states of the Association of South East Asian Nations (ASEAN) and on the other hand the countries in the South Asian region are a part of South Asian Association for Regional Cooperation. Since our objective here is not to focus on any one particular country, the paper intends to focus on these sub-regional groupings rather than focusing on individual countries for a general understanding of the economic architecture of the region as a whole. However, since there has not been any exclusive organisation comprising of China, Japan and South Korea alone, the paper proceeds by discussing these countries by clubbing them together into a hypothetical grouping under the name “East Asian Association” (EAA). The name shall only be used in the paper to signify above mentioned east Asian countries for the vantage of the readers and hence does not claim existence of any such association or organisation.  

Strategic Importance of the Indo-Pacific

Apart from being a region of major economic powers, the Indo-Pacific is important due to its strategic placement and the presence of some very crucial trade routes. The strait of Malacca that lies between the Malaysian, Indonesian and the Singaporean territories is the global gateway towards the East and South East Asian countries. Any sort of commercial ships needs to pass through this strait in order to reach out to these sub regions. The strait opens up in the South China Sea (SES), which is probably the most contested maritime region in the world. The South China sea is a dense maritime region with international boundaries at close proximities.

The Spratly and the Paracel islands in the SCS have immense energy reserves. According to a report by US Energy Information Administration (EIA), the islands hold approximately 190 trillion cubic feet of natural gas and 11 billion barrels of untapped oil. The EIA claims the above findings to be both proved and probable making it a high-end estimate (South China Sea, 2013, para.7).

East Asia’s Economic Architecture

The east Asian region majorly includes developed countries with high economic growth and GDP rates. Countries that we are referring to here, viz.- China, Japan and South Korea, have witnessed massive economic growth at different intervals. Japan as a close US ally has been witnessing a massive economic growth since the Korean War of 1950s. Major economic and land reforms introduced by former Japanese Prime Minister Ikeda Hayato in the 1960s led to significant rise in Japanese GDP growth. Since then it has found its place in the list of world’s top exporters. While Japan managed to remain world’s second largest economy after the US for a much longer time period, its economy was overtaken by the unprecedentedly rising China in 2010. One thing that could be unanimously agreed to while evaluating the reasons of a phenomenal growth of Chinese economy were its early reforms. China having opened its economy in 1978 through its “Open Door Policy” by its then Premier Deng Xiaoping following a prolonged economic stoop during the Mao years. Premier Xiaoping gradually introduced various steps from decentralising of foreign trade authority to easing tariffs on imports followed by setting up of special economic zones in order to nudge the foreign investors to invest in China. The policy had significant effects on China’s import and export volumes viz-a-viz its GDP growth. Total imports and exports increased from $206 Billion in 1978 to $4.1 Trillion in 2017. Talking of only imports, marked an increase from $11 Billion in 1978 to $1.8 Trillion in 2017, while Exports on the other hand registered an increase from $10 Billion in 1978 to $2.2 Trillion in 2017 making an annual growth of more than 14 per cent up till 2017 (Jiang, 2018). Chinese GDP rose many-fold during this time, from being the seventh largest economy in the world at $305.35 Billion in the 1980s, to become world’s second largest after the USA at $ 13.4 Trillion in 2018 (Silver, 2020). On somewhat similar path of growth followed the Republic of Korea which began its development journey in 1960 from a country counted among the most poor to become one of the strongest growing economies in the world. Korea’s heavy industrialization and cutting edge technology driven production units served it twelfth rank in the largest global GDP list at $ 1.63 Trillion as of 2018 (Silver, 2020). South Korea with the help of its liberalisation policies managed to overtake even the US to become the fourth most preferred place for the ease of doing business. Even for that matter it has succeeded other regional countries such as Japan and China in domains like electricity accessibility, conducive business environment, resolving insolvency issues etc. which would get more clear by looking at the below table illustrating ranks of respective countries in different business related domains.   

In order to get a comprehensive idea of the economic architecture of east Asian region as a whole the paper proceeds by examining its inter-regional trade patterns i.e. with South Asia and South East Asia, intra-regional trade and its share in world trade.   

East Asian Trade Volume

While the East Asian Association majorly comprises of developed and stable economies, it is evident that China is unarguably the biggest economy and trader in the region, and it therefore becomes important that we have a clear understanding of its trade with countries around the world. China’s share of world trade increased from less than 2 per cent in 1978 to approximately 13 per cent in 2015, its global ranking in foreign trade rose from 32 in 1978 to number one since 2010 (Jiang, 2018). China’s share in world trade (per cent) and its global merchandise Exports rose from $14 Billion in 1979 to $2.5 Trillion in 2018 (Morrison, 2019). China’s foremost trading partner is the European Union sharing a trade relationship worth $618 Billion in 2018, followed by USA, ASEAN and Japan.              

Its global merchandise exports rose from $14 Billion in 1979 to $2.5 Trillion in 2018 (Morrison, 2019). China’s foremost trading partner is the European Union, sharing a trade relationship worth $618 Billion in 2018 followed by USA, ASEAN and Japan. While on the other hand, Japan, which saw its economic boom till the advent of the twenty-first century became a major exporter in the technological, electronics and automobile sectors. Toyota, Honda, Mitsubishi, Nissan and Suzuki, to name some, are the leading giants in the automobile sector across the world. Leading electronic companies like Panasonic, Hitachi, Toshiba and even Sony corporation are all Japanese companies that have made a distinct position in the international market. The below table depicts some of Japan’s major trading partners across the world as per the year 2018 estimated by the World Trade Organisation.

South Asian Economies and Trade flows

After studying the Chinese growth it would be most imperative and at the same time logical to consider India’s growth story simultaneously. Imperative because like China, India is also one of the fastest growing economies in the world and considered to be a second Asian elephant after China, apart from being the largest economy in the sub-region. Logical because India is China’s immediate neighbour in addition to being its foremost competitor and challenge after the USA.  

           India has a $2.6 trillion economy in nominal terms making it fifth largest in the world. It is also world’s largest market for foreign goods which could be understood by looking at the trade deficit that India holds. It amounts for 2 percent share in the global trade volume with exports standing at $292 billion and imports valuing $417 billion (OEC, 2017, para.2).

However, India is just a part of the bigger south Asian region, which includes some of the world’s fastest growing economies. Bangladesh is the second fastest growing economy of the sub-region after India. It is a global leader in ready-made garment industry, which is also its top exporting merchandise (Samaranayake, 2019, pg.8). While Sri Lanka and Nepal are also growing economies with considerable trade flows across the world, Pakistan has picked up a reverse pace in the last five years, with GDP declining rapidly in both nominal and purchasing power parity terms. Owing to border tensions, its trade with India worth $2 billion has reached to an all-time low.

In totality the region had the fastest growing economy in 2018 with a 6.9 percent growth rate. The regional growth has been attributed to rapidly rising imports owing to a vast market and foreign direct investments, which grew at 9.6 percent in 2018 (Exports Wanted, 2019, pg.11). 

South Asia’s Inter-Regional trade flows

South Asian countries have great economic ties with other regional countries, mostly with China, Japan and US. While US is India’s largest trading partner, overtaking China in 2019, Bangladesh, Pakistan and Sri Lanka are China’s biggest export markets in the sub-region. Considering the fact that all the countries in the region are still under the developing category, they are more dependent on imports from other countries. In 2014 China’s total trade with the region stood at $10.6 billion with an annual 10 percent year-on-year increase (Xu, 2017, pg.110). India stands as the largest exporter to the Southeast Asia as well as the Pacific countries. About 95 percent of south Asia’s total trade to south east Asia is attributed to Indian exports, however it makes up only 11 percent of India’s total export flows (Indo-Pacific Economic Corridor, 2015, pg.13).      

Some of the major trading partners of the South Asian region as a whole in the year 2013. The region East Asia consists of- Japan, South Korea and Hong Kong. While it is very evident that the region itself is its prime trade destinations, illustrating the high trade volume between the south Asian countries.

ASEAN Economy.

The Southeast Asian countries, ever since the formation of ASEAN in 1967 have focused on a combined economic development rather than giving primacy to individual growth. Consisting of a few underdeveloped or developing Southeast Asian countries, the ASEAN has shown tremendous combined economic growth. Its current GDP amounted to $2.8 trillion in 2017, making it the seventh largest economy in the world and fourth largest in Asia (ASEAN Key Figures, 2018, pg.27). During the global financial crisis ASEAN economy continuously rose with some minor declines. A break-down of its economy proves Indonesia having the largest share (ASEAN Key Figures, 2018, pg.28).

Southeast Asian Trade flows.

Trade of goods and services has become a major force behind ASEAN’s economic boost since the advent of twenty-first century. It’s total merchandise trade increased from $790 billion in 2000 to $2,574 billion in 2017 and showed a continuous growth in the past couple of decades with 2009 crisis being an exception (ASEAN Key Figures, 2018, pg.33). Analyses into its trade distribution reveals that ASEAN is its own biggest trade market. Intra-ASEAN trade accounts for about 23 percent of its total trade flows. China follows the trail at the second position importing 14.3 percent of ASEAN’s total trade outflows. The European Union is the third largest market for ASEAN goods holding 12 percent of its total export share. While US occupies the third position in the list it holds 10.8 percent share of Southeast Asia’s total exports.

On the other hand, ASEAN again is its own largest importer with around 22.3 percent of its total import taking place within ASEAN countries. China has steadily emerged as its second largest importer at 20 percent of its total import with the share of Japan and US declining considerably since the past one decade.  

The Pacific Rim

In the pacific rim region, the paper intends to focus on two countries that fall at the point of confluence of the Indian and the Pacific oceans viz. Australia and the New Zealand. Although New Zealand is also a rapidly emerging nation, the focus of the paper would largely be to analyse the trade and economy of Australia while shedding some light on the former as well.

Australia has a GDP of $1.38 trillion in nominal terms and begs fourteenth position worldwide. In addition to being the world’s largest exporter of iron ore it is also among the largest producer of bauxite, nickel, zinc ore and gold, and also poses large deposits of natural gas and coal. The presence of such minerals has led Australia to become one of the leading countries in the mining sector. As per some reports, mining sector made up 9 percent of its total GDP, while minerals and fuels accounted for 42 percent of its exports in 2015 (Department of Foreign Affairs and Trade, Australia Government). Australia has over the time become one of the most relevant regional players with an increasing engagement with the Indo-Pacific countries in terms of trade. From 1960’s to the 1980’s only developed western world culminated into its top trading partners. However, over the time Australia has shifted its focus onto the Indo-Pacific region with all of its top five trading partners in 2019 lying in the region, making up 73 percent of its total trade (Department of Foreign Affairs and Trade, Australian Government). 

These countries are China, Japan, USA, Republic of Korea and Singapore as depicted in the below given table. Moreover, in terms of trade it shows that out of all top ten partners it is only the United Kingdom that could be seen, among all other Indo-Pacific countries, as an extra regional country. It is also interesting that China tops the table in both export and the import category, which implies that Australia has over the time become much dependent upon China for its trade. 

Apart from the trade in goods and services, Australian economy is also heavily dependent upon the influx of international students in the Australian universities for higher education. The international education is yet another pillar of Australian economy injecting approximately $35 billion in 2018 (Pearcey, International Education Association of Australia, 2019). This is just the education fee that students give to study in the country additional costs like miscellaneous expenditures including living expenses amounts to $51,000 per student which totalled at $9 billion for the academic year 2016-17. This in turn created about 30,000 jobs for Australians alone (Pearcey, International Education Association of Australia, 2019).  

The Free and Open Indo-Pacific

The presence of prime US allies in the region viz. Japan and Philippines has automatically dragged the great power into the scenario. Although the US claims its historical role in pursuance of freedom and openness in the region and that its future is inter-woven with the Indo-Pacific (Indo-Pacific Strategy Report, 2019, pg.2 ), it is seen that US’s specific interest focused on the region only since the cold war. The reason behind its aggrandized flattering of the region could be explained by analysing its trade ties with the regional countries. Of all its major trade partners, various Indo-Pacific countries find their positions in the top ten. For instance US has a $1.9 trillion two-way trade with the region as a whole, of which China being its top trading partner at $636 billion, its closest regional ally Japan is its 4^th largest trading partner staring at a trade volume of $204.2 billion. With South Korea ($119.4 billion), India ($74.3 billion) and Taiwan ($68.2 billion) acquiring 6^th, 9^th and 11^th position respectively (Gray, 2018, para.14). the United States’ major commodity trade with the middle east and the rest of Asia passes through the strait of Malacca which explains region’s importance for US.  

In the recent years US policy towards the region has got a new dimension in the form of “free and open Indo-Pacific”. The term free and open was first talked about, by the US President Donald Trump in 2017 which is based on the principals of: (Indo-Pacific Strategy Report, 2019 pg.3)

1.       Respect for Sovereignty and Independence of all nations.  

2.      Peaceful resolution of disputes.

3.      Reciprocity in trade based on transparency, connectivity and investment.

4.     Rules based interaction and activities.

5.      Freedom of navigation and overflight.

For the US, a free and open Indo-Pacific would mean mutual respect, accountability, responsibility and priorities. Through this stems America's ambitious vision to build an Indo-Pacific Economic Corridor (IPEC), which would foster trade and economics in the region by acting as a bridge between the south and southeast Asia while connecting both the sub-regions to the pacific.

Merchandise Trade in the Indo-Pacific

Being a region filled with some of world’s largest manufacturers, the combined growth of the region has been driven by trade in goods. Such manufactured goods vary from heavy machinery to mobile gadgets and from cloth and textile to agricultural products. Considering the presence of major technological producers, it is quite expected that trade in machinery and electrical appliances contributed 60 percent of its total exports while making 50 percent of total imports in 2017 (Asia-Pacific Trade and Investment Report, 2018, pg.5). Although the region has a general reputation for its trade in electronics and machinery, it should be noted that it is the cloth and footwear industry that brings up a surplus trade volume for the region. According to the report the apparel industry marked a trade surplus worth $313 billion in 2017, which was followed by electrical equipment at $163 billion (Asia-Pacific Trade and Investment Report, 2018, pg.6-7). The agricultural products on the other hand have kept a decent trade share of about 10 percent.

While exports of the region have generally been dominated by finished manufactured goods and electronics, imports in the region are generally in raw forms such as minerals, natural gas, petroleum etc. The region’s dependence on central and west Asian countries for natural resources have led to trade deficits in this sector. The region recorded a deficit of $381 billion in fuel commodities. Even with a modest export volume in the agricultural sector, the region is also dependent of imports for certain agricultural products, mainly soybeans and processed food packets amounting to a deficit of $104 billion.

Although the Indo-Pacific is a vast region, even so a majority of its exports volume is attributed to the east Asian region. Countries such as China, Japan and South Korea, owing to their technological superiority and logistical capability, collectively account for more than half of the regions total trade volume in 2017 (Asia-Pacific Trade and Investment Report, 2018, pg.9).

Foreign Direct Investment in the Indo-Pacific

Countries in the region have been global hotspots for Foreign Direct Investments since the advent of twenty-first century. In literal terms the actual FDI growth in the region has been driven mainly by China. Over the years, it has become the “World’s Factory” or the manufacturing hub owing to its business conducive policies, cheap labour and vast markets (Bajpai, 2020, para.2). Following on the same trajectory are Japan, South Korea and Singapore. The region in 2017 collectively attracted 39 percent of global FDI outflows with China having a share of 43 percent of the total. In addition to being a major destination for FDI the region is also a major source of FDI with a share of 36 percent in global FDI outflows.

In terms of Greenfield FDIs, China attracted about 50 percent of total inflow in 2017 while ASEAN was the second most attractive destination. However, as with the case of merchandise exports in the domain of FDIs too, the East Asian Association leaps forward to other sub-regions. This has been a direct effect of non-conducive business environment and limited production capacity (Asia-Pacific Trade and Investment Report, 2018, pg.xiv).      

Declining Trade in the Indo-Pacific

The economic growth and trade flows in the Indo-Pacific region are witnessing a gradual decline since the first half of 2019. As the global growth was expected to slow down by 2.5 per cent in 2019 among world’s largest economies like US and several European countries. This has had an adverse impact on the developing Asian and Pacific countries illustrated in a decreasing regional growth rate from 6.5 per cent in the first half of 2018 to 6 per cent in the first half of 2019 (Weathering Growing Risks, 2019, pg.2). China’s economic growth has been continuously falling from past 12 months from 6.5 per cent in 2018 to 6.3 percent in 2019 reflecting a weaker export and private investment growth rate (Weathering Growing Risks, 2019, pg.3). The slowdown in China is not specific to a few areas, rather, it is slump that is effecting a various number of commercial activities ranging from automobile sectors to real estate and to retail trade as well (Weathering Growing Risks 2019, pg.6). It is not just China that is facing an economic slowdown, other important players in the southeast Asian region, like Vietnam, Thailand, Malaysia and Indonesia are also suffering from somewhat similar downgrowth. As presented in the below given graph showing the gradual decline in the economic growth rates of different southeast Asian countries with an addition to China.

Moreover, countries in the south Asian region, even though not so strong, India being an exception, are witnessing a gradual decline in their respective economies and trade volumes both within and outside the sub-region. For instance, India after displaying great economic and trade growth since the 1991 liberalisation policies, had bumped into a gradual slowdown trap since 2011. Similar to that of China, India’s growth decline has a wide base affecting multiple work fields from manufacturing sector to retail shops and from real estate to automobile businesses. It is also witnessing a sharp decline in trade, majorly with its neighbouring and other regional countries like Pakistan, Malaysia, Nepal etc.

For the Indo-Pacific, economic growth and trade go simultaneously, baring a direct relation between the both. The domestic economic decline in the region could be seen as a direct effect of its trade slowdown.

Thus, a fall in global demand would mean decreasing trade and a decreasing trade would mean a cut in domestic production rates, which would negatively impact employment in the country, affecting its purchasing power and GDP causing a decline in overall economic growth.  

Due to a decline in demand and supply chains, foreign direct investment has also suffered in the region. The disturbances were evident in the 2017 with a 2 percent fall in total FDI inflows, while the downfall was 4 percent in 2018. On the other hand, greenfield FDIs witnessed sharp decline of 40 percent in 2017 as compared to the 13 percent globally. Such a drastic fall is assumed to be a result of changing national policies, specifically that of USA and China. 

 Maritime Security Issues in the Indo-Pacific

As we examine the economic architecture of the region while focusing on both economic and trade aspects of the sub-regions the proceeds by evaluating some maritime disputes and issues that the region is facing. While it is clear that economic activities and trade are most important aspects for any region to prove their capability and worth in the international domain. At the same time, it should be mentioned that regions with close territorial proximity of the countries, having vast resources found in the depths of oceans and important maritime routes are often disputed. Since oceans, unlike land territories, cannot have clearly demarcated boundaries, they generally become the bone of contention between different countries. Maritime security thus, play a significant role in ensuring peace and stability in a region for efficient and optimal trade and economic activities. If we try to analyse three maritime issues that could threaten the economic architecture of a region, then they would be- i.) International Territorial Disputes between different countries; ii.) Maritime Piracy and Terrorism, and; iii.) Marine Pollution and Environment. The paper contends that the evident decline of trade and economics in the Indo-Pacific, as mentioned in the previous chapter, is a result of increased regional tensions and trade wars between the regional countries. It proceeds by explaining the effects of regional tensions on the economic architecture on the region and later underlines two other maritime challenges that are additional threats to the regional economic architecture viz. maritime piracy and marine pollution and how their removal could result in a more stable region.       

International Territorial Disputes

“Violence is formed by the scarcity of nature, and will stay with us as long as we live in scarcity” (Haroutioun Bochnakian).

The above statement was made by professor Haroutioun Bochnakian in his famous book the Human Consensus and the Ultimate Project of Humanity, 2016. However, this statement has a huge relevance in the contemporary world. As we discussed about the economic architecture of the east and southeast Asian countries and the presence of natural energy reserves in the SCS it is quite evident that the region would be highly contested. The very presence of scarce resources such as untapped oil and natural gas is a root cause of major contentions between the countries. The situation in the Indo-Pacific becomes more vulnerable by the fact that the international boundaries are in close proximity with each other. This is because as per the guidelines of the UN Convention on the Laws of the Sea (UNCLOS), countries have Exclusive Economic Zones (EEZ) stretched up to two hundred nautical miles off their respective shores. This has caused overlapping of EEZ’s of different countries resulting in conflicting claims. Some of the principle claimants in the sub-region are China, Japan, Malaysia, Indonesia, Vietnam and Philippines. While China’s claims in the SES are based upon its historical naval expeditions by the Chinese Son dynasty in the 15^th century, it has presented its historically drawn maps and old records at the UNCLOS in order to reclaim the contested territories. It also puts forth its archaeological findings asserting that the region was an ancient fishing site and a merchant activity spot (South China Sea, 2013, para.22). While China’s theory of exclusive rights in the SCS region have been rejected by Philippines, Malaysia, Indonesia and Vietnam in particular these countries have their own claims based on different sources. For instance, Vietnam has based its complete authority over the Spratly and the Paracel islands upon the historical authority of France over the islands in the 1930’s and Vietnam being the former French colony has automatically succeeded to all its former subject territories. On the other hand, Indonesia limits its claims to the UNCLOS guidelines regarding EEZs although it does not lay any claims on either Spratly or Paracel islands. (South China Sea, 2013, para. 26).  

           However, of these numerous disputes, Chinese claims stand apart and aggressive from that of other claimants. China having been able to become a “regional hegemon” has increased its military might five folds since 1980. Its rising economy has acted as a helping hand for it to raise its military expenditure. It has the largest standing army in the world with the most capable air force and naval fleets in the Asian continent. From being the sixth largest military spender in 2000 at $43.1 billion, it has now acquired the second place, after US, in annual military expenditure at $266.4 billion (China Power, 2020, para.3). This has a direct impact on China’s dealing with its external disputes and relations. A more strengthened China has much more aggressive policies towards its neighbours and its contending neighbouring territories of which a vice-versa does not seems to be possible in the near future. As in the case of other claimants the assertions are limited to debates at international organisations or national level legislations like that of Vietnam which passed national legislation in 2012 declaring its sovereign rights over the Spratly and Paracel islands (South China Sea, 2013, para.35). China has on the other hand initiated constructions on the disputed islands and reclaimed more than 3,200 acres since 2015 (China’s Maritime Disputes, 2019, para.4). According to the US Department of Defence report, China has built advance military infrastructure including runways, support buildings, loading piers and communication facilities that would significantly boost it power projection ability towards by one thousand kilometres i.e. 620 miles (China’s Maritime Disputes, 2019, para.3).

Maritime Piracy and Terrorism

International territorial disputes is one thing that could possibly be resolved through talks and diplomatic initiatives, if not conflicts. However, maritime regions also hold one very potential threat in the form of maritime piracy and terrorism. The term maritime piracy literally refers to the acts of violence and thefts committed on the high seas or the EEZs specifically. Why specifically? Because under article 101 of the UNCLOS, the word piracy can only be used to define an act of violence that occurred at the high seas and not within the internal waters of a country (Bateman, 2010, pg.737). Maritime piracy related crimes in the strait of Malacca and the SCS have been of varied types ranging from robbery at sea to hijacking vessels and their kidnapping for ransom and theft from ships at anchor (Mahnken, 2011, pg.20). Around seventy-two percent of which are targeted to loot valuables and stores of the crew (Dillon, 2000, para.4). According to an estimate, the region witnesses an annual loss of $16 billion (Dillon, 2000, para.7).

However, owing to increased national and regional responses in the form of increased patrolling, heavy personnel deployment, inducting patrolling boats with modern technology have substantially decreased the number of piracy attempts or incident by twenty-five per cent in the region (Bateman, 2010, pg.743) with Indonesia recording a record low at 43 cases in 2017 from 106 in 2013. These feats could be largely attributed to the presence of the Malaysian Maritime Agency and the formation of Malacca Straits Petrol Network (MSPN). Ever since the formation of MSPN between Malaysia, Thailand, Indonesia and Singapore there has been an increased cooperation leading to joint naval and aerial patrolling of vulnerable points resulting in reduction of piracy cases at the choke points (World Politics Review, 2018, para.5)

Even though the early awareness has helped cut the piracy incidents and losses caused by it, these efforts have largely worked as deterrents and not as long-term solutions therefore they are reliable only till the time pirates come up with some new strategies to counter the forces. Moreover, cases have not been at halt. Considering the vast and open oceans it is not desirable to do away with these lethal criminals. As a matter of fact, according to the report of International Maritime Bureau the southeast Asia region saw the largest rate of piracy in the world with Philippines recording the highest jump at twenty-two cases in 2017 (World Politics Review, 2018, para.3). There is certainly a long way to go. 

Environmental Concerns

Being the global hotspot of trade and investment the flow of commercial vessels and cargo ships have been on a constant rise in the region. Owing to the importance of the Malaccan strait the region observes an estimated 100,000 vessels passing by annually, which makes it the busiest trade route globally (Calamur, 2017, para.2). Even when these growing trades are a sign of economic growth, it is not all good for the region. With increasing trade and economic activity comes environmental threats and marine pollution. Growing number of vessels clearly implies a growing congestion and traffic in the region, leading to a surge in accidents and ship collisions. Collision of vessels that generally carry crude oil, strong chemicals as well as goods & commodities could lead to a heavy amount of these materials being dunked into the sea resulting in massive loss to marine life. Apart from the collisions, vessels do generally pollute the marine environment majorly through there carbon emission which is roughly 1 billion tonnes annually amounting to three percent of total carbon emissions globally (Olmer, 2017, pg.14). Different classes of vessels like cruise and passenger ships also have immense implication on the marine life owing to large sewage dumping which is estimated to be 210,000 gallons during a week long voyage, creating bacteria and algae in the surrounding waters (Marine Insights, 2019, para.16).                          

Considering the heightened tensions in the region heavy military presence is quite patent. However, heavy militarisation and presence of warships have had negative impacts on the oceans. This is because of the military exercises and practices that are carried out by releasing destructive weapons in the seas, sometimes in the name of test fire, resulting in toxic chemicals being discharged in the sea itself.

All of this brings huge destruction in the marine life, from fishes to reefs and underwater plants. As result of which a majority of the population residing near sea shores in different countries have to bear huge consequences. Also a rapidly polluting environment is causing an abrupt sea level rise which threatens the very existence of small island nations surrounded by sea.

The Inverse Relationship 

As of now the paper has discussed the regional economic architecture and how it is increasing at a diminishing rate and also looked at some prominent maritime security issues that the region is facing. It analysed how a declining trade is adversely impacting the economic growth of regional countries. But why is trade declining in the Indo-Pacific? 

Although there could be numerous reasons behind dropping of trade flows in the region ranging from domestic economic slowdowns to the lack of adequate trade agreements. The paper argues that there is an inverse relation between the trade and economics in the region forming up its economic architecture, and the contemporary maritime disputes it is facing.

Thus, in the Indo-Pacific the fall in trade is a direct result of rising disputes, trade wars and uncertainties in the region. These disputes could be categorised in the territorial domain specifically in the SCS and the ECS region. Ever since the escalation of the SCS dispute with China adopting aggressive policies to reclaim the islands in the region in 2015, various regional countries have developed bitter relations with China. These bitter turns have led to deteriorating business confidence and weakening investments (East Asia and Pacific Economic Update, 2019). Countries like Vietnam and Philippines have deliberately trimmed trade ties with China. While China was the biggest importer for Vietnam and the third largest market for its goods and services the two-way trade has been sliding with since 2015. It should be noted that even before 2015 the bilateral trade was increase but at a diminishing rate (Huong, 2019, pg.18). the decline in trade between the two is also being assumed to be a result of the trade war between US and China that began in 2018 upon the long drawn claims of Chinese trade malpractices and intellectual property theft by US President Donald Trump. The Chinese attempts of piracy or theft of intellectual property is yet another kind of technological warfare, generally used towards US, as its tool to become the global leader in the information technology domain, surpassing the later (Smith, 2019, para.1). There is yet another not so discussed dimension to it that the paper would present with regard to Trump’s initiation of trade war. Keeping in the view the presence of closest US allies in the sub-region and the threat they discern from the potential Chinese aggression, it could be one of its strategies to bring down Chinese economic growth, which could possibly result in a temporary yet required halt to its military aggressions. To look at the western side of the Chinese borders, India and Bhutan are some other countries that are ever suspicious of Chinese activities owing to its past activities. The Chinese aggression near the Ladakh border and the Arunachal border and its frequent jump in military deployment have been seen by Indians with a bitter mindset resulting in mass boycotting of Chinese products by Indians (as depicted in the image below) causing a trade decline by $4 billion from $96 billion in 2018 to $92 billion in 2019 (Varma, 2020, para.4).

Apart from China the South Asian region in particular has been tied up in intra as well as inter regional conflicts directly affecting trade in the region. India, as a matter of fact, has cut all of its trade ties with Pakistan, which stood at $2 billion according to the Indian Council for Research on International Economic Relations (ICRIER), ever since the 2019 terrorist attack in the Indian territory of Kashmir valley (Sharma, 2019, pg.5). India was also in a diplomatic dispute with Malaysia over the latter’s remark on recent domestic policies of the former, which eventually led to a major tariff imposition on Malaysia’s palm oil import in India. This has impacted the $17 billion two way trade value (Curbs likely on Imports from Malaysia, 2020, para.5). According to the 2018 reports of the UN Economic and Social Commission for Asia Pacific (UNESCAP), the trade performance in the region further declined, causing exports to slow at 2.3 percent and imports to 3.5 percent in 2019 due to the worsened trade tensions in the region (Asia-Pacific Trade and Investment Report, 2018, pg.xiii).

In addition to inter-state disputes, the global warming and maritime pollution is also causing a great damage to the economic activity in the region, specifically in the fisheries sector. According to some estimates the economic damage caused by marine pollution globally amounted to $13 billion annually.

Marine economy is a major income source and a GDP contributor for a majority of east and south east Asian countries. Countries such as Malaysia, Thailand, Philippines, South Korea and China are among the top 25 marine capturers in the world. Damages to fisheries, shipping, and the tourism sector within the Indo-Pacific region was $1.3 billion. These losses were largely attributed to a decline in the commercial species and the aqua habitat, while operational interruptions, equipment damage and human casualties a reduction of 3.3 percent in the workforce of the fishing sector between the years 2010-2014 (Aung & Torre, 2019, pg.27-29).     

The Role of Quad in maintaining Maritime Security

Talking of the Indo-Pacific lets one confront some of the major maritime challenges in the world’s most sought-after region. Considering the presence of so many countries, quarrels in the region are quite expected. Having overviewed the overall maritime scenario and discussed about some of most prominent maritime issues of the region, the paper now tends put forth some possible suggestion with regard to maintaining the peace and stability in the region. Keeping in view of China’s unmatched might, it is unthinkable of posing any one regional country as a potential competitor for establishing supremacy. Even India for that matter does not stand anywhere in front of China, even after all its growth and accomplishment. This impossibility for a single regional player challenge drags our attention towards the dimension of multi-nation alliances and international groupings. One grouping that could instantly come to one’s mind is the Association for South East Asian Countries (ASEAN). Regional peace and stability along with free and fair trade and business was the foundational principles of the grouping. Ever since its formation the group has contributed in boosting the regional trade both within and without. However, considering the fact that ASEAN having been formed purely on economic lines does not touch upon military and political dimensions of cooperation. This certainly gives us clues that it would not be desirable to depend upon this grouping that works on what it calls the “ASEAN way”, the way that certainly does not match the “realistic way”. While it fails to offer us a strong opponent against China, it nevertheless compels us to look at other directions for that matter.

Here comes the role of a relatively new group of four countries spanning across the Indian as well as Pacific Ocean which is an organisation of the Indo-Pacific region in its true spirit, i.e. the Quad. 

The Quad or the Quadrilateral Security Dialogues refers to the grouping of four countries spread across the Indo-Pacific region viz. India, Japan, USA and Australia. The four first came together while responding to the 2004 “Boxing Day” tsunami which provided an idea for the formation of an active intercontinental grouping. Therefore, the group of four met in 2007, however this being the last one. It was only in 2017 that the Quad resumed its meetings in the wake of rising maritime instability and insecurity in the region (Buchan, 2020). While the re-establishment of the group can certainly be equated with rising Chinese aggression over the South China sea disputes, which began at the outset of 2015. It is apparently worth analysing the reasons behind the inactiveness of the group since its first official meet in May, 2007 till 2017. The global perception of the Quad as an “Anti-China Squad” intended to encircle China in the region had a very infuriating effect on it, leading it to take up the issue bilaterally. Australia’s heavy dependence on China in terms of overall trade culminated in its withdrawal, stating the 2007 meeting as “a one off and Australia would not be proposing to have a dialogue of that nature in the future” by its former Foreign Minister Stephen Smith (Madan, 2017). While it is intelligible that Australia’s disengagement served for the Quad’s disintegration, however it is also important to recognise the role of domestic problems of other partners as well. For instance, Japanese Prime Minister Shinzo Abe, who was its most ardent supporter, faced domestic crisis leading to his resignation and the Communist party of India’s criticism of the then Prime Minister Manmohan Singh’s initiatives to strengthen relations with the United States (Madan, 2017). Albeit all the reasons rendering it paralysed, just the fragility of the region served enough grounds for its restoration. The paper does not intend to offer policies and recommendations to increase cooperation within the Quad itself, which is in itself a much explored domain. Instead, the paper proceeds to assess some possibilities to increase cooperation between the Indo-Pacific region as a whole, which would be led by the Quad.

 The Quad consists of the world’s most powerful nation, it the world’s youngest and the fastest growing nation and a world’s leader in technology as its member. This in my opinion renders the group a considerable amount of strength in order to influence the region and assist it to advance in the direction of a rules based Indo-Pacific. The foremost role for Quad is, unarguably, to contain the rising dragon and its assertion of draconian laws in the region. Amid this, questions may arise on the potential role of US and its capability to singlehandedly tackle China? However, it should be noted that China is a continuously rising nation whereas US has been witnessing a gradual decline in its economy and GDP growth since the beginning of the twenty-first century. While China has become a global manufacturer, US is observing a trade misbalance with increasing imports. For US, its ongoing affairs in the middle east and western Asia holds primary relevance, while China is rapidly expanding its diplomatic base around the world. Therefore, to perceive US as a potential life saver in the region would be sheer absurdity. Nevertheless, a grouping consisting some of the world’s rising powers in addition to US would be desirable because in that case it would not shed the entire burden on one specific country.

           The foremost domain for the Quad is to work upon building a strong regional economy. By regional economy we mean economic growth and stability in all the concerned states of the region. Since a strong economy is source to all other national needs it becomes a prime aspect. Even though the Quad itself is built of some of the most powerful economies it is important that through this virtue it helps other regional countries as well. China being the second most powerful economy in the world is able to manipulate the economic needs of other countries through its infamous “debt diplomacy”. To counter the Chinese advances, it is important to have largely self-dependent and economically strong countries. One way through which economy could be boosted is by pushing the trade flows that would simultaneously raise production levels in different countries, leading to economic growth. The role of Quad here could possibly be to organise countries and introduce multiple trade agreements between the Quad and other regional economies. Providing some incentives to relatively smaller economies through tariff and non-tariff relaxations, removing trade barriers and opening up markets could be other initiatives by the quadrilateral countries. Having an upper hand in terms of economy, it is important that these countries provide big markets to smaller countries and their products. Moreover, what is important is to establish some multilateral financial institutions like a Quadrilateral Finance Bank, similar to Asian Development Bank, to provide credits to the developing or underdeveloped countries with considerably low interest rates to help them grow.        

The other important domain for the Quad is to build military capability of the region as a whole. In order to contain the rising Chinese aggression, it is important that the regional countries are backed by adequate military potentials. The role of the Quad here could be that of a leader of the sub-regional countries in assisting them to develop a solid defensive line. While it is evident that the Chinese economy has no match in the Indo-Pacific, a direct effect of which has been seen in its rising defence expenditure, this leads us to a simple conclusion that the regional countries which are no match to its economy cannot certainly match its military might as well. Hence, the primary role of the Quad is to increase defence cooperation in the region which would also include sharing of technology amongst the regional countries. This would have a great impact on the countries with lower research and development potential. Sharing technology implies trade in defence equipment and advance communication systems. Although these trades often take place in a bilateral setting, defence deals are not easy to take place and usually involve lengthy processes and time. Having a secured and stable grouping dedicated to similar causes could help accelerate such deals owing to a much more certain environment. With regard to military capacity building, US could play a major role through economical defence deals with countries like Singapore, Vietnam, Indonesia and Malaysia. These countries generally lack the modern defence equipment that would help them counter Chinese aggression, which in my opinion has resulted in fearless Chinese advancements and infrastructure building in the region. Another aspect of defence cooperation includes exercises in all three wings of the armed forces viz.- Army, Navy and Air Force. While the Quad has been organising its naval exercise called the “Malabar Exercise”, it generally includes only the Quad members apart from Singapore’s seldom exceptions. It is important that this initiative seek to attract other regional countries to ensure an active military participation by them. This might have a psychological effect on China as it would appear to have been surrounded by capable opponents which could tarnish its expansion policies.

Considering the configuration of the group, it is likely that countries would lay a firm believe on the grouping, since it is also a grouping of somewhat like-minded countries wanting to establish a rules based free and fair Indo-Pacific, it has greater chances of stability and integrity. Thus it would be a good idea if the Quadrilateral attempts to convene a joint front in international organisations and summits, to raise collective voices against the aggressive approach of China and convey their objectives to create a “free and open, rules based Indo-Pacific”. Contemplating the structure of Quad, it is most likely that its initiatives would get the international backing.

Another task for the Quad involves protection of the high seas in the region from maritime piracy and terrorism. Although patrolling is an ever-running process that is practiced by every country, to make it more efficient the paper proposes a joint patrolling effort between the Quad and the Regional Cooperation Agreement on Combating Piracy and Armed Robbery against Ships in Asia (ReCAAP). Since the ReCAAP was formed in the wake of rising piracy and ship robbery in the Indian ocean in 2006 and its Information Sharing Centre (ISC) in the same year as a first inter-government organisation fully devoted to counter such criminal activities, it has largely been successful in trimming the number of piracy related cases in the region. Even though the ReCAAP consists of 14 member states with India and Japan being one of them, a joint effort by Quad and ReCAAP is essential in two ways, first, even after consisting of 14 nation-states the ReCAAP is largely an organisation of developing countries with lower level of technological development, which may turn out to be an obstacle in fulfilling its ISC commitments of instant information and communication sharing of incidents and capacity building of contracting parties. Considering the combined strength and technological advancements of Quad countries, it is much desirable that these two organisations work in unison by sharing advance technologies and communication systems, and also conducting various counter-piracy naval drills with each other for capacity building. Working in unison would also mean strategic and efficient deployment of guarding ships and vessels for more consistent and better outcomes.  

Policy Recommendations 

Although the paper has focused largely on the possible expansion of the role of Quad in maintaining maritime security in the region, and through it, the economic architecture. However, it is not always necessary that the regional countries rely solely on the grouping. Therefore, the following are some general recommendations that focus on non-quad initiatives and steps that could be taken to tackle the maritime issues and improve the economic architecture:

Recommendation 1: It would be advisable that the US reduce its physical presence in the Indian Ocean region. This is important to decrease the insecurity factor that China holds amid heavy US presence. It is a considerable fact that presence of any foreign actor in a given region has a simultaneous effect on the regional countries. For instance, the US presence in Afghanistan triggered heavy attacks from the Taliban. Similarly, it is quite possible that the Chinese aggression is a result of the presence of an unwanted guest. Instead of deploying heavy naval strength it would be more advantageous that US work on capacity building of the region through increasing trade and defence deals. This would not only decrease the uncertainty surrounding the possible US intentions with regard to the region but will also give regional countries a chance to fight their own battle as they would be helped by US to have a stable economy and a strong military. Capable countries fighting for their own rights would be more credible and efficient rather than any other country fighting for the rights of others. 

Recommendation 2: There is absolutely no benefit in forming new organisations, it is instead important that the already existing organisations are made to work to their full potential. It has become more like a trend to form new organisations to tackle old problems. For instance Asia-Pacific Economic Corridor, Indo-Pacific Economic Corridor, Regional Comprehensive Economic Cooperation and Asia-Pacific Trade Agreement are nothing but different manifestations of same initiative, and that is to foster regional economic growth. Creating new associations or organisations have no use if they lack a shared area of interest, complete devotion to a specific cause and internal stability of the grouping itself. It is therefore important that current organisations are made conducive according to the demands of its member states and then subsequently work efficiently to achieve its prescribed goals.    

Recommendation 3: There’s a need for improved regional integration in the Indo-Pacific. A conflict ridden region has always been led to shatters even after numerous international aids and foreign mediations. A perfect example is served by the middle east or the west Asian countries where intra-regional tensions has caused vast devastation of land, life and property. Even after spending billions of dollars on the region by international organisations and global economic powers the conflicts do not seem to have any end in the near future. The same could be repeated in any other region or in the Indo-Pacific for that matter if the regional countries themselves do not approach for some stable solutions. The India-Pakistan conflict, China-India conflict, China-Vietnam Conflict or the Sino-Japanese conflict could turn violent at any moment if a collaborative effort for peace and harmony is not initiated.      

Recommendation 4: Environmental concerns should be the foremost issue for the regional countries to address instead of territorial disputes. Considering the current situation of pollution and global warming and the pace at which it is rising, it will have huge impacts on the future of the world itself and not just the Indo-Pacific. A significant number of countries in the region are in the form of small islands surrounded by ocean from all sides. This not only includes small island nations like Mauritius, Maldives or Madagascar but also other important international players like Japan, Indonesia, Philippines, Malaysia and even New Zealand for that matter. These countries not only have economic threats from pollution instead their whole existence as a nation is under grave threat as the sea level rises. Not only these island nations but bigger nations like India, China, Australia, USA are under strong possibilities to lose their cities and towns near the sea shore. However, this problem is not to be addressed by specific regions alone but needs a collective global initiative and this will require a shift of focus from petty territorial disputes to this dimension and look for ways to create a sustainable economic architecture.

Conclusion

In the paper, one has analysed the economic architecture of the region by shedding some light upon the economic activities and trade flows of the sub-regions, as we divided them. This gave us a better view of how economics is organised in the region. We then examined some of the main maritime challenges that the region faces today due to which the economic architecture suffers. In the eventual part of the paper we put forward some of the key recommendations and proposed the potential role of the Quadrilateral security dialogue in providing a secure region from all the contemporary issues and make it conducive for the a prosperous Indo-Pacific. In the end the paper also proposes some recommendations apart from the role of quadrilateral security dialogue.    

References:

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Picture Courtesy-Pinaki R Mitra

(The views expressed are personal)