Asia Territory Spats Pose Danger to Trade, Singapore Warns

The risk of territorial disputes damaging trade in Asia is “very real” and the region must focus on shoring up economic links as well as security ties, according to Singapore Defence Minister Ng Eng Hen.

“It’s completely artificial to think that there are somehow firewalls between trade and security,” Ng, 55, said yesterday in an interview at the Ministry of Defence. “We shouldn’t from a security point of view be dominating headlines every few other days and I don’t think it’s necessarily a positive if this continues for the region. At some point it may impact trade and our real economies.”

Ng was speaking after a weekend forum of defense ministers and military leaders in Singapore, where the U.S. and China openly criticized each other over their agenda in the region and China’s claims over large parts of the East China Sea and South China Sea dominated discussion. The meeting highlighted the growing pains in Asia as China emerges as a military and economic power, challenging decades of U.S. dominance.

“China’s rise is a fact,” Ng said in the interview. “China needs to articulate its own vision, and its own position in this new, revised world order. Our approach has been that dialogue is essential, inclusivity is important.”

‘Destabilizing’ Actions

U.S. Defense Secretary Chuck Hagel used a May 31 speech at the Shangri-La Dialogue in Singapore to say China has in recent months “undertaken destabilizing, unilateral actions asserting its claims in the South China Sea,” while Japanese Prime Minister Shinzo Abe said Japan did not welcome dangerous encounters by jets or warships. Lieutenant General Wang Guanzhong, the deputy chief of general staff of the People’s Liberation Army, broke from his prepared remarks to the forum to call their speeches “unimaginable.”

“If China and Japan got into a war, that would be a real problem,” Norman Boersma, Bahamas-based chief investment officer of Templeton Global Equity Group, which manages $130 billion in assets, said in an interview in Singapore. “These are two big economies and they would have a fundamental impact.”

The U.S. comments follow Vietnamese Prime Minister Nguyen Tan Dung’s appeal for a “stronger voice” from the U.S. against China after clashes between coast guard and fishing vessels near an oil rig China placed in contested waters off Vietnam’s coast. The Philippines, dwarfed militarily by China, has sought support from the U.S. and the United Nations against China’s encroachment into shoals off its coast.

Quite Strategic

Ng, a medical doctor who previously served in the education and manpower portfolios, said given the current tensions, the proposed Trans-Pacific Partnership trade pact and other multinational deals are “quite strategic, not just good to have but a must to have.” The U.S.-led 12-nation TPP, which would cover an area with about $28 trillion in annual economic output, doesn’t include China.

“You certainly don’t want a scenario where your frameworks are weighted towards security,” Ng said. “From Singapore’s point of view we would not be upset if for example there were no big issues to discuss at the Shangri-La Dialogue. That’s not a bad outcome for us.”

Under President Xi Jinping, China has taken a more assertive approach to territory. It claims much of the South China Sea under its “nine-dash line” map, first published in 1947. The map extends hundreds of miles south from China’s Hainan Island to equatorial waters off the coast of Borneo, taking in some of the world’s busiest shipping lanes. Brunei, Malaysia and the Philippines also claim parts of the sea, while Singapore is not a claimant.

Self-Restraint

The 10-member Association of Southeast Asian Nations on May 12 called for self-restraint on the territorial disputes. The statement did not mention China by name and Asean does not take a position on the actual claims. China is Asean’s biggest trading partner.

Asean is seeking a code of conduct for the waters, although talks have made little progress since China agreed in July to start discussions, and China introducing fishing rules in January requiring foreign vessels to seek permission before entering waters off its southern coast.

“To those accusations that we haven’t moved resolutely or quick enough on the code of conduct, Asean and China should say agreed, mea culpa,” Ng said. “There has been progress. Our foreign colleagues will have to work quicker, sharper and smarter to have tangible outcomes.”

Magic Contrivance

Tackling some aspects individually may be best, given the difficulty of addressing sovereignty, he said. “It’s easier to break it down into smaller pieces and not expect some magic contrivance that suddenly removes all disputes and removes all historical baggage. That’s just completely unrealistic.”

Singapore urges Thailand to move quickly toward elections, Ng said. The country’s military leaders seized power on May 22 after six months of debilitating anti-government street protests, the 12th coup in eight decades.

“We are concerned -- all countries are -- that the longer the period of military rule, the farther any country deviates from civilian rule and democratically-elected governments, and greater the risk for autocracy and the abuses that can come.”

The U.S. and Australia have suspended military cooperation with Thailand. Singapore carries out training in Thailand, “which they have kindly said we can continue and our troops are still safe there,” Ng said. “Things are so fluid that articulations of deeply held positions may not be productive at this time.”

Defense Spending

Singapore defense spending will remain fairly steady, he said. The city-state allocated S$8.6 billion ($6.8 billion) in 2004, and increased spending to S$12.2 billion last year, he said in Parliament earlier this year.

“We don’t want big dips or big jumps because we feel that’s the most disruptive for your militaries,” he said yesterday. “We’ve kept pace with real growth, or inflation.”

Turning back to the regional territorial disputes, Ng said they “need not be intractable”. “Neither do they need to precipitate outcomes which would be detrimental to the great promise that Asia holds,” he said.

“This is the region of greatest promise, and greatest performance in the past decade or so,” he said. “The question I suppose to ask is, what are we fighting about?”

To contact the reporters on this story: Rosalind Mathieson in Singapore at rmathieson3@bloomberg.net; Linus Chua in Singapore at lchua@bloomberg.net

To contact the editors responsible for this story: Rosalind Mathieson at rmathieson3@bloomberg.net Linus Chua, Andrew Davis

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