Fortnightly Review & Analysis: ASEAN, Indo-Pacific, East Asia, Japan & China (Vol 2 Issue VII)

April 1 - 15, 2017

ASEAN

Malaysian PM Najib’s Visit to India

Malaysian Prime Minister Mohd Najib Tun Abdul Razak visited India from March 30 to April 4. His visit follows the visit of PM Narendra Modi to Malaysia in November 2015. During the visit, PM Najib met with President Pranab Mukherjee, Vice-President Hamid Ansari and held bilateral meetings with PM Modi and External Affairs Minister Sushma Swaraj. Both Modi and Najib reaffirmed the importance of strategic engagement of India in regional initiatives, particularly in the ASEAN context since the initiation of the Act East Policy. Expanding upon the last joint statement on maritime security, Modi and Najib stressed the need for freedom of navigation and over-flight in the South China Sea. The two leaders further recognised that terrorism in all forms and manifestations constitutes one of the most serious threats to peace and stability in the region. They asserted that the fight against terrorism should also identify, hold accountable and take strong measures against States, which encourage, support and finance terrorism, provide sanctuary to terrorists and terror groups, and falsely extol their virtues.

Six Memoranda of Understanding/ Agreement were signed during the visit: Air Services, Sports, Palm Oil, Mutual Recognition of the Educational Qualifications, Human Resource Development, Technology Parks, and a Urea and Ammonia Manufacturing Plant. India’s ‘defence diplomacy’ towards Malaysia has over the years focused on developing an integral defence relationship through joint military exercises, training defence personnel and trade in military equipment. Malaysia is also India’s third largest trading partner in ASEAN. Bilateral trade however has declined in recent years and stood at US$ 12.8 billion in 2015-16, as against US$ 16.9 billion in 2014-15. The trade balance is in favour of Malaysia (US$ 5.4 billion in 2015-16). During the summit, Indian and Malaysian companies signed preliminary pacts worth about US$ 36 billion. Indian firms are now moving to Malaysia in a big way, making it a base to do business with other ASEAN nations. Malaysia has invested about $ 6 billion for projects in India, and Indian investment in Malaysia amounts to about $ 2.5 billion.

Duterte: South China Sea Update

Philippine President Rodrigo Duterte ordered the military to occupy and fortify all Philippine-held islands in the disputed South China Sea to assert the country’s claims amid what he says is a race to control territory in the area. Duterte said on April 6 that structures should be built on all of the nine to 10 islands, reefs and shoals held by the Philippines in the Spratly Islands. He also mentioned that he may visit one of the islands, Pag-asa, the local name for Thitu Island, to plant a Philippine flag on Independence Day. He said money has been budgeted to repair the runway there, home to a small fishing community and Filipino troops.“It looks like everybody is making a grab for the islands there, so we better live on those that are still vacant,” he told reporters during a visit to a military camp on the western island of Palawan, near the disputed Spratly group.

China asserts sovereignty over almost all of the resource-rich South China Sea despite rival claims from Southeast Asian neighbours and has rapidly built reefs into artificial islands capable of hosting military planes. Duterte has previously sought to improve Philippines’s relations with China by adopting a non-confrontational approach over their competing claims in the strategically vital waters. But the president appeared to alter his tone with his latest announcement, saying it was time to “erect structures there and raise the Philippine flag”.“I have ordered the armed forces to occupy all.“At least, let us get what is ours now and make a strong point there that it is ours,” he said, adding Manila was claiming “nine or 10” Spratly islands, reefs or cays.

Indonesia Expresses Concern over US Unilateral Strike on Syria

Indonesia expressed concern over the "unilateral actions" by the United States in launching a missile strike on an airfield in Syria in response to a suspected chemical attack on a rebel-held area earlier this week. "Military actions, undertaken without prior authorization of the UN Security Council, are not in line with international legal principles in the peaceful settlement of disputes as stipulated in the UN Charter," Foreign Ministry spokesman Arramanatha Nasir told a media briefing. “Indonesia strongly condemns the use of chemical weapons in Syria that has caused the loss of many innocent lives, including children," Nasir said. "As a state party to the Chemical Weapons Convention, Indonesia rejects the use of chemical weapons by anyone for any purpose.”

The US blamed the chemical attack on Syrian President Bashar al-Assad's regime, and CNN reported on April 6 that the Pentagon planned to release satellite imagery of Syrian aircraft dropping the chemical weapons. The Syrian military has denied responsibility. The US missile strike launched on April 6 upon US President Donald Trump's order hit the Syrian airfield where those planes are said to have taken off, with 59 Tomahawk cruise missiles, targeting the base's aircraft, petroleum and logistical storage, air defence systems, radars and other facilities. "For Indonesia, peace and stability in Syria can only be achieved through dialogue and inclusive political process," Nasir said, adding that all parties must exercise restraint in the dialogue and continue open humanitarian access to Syria.

Myanmar President Visits China

Myanmar President U Htin Kyaw visited Beijing in the second week of April for strengthening mutual relationship. Chinese side also appreciated Myanmar's support for and participation in the Belt and Road Initiative. President Xi Jinping said that China will work with Myanmar to synergize the two nations' development strategies, and push forward cooperation in trade, investment, infrastructure, energy, agriculture, water conservation, electricity, finance and border economic cooperation zone, Xi said. While no decision seems to have been taken on the fate of Myitsone Dam project which had been suspended by the previous Myanmar government it appears that China is keen to find a way out. It is quite possible that China may be offered some other strategic or other attractive projects for investment.

At the end of visit announcement was also made of the official launch oil pipeline between both the countries. The oil pipeline between Myanmar’s Arakan coast to Yunnan province of China generally follows the existing gas pipeline whose capacity is not being fully utilized because of some functional and operational problems. With the oil pipeline, China hopes to overcome its Malacca dilemma to an extent. The oil pipeline though constructed about two years back had been lying unutilized. China hopes to utilize the oil pipeline soon with operations likely to commence shortly. The agreement between China’s ‘Petro China’ and Myanmar’s government will allow the state energy giant to import overseas oil via the Bay of Bengal and pump it through the pipeline to supply a new 260,000-barrels-per-day (bpd) refinery in Yunnan province.

Additionally, the two sides also agreed to work together to better manage security in northern Burma, saying that the conflict was an issue for both countries.

Singapore

Singapore Cuts Down on Work Visas

On April 05, 2017 Singapore Ministry of Trade and Industry reaffirmed its commitment to conclude the review of its free trade agreement with India at the earliest. However, it is analysed by the Indian media that Singapore has joined the list of countries after the US to cut down on work visas issued to Indian IT professionals, prompting India to put the review of Comprehensive Economic Cooperation Agreement (CECA) on hold, citing violation of the trade pact. India and Singapore inked the CECA in June 2005 after 13 formal rounds of negotiation and covers trade in goods, trade in services, investment protections and other features. The FTA is India’s first ever CECA and is also the first comprehensive economic pact between Singapore and a South East Asian country.

On April 05, the Indian Ministry of commerce and Industry expressed its concern over Singaporean foreign employment policies which contravene free bilateral trade agreement between India and Singapore. Though the Singaporean Ministry of Trade and industry confirmed that no such intimation is received from Indian Embassy to Singapore in this regard thus, Singapore is committed to conclude the review.

South Korea

South Korea, Japan and the US conducted a Joint Naval Exercise

Amidst rising concerns over nuclear ambitions of North Korea, South Korea, Japan and the US conducted a joint naval exercise on April 02, 2017. The area of exercise was near the southern coast of South Korea closer to Japan’s Jeju islands. In the exercise nearly 800 troops took part. The objective of the drills was said to be to bolster the tactical cooperation between the navies of the US, South Korea and Japan. During the exercise tactical drills such as search, detection and tracking of mock submarines and exchange of relevant information etc. were conducted to counter the missile threats from the North Korean submarines. The exercise South Korea sent its own destroyer and helicopter while the U.S. dispatched an Aegis-equipped destroyer and a P-3C Orion patrol plane.

The drills are also considered as a preparatory measure of these countries against apparent preparation made by North Korea for its nuclear test and its latest attempt to launch a missile. It is observed by the tactical experts that North Korea is seeking to miniaturize nuclear warheads to fit onto its missiles, and SLBMs have emerged as a potential second-strike capability that enables retaliation against any attack. In the backdrop of the emerging threat, Japan, South Korea have inked an agreement of defence cooperation which includes sharing of military intelligence. The general security of military information agreement (GSOMIA) was widely seen as a breakthrough between the US allies amid the North’s saber rattling. Under security umbrella of the US, Japan and South Korea have beefed-up their defense cooperation, including ballistic missile detection and tracking drills. It is evident that the growing nuclear threat from North Korea has brought Japan and South Korea closer.

South Korea Tests Long-range Ballistic Missile

South Korea has tested a long range ballistic missile on April 06, 2017with a capability to reach any location in North Korea. These tests wereconducted within a day of North Koreafiring its own ballistic missile in the ocean of Japan. The missile met key flight and accuracy parameters. In the backdrop of installation of THAAD batteries and armed drones, the missile tests have increased the risk of hot conflict in the region. China has protested against the South Korean decision to deploy THAAD batteries and US Armed drones on its soil. China has also strongly protested against South Korea’s capacity building program of its armed forces with long range missiles and nuclear tipped missiles. China has imposed restrictions on some South Korean companies doing business in China, which led many in the South to believe Beijing was retaliating against the deployment of the BMD system. These missile tests come as US President Donald Trump meets with Chinese President Xi Jinping in Florida on April 06, 2017.

North Korea

Two Missile Tests and Military Parade amidst Growing Tensions

On April 5, North Korea test fired a medium-range ballistic missile that appeared like KN-15 from its eastern port of Sinpo into the Sea of Japan. The US Pacific Command and South Korea's defence ministry said the missile flew about 60 km (40 miles). The launch came on the eve of a visit by China's President Xi Jinping to the US to meet President Donald Trump with Trump stepping up the pressure on China, a long-time ally of Pyongyang, to help more on the issue. Trump has threatened to act unilaterally if China fails to do more to curb its neighbour’s activities.

In a military parade on the anniversary of North Korean founder, Kim Il Sung’s birthday on April 15, submarine-launched ballistic missiles appeared for the first time along with a new intercontinental ballistic missile. In 2012, North Korea had unveiled long-range missiles that some arms analysts dismissed as fake. “If the US provokes recklessly, the revolutionary forces will take an annihilating strike,” Choe Ryong Hae, a senior regime official, said in a speech at the parade. North Korea is ready for a nuclear or full-scale war if the US wants it, he added. North Korea later fired another unidentified ballistic missile after the parade that exploded almost immediately after launch, coinciding with US Vice-President Mike Pence’s 10 day Asia Tour.

While not publicly defining its plans, the White House has said that all options are on the table to prevent North Korea from acquiring the ability to strike the US with a nuclear weapon. President Donald Trump this month dispatched the USS Carl Vinson fleet toward the Korean Peninsula as the US weighed retaliation for any missile or nuclear test. Any US military strike risks leading to a war that may devastate South Korea and Japan, two American allies in striking range of North’s retaliatory attacks. China warned on April 14 that war over North Korea could break out 'at any moment'. Chinese Foreign Minister Wang Yi stated that there can be no winners in a war between the US and North Korea and pledged support for dialogue between the sides.

Japan

Kaga Destroyer Deployed

The JS Kaga (DDH-184) launched in late August 2015 was deployed to the No. 4 Escort Flotilla in the port of Kure, Hiroshima Prefecture in April 2017. Named after the ancient Kaga province, the second ship of the Izumo class has the dubious honour of sharing the same designation as the infamous IJN Kaga - an aircraft carrier that took part in the surprise attack on Pearl Harbour in 1941 and served with the Imperial Japanese Navy until scuttled at the Battle of Midway in 1942. Unsurprisingly, the choice in name has raised eyebrows given the current Kaga’s aircraft carrier-like appearance. With a length of 248 meters and a beam of 38 meters, the vessel is larger than short take-off and vertical landing (STOVL) carriers operating in the Spanish and Italian navies.

With its fully-loaded displacement of 24,000 tonnes and 7.3 meter draft, the Kaga lacks catapults or a “ski-jump” to assist conventional fixed-wing aircraft (such as the F/A-18) during take-off and arrestor cables for their recovery. Yet the potential for operating STOVL aircraft with minor adjustments is high. The ship is designed to accommodate up to 14 helicopters, five of which can simultaneously take off and land, given the large flight deck and five landing spots. Officially, the Kaga’s primary role will be to conduct surveillance and humanitarian assistance and disaster relief missions. However, the carrier with its OQQ-22 bow-mounted sonar and fleet of torpedo-armed helicopters boasts excellent anti-submarine warfare capabilities.

Altogether, the scale of the second Izumo vessel represents a major advance in Japan’s maritime defence capabilities, significantly increasing Japan’s ability to project force. Last fortnight, Japan also commissioned its eighth Soryu-class submarine - a massive 4,100-tonne vessel with air independent propulsion that many consider the world’s finest conventional submarine. With 11 older Oyashio-class submarines already in the fleet, Japan would have 23 submarines by 2021, when all 12 Soryu-class vessels are delivered.

Toshiba Bankruptcy Update: Sale of Memory Chip Unit

Toshiba Corp is selling off assets as it grapples with billions of dollars in losses from its Westinghouse nuclear division. The Japanese company put Westinghouse into Chapter 11 bankruptcy protection and has said it may book a loss of as much as 1.01 trillion yen for financial year 2016. The Tokyo-based electronics conglomerate has more than 600 different businesses in everything from elevators to light bulbs, but its most valuable asset is the semiconductor business, which makes flash-memory chips and contributes about a quarter of its revenue. The Japanese government however, wants to sell the company’s semiconductor business to a domestic buyer given concerns about security around systems already using Toshiba’s memory chips. Chief Cabinet Secretary Yoshihide Suga has said flash memory chips are “extremely important” for Japan’s growth strategy. But foreign bidders are proving more determined and aggressive as the auction heads toward a final decision in the coming weeks.

Taiwan’s Hon Hai Precision Industry Co. (or Foxconn), South Korea’s SK Hynix Inc. and US chipmaker Broadcom Ltd. have all submitted preliminary bids for the Toshiba business valued at 2 trillion yen ($18 billion) or more as per media sources. Hon Hai has indicated it may pay as much as 3 trillion yen, in part to force Japanese management into negotiations. Hon Hai’s bid for Toshiba’s chip business faces stiff resistance in part because its factories are located in China that would transfer Toshiba intellectual property to China. According to recent reports by Mainichi Shimbun, Apple which uses Toshiba’s memory chips for its i-Phone plans to financially support Taiwan’s Hon Hai to secure stable supplies. Hon Hai, which acquired Japanese electronics maker Sharp last year, is also separately asking Soft Bank to join its consortium in bidding.

As per some media reports, Toshiba could seek a bailout through what’s known as hougacho-hoshiki, or a form of community financing in which multiple domestic companies chip in a small amount of capital. The government-backed Innovation Network Corporation of Japan, and Development Bank of Japan are expected to enter later bidding rounds as part of a consortium, anonymous sources have said.

Demographic Decline: New Statistics

Prime Minister Abe has vowed to prevent population declining from present 127 million to 100 million in 2065, yet as per latest Japanese government report the number of people will fall below 100 million as early as 2053. People aged 65 years or older will make up more than 38 per cent of the population in 2065, significantly outnumbering the under-14s at just 10 per cent. Another report released by the National Institute of Population and Social Security Research showed the proportion of those who had never married by age 50 hit a record 23.37 percent for men, up 3.23 percentage points from the previous survey in 2010, and a record 14.06 percent for women, up 3.45 points. Thus, nearly one in every four men and one in every seven women in Japan had remained unmarried until age 50 in 2015 in a clear sign that Japanese people are increasingly shying away from tying the knot.

Experts attributed the growing trend to less social pressure to marry and financial worries among workers as more people hold non-permanent jobs, with the data pointing to the need for increased policy efforts to promote marriage. The findings are particularly troubling to Japan as it means the country's birthrate is unlikely to rebound anytime soon. However, rebuilding after the 2011 tsunami and a construction boom ahead of the 2020 Tokyo Olympics has pushed labour demand to its highest in 24 years. That has helped boost foreign worker numbers by 40 percent since 2013, with Chinese accounting for more than one-third followed by Vietnamese, Filipinos and Brazilians. But visa conditions largely barring unskilled workers mean foreigners still make up only about 1.4 percent of the workforce, compared with the 5 percent or more found - according to IMF estimates - in most advanced economies. Immigration is a touchy subject in Japan where conservatives prize cultural homogeneity and politicians fear losing votes from workers worried about losing jobs.

China and Taiwan

China has Banned Wearing Veils and ‘Abnormal’ Beards

China has introduced a new set of restrictions in Xinjiang. The lawmakers passed the first region-wide legislation aiming to combat “religious extremism” in the province. They issued a wide-ranging list of 15 types of behaviour that will be banned from 1 April. It includes banning of wearing veils and keeping ‘abnormal’ beards in public places. The law would be applicable across the province. In this legislation the definition of veils was vague but it appears that niqab and burkha would come under the ban. The law also failed to explain what constituted an ‘abnormal’ beard. However, the China Daily did say that long beards would be banned "as they are deemed to promote extremism."
This is to keep a check on the Muslim population in general and Uyghurs in particular. Earlier, the government had asked everyone in the province to surrender of passports and mandatory GPS trackers in the car. This is not the first time regional officials have tried to ban veils or beard. In 2014 the north-western city of Karamy banned people wearing head scarves, veils and long beards from boarding buses.

Dalai Lama’s Visit to Arunachal Pradesh

Dalai Lama’s visit to Arunachal Pradesh has irked China. He visited Arunachal Pradesh on an official invitation by Chief Minister Pema Khandu. On 5 April 2017, in a press briefing China’s foreign ministry spokesperson Hua Chunying said that “By inviting and approving (the) Dalai Lama to (visit) disputed areas between China and India, India has damaged our interests and the India-China relationship and it has fuelled tensions. The Chinese media reacted sharply to this visit and said, China will not allow New Delhi a “free ride” on its economic growth while it endangered Beijing’s core interest. An article in the Global Times said, “The Dalai Lama has long been active in anti-China separatist activities under the guise of religion. New Delhi inviting the Dalai Lama to sensitive region gravely damages the China-India relationship.”

On 4 April 2017, the Ministry of External Affairs in its press release said that “No additional colour should be ascribed to his religious and spiritual”. Further, it stated, “the government, therefore urges that no artificial controversy should be created around his present visit to Arunachal Pradesh”. Kiren Rijiu, Union Minister of State for home affairs described the visit as India’s “internal affair”. “China should not interfere just as we do not interfere in their internal matters”. Additionally, Dalai Lama said, “India has never used him against China”. “I am India’s longest standing guest. India has never used me against China”. He also urged China to give Tibet meaningful “self-rule” and “autonomy”.

During the visit Dalai Lama visited Tawang monastery, this has irked China. Tawang monastery is second only to Lhasa in importance and the fact that the Dalai Lama delivered benevolence their will further cement his ties, and therefore India’s authority over this region.

President Xi Jinping meets US President Donald Trump

On 6-7 April 2017, President Xi Jinping met the US President Donald Trump at Mar-a-lago in Palm Beach, Florida. There was no joint statement issued. The outcome of the meeting can be gazed by the media briefings by the officials from both the sides.

They announced a “100-day plan” to improve strained trade ties and boost cooperation. It was decided to set up a new US-China Comprehensive Dialogue headed by the two presidents. It will have four pillars overseeing diplomatic and security, economic, law enforcement and cyber security, and social and cultural issues. It was also proposed to set up a dialogue between the chief of joint staff of the two nations.

The US Secretary of State, Rex Tillerson, said both nations had agreed to rein in North Korea’s nuclear weapons programme. But there was no kind of a package arrangement discussed and the US was prepared to take its own action even without China. The two sides had candid discussions on maritime security wherein Trump upheld respect for international norms in East and South China Sea. During the meeting, there was no mention of Taiwan. Notably, the US strike in Syria took place during the first day (Thursday) night dinner with Xi at Mar-a-lago. President Trump briefed Xi Jinping about the strike “and explained the rationale behind it.” Rex Tillerson claimed that Xi was not rattled by Trump’s decision.

The meeting concluded on a friendly note, avoiding any political gaffe. It shows that the bilateral relationship has stabilised. President Trump said that the Sino-US relations made “tremendous progress”.

Taiwan’s Submarine Programme

Given its own security concerns, Taiwan is planning to build new submarines and updating the old ones. Taiwan plans to build eight submarines indigenously. Last month, President Tsai Ing wen announced the starting of the indigenous submarine program. The first indigenously built submarine is expected to go into operation within 10 years. This is the first time Taiwan is building a submarine hence will need assistance and rely on foreign technology. Taiwan might have to import technology which includes modern torpedo tubes and periscope. According to Taiwan’s Ministry of National Defence, a sum of USD 94.81 million has been allocated from December 2016 -2020 for the design of the new boats. In fact, the submarine project is in the middle of a four-year contract phase that began in 2016. Additionally, the navy is in the process of upgrading its two submarines purchased from Netherlands.

At present, Taiwan’s navy has just four submarines. The Hai Lung (“Sea Dragon”) and Hai Hu (“SeaTiger”) purchased from Netherlands in 1980, Hai Shih (ex-USS Cutlass) and Hai Pao (ex-USS Tusk) from the US Navy.