Building an ASEAN-China strategic partnership

S. Pushpanathan, Jakarta

ASEAN-China relations started to pick up pace with the normalization of relations between China and Indonesia and then Singapore and Brunei Darussalam. China became a participant of the ASEAN Regional Forum (ARF) in 1994 and a dialogue partner of ASEAN in 1996. There has been no turning back in the relations since then.

In fact, the partnership has expanded and deepened. The "China threat" has gradually given way to the "China Opportunity" and the South-China Sea is seen less as a "flashpoint" in the region now compared with a decade ago.

While formal relations with ASEAN were established in 1996, it was not until 2001 that the relationship started to witness a substantive content with China's proposal to establish a free trade area (FTA) and to focus priority cooperation in the areas of agriculture, information technology, human resource development, mutual investments and Mekong river basin cooperation.

This led to the signing of the Framework Agreement on Comprehensive Economic Cooperation in November 2002 to realize a Free Trade Area by 2010. The "early harvest" plan under the FTA comprising over 500 commodities commenced in January 2004 and the negotiations for the trade in goods component of the FTA is expected to be concluded soon. The negotiations for services, investment, and the dispute settlement mechanism (DSM) have commenced.

Trade between ASEAN and China had grown substantially since 1995. In 2003, it grew by 43 percent to a new high of US$ 78.2 billion. ASEAN and China are targeting to hit the $100 billion mark in two-way trade by 2005.

Bilateral investments are also growing. In 1991, ASEAN's investment in China was only US$90 million and it reached $4.8 billion in 1998. By 2001, the total FDI stood at $26.2 billion, accounting for 6.6 percent of total FDI utilized by China. On the other hand, China's investment into ASEAN is small but increasing. By 2001, China's investment in ASEAN reached $1.1 billion accounting for 7.7 percent of China's overseas investments.

Peace and security in the region received a boost with China's signing of the Declaration on the Conduct (DOC) of Parties in the South China Sea in November 2002 in Cambodia and its accession to the Treaty of Amity and Cooperation in Southeast Asia in 2003 in Bali. Both the events signaled the mutual desire to promote trust and confidence and to secure the peace and stability of the region.

ASEAN-China relations were raised to a new level with the signing of the Joint Declaration on the Strategic Partnership for Peace and Prosperity in 2003 in Bali paving the way for a more intensive and substantive interaction between ASEAN and China. A plan of action to implement the strategic partnership is being drawn up.

Development cooperation, which acts as a gel to further cement the relationship, has deepened and widened with agreements concluded in agriculture, non-traditional security issues and information and communications technology. More are being planned. Close to 40 projects have been implemented and China continues to assist ASEAN in narrowing the development gaps through the Initiative for ASEAN integration (IAI).

The strategic partnership will be mutually beneficial for a number of reasons. ASEAN and China are showing strong growth potentials and can benefit from closer economic ties. ASEAN is expected to grow by 5-6 percent a year up to 2008 and China is expected to grow by 8-9 percent between 2004 and 2008.

ASEAN views China as more an opportunity than a competitor. China is now the global factory and the largest market with more than a billion consumers. ASEAN could be the service provider and exporter of goods to the increasingly sophisticated markets in the coastal cities of China.

China is important to maintaining peace and stability in the region. Any incidents in the Taiwan Straits and the Korean Peninsula or fluctuation in the Chinese economy will have a bearing on the region and its economies. Thus, engaging China and working with China will be of interest to ASEAN.

Security dialog should be promoted for better appreciation of the positions of ASEAN and China on various issues concerning the region and the world so that common positions could be forged in areas of mutual interest.

High level interactions should be promoted for better understanding and to enhance the comfort levels among government leadership, top policy makers, bureaucrats and technical experts to facilitate candid discussions and identification of concrete cooperative activities.

ASEAN and China should do more in strengthening the economic partnership. Both sides should work towards a high standard FTA covering not only commodities but also services and investments. The FTA should serve as a template for other regional FTAs being negotiated in the Asia Pacific region.

China can do more in terms of investing in the manufacturing and service sectors of ASEAN where there are comparative advantages to be tapped so that ASEAN can contribute to China's economic growth and at the same time receive economic gains.

China should increase its assistance to ASEAN, especially for the Initiative for ASEAN Integration, to narrow the development gaps within ASEAN, as this is important for the closer economic partnership between ASEAN and China.

ASEAN and China should work towards the realization of an East Asian community in the long-run together with Japan and the ROK. Implementing the East Asia Study Group's 26 measures and strengthening sectoral cooperation under the ASEAN Plus Three process in the fields of monetary and finance cooperation, energy, public health and others will be crucial for the building of an East Asia community for the future.

ASEAN and China has turned the corner around in the last decade to establish a more fruitful partnership. However, new challenges and problems could emerge in the region that will test the strength of the partnership. ASEAN and China will have to take them on their stride as they forge a strategic partnership to benefit the present and future generations in the region.

The writer is Head of External Relations and ASEAN Plus Three Relations at the ASEAN Secretariat. The views expressed are personal.