Malaysia’s special role in the South China Sea

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Malaysia has a stake in the South China Sea dispute – and not just where territory is concerned. As Asean Chair next year, there are opportunities to take advantage of and complications to avoid.

Soldiers of the Chinese People's Liberation Army 1st Amphibious Mechanised Infantry Division.

In May this year, Chinese oil company China National Offshore Oil Corporation placed the HYSY-981 oil drilling platform approximately 130 nautical miles from the Vietnamese shore. This caused simmering anti- Chinese sentiment to boil over into riots; Chinese and other Asian-owned factories were torched in business parks in Binh Duong, Dong Nai and Ha Tinh provinces in Vietnam. The Vietnamese government acted to quell the riots to protect its relationship with China, and it was not surprising that at a public diplomacy forum in Singapore – the Shangri-La Dialogue in early June – the Chinese government drew flak from the US and Japan, and also a guarded censure from the Vietnamese1. While HYSY- 981 was announced to have completed its mission in mid-July, one can only speculate if it was withdrawn for purely operational and technical reasons, or if international pressure had contributed to this in any way.

Among many of Malaysia's interests in the South China Sea, the most strategically important is the area disputed with China off northern Sarawak and northeast of Sabah which holds significant oil and gas reserves, some in which drilling platforms are currently operating. It’s a very severe dispute – Malaysian oil and gas acreage maps can run to 400km into the South China Sea, but the nine-dotted line comes up to 37km off the coast of Sarawak.

Such episodes are one of many in a long-running series of maritime disputes about China’s claim of “indisputable sovereignty” over most of the South China Sea. Beijing’s “nine-dotted line” claims 95% of the area and encompasses clusters of islets and reefs such as the Paracel Islands and Spratly Islands – once deemed mere navigational features but which now have economic, political and security significance. For Malaysia, the challenge lies in that the Chinese claim comes within tens of miles of the Sarawakian coastline. This claim has been promulgated since 1959, when China published an official map of China. As it is, the maritime border disputes involve four Asean states and China.

The placement of HYSY-981 should be a deep concern for Malaysia – perhaps a portent of things to come. Among many of Malaysia’s interests in the South China Sea, the most strategically important is the area disputed with China off northern Sarawak and northeast of Sabah which holds significant oil and gas reserves, some in which drilling platforms are currently operating. It’s a very severe dispute – Malaysian oil and gas acreage maps can run to 400km into the South China Sea, but the nine-dotted line comes up to 37km off the coast of Sarawak2. The East Malaysian oil and gas fields are extremely vital to our economic and energy security especially since our reserves off the coast of Terengganu and Pahang are fast maturing and depleting.

As such, the government will not be able to take encroachment lightly – dividends and payments from Petronas are a substantial portion of federal revenue.

Malaysian exceptionalism

For the entire region, the lack of clarity over Chinese intentions and their growing military shadow instil fear of a gradually encroaching regional predator. In this regard, Malaysia is not an exception and the country has had incidences with China which are cause for concern. In 2009, Malaysia made a joint submission with Vietnam to the UN Commission on Limits of the Continental Shelf to extend its exclusive economic zone (EEZ) farther into the South China Sea, but this was heavily resisted by the Chinese government, which in reaction sent a note verbale with a map of the nine-dotted line. More recent incidents occurred last year in January, when a small flotilla of four PLA Navy ships held an oath-taking ceremony at James Shoal (Beting Serupai/Zengmu reef) in the Spratly Islands. James Shoal sits 80km off Bintulu and Malaysia operates some of its oil and gas platforms in the surrounding waters.

However, Malaysia differs from Vietnam and the Philippines in two salient ways.First, we have less public sentiment entrenched in our South China Sea holdings; Malaysia’s interests are extremely economic. Our hydrocarbon exploitation in the South China Sea has been a vital part in our economy, unlike the case for the Filipino and Vietnamese economies.

Chinese fishing vessels. The South China Sea contains vital sea lines of communication, rich fishery stock as well as a moderate amount of hydrocarbon resources.

In contrast, there is greater public sentiment over the symbolic sovereignty Vietnam lost over the Paracel Islands since 1974. While historically there have been great strides in bilateral relations in settling their land border as well as joint development in the Gulf of Tonkin after the 1979 Sino-Soviet War, settling the sovereignty over the Paracels Islands remains a difficult issue. China has consolidated its control over the islands by building Sansha City, a small administrative capital, and in 2012 designating it as the seat of government over the Paracels and Spratly islands. The Vietnamese protested, as expected. The same can be said for the Philippines, which claims some of the Spratly Islands. During the Arroyo government, a 2005 agreement with China, called the Joint Maritime Survey Undertaking (JMSU) to jointly survey the sea, was heavily criticised by public groups as “selling out to China”. The agreement was not renewed after three years. A standoff between Chinese and Filipino vessels at Scarborough Shoal in 2012, where Chinese fishing vessels quickly returned to the shoal after a negotiated retreat, left the Philippine government uneasy.

Malaysia’s relation with China is one of amicability which in recent years has grown to unprecedented levels. For starters, Malaysia was the first Asean state to recognise the People’s Republic of China as a sovereign state in 1974, with Tun Abdul Razak making the inaugural state visit to normalise relations and negotiate cessation of Chinese support for the Communist Party of Malaya.

Second, Malaysia has the unique position of having extremely good relations with both the West and the East. The Philippines sits close with the West as they are a formal alliance partner with the US and, driven by their insecurity with China, recently reopened Subic Bay and Clark Air Base for US naval use after having closed it in 1992. On the other hand, due to its communist roots, modern Vietnam sits closer to the East and is only beginning to open up to the West. While it announced its relationship to be a “comprehensive strategic partner” of China in 2009, it seemed to also hedge Chinese domination by opening the historic Cam Ranh Bay base to foreign navies in 2010. Malaysia’s relation with China is one of amicability which in recent years has grown to unprecedented levels. For starters, Malaysia was the first Asean state to recognise the People’s Republic of China as a sovereign state in 1974, with Tun Abdul Razak making the inaugural state visit to normalise relations and negotiate cessation of Chinese support for the Communist Party of Malaya. Further deepening of the ties with the Chinese were made by former Prime Minister Tun Abdullah Ahmad Badawi and current Prime Minister Datuk Seri Najib Tun Razak’s both making China the destination for their first overseas state visits, and within months of their appointment as prime ministers. A slew of joint memorandums and cooperative agreements with Malaysia were signed in the mid-2000s. In addition, while Chinese trade with Malaysia rose exponentially in the 1990s, it was in 2003 that China really began to join the ranks of our top trading partners. Today, they are Malaysia’s top import and export destination, beating Singapore as the foremost export destination in 2011.

Unlike Vietnam and the Philippines, Malaysian actions in disputed waters have been muted – perhaps indicative of the goodwill already built up with the Chinese government. In 1992, the Yang di-Pertuan Agong Sultan Azlan Shah visited Terumbu Layang-layang in the Spratly Islands, about 160 nautical miles off Kota Kinabalu. In 1999, Malaysia also erected structures on Terumbu Peninjau and Terumbu Siput in the Spratly Islands. The occasional promotion of acreage blocks for hydrocarbon development (such as the trading of blocks CA1 and CA2 to Brunei and SK-303B, SK-304A, DWF and DW2) within the disputed area was also met with muted public response from the Chinese government, when compared to the Philippines or Vietnam.

The standoffs have not escalated into military naval encounters; Chinese vessels tend rather to be from the paramilitary coast guard than PLA Navy warships.

Recent years have been good for relations as well – Chinese President Xi Jinping made a visit to Malaysia last year, and this, among other agreements for further trade and investment deals, culminated in arrangements for joint military exercises and the formalisation of Malaysia as a “comprehensive strategic partner”. Xiamen University will open its first overseas branch in Malaysia and will establish a China-Asean Ocean College using funds from the China- Asean Maritime Cooperation Fund3. Najib made an official state visit in June this year, and China reciprocated with “panda diplomacy” – a loan of two pandas. Our relationship with China seems so strong that in reaction to the James Shoal incident, Defence Minister Hishammuddin Hussein said that “we will not be moved by day-to-day politics or emotions”4, and in a separate international forum, Najib praised China for its “restraint”5.

The strategic environment/constraints There are at least three strategic considerations over Chinese intent, vague as they may be. First, rising China brings to the table its own cultural and historical baggage. Sinologists often point towards internalised Chinese “victim mentality” for the “century of humiliation” stretching from the Opium War to the end of World War II. Extremely sensitive of foreign intervention, “core interests” Xinjiang, Tibet and Taiwan are top priorities for China in maintaining its territorial integrity against further colonial influence. We are lucky that the South China Sea has not been formally designated as a “core interest” and the Chinese are at least rhetorically willing to negotiate with South-East Asian nations at a bilateral level.

Second, the Chinese are dealing with their newfound economic power, progressively building their military power to be proportionate to what they perceive to be a historically denied great power status. Recognising the abrasion a rising power causes to existing order, the Xi Jinping government promulgated a “New Security Concept” where Hu Jintao’s government was marked by his concept of “Harmonious World”. These represented efforts to stress peaceful development. At the same time, the Chinese government is also extremely fearful of Western conspiracies that aim to build coalitions to contain its rise.

The US stand remains relatively non-committal. While the Obama administration has announced a rebalance to Asia, US statements on the South China Sea remain restrained and hard-won. After fighting two wars in Iraq and Afghanistan, it hardly wants to have to pick sides with its Asian allies against China, which holds a great deal of its treasury bonds and is a major trade partner.

Finally, it is trying to deal with its own resource scarcity and economic security. The South China Sea contains vital sea lines of communication, rich fishery stock (news occasionally surfaces of Chinese fishing vessels detained by Vietnamese or Filipino vessels), as well as a moderate amount of hydrocarbon resources which it could use to secure its ever-increasing energy needs.

While Chinese foreign policy is perceived to have taken an assertive turn since 2008, at the very least the situation in the South China Sea has not spiralled out of control. The standoffs have not escalated into military naval encounters as vessels on both sides are hesitant about opening fire and are more likely to ram each other or blast water-cannons. Chinese vessels tend rather to be from the paramilitary coast guard than PLA Navy warships.

Meanwhile, China's navy carries out a rare joint exercise in the South China Sea in 2013.

The US stand remains relatively non-committal. While the Obama administration has announced a rebalance to Asia, US statements on the South China Sea remain restrained and hard-won. After fighting two wars in Iraq and Afghanistan, it hardly wants to have to pick sides with its Asian allies against China, which holds a great deal of its treasury bonds and is a major trade partner. In 2010, it seemed that the Vietnamese managed to win a concession from US Secretary of State Hillary Clinton who announced that the US is invested in the freedom of navigation in the South China Sea. The US has also vacillated on military support for the Philippines should China use forceful action in the Spratly Islands.

In addition, the Chinese are often abrasive when the US is called in to mediate, and see US support as a moral hazard for the Philippines and Vietnam. However, there have been at-sea incidents between the US and China in the South China Sea and they seem committed to keeping these incidents under wraps.

Opportunities for Malaysia

While it may look as if Asean is a natural leverage for Malaysia, there are several structural problems that hinder an Asean-led solution. First is China’s insistence that the disputes are strictly bilateral. Secondly, because Asean operates on consensus, it is easy for a single member state to scuttle discussions for the whole; Cambodia for example acceded to China’s request to take South China Sea discussions out of the agenda at the Asean summit during its chairmanship in 2012. The lack of depth in Asean’s economic and social cooperation means that it will be difficult for Asean to have both the political and identity suasion to keep all its members in line. Even though Asean has been searching for a Code of Conduct at least since 1992 and reaffirmed this again in 2002 through the “Declaration on the Conduct of Parties in the South China Sea”, we have seen little progress in negotiations, and proactivity from the Philippines and Indonesia seems to have been met with a weak response.

Vietnamese fishing boats spotted near Da Tay Island in the Spratly archipelago in 2013.

All this could culminate in 2015, which could prove pivotal for Malaysia to push for a deeper resolution of the South China Sea disputes. Malaysia next year takes on the mantle of Asean chairmanship from Myanmar and will be in charge of finalising the implementation of the Asean Economic Community whose deadline is the end of next year. Malaysia is also lobbying for a non-permanent seat at the UN Security Council for 2015.

With increased exposure on the international stage, it is conceivable that Malaysia will gain a lot of goodwill from China, if only to use the momentum and exposure Malaysia would possess, to drive existing mechanisms. On the one hand, Najib recognised the issue by mentioning after his June 2014 visit to China that both countries are committed to finding a negotiated solution6. On the other, he has also said that China has not offered Malaysia a mediation role as “we have not reached that level”7.

Given such a position and given the political capital built up with China and the West, Malaysia should seize the political window. One method would be to bolster the Chinese discursive bandwagon. Chinese strategic language of “peaceful rise” is less than persuasive in the Western world. Malaysia could start by emphasising the common post-colonial background it has with China and the common commitment to legitimate economic growth, but also demonstrate that further antagonism in the South China Sea serves only to damage their own rhetoric of harmony and peaceful rise. If the trust between both countries is as high as it looks, this could persuade China to move towards a Code of Conduct in the South China Sea and eventually work towards a resolution acceptable to Malaysia and Asean on the status of sovereignty in the South China Sea.

If Malaysia should side further with China, it still has to position itself as a neutral power in order not to be seen as a client state and lose credibility with other claimant states as well as the US. The weakness of the Malaysian leadership will likely be in its influence on Vietnam and the Philippines; extra care will have to be taken not to damage their own sense of national pride and national interests. The Philippines has forged ahead with its own case to the Permanent Court of Arbitration in The Hague on the legitimacy of the “nine-dotted line” claim8. But Malaysia has cooperated with Vietnam and the Philippines in related cases, such as its role in mediating the Mindanao peace treaty and the joint submission with Vietnam of the 2009 UN Commission on the Limits of the Continental Shelf.

As the next Asean Chair, Malaysia should leverage on all endorsing factors to keep the diplomatic momentum going and to ensure that negotiations at all levels do not stall.

Other related factors may also become relevant. During the most recent Asean Summit in Nay Pyi Taw, Chinese Foreign Minister Wang Yi said that the Declaration of Conduct was “the truly effective approach to maintain peace and stability in the South China Sea”; a special China-Asean Senior Officials Meeting was held in September; and the 12th Joint Working Group Meeting on the implementation of the Declaration of Conduct will be held in October in Thailand. News have also surfaced that China and the US are also beginning to talk about a Code of Conduct after an incident with US surveillance planes in the South China Sea, in the hope that the terms could set a precedent for Asean9. Even Joko Widodo, Indonesia’s president-elect, has offered to act as an intermediary in the South China Sea disputes10. As the next Asean Chair, Malaysia should leverage on all endorsing factors to keep the diplomatic momentum going and to ensure that negotiations at all levels do not stall.

Rising prominence

While a Code of Conduct will be a landmark victory for all sides, the larger goal should be an agreement on sovereignty issues in the South China Sea. While the negotiated end point may not be completely optimal for all nations, Malaysia could make a historically important mark in the qualitative security environment next year. But to do that, it will have to push for more to be done, despite the competing need to make the fast-approaching deadline for the Asean Economic Community to be fully implemented by the end of 2015.

At the regional level, Chinese reactions towards the Philippines’ arbitration case on the nine-dotted line will prove pivotal as it demonstrates how China will react towards international law even though it publicly rejects arbitration. Malaysia needs to weigh in on that too.

1 https://www.iiss.org/en/publications/conference%20proceedings/sections/shangri-la-aa36/theshangri-la-dialogue-2014-f844/sld14-07-plenary-3-bbe0
2 Author’s estimate.
3 www.whatsonxiamen.com/news35105.html
4 See http://thediplomat.com/2014/03/speak-softly-and-carry-a-big-stick-what-is-malaysia-playingat/, although Hishamuddin’s comments were then retracted by ministry officials as not being reflective of policy, it does reflect the general sentiment of the political leadership towards China.
5 "Stirring up the South China Sea (II): Regional Responses", International Crisis Group, Brussels, 2012, p.11.
6 www.thestar.com.my/News/ Nation/2014/06/02/Firm-on-negotiatedsolution/
7 www.themalaymailonline.com/malaysia/article/ najib-describes-china-trip-as-encouraging-fordiplomatic- relations
8 www.pca-cpa.org/showpage.asp?pag_id=1529
9 http://english.cntv.cn/2014/08/29/ VIDE1409266081922401.shtml
10 www.channelnewsasia.com/news/asiapacific/ indonesia-ready-to/1308176.html

Ho Yi Jian was formerly with the International Institute for Strategic Studies (Asia) based in Singapore. He is now a Masters candidate in International Relations at the Australian National University.



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