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Asia Pacific Security Outlook 2001

Regional Overview

In the preceding edition of this review, Asia Pacific Security Outlook 2000, the overall assessment of prospects for Asia Pacific security was pessimistic. It was pointed out then that widely held assumptions of the first post-cold war decade were being questioned in major countries. These included the perception that economic growth and interdependence were eroding political differences, that the nation-building process had been largely completed in the key states, and that both major states and regional institutions were contributing positively to security. However, countries were not in open conflict with each other, and security dialogue processes were continuing to expand.

The longer-term forecast continues to be mixed, but nearly all the analysts associated with Asia Pacific Security Outlook 2001 believe that the region enters 2001 with a modestly more positive outlook. This is primarily due to several specific developments during 2000. The most dramatic was the opening in relations between North and South Korea sparked by the summit meeting between their leaders. While questions remain about the long-term impact of the meeting, the fact that it occurred and that the process of North-South dialogue continues has changed the entire tone of inter-Korean relations. There were also improvements in the relations between the larger powers, most importantly between China and the United States, whose relations had been damaged by the bombing of the Chinese Embassy in Belgrade. U.S.-Russian relations and Japanese-Russian relations also appear to have improved.

Troubling Trends

Still, there are troubling trends in the region that balance the positive developments. Four stand out.

Domestic Political Instability

There is still a dangerous and unpredictable level of social and political instability in the region. Never in recent years have so many Asia Pacific leaders and governments experienced so much domestic political difficulty at the same time as at the beginning of 2001. The most significant problems exist in Indonesia, where real economic recovery is stalled, a high level of violence both in the provinces and in the capital continues, and a dangerously low and still declining degree of credibility for President Abdurrahman Wahid persists. At stake is the country's future that depends on its political system, its economy, its internal organization, its key institutions, and even its territorial reach. Because of its size, location, and resources, the outlook in Indonesia has implications for neighboring countries. The Outlook team identified instability in Indonesia as the most serious short-to-medium-term security issue facing the region.

The impeachment proceedings against President Joseph Estrada of the Philippines, accompanied by a resurgence of internal unrest in the southern islands and terrorist bombings in Manila, cast doubt on the future stability of that country also. The new year brought a dramatic conclusion to the presidential crisis, but through action in the streets rather than from constitutional processes. While the new leadership seemed likely to stabilize the country in the short term, the resolution of the crisis illustrated the weakness of the basic political and constitutional structure of the Philippines.

Political turmoil and violence were also affecting the fragile economies and polities of several Pacific Island nations—Fiji and the Solomon Islands—as well as Papua New Guinea.

The widespread political difficulties appear to have an underlying common pattern. They have been affecting mainly new democracies in societies that have never been fully integrated. Moreover, the inexorable forces of globalization are exacerbating the political pressures on all these new governments, making their democratic transitions even more treacherous. This dynamic promises to persist for as long as anyone can foresee.

Economic Uncertainty

Except for Indonesia, developing East Asian economies made remarkably successful V-shaped recoveries in 1999 and early 2000. South Korea recovered its per capita gross domestic product of 1997 during 2000, and Thailand nearly did so. The strong economic performance considerably improved the security outlook during much of the past year.

However, the economic outlook is clouded by several factors. First, although much of the region managed economic recovery, it remains unclear whether a strong momentum toward new growth will materialize. Significant portions of the population in the region have been essentially left out of the recovery to date. The drive toward reforms that had appeared imperative during the crisis has stalled with recovery. In Thailand, Thaksin Shinawatra, now prime minister, emphasizes subsidies for villages and farmers and bailouts for business, not structural reforms. In South Korea, unions and owners combine to frustrate reform of the large, heavily indebted chaebols.

The generally poor political health of many Asian leaders also affects business, which prefers a stable and predictable political environment and policy framework. Finally and very importantly, there is mounting evidence that the U.S. economic boom has finally run its course. The United States remains the most important single market for many Asian economies, most notably China and Malaysia.

Missile Systems

Turning from the short to the long term, the 2001 Outlook team identified the interconnected issues of tensions across the Taiwan Strait, uncertainties in Sino-U.S. relations, and rapid Chinese military modernization as by far the most significant threats to regional security. Most of the analysts see the development of missile defense systems by the United States (in cooperation with Japan and possibly others) as a potentially seriously destabilizing element in the picture.

The key dynamic is that Chinese leaders find even a modest national missile defense (NMD) system and theater missile defense (TMD) system threatening to their very limited strategic deterrent. Most of the Outlook team regarded the Clinton administration's postponement of the decision on deploying an NMD as positive. However, this delayed rather than resolved the issue. The assessments of the United States and Japan contained in this report indicate that, despite technical and financial problems in developing an effective missile defense system, domestic political considerations in both countries ensure that missile defense development will continue in some form. The Outlook analysts see it as essential for regional peace and security that the United States and China handle this set of issues successfully.

Weak Regional Institutions

The perceived danger posed by the above issues is magnified by the weak institutional capacity that is available to deal with them. There have been relatively successful peacekeeping operations in Asia Pacific, such as in Cambodia in the early 1990s and in East Timor at the end of the decade. However, both of these operations required international and UN sponsorship. The Outlook 2001 analysts overwhelmingly agree on the desirability of strengthening and expanding various multilateral forums as well as subregional dialogues (particularly in Northeast Asia) as a means of enhancing regional confidence and security. However, the capabilities and future of Asia Pacific multilateral institutions, principally the Asia-Pacific Economic Cooperation (APEC) forum and the ASEAN Regional Forum (ARF), seem to be subject to major shortcomings. It appears that the operational effectiveness and potential of these institutions were overestimated, much more so for APEC than for ARF. The 1997-1998 economic crisis and the 1999 East Timor crisis provided a stark demonstration of the limits of APEC and ARF in each situation. APEC continues to flourish as a venue for dialogue among ministers and leaders, but its own economic liberalization efforts have stalled. ARF has been remarkably successful in expanding its membership (North Korea joined this year) and in fostering some confidence-building measures. On the other side of the ledger, its efforts to move into the area of preventive diplomacy have proven difficult, and peacekeeping or conflict prevention activities seem well beyond the realm of the possible for the near future.

The Watch List

Since its inception in 1997, the Asia Pacific Security Outlook has monitored four "watch list" issues: the Korean peninsula, large power relations, arms acquisitions, and territorial disputes. Last year's volume also gave prominence to the situation in Indonesia. These five items are of such importance to fundamental regional stability that they should continue to be carefully monitored.

The Outlook 2001 team generally saw little change in Korea and on territorial issues. Some loosening in North Korea's external relationships was noted, but this was offset by Pyongyang's continuing economic deterioration and the use of nuclear and missile development as a bargaining tool. The major territorial disputes (especially the issue of maritime claims in the South China Sea ) continued to fester but seemed unlikely to trigger serious military conflict in the near term. However, more serious concerns were expressed over trends in large power relations and weapons procurement.

The current assessments of developments in 2000 and the outlook for 2001 see both Korea and (to a lesser degree) major power relations as improved. As suggested above, Indonesia's situation has deteriorated. No significant changes were registered for the other watch list issues.

Although it is accepted that the process on the Korean peninsula is still unpredictable and reversible, many analysts believe that the two Koreas have crossed a major threshold toward previously unimagined possibilities for improved relations and eventual peaceful resolution of the division on the peninsula. There are significant differences between the current rapprochement in inter-Korean relations and earlier episodes. First, this time the heads of state are engaged and committed. This is particularly important in North Korea, where significant change requires the blessing of the leader. Second, improvements in North-South relations are being mirrored in increased dialogue between North Korea and Japan, on one the hand, and North Korea and the United States on the other. At the beginning of 2001, Washington was even speculating that North Korea might abandon its missile program in return for a visit from the U.S. president. North Korea's entry into the ARF was also seen as a positive step toward engagement in a larger Asia Pacific setting.

That said, North-South progress remains painstakingly slow. Despite Kim Jong Il's interest in economic modernization, his government continues to be concerned about the political repercussions of opening too quickly to the South. Family visits have been highly controlled, and the process of working out the details in such areas as connecting rail links and power grids is far more difficult than the general statements of intentions indicate. The danger is that unless there is continued visible progress in North-South relations, patience with the process will wear thin and recriminations over who is to blame for the lack of progress will overwhelm the current positive atmosphere.

While the Outlook 2001 team remains concerned over the potential for mismanagement of large power relations, the critical U.S.-China relationship appeared to stabilize during 2000. This was illustrated by the careful handling by all parties of the unprecedented election of Chen Shui-bian, a leader of the pro-independence Democratic Progressive Party, as president in Taiwan. The U.S. approval of permanent normal trade relations with China, ending controversial year-by-year renewals, was another important development in Sino-American relations. Nevertheless, the advent of a new U.S. administration and the impending leadership rotation in China serve as reminders that these relationships are exposed to domestic political leadership changes and need to be constantly reinforced.

The change in U.S. leadership could well lead to early tests of intention. The new U.S. administration will be facing an early decision on arms sales to Taiwan, an area where Beijing will want to set down markers. The Bush administration's stated determination to move ahead with missile defense systems and to strengthen the U.S.-Japan alliance also presents Beijing with difficult policy choices. It has vehemently protested such directions in the past. Both the new U.S. administration and the Chinese leadership, however, may be anxious to avoid rhetorical squabbles that have so frequently bedeviled the relations between Beijing and Washington.

The great majority of the Outlook 2001 team regards the overall outlook for peaceful resolution of territorial disputes in Asia Pacific as unchanged from previous years. However, although it was not specifically addressed in the original Outlook watch list, another source of concern and controversy in 1999—humanitarian intervention in internal conflicts—appeared to diminish in urgency during 2000. Due to the recent experiences in Kosovo and East Timor, this issue was a regular theme in discussions of regional (and international) security throughout 2000. However, by year-end it seemed clear that these two cases reflected individual, unique circumstances and did not establish a precedent for frequent interventions elsewhere.

This leaves questions of weapons development, procurement, and deployment as the major watch list concerns for 2001. Military modernization programs and increases in defense spending and procurement by major regional states (e.g., China and India as well as Japan), show no signs of slackening and could lead to a destabilizing cycle of responses. The most immediate concerns center on the dual issues of missile defense and the proliferation of weapons of mass destruction (including but not limited to nuclear weapons) and associated delivery technologies. The possible impact of missile defense on U.S.-China relations and security in Northeast Asia has been noted. Although 2000 saw no significant nuclear weapons developments in either South Asia or North Korea, continued tensions between India and Pakistan over Jammu and Kashmir and the continuing unpredictability of North Korean actions give these areas high uncertainty and potential volatility.

Toward a More "Normal" Regional Community

With the exceptions previously noted, the attention of regional governments and societies tends to be devoted to individual, largely domestic concerns. China almost uniformly insists that it wants to give priority to domestic economic reforms and restructuring and would like to avoid external problems. The Philippines is similarly anxious to avoid external conflicts (e.g., with China in the South China Sea) while it deals with regional insurgencies. The two Koreas are overwhelmingly focused on their respective futures and relationship. Japan remains concerned over its weak economy and government. Indonesia is grappling with fundamental problems of internal stability. Australia is reviewing its security policies and defense spending. And in the United States, the new administration will have to reassess American interests and priorities in the region, in the context of global commitments, and attempt to develop or at least restate or modify basic policies.

Thus, the Asia Pacific environment in 2001 makes for a far more diverse set of issues across the region, and also appears to be supporting a general desire to dampen international tensions. One immediate result is an increased interest in dialogue, as governments compare notes and attempt to reduce dangers of external confrontation that could jeopardize domestic agendas. Many of these dialogues are quite superficial and consciously avoid the most vexing issues. Nonetheless, the very process of interchange seems to be making Asia Pacific more of a regional community. Despite instances of serious tensions and the acknowledged weaknesses of the region's formal institutions and other arrangements for mediating problems, underlying trends may offer long-term promise.