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Asia Pacific Security Outlook 2003

Regional Overview

This is the seventh Asia Pacific Security Outlook since the annual report began in 1997. The 1997 report, prepared in late 1996, stated: "many agree that the regional security environment in the 1990s has been more benign than at any time in recent memory," and noted that none of the countries covered "is experiencing an acute security crisis nor is there a regional perception of a security crisis." Instead, the uncertainty was about the future environment, giving the region time to develop a climate of understanding and strengthen its new institutional machinery and confidence-building measures.

In retrospect, 1997 was an important turning point, and in 2003, the outlook looks much bleaker in many respects, but with some positive developments. The year is beginning with a serious crisis in the Korean peninsula and heightened terrorist concerns, especially in Southeast Asia. The prospect of an American-led military action to effect disarmament and "regime change" in Iraq is generally regarded with anxiety, by some because they fear a conflict will increase internal tensions and lead to more terrorism, and by others because they fear having to make politically difficult choices as to how far and in what way to support the American effort. Yet larger power relationships in Asia Pacific are as healthy as they have ever been. The established states find common cause on many issues relating to terrorism; they cooperate at police and intelligence levels more effectively than before, and they are implementing with remarkable speed and unity new rules in areas as diverse as control of money laundering and enhancing cargo security.

Clearly, the Asian economic crisis, which began in mid-1997, played a critical role in creating the new and more sober political and economic assessment of the region following the hubris of the early and mid-1990s. Economic growth rates, then at the 6 percent–10 percent level in many developing Asian countries, have fallen to the 2 percent–4 percent range, with the exceptions of China, Vietnam, and South Korea. Unemployment is at historic highs in many of these same countries. Asia is faring better economically than other world regions, but it has never truly recovered from the 1997 economic crisis, and it is not meeting the high expectations generated in the 1980s and the first part of the 1990s.

Public confidence in government was also generally shaken by the 1997 economic crisis and similarly has never fully recovered. In the mid-1990s, with rare exceptions, state authority appeared to be consolidating, providing stronger internal order, and establishing solid units for international cooperation. In the two to three years after the onset of the economic crisis, many leaders were in political trouble, with the most dramatic casualty occurring in Indonesia where the fall of the long-ruling Suharto government took place in 1998. Indonesia remains in crisis.

The economic crisis also weakened the region's economic cooperation institutions, which were criticized for having failed to foresee or forestall the crisis or to react effectively once it had begun. The early and mid-1990s had witnessed a "bubble" of enthusiasm for regional organizations, with the Asia-Pacific Economic Cooperation (APEC) leaders meetings, the APEC Bogor vision, the APEC Osaka Action Agenda and Manila Action Plan, the Association of Southeast Asian Nation's (ASEAN's) expansion from six to ten members, and the establishment of the Asia-Europe Meeting (ASEM) all occurring in this period. No major regional institution collapsed, and there is a continuing creation of new processes, such as the ASEAN + 3 (China, Japan, and South Korea) group and the Shanghai Cooperation Organization (SCO), but the enthusiasm for regional economic cooperation has waned. In its place have come both restored interest in bilateral economic cooperation, including a plethora of free trade agreement proposals, and an emphasis in bilateral side-meetings and political statements in the framework of the larger multilateral meetings.

International Terrorism

The past two years have witnessed the rise of terrorism to the highest place in Asia Pacific security concerns. Terrorism is certainly not new to the region, but in the past it was generally not regarded as transnational and was typically oriented toward local issues. Our 1997 Asia Pacific Security Outlook referred to the local conflicts in the Philippines, Chechnya, and Bougainville and also stated that the movements in these places "are or may be a terrorist threat far beyond their home areas." But it did not envision the international networks and training that we now know exist, and which existed even at that time in more nascent form.

A deepening concern with international terrorism has been the most dramatic change in the Asia Pacific security outlook since Asia Pacific Security Outlook 2002, along with the new Korean crisis. The region, like the world, was shocked by the scale and senselessness of the September 11, 2001, attacks in the United States, but at the time of our November 2001 workshop preparing the Asia Pacific Security Outlook 2002, the new "war on terrorism" was seen by the Outlook analysts, particularly those from Southeast Asia, as mainly an American war. Some analysts strongly believed that the terrorist threat was being exaggerated. But the intervening year has witnessed increasing evidence of international terrorist threats to Southeast Asian countries mainly coming from the Jemaah Islamiah (JI), a loose Islamic Southeast Asian network with ties to al Qaeda.

While evidence of the ambitions, connections, and potency of the JI was accumulating from arrests in Singapore and Malaysia as well as material found in Afghanistan, it was the killing of nearly 200 Indonesians, Australian, New Zealanders, Europeans, and others in the October 12, 2002, bombings in Bali that gave the threat high public awareness. For Southeast Asia and Oceania, the Bali bombings were almost as catalytic as September 11 had been for Americans and made it clear that terrorists would take advantage of vulnerabilities anywhere.

Northeast Asia remains something of an exception to heightened regional concern over international terrorism. China, Japan, and South Korea are all committed to fighting terrorism, and Japan and China have experienced terrorism on their own soil. The Japanese, however, do not look at Japan as a likely target of international terrorists, and terrorism in China has been largely confined to the far west, away from main population and economic centers. In South Korea and Japan, the successful holding of the World Cup games without a terrorist incident or even hooliganism strengthened local belief that terrorism was unlikely in these countries.

Outside the Asia Pacific area proper covered by this report, but involving member-countries of the ASEAN Regional Forum (ARF), other terrorist attacks have also deepened concern about terrorism. These include the attack on the Indian Parliament in late 2001 and the taking of hostages at a Moscow theater by Chechnyan terrorists, with the ultimate loss of 100 hostages and hostage takers. There is little doubt that terrorism will continue to be at the top of regional security concerns in the coming years.

The New Korea Crisis

Perhaps the most surprising recent regional security development is the rapid onset of a full-blown crisis in the Korean peninsula. This was not foreseen by the Outlook team last year, although Korea certainly remained on its watch list. The demilitarized zone across the peninsula remains the world's most militarized boundary, but in recent years the opening of political dialogue between North and South Korea, particularly the June 2000 Korean summit, gave hope for improvement and some confidence in continued stability. After some loss of momentum, inter-Korean relations seemed to improve again in early 2002, accompanied by some quite dramatic economic policy experiments in the North. Even North Korean-U.S. relations, soured first by the Bush administration's relative indifference and then in January 2002 by the inclusion of the North in President George W. Bush's State of the Union address as a member of the "axis of evil," appeared to be starting a recovery when U.S. Secretary of State Colin Powell had an informal "chat" with North Korean Foreign Minister Paek Nam Sun at the July ARF meeting in Brunei, followed by the sending of U.S. Assistant Secretary of State James Kelly to Pyongyang in early October.

At the October meeting, the Americans confronted the North Koreans with evidence that they were engaged in a uranium enrichment program in violation of the 1994 Framework Agreement (under which the North Koreans had frozen their nuclear programs). Rather than denying this, according to American reports, the North Koreans admitted the program, with no apologies. After the North Korean admission became public knowledge, relations steadily worsened. U.S. shipments of fuel oil to North Korea under the 1994 agreement were cut off, and the Americans refused further discussions until North Korea abandoned its nuclear programs. The North Koreans pronounced the agreements dead and proceeded down a path similar to the one it had pursued almost a decade earlier. In almost staccato fashion, the North Koreans removed seals and surveillance equipment from their nuclear facilities, sent international inspectors packing, commenced moving fuel rods to their reactors, announced withdrawal from the Nonproliferation Treaty (NPT), and suggested that they might resume missile tests. Asserting that its security was in danger, Pyongyang demanded a nonaggression treaty from the United States and other concessions. Washington reaffirmed that it would not negotiate under blackmail.

Although North Korea possibly has one or two nuclear weapons and certainly has the capability of producing several more in a relatively short time, the rest of the Asia Pacific region, including the United States, has generally downplayed the seriousness of the North Korean challenge, hoping that the issue can be resolved through diplomacy. But as the year 2003 opened, it was unclear that this avenue would work. Some believe that once the uranium enrichment program was exposed, the North Koreans had decided to provoke the crisis while the Americans were distracted by Iraq in order to acquire a few nuclear weapons. A larger group of analysts emphasize North Korea's interest in economic aid, direct dialogue, security assurances, and recognition. The powers around the North—Japan, China, Russia, and South Korea —are all united in opposing a North Korean nuclear capability, but are unenthusiastic about using sanctions to accomplish this.

North Korea is said to have the capability of producing as many as five nuclear devices within months from the spent fuel they already have and of being able to build many more should their reprocessing plants become fully operational again. This capability is widely seen as a threat to the nonproliferation regime and a potential catalyst for the increase and/or spread of nuclear weapons elsewhere in Northeast Asia. Possible sales of technology or devices to other government or groups by the penurious North Korean state is another deeply troubling concern. It seems very unlikely that other countries in the region will tolerate an operating plutonium factory in North Korea. This provides the hope that a critical mass of neighbors will pressure North Korea toward the diplomatic route, but it also suggests how serious the crisis will become if diplomacy fails.

Iraq and the United States

The possibility of an international conflict in the Persian Gulf is a major concern throughout the region, but most intensely in Muslim Southeast Asia. In much of Asia, the interest is less in the implications of the crisis for the broader international order as in the implications for the individual countries. At the November 2002 workshop, the Outlook team itself was close to evenly divided on the issue of whether military action against Iraq may be warranted if Iraq does not meet the expectations of the international inspection process. But all felt that possible U.S. military action against Iraq would have a negative impact on the overall Asia Pacific security outlook. Some, particularly in Muslim parts of Southeast Asia, believe that military action against Iraq could be very divisive or even destabilizing for their societies and would create more terrorism rather than help resolve the problem. Only four of the team felt their own countries should fully contribute to an international coalition, and for two members this support was conditional on clear UN authorization.

An underlying concern for many non-Americans in the case of both the North Korea and Iraq issues is that decisions affecting all countries' security are being made in Washington. The policy communities in other countries feel that they have little influence over these decisions and that their own interests may not be taken into account or even well known. Some of the Outlook team felt that the United States was making policy on the basis of a narrow set of domestic interests or prejudices, and thus that its actions do not have the legitimacy required to make them truly effective in the longer term. Others felt that the lack of action by other actors requires the United States to take leadership and set an agenda.

China's New Diplomacy

Each year Outlook analysts have consistently agreed with the proposition offered in our annual questionnaire that "how China emerges as a great power is the biggest uncertainty in the region." Of the 2003 Outlook analysts, 16 agreed with this statement, two were neutral, and none disagreed.

China has more neighbors than any other country in the world, and at one time or another during the past 50 years, it has been in conflict or confrontation with most of those neighbors. But in the early part of the 21st century, China enjoys positive relations with all the countries around it. The recent and general improvement in China's relations with its neighbors was a noticeable feature of the Outlook 2003 workshop.

Aside from individual country considerations, there seem several reasons for the unanimous positive attitudes toward China:

Looking back over the past quarter century, China's reemergence as a central power in Asia has been quite spectacular. In the early 1980s, Chinese cities were markedly different from those of most Asian countries and the world, communications were primitive, there was little understanding of international diplomacy or law, and Chinese seemed awkward and uncertain in many international gatherings. China is today an integral part of the region's economy, it is a member of all major regional organizations and the World Trade Organization, and it is gaining confidence in playing leadership roles.

Other Watch List Issues

Among other issues on the APSO watch list, large power relations continue to be stable, or—in the view of the Outlook security analysts—neither significantly improving nor deteriorating. Despite the leadership changes in the United States two years ago and in China in 2002–2003, which some thought might cause new difficulties in Sino-U.S. relations and heighten differences over Taiwan, the relationship appears outwardly harmonious. In both countries, however, a significant body of opinion sees the other as a rival. Another problematic large power relationship, that between Japan and Russia, is also stable. The dispute over the Northern Territories seems as far from a solution as it has always been, but Japan and Russia are emphasizing other aspects in their relationship, with new gas pipelines an important prospect.

The Outlook 2003 analysts also saw no major changes in two other watch list issues—arms purchases and territorial disputes. These were seen as problematic issues in 1997-1998, but in line with the generally improved relations among the governments in the region, they are now less salient than they once were. With the partial exception of the Taiwan Strait, most arms purchases seem related to modernization and new functions, and they are not regarded as problematic in neighboring countries.

The many territorial disputes in the region were largely quiet in 2002, with Indonesia and Malaysia resolving an ownership question over two disputed islands through the international court. At the ASEAN leaders meeting in November, China and the ASEAN countries declared that they would not take actions disrupting the status quo in the South China Sea. It was not quite a "code of conduct," as desired by some ASEAN countries, but there has been a noticeable drop-off in incidents in this area. Demarcation of some land boundaries, such as that between China and Vietnam, is continuing. However, the lack of incidents in 2002 cannot be considered too comforting. Territorial conflicts can be highly volatile and can flare up almost momentarily.

A final watch list issue, Indonesia, remains a serious security concern with implications for the rest of the region. Although there are signs of improved political stability associated with the transfer of leadership in 2001 and a lessening of some separatist and sectarian conflicts, as pointed out in the Indonesia chapter in this volume, Indonesia continues to face very difficult and fundamental challenges.

Contributions to Regional and Global Community

Among the brighter spots in the regional security outlook is the growing attention that Asia Pacific countries seem to be paying to regional and global security issues. Not many years ago, contributions to international peacekeeping were relatively rare in Asia and the Pacific. Today, as the country chapters in this volume indicate, most countries contribute in some fashion beyond maintaining domestic order, and some are prepared to further increase these contributions. Moreover, regional countries are increasingly accepting outside involvement by friendly countries in internal affairs as in the case of Indonesia's acceptance of outside monitors for the agreements it has reached with the Free Aceh Movement.

Moreover, the September 11, 2001, attacks in the United States and the October 12, 2002, Bali bombings have greatly strengthened international cooperation. In the period since September 11, intelligence and police cooperation has been reinforced, as illustrated quite dramatically in the international effort that went into helping the Indonesian police in their investigations in the Bali bombings. Similarly, there was significant South Korean-Japanese police cooperation to ensure a safe World Cup.

The year 2003 promises to be a significant one for the Asia Pacific security order. Both the Iraq and Korea crises are likely to come to a head in the early part of the year, while the war against international terrorism will be a continuing one. The basic interests of the established states in supporting each other and improved cooperation should help the region weather this difficult period. Spurred by the recent and ongoing challenges, there are definite signs of growing maturity and confidence in regional relationships and thus in the overall security outlook.

Still, as reflected in the Outlook analysts' discussions in 2002, the relationships, arrangements, and institutions that have been established over the past two decades remain young and relatively fragile. And as demonstrated by the rapidity of the new confrontation with Iraq and the crisis on the Korean peninsula, the times remain perilous, and volatile issues continue to threaten the security environment.

Thus as 2003 opens, it is impossible to predict whether 2003 is more likely to be a year of wise leadership, positive accomplishments, and progress or one of miscalculations, lost opportunities, and tragedy on the regional (and global) scene.