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An economic solution for the South China Sea conflict?

Kazi Mahmood / Khmer Times No Comments Share:
A third of all cargo transported by container ships passes through the SCS. Reuters

The ongoing South China Sea (SCS) conflict is nerve-racking. The conflict has split Asean wide open and has brought along with it a growing foreign influence in the region. Asean could do without these problems.

However, the SCS is an issue that should be resolved among the concerned nations in the region. That is, between Asean as a united grouping, and China, on the other hand. But first of all, Asean as an organisation should take the lead to unite its members to face off with China.

To do that, they should find their own common ground before they propose a definite solution to the problem. However, the current state of affairs within Asean does not augur good for the unity of the grouping.

The Philippines is pulling itself away from Asean on the SCS issue, while Vietnam is pushing for a political solution only and wants the grouping to support its national needs. Asean, split into various groups, does not seem to know how to handle this lingering issue.

Some analysts and observers have suggested an economic solution to the conflict. Indeed, an economic solution should be on the cards. After all, this problem has seen nothing else but attempts at finding a purely politicised solution, and these are going nowhere.

The idea of an economic solution may sound far-fetched to many, but while we are living in utterly dangerous and disruptive times, it is the human instinct for survival that should prevail. If that means that Asean members need to make significant compromises on the SCS issue, so be it.

Such compromises will be inevitable in the long run anyways because achieving peace is far more important than risking the unity and the centrality of the Asean movement.

The SCS conflict has tested Asean’s unity and has also added pressure on the movement’s centrality. Both are crucial for its survival in geopolitical matters involving foreign entities.


Two years after the Permanent Court of Arbitration’s (PCA) ruling on the SCS – which dismissed China’s claims to much of the area – the undertones of the conflict are still simmering below and above the tides of this vital global shipping lane.

The SCS is a resource-rich area, with oil and gas, as well as other natural resources, confined under its seabed. It is also the source of livelihood for the many inhabitants who depend on the sea. They are mostly fishermen and they are directly impacted by the high-sea showdown between their countries, the USA and its allies, and China.

It is also the gateway to a massive volume of global sea traffic that crawls on the surface.

The United Nations Conference on Trade and Development estimates that roughly 80 percent of global trade by volume and 70 percent by value is transported by sea.

About 60 percent of global trade passes through Asia, with approximately one third of cargo shipped by sea traversing the SCS.

Besides Asean and China, the SCS waterways are critical for Taiwan, Japan and South Korea, as well as for the global superpowers, the United States and the European Union.

A closer look shows that the SCS is also linked – thanks to trade – to the Strait of Malacca – a vital strait coveted by the superpowers and by China itself. The strait connects the SCS with the Indian Ocean.


The first step to a possible long-term compromise in the SCS is to understand why China has acted like it did over a sea that affects its territorial integrity.

While Beijing is seeking the consolidation of its security perimeter, it is also encroaching on the rights of claimant countries that hail from the Asean region.

In its attempt to protect its own territorial integrity, China has wreaked havoc in the area, establishing itself as the undisputed, but controversial military power.


Chinese dredging vessels are purportedly seen in the disputed Spratly Islands in the South China Sea in May, 2015. Reuters

Yet it is the economic aspects surrounding the conflict that have far too often been overlooked. The crisis has the potential to disrupt the trade that transits via the SCS.

With a conflict that may endure for a longer time than expected and no concrete resolution in sight, a greater sense of responsibility must prevail among the warring factions.

As the second-largest economy in the world, and with over 60 percent of its trade in value travelling by sea, China’s economic security is closely tied to the SCS, according to

With the economic impact taken into consideration, Asean and China must find some common grounds that will allow them to seek a peaceful resolution to the conflict.

It is not only about the security of the thousands of vessels crossing the SCS and the territorial integrity of the parties involved, but also the livelihoods of the people who depend on this shipping lane.

But should Asean members ignore the importance of the economic needs of the rising Chinese nation?

If Asean can find common ground on the economic importance of the SCS with Beijing, it will open the door for major economic prospects in the most militarised seas in the world.

This may turn the tide in the problematic Asean-China relationship.


Former Malaysian Foreign Minister Tan Sri Syed Hamid Albar delivered a keynote address at an event in Kuala Lumpur in 2016, discussing the PCA ruling and the need to find alternative solutions to the problem.

“Asean should use the economic potentials in the SCS to deal with China on the issue. Economic exploitation of the disputed seas could help settle the issue,” he said.

To achieve that, Mr Syed Hamid said Asean should find common grounds as an organisation. He added that it should set aside the differences among the member countries over the thorny SCS issue.

This, he said, would help the organisation overcome the dispute with China in the resource-rich sea.

On the other hand, the newly elected Malaysian Prime Minister Mahathir Mohamad said in June that the countries involved in the conflict should do without warships.

They should have joint small-boat patrols instead. He did not, however, dismiss the role of China in the SCS, which is indicative of the need for a compromise on the military issues as well.

Nevertheless, the settlement of such issues will also demand that all the parties involved approach the conflict resolution aspect in good faith.

The very first issue to tackle in this instance is finding a form of unity among the parties on the basis of international law, including the United Nations Conventions on the Law of the Sea or UNCLOS.

China is not necessarily a party that would abide by the UNCLOS in the SCS conflict. Yet, given the extremities of such an intricate conflict that may impact the economic wellbeing of China itself, Beijing might be interested in an economic solution.

To keep the focus on the UNCLOS and the Code of Conduct as the only ways to stem the militarisation of the SCS would be a futile exercise if no solution is found. The reason is that Asean itself has lost the spirit of unity in its search for a political solution to the conflict.

It is high time for the association to look at the economic losses it is incurring in its preoccupation with finding that elusive political solution.

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