China-ASEAN Free Trade Area: Its Potentials

Last 18 August, FVR keynoted the 6th Pan-Beibu Gulf Economic Cooperation (PBGEC) Forum in Nanning, Guangxi Province, and People’s Republic of China upon the invitation of the People’s Government of Guangxi and the China Development Institute.

The PBGEC was established in July 2006 to reinforce the strategic partnership between China and ASEAN, boost bilateral and sub-regional economic cooperation, and speed up economic integration under the China-ASEAN Free Trade Area (CAFTA) framework.

The overall objective of the 6th Forum, as with the five previous annual meetings, is the development of stronger ties between ASEAN and China.

Importance of the Beibu Gulf The 3-day Forum was sponsored by the PROC National Development and Reform Commission together with China’s Ministries of Commerce, and Transport and Railways; and the Guangxi Provincial Government. It was attended by top executives of leading multinationals; officials of the Standing Committee of the National People’s Congress; local party leaders; and heads of key Economic, Trade, Tourism and other Ministries of the participating countries, plus leading economists and international think-tankers – all numbering more than 200 participants.

The PBGEC growth zone covers the Guangxi-Zhuang Autonomous Region; Guangdong and Hainan Provinces; and 7 ASEAN countries — Vietnam, the Philippines, Malaysia, Singapore, Indonesia, Brunei and, lately, Thailand.

The venue of the Forum, Nanning, is the capital of the Guangxi- Zhuang Autonomous Region. Nanning is known as a “green city” because of its abundance of lush tropical plants and trees, and is a sister city of Davao City. It is the center of science and technology, education, culture, and health in Guangxi Province, in which are located some 54 scientific research institutes, 10 colleges, 50 trade schools and 62 cultural organizations.

National Economic Territories As seen from the East Asia map, the cities of Laoag and Vigan, Philippines; Haikou and Nanning, China; Haiphong and Hanoi, Vietnam; Vientiane and Luangprabang, Laos; and Chiang Mai and Chiang Rai, Thailand are all located within the same tropical latitudes.

Within the PBGEC Growth Zone are the common maritime and land frontiers between China and Southeast Asia in which are untapped opportunities and building blocks for real economic integration between ASEAN and China. Because they make up “natural economic territories,” the PBGEC Growth Zone requires the regional connectivity and cross-border convergence we wish to nurture between Chinese regions and contiguous ASEAN areas.

The creation of the PBGEC zone is part of the clustering strategy adopted by China where its industrial centers are grouped together with their neighbors to create economies of scale, and enhance efficiency in the production and distribution of goods and services.

Other notable examples of China’s “generational” (20-25 years ahead) forward planning are the world-class combinations of Macau and Hong Kong SARs with Pearl River Delta megacities — Guangzhou, Shenzhen, Zhuhai and Dongguan — and the Cross-Taiwan Straits Special Economic Zones.

Regional Productivity and Competitiveness Experts foresee that the CAFTA — which went into full effect last year — will continue to create even more favorable conditions for China- ASEAN by harmonizing industrial structures in wider areas, creating new supply chains, and improving regional productivity and competitiveness. In 2011 Q1, the bilateral trade volume between China and ASEAN countries was estimated at USD 79 billion.

Under the recently approved 5-year (2011-2015) PBGEC Social Development Plan, China will rebalance its development goals with more emphasis placed on green industries, domestic con sumption and services, and CAFTA complementation. Part of said Plan is the upgrading of transport facilities and logistics systems with the construction of more than 2,500 projects at a total cost of 2.6 trillion yuan (about USD 406 billion) over the next 5 years. These include the construction of high-speed railway networks linking Nanning and Singapore via Vietnam, Laos, Cambodia and Thailand, and other new international passageways to bolster trade in the region.

Since 2007, the Asian Development Bank (according to its Vice President Lawrence Greenwood) has provided substantial financial and planning support to PBGEC: “We are already financing some projects that link Nanning to the Mekong region; we are looking to do more investments in hooking Guangxi together with Vietnam.”

Moreover, China Development Bank is providing loans of about USD 3.2 billion to PBGEC.

Regional Economies as Engines of Cross-Border Prosperity. The PBGEC is a worthy example of cross-border clustering — by bringing together all of Pan-Beibu’s stakeholders for mutual benefit and win-win outcomes.

In our “Age of Globalization,” nation-states are less and less able to generate their own sustainable economic activity. New engines of prosperity are rising that create synergy at higher levels. More and more, sub-regional economies transcend formal political boundaries to form “growth polygons,” and are able to maximize comparative advantages in resources, capital, labor, and strategic locations.

Collectively, we of East Asia are beginning to realize the extent of our interdependence. We are also starting to realize that focusing on cooperation clusters provides the best approaches to developing the continental sea-and-land-mass of East Asia, and achieving the full potentials of “natural economic territories.”

This early, it is easy to foresee that CAFTA could bring significant benefits to still relatively poorly-developed sub-regions of East Asia.

Focus On the Beibu Gulf

Beibu Gulf — called the “Gulf of Tonkin” by the Vietnamese — has rightly become the first center of ASEAN-China intensified cooperation, because it is among Asia’s best examples of a “natural economic territory.”

Within easy reach are Vietnam’s port-city of Haiphong and its capital Hanoi; six cities of Guangxi, and the inner cities of China’s most powerful growth engine — the Province of Guangdong whose GDP is greater than that of the entire Philippines.

The PBGEC offers tempting investment opportunities, particularly in petrochemicals, iron/steel, agriculture, fisheries, forestry, tourism, and environmental protection. Large bauxite reserves have just been discovered in mineral-rich Guangxi Province.

ASEAN and China are building an outstanding cooperation model — amid the tensions rising southward in the islets and atolls of the South China Sea.

The challenge to the present crop of Asian leaders is to preserve and/or enhance the existing conditions of durable peace/stability and of easy market access among the China-ASEAN stakeholders.

Tradition Of the “Nan Yang” Trade

This growth zone started out as a bilateral venture between China and Vietnam in 2006.

As one of Southeast Asia’s most dynamic economies, Vietnam has experienced two decades of rapid growth and inclusiveness since it opened to global commerce in 1986. Vietnam aims to become a modern industrialized nation by 2020.

PBGEC’s founders have invited the participation of other ASEAN countries with close linkages to Beibu Gulf. In this way, PBGEC is building on the centuries-old tradition of maritime trade between China and the seafaring peoples of what the ancient Chinese called the “Nan Yang” or “Southern Ocean.”

The islands and peoples of Southeast Asia were well known to the Chinese long before the Spanish so-called “discovery” of the Philippines in the early 16th century. By then, at least five centuries of robust trade routes were already linking both insular and peninsular Southeast Asia with Chinese seaports as far north as Fujian Province.

From these ports, Chinese ships sailed on the seasonal winds — out- ward with the northeast monsoon and homeward with the southwest — bartering their cargoes of silks, porcelains, and other manufactures for Southeast Asia’s sea-and-forest products.

Our Ancient Linkages

Part of history during that period was the voyages, in the 15th century, of the renowned Chinese explorer, “Admiral” Zheng He. In splendid ships bigger than no other power had built, he undertook a series of naval expeditions that touched at major seaports in Southeast Asia and as far as the East African coast.

Discovered in June 1993, during FVR’s term as Philippine President, was the wreck of a Chinese ship belonging to Zheng He’s fleet off the coast of our southwestern island of Palawan. Its rich cargo of ceramics and imperial coins (dated 1414) revealed a wealth of historical evidence about centuries of commercial and cultural interaction between China and the Philippines, long before the arrival of the Europeans.

They provide unmistakable proof of the strength, resilience and splendor of the economic and cultural linkages between China and the Philippines.

Now displayed in our National Museum in Manila (renovated for our Centennial of Independence from Spain in June 1898) are the finest Ming dynasty artifacts recovered from that Zheng He ship.

Win-Win, Not War-War

Since 1993, we have consistently recommended multilateral executive agreements to be undertaken by our ASEAN partners to make peace/stability arrangements binding on our powerful neighbors.

Today, the options are therefore clear to the stakeholders in China and ASEAN (in which the Philippines is a founding member) where their shared interests converge from the Beibu Gulf (or Gulf of Tonkin) all the way to the South China Sea (or “Nan Yang/Southern Ocean”), thus:

“It is better to talk-talk, trade-trade, and win-win than to fight- fight and war-war.”

Kaya ba natin ito???