The Spratly Island

The Spratly Islands in the South China Sea have caused numerous challenges and issues in the Asian continent. Since its inception, that side has been embroiled in a serious territorial dispute. The Spratly Island is a large island surrounded by about 100 smaller islands. Aside from the island, some of the world’s most famous reefs can be found here. It is situated in the China Sea’s southern hemisphere. Many governments have claimed these islands. The majority of these are just from Asia. It is one among the sea’s major archipelagoes. This island has led to very complicated governance in Asia and especially the southern part of the country. It has also brought about economic issues to all the governments that share its coastal boundaries. These economic challenges have been as a result of the strategic position in which it is located and the fact that it possesses some shipping lanes. The islands in Spratly do not possess any inhabitant who is indigenous. However, it has been able to offer very rich grounds that can be used for the sole purpose of fishing.

Apart from this, the island has the most important natural resources which are valued by most of the government due to their economic might in the name of oil. It also contains the most valuable gas i.e. natural gas in some of its reserves. These are some of the issues that most of the governments have been able to consider in their quest to claim some parts of it as they try to establish their boundaries within the locality. Spratly Island also contains some islands which have some sentiment of settlement for the civilians who are located in them. In almost 45 islands that are covered by the civilians, all these have been occupied by the structures of the Malaysian, Vietnam, china, Taiwan and the Philippine military coup. However, there have been some recent claims by Brunei who have just shown their exclusive desire for the economic zone which exist in the south eastern part of the Spratly island. Their claim has included the Louisa Reef which has not been habited by any civilian so far.

It has been established through records that this island was occupied at the different times of history. This was mainly done by the fishermen who were from either Vietnam or China. This record was obtained during the World War Two. It was produced by the troops who came from the Indochina French and others from Japan. However, it was until the year 1956 that a large record of people in that island. Before that, there was no record of settlement in that region. This is the time when the Tomas Cloma from Filipino decided to have some adventure into this region. In this attempt he was able to adopt a decision to lay a claim to some part of the Spratly Island which he had desired to be exclusively given to him and that he was to be the main owner. After he was done with the adventure, he was able to name the place to what it is known today as the Free Territory of the Freedom land. Through this, the island became well known to most of the Philippines as a free land that is supposed to be inhibited by its government.

The Spratly Island Dispute

This island has been under dispute since it was first discovered. Until to date, there are a number of governments who still have very stiff interest in the whole area. This has led to territorial dispute among the various governments in Asia. Everyone has tried to gain acquisition to the area due to its economic potential. The main victims of this dispute have included the people of China republic, the Vietnamese, the Malaysians and the Philippines. Most of them have been arguing on the matter of who owns this rich island. Apart from the Spratly Island, they have also claimed to be the legitimate owners of the group of maritime features and the group of islands which are associated with each other. All these segments are located in the southern part of the Sea in China. The main characteristics of this dispute have been concerned with the stalemate that has curbed the diplomatic relations between the countries involved. It has also involved very serious usage of military techniques such as the use of pressure from these organs. This has mainly been brought about by the fact that there have been a number of military occupations that has used this region as their settlement from the interested groups. These characteristics were mainly evident during the time when different nationalities were advancing their claims over some of their territories. However, the only government which never had such claim was Brunei which never occupied any of the features of the maritime.

There has existed some increase in the coverage by media on some of the increase in the vocal objection of the China republic. This has been brought about as a result of the American invasion. This has witnessed a number of vessels from that continent being transited in that area. The Americans have been trying their best to ensure that they are able to achieve their objective of having some freedom right to navigating on this island and within other waters that belongs to the international bodies such as this Spratly Island. The Chinese have considered this as one of the strategies that the Americans have been trying to adopt so that they can take hold of that territory since they started developing interest in it.

The maritime features have adopted very intensive names since they were established. Most of these features have their least number of names being six. They have their international names which are mainly in English version. The Chinese also have a name which they use when referring to these features. This is mostly different for the ROC and the PRC also. They also have different set of characters for that reason. The likes of Philippines, Vietnam and Malaysia have also set out their own names. They have also come up with some names to be used as an alternative. A good example is the Storm Island which is an alternative name to the Spratly Island. They also possess names that were mainly engineered by the colonial powers such as the British, French and Portuguese. These names have really made these islands to be known easily in different parts of the Asian continent. It is therefore significant to consider some of these since they can help you become aware of the island.

Claims by the different countries

There have been so many countries in the Asian continent that have developed claims to the Spratly Island based on some of their issues and point of reasoning. In this section, I will present some of the claims that have been put by the different countries in relations to this island. To begin with is Brunei who has also presented their claim on some of the islands in this area. To them, they have not claimed any of the islands in the region. However, their main claim was the section of South China Sea which they said was nearest to it. This would later become part of the Exclusive Economic Zone and also much related to their continental shelf. When it came to 1985, the Brunei was able to declare and EEZ that would also include the Louisa Reef as part of its territory.

The other party that laid a claim on this island is the China Republic who would constantly refer to this island as a Nansha. The government of China had laid claims of the whole island and most of the sea in its southern part. They laid this claim based on their historical reasoning. Their claims were clearly defined and therefore not marked by some of its coordinates. One of the key historical stories for their claim is the expedition that was conducted by American dynasty in the name of Han and Ming. It is also evident by facts that the fishermen and most of the Chinese merchant spent most of their time in that region working over a long period of time. They would therefore this as sure evidence that would later bolster their claim that they were a sovereign state with that mindset. During the late 19th century, China had begun claiming both the Spratly and Paracel Islands. However, during the Second World War, the Japanese also started claiming this island. China was then forced to produce a map which consisted of 9 dotted lines that were not well defined. They then decided to claim this land by the use of these lines as clear evidence. However, in 1992, there is a Chinese law that chose to restate the government’s claim on this land. China had also established occupancy in some of the parts of the Island. They had to continue with their quest in 1977 when they decided to claim the Paracel Island which they seized from the possession of the Vietnamese. They were able to change its name and renamed it as Xisha Island which they later included into the Province of Hainan Island.

The Malaysians were also not left out of the claim to have possession over the Island. They also fought so hard to ensure that they secured a place in this rich Island. The claim of the Malaysians was based on the fact that there was a continental shelf. They also had very clearly defined coordinates who they would depend on when it came to making decisions. This view helped them to secure 3 islands that were within the shelf of the continent. They have even decided and tried to come up with one atoll which they constructed through the use of soil. Most of the resources for this were from their mainland. The government has also tried its level best to come up with a hotel for that purpose.

The Philippines were also not left behind in their pursuit for this piece of island. They also had their claim which was mostly based on the definition that they were given by the coordinates. This was mainly based on the principle of proximity. They also depended on the exploration that was brought about by one of their explorer in the 1956. Some few years later, the Philippines had officially claimed some of the 8 island that were found within the Spratly Island of south China. They would constantly refer to the as Kalayaan since most of them were claimed on the basis of exploration. Their main arguments were that the islands that they wanted were not part of the largely known Spratly Island. They also believed that these 8 did not belong to anyone and therefore anyone would openly claim any of them. In the 1972, they were all designed to be part of the Palawan Province. They would therefore be put under the Kalayaan municipality. The area for this land was approximately 800,000 m2.

Vietnam was also a very interested state when it came to occupying this land. Their claim was based entirely on the historical facts and the principle of continental shelf which was quite clear. They had developed the belief that the entire island of Spratly was part and an offshore of the province of Khanh Hoa. Their claim also included the cover of an extensive South China Sea area. However, this was never defined clearly. They were also able to copy the Chinese style of using archaeological evidence as a sovereignty claim bolster. During the colonial period, the French people who colonized the Vietnamese and had claimed the Paracel and Spratly Islands on their behalf. Since then, the Vietnamese have occupied a significant number of islands in the Spratly. The Vietnamese were however seized the Paracel island in the 1974 when it was taken over by china.

Critical of Spratly Island dispute on the future of business in Asia

Business in Asia is not going to remain the same again with this great influence from the dispute over this particular area. The dispute will act as a pivot to the Asian continent. There had been some understanding that the attempt made by china to claim the shoal of Scarborough lacked the connection that should exist between it and the sea laws. Many have thought at it as a claim that was mainly made in order to gain world superpower status which they have considered to be a very crucial thing for the Asians. However, in the today’s business sphere, it has served to have no international authority which is legal.

Most of the Asian governments have been seeing the region and what they think of first is the projection of the power of US. The US has been able to establish most of its bases in the countries in Asia. They have been able to establish some in South Korea, a nuclear submarine fleet in japan. In both Australia and Philippines, they have been able to set up a military presence. Their fleet of carriers which are much superior has been able to project the power of these or organs. They have also taken much of its influence. The Chinese have, however, seen the presence of the US naval and military troops as a threat to its goals of developing this region in terms of acquiring the state of being the most powerful. The business is therefore not as usual as one might think. Most of the nations in Asia believe that the US is the only state that is capable of being a credited and a counter force in the claims for this particular Island. Their response has therefore been seen as a pivot to the Asians which was announced in late 2011.

The island will also give economic strength to any country that will gain full control to it. This means that the business in this area will be a different one. The area is full of resources that can help turn the economy and business of the whole continent. The island possesses a very important amount of oil together with natural gas. The China Sea to the south has been estimated to possess very huge barrels of oil. If this is to be extracted, the stable production that will be realized per day will be over 1.4 million barrels. This is if we consider the main sources from Philippine down to Malaysia. This means that the prospect of oil in this island has not been too farfetched. However, there have been failed efforts in an attempt to start the whole process of mining in the Spratly Island. This is due to the fact that there have not been any expeditions on drilling that having been attempted in that area. All these have been brought about by the fact that the area has been prone to disputes and clashes among the different military groups in that area. No one can therefore the level or quantity of natural gas and oils that can be measured. If this is realized, the business sectors of the Asian continent. The economy will also grow due to the worth of these natural resources.

Belt and Road Initiative

The Belt and Road Initiative refers to the Silk Road Economic Belt and 21st Century Maritime Silk Road, a significant development strategy launched by the Chinese government with the intention of promoting economic co-operation among countries along the proposed Belt and Road routes. The Initiative has been designed to enhance the orderly free-flow of economic factors and the efficient allocation of resources. It is also intended to further market integration and create a regional economic co-operation framework of benefit to all.

Conceptual Framework

The Belt and Road Initiative aims to connect Asia, Europe and Africa along five routes. The Silk Road Economic Belt focusses on: (1) linking China to Europe through Central Asia and Russia; (2) connecting China with the Middle East through Central Asia; and (3) bringing together China and Southeast Asia, South Asia and the Indian Ocean. The 21st Century Maritime Silk Road, meanwhile, focusses on using Chinese coastal ports to: (4) link China with Europe through the South China Sea and Indian Ocean; and (5) connect China with the South Pacific Ocean through the South China Sea.

Focussing on the above five routes, the Belt and Road will take advantage of international transport routes as well as core cities and key ports to further strengthen collaboration and build six international economic co-operation corridors. These have been identified as the New Eurasia Land Bridge, China-Mongolia-Russia, China-Central Asia-West Asia, China-Indochina Peninsula, China-Pakistan, and Bangladesh-China-India-Myanmar.

Impact on global trade

The five major goals of the Belt and Road Initiative are: policy co-ordination, facilities connectivity, unimpeded trade, financial integration, and people-to-people bonds.

In terms of specifics, policy co-ordination means that countries along the belt and road will, via consultation on an equal footing, jointly formulate development plans and measures for advancing cross-national or regional co-operation; resolve problems arising from co-operation through consultation; and jointly provide policy support to practical co-operation and large-scale project implementation.

Facilities connectivity refers to prioritising areas of construction as part of the Belt and Road strategy. Efforts will be made to give priority to removing barriers in the missing sections and bottleneck areas of core international transportation passages, advancing the construction of port infrastructure facilities, and clearing land-water intermodal transport passages. The connectivity of infrastructure facilities, including railways, highways, air routes, telecommunications, oil and natural gas pipelines and ports, will also be promoted. This will form part of a move to establish an infrastructure network connecting various Asian sub-regions with other parts of Asia, Europe and Africa.

In order to facilitate unimpeded trade, steps will be taken to resolve investment and trade facilitation issues, reduce investment and trade barriers, lower trade and investment costs, as well as to promote regional economic integration. Efforts will also be made to broaden the scope of trade, propel trade development through investment, and strengthen co-operation in the industry chain with all related countries.

With regard to financial integration, action will be taken to enhance co-ordination in monetary policy, expand the scope of local currency settlement and currency exchange in trade and investment between countries along the route, deepen multilateral and bilateral financial co-operation, set up regional development financial institutions, strengthen co-operation in monitoring financial risks, and enhance the ability of managing financial risks through regional arrangements.

In terms of people-to-people bonds, efforts will be made to promote exchanges and dialogues between different cultures, strengthen friendly interactions between the people of various countries, and heighten mutual understanding and traditional friendships. This will all form the basis for the advancement of regional co-operation.

The meeting resulted in formal approval of the Mid-term Roadmap for the Development of Trilateral Co-operation between China, Russia and Mongolia. It was also agreed that the Planning Outline of China-Russia-Mongolia Economic Corridor Co-operation is to be formulated to align the Silk Road Economic Belt with the establishment of the Eurasia Economic Union and the Steppe Road Initiative.

At the same time, in order to further enhance trilateral trade facilitation (including expanding the use of local currency in reciprocal trading), the three parties determined to look into the possibility of setting up a co-operation mechanism for their respective economic and trade departments. It was also agreed that efforts will be made to improve the co-operation mechanism for industrial associations and chambers of commerce in the three countries. At the same time, consideration will be given to advancing customs co-operation, exploring the possibility of establishing a joint company for China-Russia-Mongolia rail transport and logistics, strengthening co-operation in the technological sector, and promoting investment in infrastructure facilities construction projects.

Advantage to Sri Lanka

Trade along the Ancient Silk Road can be traced back to historical times when land and sea routes between China and Europe were vibrant with the movement of a range of goods including silk, spices, precious stones, etc., as well as cultural exchanges. Sri Lanka too played an active role in the ancient Silk route of the ocean. Situated strategically in the middle of the ancient Silk route of the ocean between East and West, Sri Lanka functioned as an entreport of trade for exchanging commodities. Archaeological excavations in many parts of Sri Lanka have unearthed large hordes of Roman and Chinese coins, which indicate that merchants from West and East met in Sri Lanka and exchanged wares.

Potential trade and economic gains from greater connectivity along the Silk Road have resulted in various efforts to revive the ancient Silk Road. Efforts of UK and France to connect South Asia, South East Asia, and Far East during colonial times and more recently, the ’Asian Highway’ proposed by Economic and Social Commission for Asia and the Pacific (ESCAP) are some initiatives taken to develop intra-Asian and Euro-Asian connectivity. More recently, China aims to reclaim the past glory of the ancient Silk Road through its own One Belt One Road initiative and it is one of the boldest initiatives taken by China since becoming the second largest economy in the world.

The Sri Lanka Economic Summit 2017 will deliberate how Sri Lanka can harness opportunities out of China’s ambitious plans to set up a network of railways, roads, pipelines, and utility grids that would link China with the Asian region.

Accordingly, the session titled, ’Belt and Road Initiative - Transformative Opportunity for Sri Lanka’ will talk on the potential investment opportunities for Sri Lanka from China’s ’One Belt One Road’ and initiative and the ’Maritime Silk Road’ projects. The session also will focus on the risks and pitfalls for Sri Lanka of Chinese capital and industries locating here.

Potential benefits for Sri Lanka’s real estate market

There is ample evidence to support Sri Lanka’s importance and strategic location, between East and West, during the period when the ancient Silk Road operated from China to Europe providing land and sea routes for the movement of silks, spices and precious stones. Archaeological excavations have revealed troves of Roman and Chinese coins that prove sea faring merchants of the time ventured to, what is now known as Sri Lanka, to exchange goods and barter for wares.

Since becoming the world’s second largest economy, China’s bold One Belt, One Road (OBOR) initiative, first announced in 2013, has become the cornerstone of China’s economic diplomacy and has put Sri Lanka firmly back on the maritime trading map. This contemporary reincarnation of the ancient Silk Road was articulated in a document released by the Chinese Government in 2015 entitled ’Visions and actions on jointly building Silk Road Economic Belt and 21st Century Maritime Silk Road,’ outlining strategy to connect the Asian, African and European continents and to strengthen partnerships with countries along the belt and road, towards promoting diversified, independent, balanced and sustainable development.

Of particular significance to Sri Lanka is the Maritime Silk Road linking China’s coastal cities to Africa and Europe via the South China Sea and Indian Ocean. Sri Lanka’s strategic position, bridging east and west on the new Maritime Silk Road offers the opportunity to re-establish and promote the country as a key trading hub in the Indian Ocean, with obvious benefits to commerce and business throughout the island nation.

China’s trade with nations along the Maritime Silk Road, over the past decade, has been growing at an astonishing average annual rate of 18.2% and China has already invested over $ 8 billion in Sri Lanka with an additional $ 24 billion of potential future investment recently announced when Prime Minister, Ranil Wickremesinghe attended an OBOR forum for global leaders, hosted by the Chinese Government.

In addition, work has recently restarted on the Chinese funded $ 1.5 billion Colombo Port City, a 270-hectare master planned land reclamation project, that will transform the real estate market in Colombo, and talks are well advanced between the two countries to restructure the $ 1.4 billion loan granted to Sri Lanka, by China, to develop Hambantota Port.

This frenetic activity has heightened geo political sensitivities in the region, with India expressing suspicions over Chinese military ambitions, amongst other concerns, leaving Sri Lanka to carry out a delicate balancing act between the interests of its nearest geographical neighbour and traditional trading partner, India, and its largest economic investor and provider of much needed infrastructure, China.

Historically, freedom of navigation across the Indian Ocean has been the catalyst for economic growth and prosperity in the region and, as India belatedly expands its interests in Sri Lanka, it is hoped that economic priorities outweigh military considerations.

The keys to Sri Lanka’s future prosperity and the island’s real estate ambitions are transport infrastructure and security of utility provision, both heavily reliant on Chinese investment, as part of the OBOR strategic initiative.

The sea ports of Colombo, Hambantota and Trincomalee and the international airports, Colombo and Mattala, are to be linked to special economic zones (SEZ) by road and rail, creating corridors of potential land price growth which is already attracting speculative real estate investment activity.

China is also pushing for 15,000 acres of land to be granted to them and designated as a SEZ, on the promise of up to 1,000,000 jobs being created and there are hopes that a Sino-Sri Lanka Free Trade Agreement (FTA) can be ratified in 2017.

With over 40% of Colombo Port City now reclaimed, notice is beginning to be taken in this ambitious project and JLL is actively involved in negotiating expressions of interest from Chinese, Indian, Malaysian and Singapore based investors/second tier developers, while local development companies and investment institutions are also jockeying for position.

The existing Colombo central business district (CBD), Colombo 01 and 02, might also come under pressure from the creation of Colombo International Financial City (CIFC) with Free Zone status on Colombo Port City and China Harbour Engineering Company, the Government’s joint venture partners in the project, are demonstrating their confidence in the overall project by developing a mixed use pilot scheme with residential, retail, commercial office and hospitality components.

With a proposed light railway transport system, open spaces, parks and squares, cultural, health and education amenities, plus a world class marina, Colombo Port City is just one visible benefit to Sri Lanka of the new Maritime Silk Road and it is hoped that there may yet be many more to be revealed.

Economic cooperation

With the launch of ’One Belt, One Road’ initiative, China is to bring forth the opportunity of economic prosperity, innovation and peace for both China and countries in the region including Sri Lanka, Secretary of Communist Party of Guangxi Zhuang Autonomous region Committee Penh Qinghua said.

He made these comments speaking at the China (Guangxi)-Sri Lanka Economic Cooperation Forum held in Colombo recently.

Qinghua led a high-profile business delegation to Sri Lanka last week in a bid to explore trade and investment opportunities between the two countries.

The Chinese delegation to Sri Lanka comprised government officials, high profile entrepreneurs representing areas such as medical, finance, construction, electro communication, tourism, tea, gems and jewellery and logistics.

Speaking at the forum, Zhuang mentioned that the event would be an ideal opportunity to garner new economic and trade opportunities arising from ’One Belt,One Road’ initiative and with the launch of the project, china is to enhance regional interaction to a higher level.

Commercial Councilor of the People’s Republic of China in Sri Lanka, Yang Zuoyuan speaking at the event said the Sri Lankan government has responded positively for ’One Belt, One Road initiative.

With the launch of ’One Belt, One Road’ initiative, China is injecting vitality into the Ancient Silk route and is actively pursuing cooperation in every sector under the maritime silk route initiative with Sri Lanka. Zuoyuan further added that bilateral trade is rapidly increasing, more and more Chinese companies have started to invest in Sri Lanka.

China has become the largest trade partner of Sri Lanka and one of the most important sources of FDIs. Guangxi and Sri Lanka have already established solid cooperation in numerous areas and reached many achievements during the past few years.

He also added that Chinese funded new projects in the areas of road, railway, irrigation, water resources development have increased and Colombo port and Hambantota Industrial Park projects are moving ahead.

Demerits of the project

While China stands to reap major benefits from OBOR projects, it is also footing a significant proportion of the risks entailed with them.

Many key countries targeted by OBOR -- in central Asia, Africa and southeast Asia -- are prone to economic and political instability and corruption.

What happens when an OBOR project funded by the Chinese government fails is unclear, said Xu. He warned that if a series of projects fail at the same time, “then the whole thing could collapse.”

Balding said China “has a very poor track record of their investment overseas,” pointing to widespread problems with Chinese projects in Venezuela, Sri Lanka and Myanmar.

He added that OBOR in particular is characterized by projects with “very little economic rationale for China.”

Wuttke warned the project could be remembered as a “huge white elephant that left an enormous amount of wasted resources strewn along its path.”

Obstacles have impeded implementation

One thing that’s worth noting is that no one here refers to these projects as part of the broader OBOR scheme-not even China. Academics and researchers might, but businesspeople, politicians and ordinary citizens don’t. These are merely seen as Chinese investments, or projects funded using Chinese loans.

The outlook for these projects is generally positive, but one major stumbling block will be the attitude of Sri Lankans toward the growing presence of Chinese people and firms on Sri Lankan soil. Already in Colombo and in the south of the country, the presence of Chinese workers, many of them construction workers, is very noticeable. There is a risk of social backlash driven by nationalistic sentiment. These tensions could be exacerbated if the government were to sell stakes in state-owned enterprises to Chinese firms in order to relieve the debt burden.

Already we are seeing substantial protests over the Hambantota port and airport projects. Local residents worry that their agricultural land will be lost to large Chinese industrial zones, and that jobs in these zones will be mainly for Chinese workers. In January, these protests became violent when people living in the area refused to leave their land.

Even though the Hambantota project began on his watch, Rajapaksa is keen to scuttle it as well. If completed, it would be the largest industrial development project in an area where his family has enjoyed strong popularity for decades. But the former president now says it raises concerns about sovereignty, and he is championing the cause of residents who fear they will be displaced.

The success of these projects going forward will be jeopardized if the current government is not able to effectively communicate their benefits to local communities and keep these kinds of protests to a minimum.

EFFECT OF CHANGE IN GOVERNMENT

In January 2015, opposition coalition candidate Maithripala Sirisena scored a surprise win over Rajapaksa to become Sri Lanka’s new president. At first, the new government didn’t recognize the role China was playing in Sri Lanka’s infrastructure and investment ambitions. The opposition had vilified the Port City in the run-up to the election on environmental grounds. After the election, however, they realized that it had to continue.

China is the largest exporter of capital in Asia, and so, to finance new infrastructure needs, Sri Lanka is going to need to continue to work with China. Moreover, because of poor investment decisions made by the Rajapaksa government, the country is saddled with severe debt from projects that have not yielded revenue, including the port in Hambantota and a second international airport nearby. Sri Lanka now appears keen to convert Chinese debt to equity, further cementing China’s importance to Sri Lanka’s economic future. While India greeted Rajapaksa’s election loss with enthusiasm-probably in the hope