 Welcome back. I'm Ernie Bauer, the Sumitro Chair for Southeast Asian Studies here at CSIS. It's my honor to present our second panel, which is a panel that will look at the role of maritime forces in the South China Sea. We've got a distinguished panel, and I will introduce each speaker in turn, and then we would welcome your questions along the lines as we did with the first panel. Our first speaker is Dr. Philip Saunders. He's the Director for the Center of Chinese Military Affairs and Distinguished Research Fellow at the National, at the Institute for National Strategic Studies at the National Defense University here in in Washington, DC. Dr. Sanders. Thank you, and I'm going to go in against type by not having PowerPoint, so it's a rare case of the U.S. Department of Defense person speaking without PowerPoint, but conversely I have to give you the warning that everything I say are my own views, not of NDU, the U.S. government, the Department of Defense, or anybody else. To frame this topic, I want to start by posing what I see as China's regional challenge, that on the one hand China wants a stable regional security environment and is trying to assure its neighbors that it is not going to be a disruptive force, and on the other hand, they want to defend their territorial claims and their aggressive steps to pursue their maritime claims have generated fear and alarm throughout Asia. So I think that's the essential dilemma in managing that contradiction or the tension between those two goals is the biggest challenge that China faces. I'm going to talk about the role of the Navy and the paramilitary forces in China's approach to maritime disputes, and I'll just start by noting that they rely primarily on the paramilitary forces, the new China Coast Guard, and have been using a variety of salami tactics to expand China's effective control of the disputed territories while staying below the threshold of military confrontation. And I'll talk about the role of the Coast Guard and then the Navy in carrying out those activities. And the key point is that paramilitary forces typically play the lead role in Chinese efforts to exercise control over disputed waters and maritime territories. It's partly because they're better suited for some of the types of missions, such as enforcing fishing regulations, and it's partly because Beijing thinks lightly armed paramilitary forces are less provocative, and that reduces the likelihood of a confrontation escalating into violence and military conflict. Prior to March 2013, there were five different Chinese agencies, sometimes known as the five dragons that had responsibility for maritime security. That's covered in my paper, so I won't go into the details of it here. But I think the points were that Chinese analysts were critical of the capabilities. They noted that on the one hand, the paramilitary forces did not have enough ships, and those ships were not capable enough to carry out the mission. And on the other hand, when you had assets divided among five different maritime agencies with overlapping missions and bureaucratic rivalries, what you got was duplication of effort, you diffused limited resources too far, and you made your coordination problems much more difficult. So at least the organizational piece of it China tried to solve by consolidating four of these agencies into a new China Coast Guard in March 2013. The paper goes into some details of that. It's still under the State Oceanic Administration, but I think a key point is that the Ministry of Public Security provides operational direction, and the leader is seconded from the Ministry of Public Security to continue to run this agency, which suggests that they have a lot of influence over the operations of the Chinese Coast Guard. So that's one piece is the reorganization and consolidation. The second is an effort to build capabilities. And I think the 2014 OSD report gives a good picture of this. And essentially the story is of a two-phased effort, one 2004 to 2008, which saw the addition of about 20 additional ships, and then a second phase beginning in 2009, which saw an acceleration of that modernization. That's expected to add about 30 medium and large-sized ships, decommission some older, less capable ships, and add about 100 new smaller pre-cultural craft to expand the fleet. So the net result will be a force that's about 25 percent larger through construction and the addition of larger ships, some of which are inherited from the PLA Navy. So that's in quantitative terms. In qualitative terms, what this means is the Coast Guard is getting newer and larger ships that can patrol further away from China's shores for longer times. Many of them are armed. Many of them support helicopter operations, which further improves their capabilities. And these force improvements, which now are the product of a decade long effort, give the Coast Guard a lot more ability to sustain a robust presence in the South China Sea, including the further reaches of the sea. Turning to the PLA Navy proper, I can't say everything about modernization, so I'm going to focus on the parts that are most relevant to the South China Sea. And I'll begin by noting that Taiwan is still the most important mission, but the task of defending China's maritime territorial claims has become increasingly important as a mission. If you look at the data, and again this is in the paper, I won't put the slides up, what you see is a relatively modest quantitative expansion in terms of major surface combatments. A few more destroyers, a few more frigates, a lot more corvettes, but I think the real important piece is the qualitative improvement, that you've seen a lot of older ships retire, their replacements are much, much more capable, and some of, and the result is a significant upgrade in the PLA Navy inventory. And some of the things that modern ships feature are much more effective radar and communication systems, much better air defenses, the ability to carry more modern and more lethal anti-ship cruise missiles and a greater operational range. And a lot of those capabilities are particularly relevant to the South China Sea, where forces have to operate outside the range of land-based aviation. Other significant development is the deployment of China's first aircraft carrier, the Liaoning, originally built by Ukraine, never finished and converted and finished by China. It's a ski-jump style carrier, so it doesn't have catapults, and that limits the payload that aircraft operating off it can carry. It's not yet operational, although it's done its first training cruise and aircraft are conducting training missions. One of the points I want to make, I've talked a little bit about some of the new capabilities, but I think the point is how they're being used and China's willingness to show them off. Historically, China has been reluctant to showcase new capabilities and concerned about transparency, but I think there's a shift that increasing PLA strength means that China now has the ability to demonstrate its capabilities in order to shape its regional security environment. And there's a number of recent instances where China has done this. In March 2013, a four-ship PLA Navy flotilla went into the South China Sea, including a televised oath-taking ceremony by Marines and sailors right off the James Shoal. So that was certainly significant, and it was significant, I think, that Xi Jinping visited Sanya a couple of weeks later to meet with some of the ships and the crews involved in the deployment. The Liaoning's, the aircraft carrier's initial training deployment was in November 2013. It sailed from Qingdao into the South China Sea, and even though not operationally capable, that showcases something that's a new capability for the Navy and the fact that it's potentially relevant to the South China Sea. And then I think the January 2014 Navy deployment of two destroyers and an amphibious landing craft, again, through the South China Sea, but out through the Sunda, Lampak, and Makassar Straits conducting anti-piracy search and rescue and live fire drills, again, showing the capability to patrol further away from China's coast. The last point I want to touch on is the coordination between the Navy and the Coast Guard. As I've said, generally China prefers the Coast Guard to be in the lead. That has been the pattern in Scarborough Shoal and the Senkaku Islands tensions with China maritime surveillance and fisheries law enforcement command ships directly asserting Chinese sovereignty in the Navy in a backup position, which is the way China prefers to operate. But we have seen more and more joint exercises between Coast Guard and Navy vessels beginning in July 2009. And there's also an increasing educational and training relationship between the personnel in those two services. I think the most impressive example of this is the May 2014 deployment of the scenic oil rig to waters claimed by both China and Vietnam. And what's impressive there is that the rig was accompanied by some 80 ships, including seven PLA Navy warships. The size of that deployment suggests that China anticipated potential resistance and wanted to deter attacks, but also be positioned to respond to them. And I think what's impressive there is showing that this was a carefully planned and coordinated operation showing that China can coordinate Navy assets, Coast Guard assets, and state-owned enterprise assets. And that's a step forward for them. The last point I want to make in conclusion is to note that clearly this investment in maritime capabilities both for the Coast Guard and Navy has improved Beijing's ability to enforce its maritime territorial claims in the South China Sea. And I think we've seen Chinese leaders that are more willing to use these capabilities in response to perceived challenges. But clearly this more assertive approach to territorial disputes is in tension with efforts to persuade neighbors that China is committed to peaceful development and regional stability. And maintaining this balance between those two goals, I think, is a challenge. There's a variety of things China tries to do, including relying primarily on paramilitary forces to pursue its claims, to try to deter challenges by other countries, insisting on bilateral resolution in order to prevent others from uniting to resist Chinese tactics, and a willingness, a stated willingness, at least, to pursue joint development. And I think the Chinese hope is that these measures coupled with its reassurance arm of its strategy will allow China to gradually expand its effective controls without the need to use force. Ultimately, though, this is based on the belief that the regional balance of power is moving in China's favor and that other countries will eventually compromise. However, as everyone in this room knows, other claimants also face nationalist publics and are unlikely to simply abandon their claims. And if they adopt equally uncompromising policies, I think these more assertive Chinese efforts are going to have an increasingly corrosive impact on China's relations with its neighbors and on the regional security environment. So to manage these tensions as China hopes, it requires agile diplomacy and very effective control and coordination of both military and paramilitary forces. And unfortunately, China's nationalistic policy environment and mixed crisis management record doesn't inspire confidence in Beijing's ability to strike and maintain the right balance. Let me stop there. Thanks very much, Phil. Next, we'll turn to Vietnam and other topics. And that discussion will be led by Dr. Carl Thayer, who is the emeritus professor for in the School of Humanities and Social Sciences at the University of New South Wales at the Australian Defense Force Academy. Carl. Thank you, Ernie. I'd like to thank the CSIS for the invitation. This is the fourth time I've attended. No jet lag from Australia. My outline is to focus very narrowly on the three maritime forces, the Navy, the Coast Guard and the Fishery Surveillance Force, and then relate that to the oil rig crisis. But before I do that, Vietnam has a venerable naval history. From the 17th century onwards, the Emperor commissioned the Doi Huangsa, the Huangsa flotilla or brigade, a separate one for the Spatlys, but this one went to the Paracel Islands, five-week deployments, five-eight ships. I told to take enough provisions for that period, and they salvaged wrecks that occurred. This is a ceremony that I attended on Lisa and Ireland two years ago. I was just back this year. That's the island closest to the oil rig, where they keep alive the tradition of remembering those who have perished and also who protected Vietnamese sovereignty. Now to get to the present. The first two forces that I'm discussing are under the Ministry of National Defense. That's the People's Navy, and it went through several periods of modernization and thanks to the Soviet Union. And to make that very brief, it's from 78 with the Treaty of Friendship up until economic reforms, basically, but by 1990 to look at the change in the order of battle here, it's really a principal service combatants. The Frigates, Corvettes, and Territile-class Frigates, Light Frigates, and their missiles. That's key. The overall number of ships has been basically the same in the IISS military balance. The Navy has been about 42,000, 40,000, including 27 naval infantry throughout that period. But the major, major improvement is the acquisition of the enhanced kilo-class submarines that I've pointed out on that particular slide. Vietnam's modernization is heavily limited to its defense budget, and that's just under 3% of GDP. It's risen to about 3.8 billion in the most recent year, and that will, that, that shows the limited resources about what I'm going to be talking about. The gradual force modernization has been from its first light, one copy of this BPS missile boat is overtaken by more advanced technological designs with the Vietnamese co-produced it in Vietnam. The acquisition of fast attack craft, the two Gepard guided missile stealth frigates, which are the modern end, very little, and the Moininha-class Corvettes. Under the Navy, they're in charge of coastal artillery, and they have the very effective bastion system that can fire multiple Yakkant missiles, and pretty well cover their, their mobile, and they can cover very much up and down the coast. Vietnam's 200 nautical miles, lucid economic zones. They're in the process of getting in either two to four Sigma-class Corvettes from, from the Netherlands, the Diamond Company, and further enhance the, they've already taken delivery of two kilos, and they'll have four by 2017. The Navy, under the Defense Ministry, there's a national defense industry that is able to produce 400 ton gunships. They're upgrading the old light frigates from the 1990 period, producing these co-producing Corvettes and producing crews and other missiles for the Naval. Future acquisitions, two more Gepard frigates with an anti-submarine warfare capability, two to four Sigma's, as I've mentioned, and the other kilo-submarines. If we turn to the Coast Guard, the numbers vary 50 to 60 vessels, but probably only 38 active, three or only three aircraft, the largest 2,000 tons. So when they confront the Chinese, the Chinese are two to four times heavier in weight and much more modern, capable and sophisticated. The Coast Guard is a law enforcement agency. Its newest vessel launched this year is 2,200 tons displacement, so that gives you an idea of what they're on about, but they're capable of building that size ship. Coast Guard missions are perfectly law enforcement, but the very last line is to cooperate with the People's Army Navy when necessary, and since they both come under the Defense Ministry, that coordination is there, but everything else is. All the modernization that I've talked about from about the 1980s to the present has been from riverine to coastal to exclusive economic zone, continental shelf, defending features on the Spratly Islands and the offshore oil rigs that Vietnam has. The newest boy on the block is the Vietnam Fisheries Surveillance Force, shown here. Again, it's newest ship launched in June this year. Again, around the 2,000 ton class, the other is much smaller. Now, if we go to May this year with the oil rig crisis, I think the important thing is to say is Vietnam has adopted a both a conciliatory diplomatic point, but has kept its Navy at harbor, and none of its armed Coast Guard vessels have unsheathed their weapons at all in contrast to China, which is engaged in intimidation by unsheathing their guns and pointing them at the Vietnamese itself. And so here we have the oil rig crisis, which has led to a series of ramming incidents. Now, according to China, 1,500 of their ships, the Vietnamese have conducted 1,500 rammings. They say there are 69 Vietnamese ships that's inflated, but that's 21.7 rams per ship. And I visited the repair yards along with Jeremy Cole, and we didn't see many damaged Vietnamese craft there needing to be repair. So I think that the Chinese figures are absolutely incredulous. But it has led to the sinking and capsizing of one Vietnamese fishing boat with 10 crew on board too, which were trapped momentarily in the cabinet when it was overturned, and it's led to the smashing and damaging of this fishery surveillance craft. There have been over 30 vessels that the Vietnam has had at sea from both these paramilitary forces that have suffered severe damage. The modernization program, the U.S. is providing, since 2009, a Coast Guard trading program. And if you read today's intake, the Japanese diet is considering providing overseas development assistance to provide loans to Vietnam so they can acquire more modern Coast Guard vessels, and they're expecting delivery by early next year. The Vietnamese National Assembly has allocated roughly 756 U.S. million to the Coast Guard and the surveillance force, and an additional 473 million in soft loans to build new fishing boats to make them reinforce steel to confront the larger Chinese boats which already have that capability. So that's my presentation on the three services of Vietnam. Thanks very much, Carl. I turn next to a discussion of the Philippines and other capabilities from Mr. Christian Lemaire, whose defense and military, I'm sorry, who is the senior fellow for Naval Forces and Maritime Security at the International Institute for Strategic Studies, or IISS, in London. Thanks for joining us again, Christian. Thanks, Annie. And thanks to CSIS for another well-attended and very interesting conference. I was going to speak briefly about the Philippine Navy, briefly because there's not much of a navy in the Philippines. And this is largely because the Philippine has, quite understandably, been much more focused on internal security issues for several decades. The various waves of violence that have occurred with the New People's Army, the challenges they found with the Abyssiaf group, with MILF and MNLF, and various other domestic instabilities as well, have led to a long-term focus by the Philippine military, both on the land, but also in particular on internal security issues. Meanwhile, the Mutual Defense Treaty that the Philippines has been partied to with the U.S. has allowed it to essentially delegate out its external security to its partner in the U.S. and has allowed it to give international disputes a relatively low priority. That is, until recent years when suddenly the Philippines is much more concerned about, certainly, its maritime periphery. The military broadly, but particularly the navy, has been underfunded and it's been really insufficient to maintain maritime security, domain awareness, and maritime governance more broadly. And this continues to be reflected in the balance of spending by services within the Philippine military. In 2014, for instance, the army was budgeted to receive approximately 64% of expenditure on the armed forces. The navy was budgeted to receive just 17% of that spending. There still remains a very heavy focus in spending on the army and on land-based security generally. Defense funding broadly has been a very low priority for many years for the government. Current defense spending as a percentage of GDP is approximately 1%, which is the same as Japan, but Japan has other constrictions on its defense spending. It's vacillated within this broad 1% area for decades, really. I mean, it did rise briefly to about 1.5% in 2002 amid the intensification of Islamist insurgencies, but since then it's really been around 0.9% or 1%. And I think it's instructive to compare the Philippine budget with the Vietnamese budget that Carl was just talking about. Despite the Philippines having an economy that is far larger than the Vietnam's, its defense budget is about 2.30 size of Vietnam's in U.S. dollar terms. So because of these factors, the lack of broad defense spending and lack of a focus on the navy, the Philippine navy is without doubt, with the exception of Brunei, the weakest of the South China Sea claimants' navies. There are no effective anti-ship missile capabilities. There's certainly no subsurface capabilities. There's very little ocean going capability within the Philippine navy more broadly. And I think perhaps the most indicative aspect of this is the fact that a former U.S. Coast Guard cutter, which is about 45 years old at the time, was renamed Gregorio del Pilar when it was handed over to the Philippines and instantly became the navy's flagship. So the very fact that that was seen as certainly the most iconic and perhaps the most capable vessel that the Philippines could muster at that point is a damning statement of its naval capabilities. Arguably, the paucity of military capability within Philippines is actually one reason why the country is pursuing an independent third party arbitration case against China, lacking the military and paramilitary capabilities to enforce its sovereignty claims effectively. It is therefore resorting to legal maneuvers and public relations efforts instead, which is something that Vietnam has discussed and talked about but has not felt the need to do so perhaps in order to manage its relations with China better. That's not to say that the navy is irrelevant in Philippine calculations and the military more broadly does have a role to play in its South China Sea claims. The Philippines occupies 10 features in the South China Sea in Spratley Islands and the military is often present there. The Sierra Madre, the grounded vessel on Second Thomas Shoal has become a crucible for competition between China and the Philippines over the past year and is the most recent Philippine occupation of a feature in the region from 1999. Gregorio D'Opila was in fact the lead vessel used in the 2012 Scarborough Shoal standoff demonstrating the Philippine desire to utilize its new capabilities where possible but also the limitations of that given that the standoff eventually led to a fairly humiliating climb down. But what we've seen within the Philippines as with other smaller Southeast Asian states over the last few years has been a realization that military funding defense expenditure is insufficient and a resolve to increase that expenditure in reaction to China's increasingly dominant military posture within the region and increasingly assertive posture within the region. So the 2013 budget for instance in the Philippines suggested 25% increase in spending in dollar terms and there are likely to be increased defense expenditure figures for future years as well. Despite that there are obviously significant capability gaps in the Philippines military's capabilities given long-term underfunding. Recent defense budget reports looked at four key areas that needed upgrading and naval and ground defense and general headquarters capability and set various targets for where the Philippine military should be in coming years. So by 2027 for instance Manila hopes to have control of the airspace over land and sea and maritime patrol capabilities and include patrol and surveillance coverage up to 200 nautical miles of the exclusive economic zone. Now again that's a very worthy ambition but again a damming statement that a country is currently unable to effectively govern its own maritime space and airspace above its maritime zones and is looking at a more than decade timeline to be able to realize that ambition. The Navy is currently engaged in a first phase of procurements to try and fill some of its capability gaps and the contract has been awarded to an Indonesian firm for instance for strategic sea live vessels and it's looking very intently at other possible purchases such as wildcat helicopters possibly frigates from South Korea. It's even discussed the possibility of purchasing submarines as the regional frenzy for subsurface capabilities continues to pace but whether the funds will be able to be found to procure these capabilities is another question. It certainly needs anti-ship missiles if it wants to be seen to be credible to turret force anyway. New frigates of some form anti-submarine helicopters, multi-purpose attack craft and amphibious assault vehicles but again this is a broad shopping list which a limited military budget may not be able to fulfill. So given that fact and even with recent procurements and increases in defense budget I think it's fair to say that the Philippines is going to remain the weaker of the competitors in the South China Sea from a naval standpoint and so the Philippines will continue to rely on US support both financially through foreign military assistance and in terms of the US presence and that's part of the reason why we've seen a rejuvenation of the Philippine US military relationship in recent years particularly with the Manila Declaration signed in 2011 and earlier this year with the enhanced defense cooperation agreement signed in April which essentially will open up Philippine bases to greater rotation of US forces in coming years although it's not being clearly defined exactly what forces will be deployed where. The difficulty of the Philippines I think in this strategy is that a greater US presence acts as a deterrent but equally the US is quite rightly a little bit low to engage itself in direct confrontation with China so when it comes to situations like Scarborough Shoal the Philippines can't really call on the US to step in and send a carrier strike group to the South China Sea so the Philippines is still required to invest in its military even while it's trying to rely on the US for its external security but aware of these limitations is also trying to build relations with other countries in the region particularly with Japan which has pledged to donate vessels for its coast guard but equally with other countries such as Australia and India to enable it to internationalize its military relations to some extent. Ultimately the lack of capabilities will remain a concern for the Philippine Navy for the foreseeable future. Equally a concern is whether the Philippine military is ready and willing to use force when required. The Philippines has not really been engaged in an international conflict in its modern history and it's unclear exactly how prepared its forces are to fight and how willing the political leadership is to use its forces to fight. So beyond the capabilities themselves there are also questions about resolve within the Philippine military. It should be noted that the Philippine coast guard is a very active force but again it's relatively underfunded and relatively limited in its capabilities particularly in the face of rapidly growing Chinese paramilitary capabilities in the form of the recently conglomerated China coast guard that Philip was talking about. So it's all a rather bleak overview of the Philippine military but it does suggest that while there will be more investment in Philippine capability in the future Manila will be forced to look towards other strategies such as the legal route that is currently taking to try and enforce its sovereignty and undermine Chinese claims to the region as well. Thank you Krishnan and for the view from Kuala Lumpur in Malaysia Mr. Shariman Lokman who is the Senior Analyst of Foreign Policy and Security Studies Program at the Institute of Strategic and International Studies or ISIS in Malaysia. Shariman. Thanks very much Dr. and thanks for mentioning our full name. You know I wouldn't want people to think that I'm from the other ISIS. Yeah thankfully they let me hear not Tuesday. I'm just going to organize my presentation around five key points. I'll first describe the sort of attitudes, perceptions, judgments that underpin the Malaysia's approach towards the situation in the South China Sea and I'm gradually moved towards talking about forced modernization, modernization, forced development in the Malaysian Armed Forces and I'll end with a brief note about the Malaysian Coast Guards, the Malaysian Maritime Enforcement Agency. My first key point is this, the Malaysian Government continues to have a very high degree of confidence in its current approach to the South China Sea and that approach emphasizes the need for quiet diplomacy, the need to avoid discussions as much as possible in the media, avoid the glare of the media and underscores the need to software as much as possible to separate the issues into two aspects. One is issues of common concern, stuff that, you know, affects everyone, user states, claimants states, that, you know, you can involve discussions about that, you know, you can involve in other states, you can involve everyone in those sorts of discussions. The second aspect is the maritime, the territorial and jurisdictional dispute itself and there is still this insistence that we should keep that among the claimant states. I know it's very difficult sometimes to untangle those two aspects, but, you know, the working assumption is this, the working assumption is that an airing of the dispute in the media would unnecessarily incite nationalistic passions that it would further limit options for the for the political leadership of the country's concern, especially China, or maybe including China, especially China and the other assumption is that the involvement, the excessive involvement of extra-regional countries, including the United States, would could be counterproductive, that it would only provoke a very, you know, even harder response from China. It's not that Malaysia does not want the United States to be present in the Western Pacific and in Southeast Asia, it does. PM Najib has said that Malaysia welcomes the US rebalance, but there is this notion that, you know, it needs to be, the rule needs to be calibrated properly, you know, not too hard, not soft, but just right. You know, yeah. So, yeah, so in that case, sometimes Malaysia's approaches perform slightly different from Vietnam and the Philippines, and we get a lot of visitors to Malaysia, to ISIS, and, you know, they want to talk about the South China Sea and the discussion in that really leads to that one single question that everyone wants to ask us, why are you so quiet? And I guess it's two possible reasons. One is just sheer geography, we are just further away from the epicenter of the experience of the South China Sea. And the other is the nature of Malaysia's relationship with China, and that brings me to a second point. I'm going to move very quickly. Sorry. Malaysia generally believes that it has a fundamentally different kind of relationship with China compared to the other South Asian countries. The word special relationship has been used. Internal discussions in public statements, it is genuine. You might be cynical about it and dismiss it as mere rhetoric, but, you know, and I was initially skeptical about it as well, but, you know, it's not entirely unwarranted. The Chinese have been soft on us compared to the others. They have been, I know, well, forgiving of our oil and gas activities in the South China Sea and that is very important for us because 40 percent of Malaysia's government revenue comes from the oil and gas industry. That's our lifeline. You know, and there's this expectation that China will reciprocate our gestures of the past, that it has a long memory that in 74 Malaysia was the first ASEAN member state at the time, among the five, the first ASEAN member state to recognize China in 74. That during difficult times, when Tiananmen Square happened, the next month, you know, Tiananmen Square happened in June 89, in July 89, we sent a trade delegation when no one wanted to have anything to do with China at the time. Our mission was the country that brought in China into the ASEAN framework by bringing the guest of the ASEAN chair in 1991. We brought our minister Chen to the AMM, but this doesn't mean that we don't have any problems with China in the South China Sea. You've heard the mentions of James Hsu, and you know, they've been all this public highly publicized visits you know, in March 26, 2013, four ships led by its biggest and newest amphibious landing ship. They dropped the sovereignty steel in April of 2013. And again, on January 26 this year, four ships that came by the amphibious landing ship. I can't pronounce the name Jiangishan, I can't pronounce it. Yeah, you know, we initially, I mean, the Navy initially, nation Navy initially said they weren't there, but finally, the Chief of Defense Force came around and said they did pass through James Hsu on January 26 this year. It's just that there's this real desire not to make a big fuss about it. That, you know, discussions, again, back to my original point, discussions should be kept firmly within the official channels and not to bring it up in the media too much. And also, well, there's the other incursions that we don't really hear about. There's never been reported in the press, but it has been mentioned in parliament recently on the 22nd of, on the 20th of March, 2014, the Malaysian government told parliament that and I quote, I'm translating this from the Malay, since 2011, incursions by the warships of the people through the Republic of China, intermalation waters in the South China Sea have to complete at least one year. Since 2013, there has been an increase in the number of incursions by the PRC that are focused in the areas of South Luconia, Sholes, North Luconia, Sholes, and also James Sholes. These are all within Malaysia's economic, exclusive economic zone. I mean, it's added that since 2013, seven incursions have been detected involving 16 assets of the people's Liberation Army Navy and the Chinese Coast Guards. The seven incursions and the 16 assets the minister did not give any details about, I don't think it's 16 ships on each occasion here. So, yeah. But even though there have been all these incursions, so when I talk to naval commanders from Royal Asian Navy, they say that it's in directions with the Chinese vessels in the South China Sea has been professional, quote unquote, that sometimes even cordial that it's become almost ritualistic where we say that you are in Malaysian waters and they will respond, you are in Chinese waters and they inevitably part ways or even continue mirroring each other, but that's it. That's the full extent of the interaction. No bumping into each other. Not yet. And, you know, but and it's difficult to determine how Malaysia has reacted in terms of force modernization because there's a lot of things going on here. But there is a plan to build a naval base in Bintul, which is 60 kilometers away from Changshao. There is a desire to develop an amphibious capability for the Malaysian armed forces. It's unclear whether this amphibious capability will be parked under the Navy or the Army. The Army continues to be very dominant in the armed forces console. So I think the Army is probably going to get it. And the MEF has been very keen to get assistance from the U.S. Marine Corps. I should note that in the last two carrier exercises that they had between the nation and U.S. military, they both had amphibious landings as the main feature of those exercises. My third key point, sorry, do I have... Yeah, thanks. Third key point, it's not all about China. It's not all about South China Sea. The reason I'm saying this is that it's a very tempting to say it was all about China that you're spending more and more and it's all about China. It's very neat, very parsimonious, very clear, makes you feel very good, I think, to just be very almost clear-minded about it. But in case of Malaysia, well, in the case of Southeast Asia, I think, we are also looking at each other. This is something that we don't really discuss. Malaysia looks like Indonesia. Indonesia looks like Malaysia. When asked why Indonesia needs to be in submarines, the Indonesian Defence Minister has said we need to keep up with the other other member states. The Thai defence spokesman quoted by the Bangkok Post a couple of years ago said that we need to maintain the balance of power within ASEAN. It's worth thinking about that. You know, it's not quite, it's not often made very clear in the press reports that this is also a factor in force monetisation in Southeast Asia. In Malaysia's case, the main thing that's driving recent purchases is not even Indonesia, not even Singapore or not. Not South China Sea. Those things are thought about, but the main thing is a response to what happened last year in Sabah. There was, you know, in February 2013, there was incursion by 200 militants from Southern Philippines claiming to represent the Sulu Sultanate. There was, you know, that for three weeks, the government wanted to resolve that situation peacefully, but its hand was forced when policemen were killed. In one case, about four of them had their bodies mutilated. One policeman was beheaded. You know, in the end, the government just had to all out assault, including bombings by F-18s, which was very effective. In the end, you know, nine members of the emigration security forces were killed, 68 militants killed. But after that event, there was a bit of social searching going on. It's like, gosh, this shouldn't be happening to us. You know, this is, this is just 200 RAC tech sort of, you know, militants, you know. And the two principal conclusions were reached by the military forces. One, there needs to be a renewed emphasis on counterinsurgency. It might sound familiar to some people here. The CDF said that the fourth militant, fourth dimension militant armed forces plan for the AMAF, which is the main sort of like document that informs purchases, focus primarily on conventional threats and we did not place enough emphasis on combating symmetry threats. The other conclusion that was reached was that militant armed forces, they needed to boost its capability to move reinforcements quickly from one side of nature to the other. They had a CPX, command post exercise earlier this year. And they found that they were caps into their capabilities. And so a lot of money is being chained out towards low intensity conflict. The Malaysian Army is getting the the biggest share of recent spending. The Navy is getting a lot of small patrol boats. That's the main preoccupation right now. And they also think about sea basing, you know, turning amphibious ships into, sorry, turning the auxiliary ships into a sea base sort of thing. So the fourth and fifth point very quickly, the fourth point is the Malaysian Navy is pretty stretched. It has a core force about 39 surface ships and two submarines. Its development has been in fits and starts really. There's always been, oh, we're going to give you a lot of information about the Navy. Oh, we're going to give you lots of money than there's an economic crisis and plans get trimmed. It is a very, very big sea area that we're talking about. We are talking about an EEZ the size of California, basically. So 39 ships won't do it. But, you know, there is a plan to purchase six littoral combat ships. We're calling it littoral combat ships, not the same as the US LTS. Six will be added into the inventory within a couple of four or five years. And that should fill in quite a bit of gap there. Last point, in talking to people in the security establishment in Malaysia, there is a growing sense that we need to focus more on building out the capabilities of the MMA, the Coast Guards. That the Coast Guard is the best place to deal with incursions from China because they are sending their civil maritime maritime vessels. And, you know, they say don't bring a don't bring a knife to a kind of fight. Well, this is the this is opposite. You know, don't bring a cruise missile to essentially what is essentially usually a staring contest. You know, so bring, you know, so have don't don't have all these ships that can then get that are fully armed to to to the South China Sea is better to have lightly armed stuff. Unfortunately, it is the MMA vessels are pretty old. So, you know, there is a real need to invest more on building new ships for the MMA. Thanks very much. Sorry. Thank you very much. I'd like to thank the the panel and we'll open the floor to to questions. I'm going to take the prerogative of the chair and ask the first one. But when you do ask your question, just please identify yourself and your institution. I wonder if the panel could comment on the your country's attitudes towards Japan's the proposition that Japan would play a more active role in regional security and defense. And do you see that happening already with your countries and what what is their attitude towards an increased Japanese role? That's a bad thing. Okay. That's all. Well, Vietnam has made it clear that it welcomes any country, including the United States of Japan, that contributes positively to regional peace and security. And in that respect, it welcomes what Japan is doing as long as it contributes positively. That's viewed positively in Hanoi. I think the same is true in Manila as well. Despite a somewhat tricky history between Japan and Philippines after the Second World War, Manila is keen to have any strong friends that can lean upon and rely upon for greater equipment, capabilities, and capacity building as well. Christian, could you just talk? Are the Japanese playing a key role in maritime surveillance for the Philippines? I've understood that there's some role of P3s from Japan. Are you aware of that? Yeah, I think it's at a very nascent stage, though. I don't have full information on that, but I know maritime domain awareness is one of the areas that the Philippines is most eager to improve upon, and they have discussed the issue with Japan. What exactly that means in terms of Japanese loan or operation of equipment is currently a little bit unclear. Thank you. Generally welcoming, but I think questions about any attempt to link the East China Sea with the South China Sea that discussions on those two things should be kept separate. Okay, let's open the floor. The young lady here in the front. Mike should come to you soon. Hi, I'm Dr. Donna Wells I'm a geopolitical analyst. Can you talk, Dr. Saunders, could you talk about the future role of the U.S. carrier fleet given China's anti-ship technology? It's a problem and it's not just a function of the anti-ship ballistic missile. It's a multi-access threat in terms of conventional submarines, advanced cruise missiles, as well as the anti-ship ballistic missile. There's a lot of work going on in the Navy to think about the various ways to respond to that with I think the anti-ship ballistic missile being the newest kind of threat focused. But my center has just published a book on Chinese cruise missiles which highlights the various ways which they can be used to threaten U.S. carriers. There are solutions to some of those approaches, a lot of which involves trying to push forces further back out of range and the Navy is pursuing a number of those. So I guess I would add that I'd come to the bottom line that it is a tougher threat environment for U.S. aircraft carriers to operate. There's a variety of things we can do to mitigate some of that. But the bottom line is there's going to be an increased risk when you go inside the threat envelope of certain weapon systems and that's I think a factor for Pacific Command and PAK fleet commanders to weigh. How do you balance what you want to achieve with the operational risks you're prepared to run? Chris? Chris Young, National Defense University. I wonder if the panelists could talk a little bit about whether they see the developments in the age of Pacific as an arms race or an arms crawl. We hear a lot about how there's a relentless build of forces in the age of Pacific and I'm wondering if they're feeding off of each other or is it a natural development force modernization capability developing in the age of Pacific region. So there's a debate over which one is which. The second thing I'd like to ask is you've all have focused a lot on the hardware. Talk a little bit about the software with regard to capabilities. Training, ISR, command and control, that sort of thing. Thank you. Yeah, just on the arms race issue this is a topic that I've discussed fairly frequently. Now I am more reticent to use a phrase arms race than other people just because I think there's so much historical baggage tied up with that particular phrase. There is definitely a military procurement competition occurring within East Asia. There are definitely action reaction dynamics to it. The Vietnamese submarines could be seen as just an expansion to subsurface realm in a developing country but buying six subs when China has increasingly dominant surface capabilities and other countries also buying subs does appear to be a clear reaction to China's increase in dominance of the surface. But there are other reactions in there. You know, why does Malaysia need two submarines? Perhaps it doesn't but maybe it wants them because Singapore has got four submarines. So there are inter-regional rivalries that also fueling these purchases as well. And as Sharaman said there are internal security issues as well to some extent. So yes, I think we can certainly talk about military procurement competition. I would also say that you know, it's not much of an arms race when most defense expenditure as a percentage GDP is not increasing very quickly. Japan has recently increased defense budget for the first time in more than a decade and last year by the most in more than two decades but it's still about one percent of GDP. And it's a statement that will increase defense spending over the next five years by five percent is really not a race in any sense. It's not very rapid in any way. So, you know, I think it's difficult to talk about a regional arms race. I think it's very difficult to talk about an arms race when there's really only one horse in that race and that is China. There's no real symmetry to the competition at the moment between China and its neighbors nor between the U.S. and China as well. I think there is the possibility in a very long term for an arms race between China and the U.S. if relations deteriorate and there is a greater bilateral military competition. But for the moment I would refrain from using the phrase arms race and refer more to a military procurement competition between various states and within the region more broadly. Does anyone else want to comment on the race, Carl? Yeah, the historic baggage is that two countries identify each other as adversaries and strain in resources to compete each China match and counter match the other. So, by that definition using the historical baggage, no, there's not an arms race in the region. Yeah, he asked about ISR and software. All right. In terms of training, as I mentioned, amphibious capability work with U.S. Marines and the amount of interactions that we're having with the United States government and the United States military is increasing quite rapidly. There were three ship visits. Sorry, six ship visits in 2003. By 2011 it was 30 plus. And in most instances when U.S. Navy visits we usually have one exercise, one exercise or another. We're doing quite a lot with the U.S. Air Force as well. Cope Tower Fund recently quite remarkable. The first time the U.S. deployed an F-22 outside a U.S. base. It has been deployed in Japan but it was in the U.S. base. It was deployed in Penang and that shows the rules of I guess desire to build each other's gracious air defense capability there. So yeah, that software part America is doing a great sort of service for us, I guess. Anyone else want to comment on software among the capabilities among the countries you're looking at? Yeah, I would just if we take the enhanced kilos for Vietnam retired Australian admiral indicates there'll probably be Soviet technicians on there for several years, at least five or so. There are problems with communication now. Reading the Vietnamese Army Press Quang Doi Nhan's on that newspaper and that's not classified. There are very few joint exercises where you have the Sukhoi's operating with the naval craft that was a highly publicized one. You have individual missile firing exercises. But the intelligence was highlighted as an area for development at the last party Congress in 2011. Vietnam is going to get its first satellite but it's not a military satellite. It's just a general one that they can use. So it has to hook into other facilities. So it's trying to develop its own singent, etc. But we're talking a very low base and then I think there's a thing called the Lancaster equation that measures the extent to which the Revolutionary Military Affairs is actually integrated into the hardware. And I think if you did a bar graph and comparing Vietnam with other navies you would barely see the green line of how much RMA has been brought into it. But as long as it's Soviet compatible equipment India is an alternate source for training, particularly Submarinus. There are 500 training there. Vietnam is putting its eggs in two baskets, the Russian and the Indian one. Used to do Ukraine but they defaulted and now it wouldn't be possible. You and Graham from RSIS. I have two quick questions for Dr. Saunders in the first instance. Anyone else on the panel who wants to have a go at them? The first amphibious capabilities in the PLA don't get that much attention. But significantly most of those assets are deployed in the South China Sea and they have been growing from a small base quite rapidly. There's also a large reserve of amphibious capable forces. So how much does that feature within the military strategy and the PLA sign for the South China Sea and what are the sort of concepts that might be developed going forward. The second point, the wording of the US Philippine Security Treaty does mention specific language about public vessels in the case of the Philippines. That might be interpreted I suppose either as navy vessels strictly speaking or even Coast Guard vessels. Is China aware of that wording and if so does that moderate its likely tactics when it comes to collisions of the types that we've seen recently around the parasols in the case of Vietnam? I think I'm just going to speak briefly to the amphibious part. That is an area where there is some increased attention including in the training. My colleague Dr. Chris Young is an expert on amphibious operations and I think if you talk to him during the break you'll probably get a better informed answer. But I think more broadly that is a capability the Navy is trying to develop and it obviously has relevance for the South China Sea and other areas. So it is an area of focus and things are happening there. In terms of the US Philippine Security Treaty I haven't had a chance to ask that precise question. I would say it's a public document that the Chinese probably are very well aware of it. How much it restrains their activities that's a difficult question. I think they try to keep things under a certain threshold and they try to keep the US out of these disputes both by engaging us diplomatically but also by calibrating their actions in ways that try not to cross lines that might bring the US in. Carl and Christian. I'd like to point out that the Philippines US treaty is worded exactly the same as the Australia-United States Treaty. I don't think it's really the question of military ships. It's the use of the word in the Pacific. The US has reportedly clarified that that does include the South China Sea but the 1951 treaty of course was signed before the Philippines laid claim to some of its possessions so that leaves an ambiguity. But the wording is exactly the same and as I told the Filipino naval gazers before the modernization an alliance is what you make of it and in respect to the United States what do you bring to the table in other words using the Australian example you've got to pay some money and build up your own forces and make a commitment? Yeah I would agree with Philip but I think it's impossible to say whether the Chinese are fully aware of it on a day-to-day basis but I think that they are making a calculated gamble that the US will not commit significantly in military fashion to civilian or China Coast Guard vessels harassing through non-military coercion Philippine vessels as well and so the long-term strategy of China which seems to be one of relative dispute management whereby they are not trying to escalate these disputes to the level of conflict but equally certainly not resolving them in any way also involves pushing the status quo as much in their favor without drawing in a particular US military reaction and I think that gambler is part and parcel of what they're doing in the South China Sea with the China Coast Guard but also civilian vessels. Yes I'm retired Vice Admiral Koda former commanding chief of Japanese Fleet and I spent 40 years in Japanese Navy and watching Chinese Navy very carefully and the two comments and two questions one there were questions about Chinese anti-ship boats missile and the arms racing they according to the open news sources they're still Chinese ASBM is a long way to go especially to complete that missile system as a whole functioning combat system there are many things for China to do so perhaps it's all I'd say about 10 more years but key question is 10 more years is short or long we should interpret that as a short and we should be prepared for that and arms race if we you know the one analogy is if the US is the grown-up adults in terms of naval capability Chinese capability could be the senior of the high school or college graduate or college students and all the ASEAN nations they are great arts do you say this arms race no okay and the only Japan is competing but our defense budget last 15 years has been declining about 1 to 0.5 percent every year except the last year and Chinese total spending of the this is also the released spending is about 80 US dollar billion dollar equivalent Japan is about 40 US billion dollar equivalent so this is also not an arms race and questions to the panelists one is you know the Chinese strategy of the white ship against white ship this looks brilliant but at the same time regional nations also know what to react or how to react for example Vietnamese in the last May response no they also send the white ship or Japanese response to the Chinese challenge at Senkaku we have been also sending the only the white ship our navy is far over the horizon so you know if regional nation still may and they employ these tactics perhaps all the incident would go for the stalemate so we have to be prepared for the kind of the long-lasting conflict or non-combat skirmish and my question to the Philip is you know the what could be the Chinese alternate strategy against of the white ship because if or does China or is China prepared to take the risk of the long maybe decades long you know the conflict that's my question and second is not well discussed but you know the some the Malaysia navy for example of Vietnamese navy they are started operating submarines and operating submarine is not easy safety or water space management and also the submarine forces could be a trump card against for example Chinese carriers okay what could all the regional navy can do to operate submarine effectively and safely against the growing Chinese navy's challenges that's my second question and the third one is the easy yeah but all of the nations in terms of the maritime domain awareness they lack the naval aviation capability so China also China's Chinese navy looks strong but if we take count the number headcount of the number of the maritime patrol aircraft only handful okay Vietnamese Filipino almost nothing so what is your opinion especially the Filipino and Vietnamese what their course of action yeah those are my questions okay well let me take on the white hole approach I think for China that's okay because that keeps the things at a low level it limits the risk of escalation you know are they prepared to wait decades for this I think they feel time is on their side and that their strength is improving and eventually other you know their their gamble or their their view is that others will eventually come around to realize this and find a way to give up their claims so as long as this is done at an acceptably low level of violence and doesn't destabilize the whole region I think they're okay with that strategy of keeping it at a white hole and I think they can be patient what they can't do is be seen as losing or not responding to what what they feel are provocations and I'll let others I think speak to the submarine question thank you recently retired very senior Vietnamese general said there are three scenarios that the best one is august 15th China withdraws the rig and then they can get on with diplomacy to that they continue this long lasting pressure and Vietnam miscalculates and responds with a provocation and China comes down heavy or thirdly that China just ups the ante and seizes a piece of territory that's out there so at the moment it's it's white on white Coast Guard fishery surveillance it's unequal it's not a standoff it's a war of attrition China's expanded the zone from the rig it's damaged many Vietnamese ships it's now operating beyond 10 nautical miles even 30 to harass Vietnamese fishing boats to continually put the pressure on Vietnam and Vietnam is feeling that yeah I think the three aircraft that the Vietnamese have for maritime patrol the larger vessels are getting helicopters that's in under the Navy I saw Murray's eyebrows raised the Navy only has control of three CSAs 2000 sea planes a Spanish manufacturer they've identified that as a weakness I suspect they're hoping the U.S. to provide intelligence and information or even Japan and others as for the regional submarine I think using the expression as Buckley's impossible hope for the regional navies to even cooperate the ASEAN Chiefs of Navy meeting which I've dealt with at other conferences in great detail is struggling to even it's improving its act in getting exercises and things together but even anything like that would be provocative you'd have to bring in Singapore, Malaysia, Indonesia in Vietnam probably the the only ones that might operate would be India, Vietnam on an occasional exercise Russia, Vietnam because Russia is about to be given a facility in Kamran Bay for its fleet as it comes back from Aden and to assist in the development but in other words you've identified weaknesses absolutely yeah very briefly on the first issue of you know white ship versus white ship I recently wrote a book on what I call coercive maritime diplomacy brackets available on Amazon close brackets and you know there I was trying to identify why it has become much more common particularly in East Asia for the use of maritime diplomatic force even coercive manners being used for coast guards and I think you know we can take positive signs from this to some extent that China is not willing to escalate this to currently not willing to escalate this to a full-blown conflict and that may be because of how the international system is structured and greater norms against the use of violence than have currently previously existed you know a hundred years ago I have little doubt that this kind of thing would have led to some kind of conflict already even 20 or 30 years ago China has already had naval clashes with Vietnam in 1974 and 1988 but it seemed unwilling to bring its navy to the front line currently so yes it's a waiting gate for China but perhaps there are other issues here that we could look at to to draw some sucker from the idea that there are greater constraints on the use of force on China now which in Italy might diminish over time on regional submarine safety it's definitely a concern and two years ago at Shangri-La Dialogue Singapore and Admiral suggested that Singapore could host a regional submarine safety and rescue center that hasn't really progressed but I think all countries are aware of it Vietnam is receiving training from very experienced submarine operators in the Russians and arguably some of the best submarine operators in the world from Russia so that is a positive sign that safety is a concern but having said that it's a very difficult vessel to operate the UK and France have operated submarines for nearly a hundred years but still they have nuclear submarines bumping into each other in the depths on maritime patrol for the Philippines it's just one of a long list of things they need they don't really have much maritime patrol capabilities MPAs and various forms of ISR helicopters will be very useful for them but it's just somewhere down the middle of the queue of lots of things they need yeah I'll just address the MPA question I mean maritime aviation the Air Force recognizes that they need this capability what you have right now is just four beach craft when you have four you're actually talking about two at any point of time right because 50% civility rate at any one time the beach craft has an endurance of only about five hours which is nothing and after the search for MH370 there is a renewed emphasis on that Malaysia for a long long time has been doing something quite understated but important with Australia something called Operation Gateway where the Australians essentially fly their P3 sort of by the way and they go on on this figure eight sort of route you know around the Indian Ocean and around the South China Sea sometimes when they are in the South China Sea they link up with the P3s from the Japanese forces and the exchange information so the both sides will have full coverage of both East China Sea and you know that unfortunately has that number of of patrols on the and for that program has gone down because the P3s the Australians have been putting the P3s in Middle East but hopefully you'll go back up numbers but yeah that is no substitute for having a one's own capability Do you want to The footnote a building Malaysia has contracted a Singapore builder to produce a ship for submarine rescue and Daman from the Netherlands is building one for Vietnam I missed that part of your question but I think that under the eyes and cheeks of navy is a possibility because they all recognize it and it would fall under the search and rescue so that's that's a protocol that would not be seen as provocative to China so I misheard your your question I want to apologize to the others who have questions that we we do need to stay on time and since we had several answers to that question we'll wrap up I'd like to remind you that we're headed into a short lunch and then a discussion of the legal issues in the South China Sea over lunch and then this afternoon just after lunch our last panel of the day will be a role playing a simulation of a U.S. response to a crisis in the South China Sea with different actors playing national security advisor secretary of state secretary of defense and national intelligence director that should be fun but please join me in thanking this panel for their expert advice