Sino-US Colloquium (VII)
Closing Remarks
Dr. Patrick Ho,
Deputy Chairman and Secretary General,
China Energy Fund Committee
Jan 24, 2015
I am very much impressed by the depth and candor of the discussions here today. Your active participations have provided important support not only to us, China Energy Fund Committee, but also food of thought and inspiration to further peace and stability of the whole region.
Changing Energy Landscape in the Asia-Pacific Region
Just like almost everything else happening in this globalized world today, the focus and general situation of global energy security have changed dramatically in recent years, driven by the twin forces of rising Asian energy demand and the unexpected boom in North American production of shale gas, tight oil, and oil sands, and coupled with the undercurrent of plummeting oil price and the petrodollar. These changes in the energy equation have no doubt delivered successive heavy blows to some of the premises of Asian energy security.
In face of such predicaments, the Asia Pacific region should respond by assigning the highest priority in the region’s development agenda to forge a regional coordinating mechanism to assure accessible, affordable and sustainable energy sources, and to highlight the regional aspiration to participate equally in agenda setting in the global order of energy security.
Regional Efforts to Enhance Asia’s Energy Security
We must acknowledge that the Asia-Pacific is steadily making progress in the cooperation of energy security. The APEC process, ASEAN led groupings such as the ASEAN+3 and the East Asia Summit (EAS), in conjunction with the International Energy Agency (IEA), have become progressively active in their technical collaboration in regard to emergency planning.
The IEA, which was founded by members of the Organization for Economic Cooperation and Development (OECD) countries in the aftermath of the 1973 oil crisis, is regarded as the world’s most comprehensive international energy-security arrangement to safeguard the energy interests of the developed economies in the West against OPEC. Over the past 40 years, IEA has developed an energy strategy which enabled the developed world to act as an engine for the global economy and feature more prominently in the global political and economic landscape. However, China, the world's top energy consumer today, which accounted for nearly 12 percent of total global oil demand in 2013, as well as other emerging economies such as India, Russia, South Africa, Brazil and Indonesia, though invited to attend some of the emergency response exercises, are never full members of this organization. This represents a critical gap in the reality of national, regional, and even global energy security.
APEC is a regional economic forum established in 1989 to leverage the growing interdependence of the Asia-Pacific. The Energy Working Group (EWG) was formed the following year, and the Asia Pacific Energy Research Centre (APERC) was established in July 1996 to collect data and publish energy reports. Although APEC has the potential to play a leading role in Asian energy security, it has not yet taken the necessary steps to establish or implement any real focus of cooperation such as an actual oil-sharing or stockpiling arrangement.
ASEAN was established as a regional organization in 1967, and is considered to be one of the most successful regional experiments in the regional cooperation of the developing world. In recent years, the ASEAN groupings are active in participating in emergency preparedness training exercises, but neither grouping has implemented any defined initiative of risk sharing and energy cooperation. Much political willingness has been pledged, but few have been put into deeds.
While the existing regional forums and platforms featured the enthusiasm of the member countries to move forward in energy cooperation, they usually fall short of the expectation of providing concrete policy measures and coordinating regional energy cooperation. They also failed to capture the role of private sector and other stakeholders in bolstering initiatives on energy. This raises the question of the adequacy of the current platforms to coordinate the regional energy issues at large.
The European Experiences and the Asian Challenges
In this regard, perhaps the experience of European integration over the last fifty years can provide some possible insights for the Asia-Pacific region. The establishment of the European Coal and Steel Community after World War II used energy as a unifying concept that led to the formation of the economic union, which later developed into the European Union. However, constructing collective energy-security arrangements can be more complicated in Asia than in Europe.
First, unlike post-war Europe, Asia is less homogenous, having a mix of energy exporters and importers with varying resource endowments, economic disparities, and different national political systems.
Second, as some scholar noted, the region’s powers have increasingly embarked on a national competitive approach that intensifies distrust, worsens maritime tensions, and aggravates key strategic rivalries.
Finally, another reason Asia has not been as successful as Europe in reaching collective energy agreement is the fact that there is no single overarching organization or institutional platform actively engaged in energy security planning where all stakeholders can be brought into such cooperation, especially the contribution from the business, academic, community and private sectors. All the supra-national platforms, including the APEC process and the ASEAN groupings are state initiated and discussions are often bogged down by geopolitical standoffs.
The Role of Private Sector in Regional Cooperation
The private sector can play a pivotal role in working with the public sector in promoting regional cooperation and integration by contributing, first, through trade and, second, through infrastructure investments cutting across boundaries and interlinking countries in the region. Governments, then, can concentrate on ensuring an appropriate enabling environment for the businesses to grow and thrive. Governments and business sectors must join hands to make happen the often very large and complex investments.
Moreover, while territorial claims may intensify geopolitical rivalries, business cooperation tends to align the geo-economic interests and induce strategic restraint over the sovereignties involved. As for the South China Sea disputes, common interests include regional peace and stability and benefits accruing from common resource exploitation. This principle has been proposed by China long time ago first by the late Chinese leader Deng Xiaoping to ensure the peaceful resolution of territorial disputes with China's neighbors. In the 1990s, oil corporations from China, Vietnam and the Philippines signed an agreement for joint marine seismic exploration in the South China Sea, signaling a breakthrough for the principle of "Shelving differences and seeking joint development". Indeed, energy cooperation and joint development of natural resources in the region can serve as a means of mutual reassurance and a measure to defuse tensions in the East and South China Seas. This is a prime example where business cooperation arising from discussions of geo-economics can overcome the geopolitical hurdles.
It is also high time now for policymakers, industry leaders, professional and academic experts, and NGOs in the region to work together and explore the possibilities of forging a new, more inclusive, more specific and more collaborative energy security strategy and program and to complement the existing and future energy cooperation mechanism. Maybe we should explore the possibility of setting up a new platform: “Energy Development Fund” which would focus on investing in Asian energy infrastructure.
Proposal of an “Energy Development Fund”
Energy infrastructure development in Asia, particularly in remote areas and landlocked countries, is seriously inadequate. According to the Asian Development Bank, the need for infrastructure investment in Asia is about US$800 billion annually during 2010-2020. A large portion will be going to the energy sector. Without a concerted effort by regional governments and business stakeholders, the inadequacy of energy infrastructure will continue to hinder economic development making many regional cooperation projects very difficult to be implemented if at all.
Against this backdrop, China has proposed several new finical institutions namely, the so-called BRICS Bank, the Asian Infrastructure Investment Bank (AIIB) and the Silk Road Fund, to boost connectivity across Asia.
The idea of setting up an “Energy Development Fund” carries forward the spirit of mutual trust, equality and mutual benefits, inclusiveness and mutual learning, and a win-win cooperation. With active participation from foreign and regional investors, state and private enterprises, this new platform can act as a complement to the State’s initiatives and operates entirely according to market principles of governance and standards.
This proposed fund, initiated by international and regional investors, and with the endorsement and support from the States, can be instrumental in:
1. Promoting all-round energy cooperation in both official and civil levels in the region, with buy-in from stakeholders of all levels;
2. Coordinating trades with producers, acting as a clearing house for collective bargaining and cooperation on energy pricing; and organizing regional trading platforms and energy exchanges;
3. Establishing regional strategic energy (oil) reserves and a system of risk-sharing and distribution;
4. Integrating energy infrastructure within the region to achieve the integration of an Asian electric Super- grid;
5. Establishing funding platforms for the development of unconventional energy sources and to share the latest achievements of energy and renewable energy technology;
6. Serving as a common platform to align commercial interests to jointly develop the resources and energy potential in the region such as those of the East China Sea, and of the South China Sea.
2015: A Year that Geo-economics Trump Geopolitics
Ladies and gentlemen, the year 2014 was characterized by the return of harsh geopolitics. But I believe that 2015 will be a year that geo-economics trump geopolitics. When nations come together to do businesses, they may become too busy making money instead of wars.
This year will be a year of landmark significance for both the world and China. The international community will commemorate the 70th anniversary of the end of WWII and jointly adopt a post-2015 development agenda. Peace and development will become the two focal issues of the world this year.
As president Xi said, "We should be fully mindful of the complexity of the evolving international architecture, and we should also recognize that the growing trend toward a multi-polar world will not change… We should be fully alert to the grave nature of international tensions and struggle; but we also need to recognize that peace and development, the underlying trend of our times, will remain unchanged.”
At the beginning of 2015, I promised you that the China Energy Fund Committee will continuous to work with all of you to turn challenges into opportunities, to build small gains into major accomplishments, and to promote international cooperation and mutual respect, which is essential to the sustainable growth and prosperity of our societies. I hope that when we meet in this room again next year, we will be able to come up with a long list of deliverables and take a new step forward in the pursuit of common development of our planet!
See you again, same time, same place, next year!