MANILA – Indonesia and the Philippines inked an agreement last week that clearly defines the borders of the two countries’ Exclusive Economic Zones (EEZ) in the Mindanao Sea and Celebes Sea.

Vowing to forge closer economic and political ties in the future, Philippine President Benigno Aquino III and Indonesian President Susilo Bambang Yudhoyono witnessed the signing of the document on Friday by their foreign ministers alongside separate agreements on counterterrorism and higher education.

Labeling the border agreement a milestone “that is founded on the principles of international law, particularly the United Nations Convention on the Law of the Sea,” Aquino lauded the deal as, “solid proof to our steadfast commitment to uphold the rule of law and pursue the peaceful and equitable settlement of maritime concerns.”

In stark contrast to China’s seemingly intractable position in its sea border disputes with ASEAN nations such as Vietnam, the EEZ agreement between Indonesia and the Philippines highlights the productive power of peaceful dispute resolution in regional economic and political affairs.

Yudhoyono, who is currently in the Philippines for an official state visit and the World Economic Forum on East Asia, characterized the deal as a “good example” of how other states in the region should seek to resolve sovereignty issues without military force.

Only weeks after China’s relocation of a deep-sea oil rig into an area of the South China Sea claimed by Vietnam sparked anti-China protests and riots across the country, the need for improved mechanisms and standards for dispute resolution within ASEAN could not be more palpable.

Other simmering territorial disputes between China and the Philippines, Malaysia, Japan and Brunei have led to fears among investors that future unilateral action by China could lead to similar political and economic crises similar to those seen in Vietnam earlier this month.

Partly in response to these concerns, the Philippines stepped up its efforts to push for a “code of conduct” on the peaceful resolution of territorial disputes in Southeast Asia.

“The code of conduct has been long in coming, we have been discussing this for the past seven or eight years, and we’re also wondering why there is a delay,” Philippine Foreign Ministry Undersecretary Laura del Rosario commented during a security outlook session at the World Economic Forum.

“Are we changing the environment so that when we are ready to discuss the code of conduct, the environment has changed? There are a lot of build-ups, a lot of construction going on, until we realize people are already doing some kind of fencing.” She added.

For the time being, Vietnam appears set on approaching its current dispute with legal action rather than military force – to the relief of many investors shaken by the recent riots across the country.

“We [have] prepared all possible measures, including legal measures. Using legal measures is better than armed conflict,” announced Nguyen Thi Thanh Ha, head of Vietnam’s Foreign Ministry legal department last Friday.

Leading the Way

With Indonesians set to cast votes in the country’s third direct presidential election this July following national legislative elections last month, countries such as the Philippines and Indonesia are expected to embrace a leadership role not only in ASEAN economic development, but in fostering democratic progress and the peaceful resolution of disputes across the region.

Receiving the Global Statesmanship Award at the Forum on Friday, Yudhoyono expressed his opinion that Indonesia had “achieved that critical political point of no return in our democratic development.”

“We have broken the myth, the fear, that democracy will unravel national unity and instead democracy has made us more united. We have become an example that democracy, Islam and modernity can go hand in hand,” he concluded.

As Vietnam seeks to provide economic assistance to foreign firms affected by the recent riots, all eyes will be on the new territorial agreement as a shining example of how ASEAN nations should approach territorial disputes moving ahead.

Asia Briefing Ltd. is a subsidiary of Dezan Shira & Associates. Dezan Shira is a specialist foreign direct investment practice, providing corporate establishment, business advisory, tax advisory and compliance, accounting, payroll, due diligence and financial review services to multinationals investing in China, Hong Kong, India, Vietnam, Singapore and the rest of ASEAN. For further information, please email asean@dezshira.com or visit www.dezshira.com.

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