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ANNE BLACKBURN: Good afternoon, everyone. I think some will still be joining us as I make the introduction, but it's good to get started, so that we have quite a lot of time left for our presentations and discussions this afternoon. Good afternoon to all of you. It's a pleasure to be here today. On behalf of Professor Miyazaki Hirokazu, Director of Cornell's Mario Einaudi Center for International Studies, it is a great pleasure to welcome you to today's Einaudi Center Roundtable, "Indian Ocean Politics in the 21st Century." Hiro was called away from campus this afternoon, which he regrets.
I am Anne Blackburn, director of the South Asia Program, co-sponsor of today's roundtable. The event is part of the Einaudi Center's roundtable discussion series. These roundtables address issues that cut across disciplinary areas or regions of the world. For instance, recent topics have included the potential of geothermal energy, the future of the World Bank, and the Syrian refugee crisis.
I should let you know-- especially as I look at the composition of this room and see those interested in Burma, and Myanmar, and Bangladesh with us here-- I should let you know that we have another roundtable coming up on November 7th that may interest many of you. This is on the Rohingya crisis in Burma, Myanmar, and Bangladesh. It will feature Michael Charney, a professor at SOAS, School of Oriental and African Studies, in London, and Eaint Thiri Thu, a human rights researcher from Myanmar. So November 7th, we'll be back with another roundtable.
Let me offer warm thanks to our colleagues who have made this event possible logistically. The staff at the Einaudi Center is terrific in putting these things together. I'm particularly grateful to Heike Michelsen, Bari Doeffinger, Valerie Foster Githinji, Walt Baschnagel, and Jonathan Miller, who have managed to put this event together for us today. Yes indeed, a round of applause.
And it's certainly a very great honor for me to introduce today's speakers. Tissa Jayatilaka is currently the Director of the United States-Sri Lanka Fulbright Commission and member of the board of the Bandaranaike Center for International Studies. The Bandaranaike Center, located in Colombo, Sri Lanka conducts research in foreign policy and international affairs, and offers courses in these areas.
In our era of hyper-specialization and diminished attention to the humanities, it is particularly refreshing to introduce Tissa Jayatilaka, who has achieved much in more than one professional and intellectual domain. Jayatilaka is a scholar of literature, teaching part time at the Sri Jayewardenepura University in Sri Lanka. In his role as literary critic and arts commentator, Mr. Jayatilaka has, for instance, chaired the jury for Presidential Awards in Sri Lankan Sinhala films, served as a judge at the National Sinhala Drama Festival, and chaired the Gratiaen Trust, which offers Sri Lanka's preeminent prize in Anglophone literature.
Amazingly, all this and more has, through burning of the proverbial midnight oil, occurred contemporaneously with his day job as Executive Director of the US-Sri Lanka Fulbright Commission, running a multi-faceted fellowships program for graduate students and professionals. The Fulbright programs have made possible international exposure and professional training for generations of Sri Lankan and American citizens. I'm honored to count myself among Tissa's Fulbright alums.
In the nature of things, directing the Fulbright commission has brought Tissa Jayatilaka into close ongoing connections with American and other foreign diplomats moving through Sri Lanka. Mr. Jayatilaka has, on many occasions, helped broker important intellectual and political conversations among these parties and with their local Sri Lankan counterparts. Indeed, today's roundtable is the latest iteration of a long-running conversation between Tissa Jayatilaka and Robert Blake on matters related to Sri Lanka's place in current geopolitics.
Allow me to use this occasion also to thank Tissa Jayatilaka for his strategic guidance and mentoring during this particularly difficult time in post-secondary education, a time at which many of us connected with area studies programs and departments worldwide are working overtime to defend these curricular and research initiatives, which make possible substantial comprehension and interconnection across the world's social, linguistic, and political boundaries.
Robert Blake is very well known to many of us active in Indian, Sri Lankan, and Indonesian circles and, indeed, farther afield. He is currently Senior Director for India and South Asia at McLarty Associates in Washington, DC, Chairman of the Board of the US-Indonesia Society, and board member of the Asia Foundation and the Bhutan Foundation. This follows a distinguished career in the State Department. His honors are numerous. Among his appointments at State most relevant to today's roundtable, were postings as Deputy Chief of Mission in India from 2003 to 2006, followed by his appointment as US Ambassador to Sri Lanka and the Maldives from 2006 to 2009.
This, as some of you present today recall, was a particularly delicate moment in Sri Lanka's internal and foreign affairs. Serving as ambassador to Sri Lanka while the island's longstanding civil conflict reached its military close was doubtless an immense challenge. Ambassador Blake is still warmly regarded by many for his contributions at that time, including attempts to mitigate large scale civilian casualties in the last days of the war.
Bob Blake then returned to Washington as Assistant Secretary of State for South and Central Asia. Most recently, from 2013 to 2016, he was the US Ambassador to Indonesia, where he focused on building stronger business and educational ties between the US and Indonesia. Another key feature of Ambassador Blake's tenure in Jakarta was his strong interest in climate change and work on cooperative ventures to help Indonesia reduce greenhouse gas emissions.
I am grateful to Bob Blake not only for joining us here today as roundtable speaker, at what I know will be a deeply interesting event, but also for his generosity in taking additional time at Cornell to help cultivate the next generation of diplomats and area specialists, and time to speak with our administrative leaders about the ongoing-- indeed increasing-- importance of area studies expertise and the study of less commonly taught languages.
With great anticipation, I welcome Ambassador Robert Blake and Executive Director Tissa Jayatilaka to this Einaudi Center Roundtable, and invite them to make their opening remarks. Each of you, I understand, will speak for about 20 minutes, and then we'll have a substantial period for questions and discussion. Please join me in welcoming Bob Blake and Tissa Jayatilaka.
ROBERT BLAKE: Well, thank you very much, Anne for that very kind introduction, and let me say what really a privilege it is for me to be here at Cornell. As Anne noted, I served in both Sri Lanka and Indonesia, and the name Cornell is held in great reverence in both of those countries because of your superb area studies program. And so many Americans, but also so many Sri Lankans and Indonesians, have gone through your programs here, and they are really respected for the quality of expertise that has been generated. So I've always wanted to come to Cornell, so when Anne kindly asked me to come, I jumped at the opportunity.
It's been a real pleasure to talk to many of you here, and I look forward to really good discussion today. Let me just add, parenthetically, for those of you who are considering a foreign service or international affairs career, I'm happy to take questions on that, too, if there are any questions about that.
So let me just jump in now about the Indian Ocean, because I think it's a really timely topic, at a time when we're really seeing a reinvigorated interest in the Indian Ocean. As all of you know, for much of its history, it was really a zone of trade, and of course, ships crisscross there from the Persian Gulf and the Arabian Gulf all the way to Indonesia and beyond. One of my most pleasurable experiences in Indonesia was to visit the island of Run in the Banda Islands, and that's where of course, it was the center of the spice trade as far back as the 15th century. So I came to know firsthand the great history of the spice trade and all that went on across the Indian Ocean.
But more recently, it's become a focus of the big powers, the United States, and China, and many others. And let me first just describe why I think that's the case. First, of course, obviously, the Indian Ocean is of great economic interest to those three countries and many others. It's probably the center today of global trade. Half of the world's 90,000 commercial vessels and two-thirds of the global oil trade now travel across the sea lanes of the Indian Ocean.
It is home to a quarter of the globe's population and, of course, it's very rich in natural resources. 40% of the world's offshore oil production takes place in the Indian Ocean basin, and fishing in the Indian Ocean is now 15% of the global total. And, interestingly, aquaculture has grown quite significantly, twelve-fold since 1980, and, again, is an increasingly important source of both livelihoods, but also nutrition, for many of the countries in the Indian Ocean basin. Lastly, sizable quantities of key minerals, like nickel and cobalt, iron, manganese, copper, iron, zinc, silver, gold et cetera, are to be found in the Indian Ocean, so there's considerable interest in exploiting those.
Second is, of course, very important security interests for many of the countries in the region. First, I would note, is piracy. Now many of you recall, there used to be quite an important and terrible spate of piracy off the coast of Somalia, and that invigorated the international community to put together an international task force that I think successfully dealt with piracy. But it hasn't been completely eradicated. We still see, from time to time, some ships that are hijacked off the coast of Somalia and also in the Straits of Malacca from time to time, when I was Ambassador in Indonesia. We would hear about ships that had been pirated, mostly for oil, but for other things as well. So it still is a concern and navies around the world are alert to the risks of it.
Second, and of growing priority, I think, is the risk of terrorism. Most of you remember the terrible attacks on Mumbai in 2008, in which more than 160 people were killed. Very few people remember that those attacks actually came from the sea, from Pakistan. And so that, I think, alerted a lot of people to the need to take more seriously the threat of terrorism, and particularly the threat of terrorism at sea. But of course, many countries along the Indian Ocean literal are affected by terrorism, so that is, of course, a growing concern.
Drugs, human trafficking, illegal fishing are all major concerns as well. In the interest of time, I won't go into all of those, but all of you are familiar with those. And then last, but not least, as something that I dealt with personally when I was in Sri Lanka, is the threat of weapons of mass destruction proliferation. You all remember what happened with A.Q. Khan in Pakistan, and the proliferation of many kinds of weapons of mass destruction from Pakistan. Most of that was sea-based, and we in the US government spent quite a lot of time trying to track vessels from North Korea and elsewhere, to try to interdict and stop this weapons of mass destruction proliferation. But it's still an ongoing concern and something that we monitor very closely.
A third and, perhaps, determining factor now about why there's more great power interest is that China is playing a much greater role in the Indian Ocean, and doing so at a time when India, of course, sees the Indian Ocean as its strategic backyard, much like China sees the South China Sea as its strategic backyard. So there's already quite a lot of great power rivalry, and that is going to certainly increase over the course of the 21st century. China is fast developing a blue water navy that is capable of projecting its power into the Indian Ocean region. The International Institute for Strategic Studies has projected that China's Navy in 2030 will exceed in numbers the US Navy, and will include four aircraft carriers, 12 ballistic missile submarines, and countless other naval vessels. This in turn has occasioned a lot of concern in the United States, and so leaders like John McCain and others are now pushing for a reinvigorated program of building up our own navy to counter that.
Likewise, China is very busy developing ports around the Indian Ocean region. It developed its first so-called support facility in Djibouti, but it is also working hard on the famous ports in places like Hambantota that Tissa will talk about later. Gwadar in Pakistan, in Balochistan, which is the end point of the China Pakistan economic corridor. So a lot of the Belt and Road initiative has its sort of endpoint there at Gwadar, and so the Chinese see that as a very, very important link, and one that will enable them to avoid the potential bottlenecks of the Straits of Malacca between Malaysia and Indonesia, and also enable them to reduce considerably transport costs in the meantime.
And third, of course, is the Belt and Road initiative itself, where China has been very, very active promoting that. And as, again, when I was the Assistant Secretary of South and Central Asia, the Central Asians in particular very warmly welcomed this effort, because it enabled them to reduce transport costs of their exports, mostly to Europe, but also to the Middle East and even Africa. So it has been warmly welcomed around the region, and we'll talk a little bit about some of the risks later on.
So as we look ahead now into the 21st century, I was very interested to read a recent book by Admiral James Stavridis, who's now the head of the Fletcher School of Diplomacy, but of course, a renowned naval expert. And he's written a terrific book about sea power that I commend to all of you. He predicts that the 21st century is going to be more about the Indian Ocean than it is about the Pacific or the Atlantic Oceans. In addition to the interest that I talked about earlier, he characterizes the Indian Ocean as being what he called the beating heart of the Islamic world, which is certainly true. But it's also going to be the focus of Sunni-Shia rivalries. Already, we see that, for example, in what's going on between the Saudis and the Iranians directly, but also the Saudis and what's going on in Yemen, and perhaps elsewhere as well. So that's something very much to watch.
And of course there's the continuing tensions between India and Pakistan, and other things like that that we've seen before. So what are American interests in the Indian Ocean region? Why do we really care about this? I'll tell you that for many, many years, we really neglected the Indian Ocean. We turned our backs on the Indian Ocean and focused more on the land-based interests that we had in Africa, and the Middle East, and South Asia, and so forth. And it's only very, very recently that we began to try to look strategically at the Indian Ocean itself, and what it means, and how we can kind of try to manage some of these tensions, but also take advantage of the many interests that we have there.
At a recent conference in Colombo, our Acting Assistant Secretary for South and Central Asia, Alice Wells, articulated six key interests that the United States has in the Indian Ocean region. One, encouraging regional integration. Secondly, preserving freedom of navigation for commercial shipping. Third, sustainably and equitably harnessing the natural resources of the Indian Ocean. Fourth, establishing protocols for disaster relief. Obviously, it's a very disaster prone region of the world. Fifth, countering piracy, terrorism, smuggling, and WMD proliferation. And then last, but not least, managing international naval competition. So most of these are self-explanatory. I'm not going to go into those in the interest of time.
But let me focus really on the first, because I think that is potentially an area of both opportunity, but also friction. And that's the priority of trying to bolster economic integration. We have not long known, those of us who work in South Asia, that South Asia is one of the least economically integrated regions in the world. Intraregional trade in South Asia accounts for about 5% of total trade, which is really miserable. And the South Asian Association of regional cooperation, SAARC, whose mission it is to try to bolster that, has really failed pretty miserably in making progress on that, largely because of those tensions between India and Pakistan.
You contrast that with ASEAN, the Association of Southeast Asian Nations, where intraregional trade now accounts for about 25% of their trade, and is likely to grow fairly rapidly going forward. So there's plenty of scope to increase intraregional trade in this area. Indeed, the State Department has done some projections, and they project that if South and Southeast Asia were to reduce their non-tariff barriers by 50%, which is an ambitious but attainable goal, intraregional trade would net $568 billion in increased GDP by 2030. Just to put that into perspective, that's about a quarter of India's current GDP, and about half of Indonesia's-- it's a little bit more than half of Indonesia's. So very significant opportunities to increase trade. And Tissa will talk more about how Sri Lanka is really trying to now position itself as a hub, both for that trade, but also for the financial flows that they hope are going to flow from them.
But increasing infrastructure development to facilitate trade must also be done in a transparent way that is going to hopefully help these countries. I was very interested to attend a speech by Secretary Tillerson a couple of weeks ago at CSIS, in which he was previewing his trip that he just made to India. And one of the things that he said that was quite interesting was, he described China as-- the word he used was predatory economics-- and then he went on to elaborate, again, on the record, publicly, by voicing concerns about Chinese financing mechanisms that bring enormous levels of debt to countries like Sri Lanka. And sometimes those debts, the countries can't service them, and there's pressure then for those countries to convert the debt to equity. And indeed, that's been the case in Sri Lanka.
There's also, of course, a lot of concern in many of these countries about the large number of Chinese workers that are imported by the Chinese to develop these projects, at the expense of local employment. And I'm sure Tissa will talk a little bit about examples of the port and the airport in Hambantota in southern Sri Lanka.
So how is the United States reacting to all this? What are we doing to try to take advantage of these opportunities, but also manage some of these risks? First of all, we are cementing our strategic partnership with India. As many of you know, we really began to take our partnership with India more seriously after 9/11, and India itself began to see the opportunities and the rewards of working with the United States as it saw our shared concerns about things like counter-terrorism after 9/11. And that began a process that culminated first with the famous civil nuclear deal, but then a huge range of other things that we've done since then. And I'm happy to note that that process of strengthening our relations has continued through every administration, including even Donald Trump. Very few people-- President Trump doesn't like too many countries, but he does like India, which is nice, and so we're happy to see that continue.
Secondly, we are forging a strategic partnership both with Japan and India to try to work more closely together in a trilateral fashion, and that includes the very important Malabar naval exercises as well. Now, as many of you know, unlike in East Asia, where we have a whole network and web of different alliances, we don't have those in the Indian Ocean. So many see the partnership that we're developing now with Japan and India-- potentially Australia as well-- as perhaps the nucleus of the future structure that can help to manage some of these potential tensions in India and the Indian Ocean region. We're also working through some of the regional organizations that do exist, the most prominent of which is the Indian Ocean Regional Association. Tissa will talk about that.
And then, as I mentioned, we are taking steps now, we hope, to try to increase the size of our own navy in response to what the Chinese are doing. So President Trump, the current Chief of Naval Operations, and congressional leaders like Senator McCain have called for increasing the US fleet by more than 25% in the coming years, to really try to deter some of this potential conflict that will occur in places like the Indian Ocean, but elsewhere as well. Already, as you probably know, the Fifth Fleet, that is based in Bahrain, is our largest of these global fleets, and is likely to expand if these proposals go through.
We also support an increasing role for India. One of the interesting things that you will notice in American pronouncements about India over the last, say, 10 years, is American military leaders referring to India as a net security provider. And that means that, in a way, we see them as an equal partner in trying to, again, manage some of these threats and take advantage of some of these opportunities.
I might add that it was interesting to note that last week, the Indian Navy announced its plans to try to institutionalize round-the-clock surveillance of critical choke points in the Indian Ocean, by using at least 12 to 15 of their major warships. So that's a very concrete sign of their intention to manage much more closely some of these places, like helping out in the Straits of Malacca, but elsewhere as well. And of course, we've encouraged regional initiatives, like the Japan-hosted Global Coast Guard Forum, to improve cooperation on things like illegal fishing and marine pollution, law enforcement, search and rescue, and so forth.
So to sum up, even though we don't yet have a defined strategy for the Indian Ocean, I think it's really important now that the United States is working more closely with countries like India and Japan, and really beginning to take the Indian Ocean region seriously, both as a place of tremendous opportunity for the United States, but also one of likely increased risks. So this is going to be, I think, a really important region for us to watch over the next 20 or 30 years. And again, I just want to commend Anne and her colleagues for pulling this talk together, because it's a very timely one, and I very much look forward to the question and answer period. Thank you very much.
TISSA JAYATILAKA: Thanks, Anne, for the introduction, and also I need to say how happy I am to be back in Cornell. The last time I came here, it was on the summer period, and there was hardly anybody. There were no students around. And though I enjoyed my visit, it wasn't as good as coming at this time of year, when there are students, the trees have changed color, and so much nicer setting than it was the last time, though I enjoyed that visit as well.
And also, I must pay my tribute to Cornell for the close connection that we have apart from Anne Blackburn, who has been a Sri Lankan scholar of Sri Lankan Buddhism. We've had the connection with Jim Gair, the late Jim Gair, who I met many years ago, and who collaborated with Professor WS Karunatillake of the University of Kelaniya, and was a pioneer in the introduction of [? Sarai ?] Sinhala to the United States. And also professor Norman Uphoff, who was involved in rural development in Sri Lanka with one of the biggest think tanks, the [INAUDIBLE] Institute, in the '70s and the '80s.
So I'm very pleased to be here and also to be able to reconnect with Ambassador Blake, with whom I have worked very closely during his years in Sri Lanka. And I consider him one of the closest American friends that I have had over the years of my involvement with the US government. One of the downsides of following somebody like Bob Blake is that he has said some of the things that I was going to say, so I'll try not to get into too many of those areas where he made the presentation and I agree with him. And it's a sign that-- it's nice to know that we both agree, and some people say that great minds agree, so that means I have a little bit of reflected glory here.
The Indian Ocean provides critical sea trade routes that connect West Asia-- by the way, we in Sri Lanka refer to what the Western strategic advisors call the Middle East, we tend to refer to it as either West Asia or Near Asia, but it means the same thing. The Indian Ocean provides critical sea trade routes that connect West Asia, Africa, and South Asia with the broader Asian continent to the east and Europe to the west. A number of the world's most important strategic choke points, including the Straits of Hormuz and Malacca, through which 30-plus millions of barrels of crude oil and petroleum are transported per day, are found in the Indian Ocean region. This amounts to more than 50% of the world's maritime oil trade.
Nearly 100,000 ships transit the Indian Ocean annually. India and China, two of the fastest-growing economies of the world today, are heavily dependent on energy resources that are transported by the sea lanes of the Indian Ocean. India imports about 80% of its energy resources, mostly oil from West Asia. According to a recent US Department of Defense report, 84% of China's imported energy resources passed through the Straits of Malacca in 2012. China's rise as an influential global presence and India's rapid economic development, and their respective geographic locations, have heightened the Indian Ocean's strategic value.
The significant shift in the United States' foreign policy focus, from the Middle East or West Asia to the Indian Ocean region and the broader area of Asia, has also contributed to the geopolitical flux in the region. Given the above, unsurprisingly, the Indian Ocean region-- its past, present, and future-- have received a great deal of attention lately. The 21st century is barely two decades old, and we have already seen momentous political change in the world, and these have implications for the Indian Ocean region as well.
2016 was a tumultuous year in politics and economics. We in Sri Lanka have witnessed-- are witnessing-- change brought about by the impact of globalization. The rapid pace of change, and what this change portends for our economies, are issues of concern to us. The effect of Brexit and other possible exits from the European Union, and the trade policies of President Donald Trump, will take time to manifest themselves. How the US and China will interact under the new dispensation in Washington will be watched by one and all with bated breath. To use the cliche then, the new normal in economics and commerce today is uncertainty.
Those states that will negotiate best this uncertainty will be the ones that act prudently in these circumstances. The emerging uncertain global dynamics will present both challenges and opportunities, as Bob Blake noticed, for those of us in the Indian Ocean region and beyond. Economists and politicians tell us that we are presently in a time when global and economic power shifts point towards Asia.
The prime minister of Sri Lanka, Ranil Wickremesinghe, speaking at the September 2017 Indian Ocean Conference in Colombo, organized by the India Foundation, noted that the global economic power rebalance away from the established advanced economies of North America and Europe will continue well into the 21st century. He went on to note that the cornerstone of Western power, based on its economic dominance technological and military superiority, has been eroded to a significant extent by the extraordinary economic development in Asia in the last 50 years or so.
The Hong Kong and Shanghai Banking Corporation World Forecast predicts that 19 Asian countries will be among the largest economies by 2050. India is expected to surpass the rest in terms of global power, based on population, GDP, technology, and military spending. The 2016 annual meeting of the Global Future Council, convened by the Geneva-based World Economic Forum, concluded that by 2030, there will not be a single hegemonic force, but that in its place there will be a multi-polar world in which the United States, China, India, Germany, Japan, and Russia will be key players.
These forecasts are reinforced by the recently released PricewaterhouseCoopers report, World in 2050. It presents economic growth projections for 32 of the largest economies of the world, accounting for around 85% of the global GDP. Of them, 10-- Australia, Bangladesh, China, India, Indonesia, Iran, Malaysia, Pakistan, Saudi Arabia, and Thailand-- are from the Indian Ocean region. This reality will increase the Indian Ocean region's strategic influence in the world.
Despite its projected slowdown, the forecast is for the Chinese economy to supersede the United States economy in 2028. Similar forecasts are made for the economies of India, Indonesia, and Malaysia by 2050. ASEAN is poised to cover over 38% of the global GDP, once the Regional Comprehensive Economic Partnership agreement among the member countries is concluded.
Despite these promising predictions, as Bob Blake indicated, intratrade in the Indian Ocean region, including the Bay of Bengal, remains low-- Bay of Bengal area. South Asia, we are told, remains the least economically integrated region in the world. Unlike in the European and Pacific countries, in South Asia, we see a marked absence of political will to promote trade liberalization and connectivity.
Leveraging the asymmetry between India and its neighbors in a positive way is not easy. Primordial fears, based on ancient as well as recent rivalries among and between these South Asian states, impede their coming together for the common good. The 21-member Indian Ocean Rim Association, or IORA, held its last summit in Jakarta-- or held its earlier summit this year. There was a summit in Durban, South Africa, about two weeks ago. But at the March summit, held on the 5th to the 7th of March, they issued a strategic mission document, titled The Jakarta Concord, at the conclusion of their deliberations. This concord, among other things, sets out a vision for a revitalized and sustainable regional architecture. Whether the IORA will be able to sustain this momentum remains to be seen.
Business in the region must grow for intraregional trade to develop and flourish. These businesses need capital for expansion, which is not readily available in the region. In this context, prime minister Ranel Wickremesinghe of Sri Lanka, his call for the establishment of an Indian Ocean Development Fund, or IODF, makes sense. This proposed fund is expected to make financial resources available to the national development banks in the region, which in turn, I expect to promote growth and expansion by provision of capital for business expansion.
But where will this money come from is a key question from those of us who are looking forward to such a kind of development. In Jakarta, the IORA also laid emphasis on the blue economy of the Indian Ocean. While other oceans in the globe are experiencing a decline in their fish stocks, the opposite is true of the Indian Ocean. These fish stocks are of great and growing importance to the countries bordering the Indian Ocean, for both domestic consumption and for export. It is estimated that 40% of the world's offshore oil production comes from the Indian Ocean, with large reserves of hydrocarbons being tapped in the offshore areas of Saudi Arabia, Iran, India, and Western Australia.
The recent UN conference on conservation and sustainable use of oceans, seas, and marine resources, held in June 2017, concluded that preserving the health of the oceans is vital for the future of mankind. In order to avoid irreversible damage to the ocean, IORA must coordinate efforts by all member countries to address overfishing, pollution from offshore and land-based activities, biodiversity, and habitat loss. For countries like Sri Lanka, the oceans are quite literally life and death. The Indian Ocean has provided employment, food, and avenues for trade and commerce for us. Rise of the seas, pollution of oceans, depletions of fish on good coastal ecosystems are not abstractions. They form the core of our existence. Climate change and disaster management in the Indian Ocean region are hence of vital interest to us.
The creation of wealth and enhanced economic activity in the Indian Ocean region will not only bring benefits, but will pose enormous security challenges to us. Most of the world's armed conflicts are presently located in the Indian Ocean region. The waters of the Indian Ocean are also home to continually evolving strategic developments, including the rise of regional powers with nuclear capacities. Conflicts in the Gulf, unrest in Iraq and Afghanistan, the rise of violent extremism, growing incidents of piracy-- Bob Blake spoke of this-- in and around the Horn of Africa and all over the region. All of this has led to substantial militarizations in parts of the Indian Ocean region.
In Sri Lanka's view, the vital sea lanes of communication in the Indian Ocean, that fuels the global economy, needs to be open for all, and must be used for mutual benefit in a sustainable manner. It is essential to maintain peace and stability in the Indian Ocean region, which ensures the rights of all states to freedom of navigation and overflight.
In terms of the maritime buildup in the Indian Ocean, we see India, China, Japan, Australia, and the United States investing in various projects, from ocean exploration to placing remote sensors for ocean research. The United States, China, India, and Japan are deepening their naval presence. Naval power is expected to play an increasing role in regional affairs. This in turn will lead to naval power competition, with plans for sea control as well as sea denials. These are massive challenges that have to be met.
Maritime pollution is one such. The Indian Ocean, we are told, has the second largest accumulation of floating plastic waste in the world. It is the region where larger tankers, container vessels, and the like, plying between West and East, dump their waste. Oil and tar are common sights on Sri Lankan beaches. Recent studies estimate the amount of oil and petroleum discharged in the Indian Ocean to make up about 40% of the total petroleum spill of the oceans of the world.
Undercurrents of naval buildups in the South China Seas are being felt in the Indian Ocean. China has established its first overseas military base in the Indian Ocean nation of Djibouti region, causing serious concerns in Delhi, for example. Sri Lanka faces a continuing issue of poaching and rape of marine life in the Palk Bay and the Gulf of Mannar, due to illegal fishing by Indian fishermen. Bottom trawling by these fishermen are causing immense damage to Sri Lanka's precious marine resources and harming livelihoods of Sri Lanka's fishermen.
Research in countries like Somalia have shown that illegal fishing by foreign vessels was a fundamental grievance that sparked piracy and provides ongoing justification for it, according to The Sunday Times of Sri Lanka. Primarily caused by the so-called developed European countries, like Spain, sending their surplus trawlers and mother ships to exploit tuna stocks and other Indian Ocean resources, using satellites to track movements of schools of fish.
Some countries, like Indonesia, for example, have been less tolerant of illegal fishing in their waters. It has been reported that last year Indonesia had blown up foreign boats confiscated for fishing illegally in its waters, again according to the correspondent of The Sunday Times of Sri Lanka. Of the 23 so blown up, 13 were from Vietnam and 10 from Malaysia.
The Indian Ocean plays a crucial role in the future of both China and India. The sea routes through the Indian Ocean are vital to China's maritime trade and energy supply. Both countries need to respect each other's legitimate interests in the region. As Anit Mukherjee observes, the United States can be considered a resident power in the Indian Ocean by virtue of its bases in West Asia-- that's Kuwait, Bahrain, the UAE, and Qatar-- in the Horn of Africa, Djibouti, and in Diego Garcia. In addition, on the eastern flank of the Indian Ocean, the United States has a military presence in Thailand, Singapore, and Australia. As it is preoccupied in West Asia, or in the Middle East, the United States is comfortable, I gather, with India playing a leading role in the Indian Ocean.
Some analysts view this development as an indication of stretched US resources, given its interests in East China and South China Seas. Nilanthi Samaranayake and others of the CNA, a nonprofit research and analysis organization based in Arlington, Virginia, view this development as a "security burden sharing" between India and the United States in the Indian Ocean region. Enhanced Indo-US defense cooperation received a fresh boost with the 26th to 28th September 2017 visit of US Defense Secretary James Mattis. It was the first cabinet-level level visit to India under the Trump Administration. It was also the first follow-up visit by a US cabinet official after Prime Minister Narendra Modi's June 2017 visit to the United States. Secretary of State Rex Tillerson was there last week. Although no major announcements were made during the visit of Mattis, it needs to be noted that in 2016, the United States acknowledged that India was now a major defense partner. India may not become an ally in the way Japan, or South Korea, or any of the NATO countries are, but if even limited cooperation develops, it will be a strikingly complex change for the region.
Such a change will impact not just on South Asia, but on the strategic dimension of the larger Asia-Pacific region, presently dominated by the United States and China. According to a publication titled India Legal, the United States' decision to supply 22 Sea Guardian drones to enhance India's naval surveillance in the Indian Ocean was announced during Prime Minister Modi's meeting with President Trump in June 2017. These drones are expected to help the Indian Navy to keep a close watch on the Chinese naval ships and submarines in the Indian Ocean. India, it appears, is the first non-NATO country to be given these drones by the United States, again, according to this publication called India Legal.
Analyst are of the view that there is likely to be closer cooperation among China, Pakistan, and Russia to meet the challenge of a joint defense arrangement among the United States, India, Japan, and South Korea. Thus we see that tensions in the region are most likely to escalate, given that the United States and China on the one hand, and India and China on the other, are competing for dominance in the Indian Ocean region.
Sri Lanka is a small state, and its strength has been in the significant diplomatic role it has played on the international scene over the years. We are not able to change the geopolitical realities of the region surrounding us, and we have no such illusions, I am happy to report. But through a pragmatic foreign policy, based on avoidance of alliances with any one power bloc, and maintaining friendship with all, Sri Lanka should be able to play a constructive role, as in the past. We were in the forefront of the UN Convention of the Law of the Sea and we were the first to promote, in the '70s, the Indian Ocean as a zone of peace concept.
Sri Lanka should push for an international code of conduct for military vessels traversing the Indian Ocean. ASEAN and China have agreed to prepare such a code for the South China Sea. The Indian Ocean code could be along the lines of a memorandum of understanding that exists now between the United States and China, regarding rules of engagement for safety in the air and maritime encounters.
Such a code would recognize and seek to deal with the escalation in human smuggling, illicit drug trafficking, and the relatively new phenomenon of maritime terrorism. The UN Convention on the Law of the Sea does not have adequate provision to address these issues. And any code on the freedom of navigation in the Indian Ocean must include an effective and realistic dispute resolution process.
The code of conduct, ideally, should be built on consensus, with no single state dominating it. In this regard, the United States Pacific Fleet Commander, Admiral Scott Swift, addressing the annual Galle Dialogue 2017-- this is an annual seminar dealing with the Indian Ocean region, hosted by Sri Lanka. In early October 2017, he said the following, and I quote him, "For the last 70 years, the Indo-Asia-Pacific region achieved unprecedented levels of stability and prosperity, due in large part to our collective respect for and adherence to international norms standards, rules, and laws. These benchmarks were not imposed by any one nation upon another. Rather, they emerged through compromise and consensus, with all states having an equal voice, regardless of size, military strength, or economic power." Words that I would like to re-echo most heartily.
And one more quote before I sit down, "The Indian Ocean region is in need of a mutually benefiting security architecture, established on a multilateral , basis with an effective multilateral governing structure." The Prime Minister Ranil Wickremesinghe of Sri Lanka, speaking at the inauguration of the Indian Ocean Conference in 2016, a conference at which I presented a paper, called for the formulation of an Indian Ocean order, with accepted rules and regulations, that would guide interactions between and among states. Importantly, he called for this order to be built as Admiral Scott Swift said, on a consensual arrangement and agreement in which no one state is allowed to dominate it. Again, it's a consummation devoutly to be wished for, coming from a regional small state like mine. I'd like to end on that note. Thanks very much for your attention.
ANNE BLACKBURN: Thank you very much, Tissa. That was indeed thought-provoking, and I can imagine that we'll have quite a lot of room for discussion, based on the presentations by Ambassador Blake and Executive Director Jayatilaka. The floor is open. We have some assistance in moving a microphone around the room, so that all of you can be heard from. I suggest that we take two questions at a time, and then invite each of our panelists to comment on those two, take another two, and so on. And some kind of discussion will emerge therefrom.
[INAUDIBLE]
AUDIENCE: I was wondering, as it seems like the Indian Ocean is going to be neutral, as China's base is in Djibouti, the US base is in Djibouti, as you said. I was wondering if you could then cast forward and see what some ignition points might be in the Indian Ocean, between the major powers, as they [INAUDIBLE].
AUDIENCE: Military competence without adequate economic development can actually cause more fragility and conflict. So I am very curious about your views on this, including Sri Lanka, because of [INAUDIBLE] in South Asia. Sri Lanka was treated as a sort of beacon, in terms of economic development, incredible economic development, quality of life, but has had a troubled history over the last couple of decades, in fact, so lost some of that. I'm just very curious about what you feel about the prospects of economic growth.
Also, as all of you noted, trade is just very, very thin in that region. The scope for that is huge. And not just trade. Even some activities where you can generate power in one country, using the rivers of another country, supply that to yet another country. Some of that [INAUDIBLE] which has been at the Mekong Delta quite a bit, negligible or not. Just your views on the prospects.
ANNE BLACKBURN: Terrific. So we'll take those two questions to begin, and I invite Tissa and Bob to comment on these, respond to these points as they see fit. Bring your mikes on board for this process.
ROBERT BLAKE: Well, to your question about ignition points, that's difficult to say. I think both the United States and China are going to go out of their way to hopefully avoid military confrontation anywhere, particularly in the South China Sea. I think recently, we've been encouraged to note that the United States and China are beginning relatively modest military exercises with each other. But the important part of that is that the military leaders are getting to know each other, and that there can be then communication in times of stress, wherever they might be.
So I think that's an important development, and certainly our military is pushing as hard as possible to have more and deeper forms of engagement with the Chinese military, exactly for this reason. We want to avoid conflict and create the kinds of agreements and codes of conduct that Tissa was talking about. So that would be my answer on that. I don't know if you wanted to add on that question.
TISSA JAYATILAKA: The only thing that I can see as an ignition point is, it's not so much US-China rivalry for me as India-China rivalry, and the Straits of Malacca there tends to me to be a possible difficult point. Because if there is any kind of disturbance there, then the ships taking the energy resources that China requires, that could be a problem. And I think this so-called string of pearls that China is supposed to be building, I believe is as a result of China wanting to ensure an alternative route in the event of there being a blockade in the Straits of Malacca.
So apart from that, I agree with Bob. I honestly cannot see China and the US going into confrontation mode. And if I gaze into the crystal ball and make a prediction, I would say that the United States and China are going to be able to manage tensions in a way without escalating it and causing problems in the region. But I see greater danger of rivalry between India and China spilling over into the Indian Ocean region.
ROBERT BLAKE: One of the things that was interesting while I was ambassador in Indonesia was that the Indonesians hosted some multilateral naval exercises, and it was interesting who showed up, the Russians, the Chinese, the Indians, the United States, and several others. And it's the first time, in my knowledge, that there had been that collection of countries together in one place. And so hopefully, that can be a model for the future as well, that we will begin to have these kind of multilateral exercises.
Because, you know, we've had these Malabar exercises with India and Japan. I don't think there's any plan to include China or Russia any time soon. But certainly they want to include the Australians, I think, at some point in the future. But beginning to have very modest sort of search and rescue and those kinds of activities, I think are quite useful, and again, a launching point for dialogue and just military leaders getting to know each other.
I think I would respectfully disagree a little bit with my friend Tissa in saying that the Straits of Malacca-- I think everybody is so conscious of the huge volumes of trade that flow through there, that they're going out of their way to try to avoid any kinds of conflict there. One worry that countries like Indonesia have is that the militarization of the South China Sea by China has given China the opportunity to base its naval assets much further south in the South China Sea than previously.
So you're seeing a much greater incidence of Chinese vessels, particularly Coast Guard vessels, but presumably also submarines-- nobody really knows because the Indonesians don't really have very good maritime domain awareness-- but everybody assumes that we're seeing many more Chinese submarines as well, passing through those waters and through the Straits of Malacca. But the Chinese themselves have a huge interest in keeping the Straits of Malacca open because of the volume of trade, so I'd be a little bit surprised to see open conflict in that area.
Maybe just on the second topic, I would agree. I think that, as we said, the volume of trade within South Asia is not really that great, and probably not likely to become that great. One of the interesting things to note is that India, if you look at the pattern of India's trade, about 90% of its trade is maritime trade. They don't have a lot of overland trade like many of the other countries. And so the Indian Ocean is extremely important for the Indians, unlike, let's say, Pakistan and some of the others, who have much more trade going northwards.
And so I think the real opportunity that we see is between South and Southeast Asia, and India for a long time has talked about its Look East policy, but hasn't really acted on it to the extent that I think many of us expected. But now, I think they do really want to try to take advantage of those opportunities, and there is beginning to be a much greater think tank and other thought being given to how to really put this into action. And I think that would be a very, very helpful development for the region. And of course Sri Lanka is very well poised to be kind of a linchpin for that trade, and it's trying to position itself now, not only commercially, but also financially. So they're building this big so-called financial city. For those of you who are familiar with Colombo, there's a huge new development going up there on Galle Face Road, which is interesting.
ANNE BLACKBURN: Yeah, would you like to jump in on that point Tissa, or others? It would be good to hear more about that dimension.
TISSA JAYATILAKA: Prospects for economic growth in the South Asian region, unfortunately, is not as optimistic as one would like to be. The South Asia Regional Organization has not done anything significant. It's due to the political rivalries between India and Pakistan. And yes, Bob Blake is right, Sri Lanka wants to be the hub in the Indian Ocean region, if it can be. But Sri Lanka's own problem is its political instability at the moment, so whether it can sort of overcome those instabilities that are being caused by domestic upheavals and be a player remains to be seen.
But we are hoping that we will be able to piggyback with ASEAN and the Indian Ocean Rim Association, and that's where we are looking for. We are not counting so much on SOC, but to ASEAN and IORA. And Sri Lanka herself is trying to enter into FTAs with China and Singapore, and it wants to expand its economic cooperation and trade agreement with India. But again, as I said, I hinted about primordial fear. Sri Lankans and India have this troubled relationship, due to various reasons which I won't go into now.
And it also is a domestic political hot potato. When one political party tries to get close to India, the other cries foul or says, the Indians are going to take over Sri Lanka. We'll be just another state of India. That kind of very divisive approaches rather than having a bipartisan approach to this. But the government is determined to go ahead with the economic and trade agreement with India, but it has been shelved due to its violent political opposition from the current opposition political arrangement in Sri Lanka.
ANNE BLACKBURN: I think that answer raises another follow-up question, which I would like to just throw out. Namely, to what extent are any of the Indian Ocean countries-- but specifically, also, Sri Lanka, given that we are speaking about that now and have your expertise here, Tissa-- explicitly addressing the relationship between improving internal economic benefits, and thereby generating more flexibility in international agreements.
I mean, in the context of what you've said just now, Tissa, you've made the point that there is political instability in Sri Lanka, which makes it more difficult for Sri Lanka to broker effectively with India in the Indian Ocean region. One could make the internal political argument for Sri Lanka that that instability derives in part from economic instabilities in Sri Lanka. So the question really is, is there any sense amongst leadership of either of Sri Lanka's major parties to address internal economic weakness, seeing that as linked to a greater flexibility in the international arena?
TISSA JAYATILAKA: I'm afraid, as far as I can see, there is no cooperation between what's called the joint opposition of Sri Lanka and the government of Sri Lanka. I don't know how familiar you are with the political situation in Sri Lanka, but we have what is called a unity government, where the two major political parties have come together and formed a government. And all of us who supported that change in 2015, January, were optimistic, thinking that here at last is going to be a bipartisan approach to issues in Sri Lanka, economic, ethnic, whatever the problems that we had.
But unfortunately, the single major party, the Sri Lanka Freedom Party, which is where the president of Sri Lanka comes from, it's split down the middle between what I would call the President Sirisena faction and the former president Mahinda Rajapaksa faction. And therefore, there is a kind of instability that I cannot see being bridged in the short run. So for there to be that kind of bipartisan consensus, I think we'll have to first resolve the problems between the Sri Lanka Freedom Party different factions.
Coalition governments are not really easy. When I think of the Sri Lankan situation, I ask myself, what if the Democrats and the Republicans were to form a joint government in Washington, or the Labor Party and the Conservatives in the UK? So it's fraught with deep challenges, and there are these divisions within the Sri Lanka Freedom Party which might impede a kind of unified approach.
ROBERT BLAKE: I would just say that, as a general proposition, what you said is really true. And I'd say a very good historical example of that is what happened in India, where, when India made the transition from the so-called Hindu rate of growth of 3% a year for countless years, to 6%, 7%, 8% growth, once the Manmohan Singh reforms began to take hold in the early 2000s. Once it had those growth rates, it really began to expand its strategic horizons and began to think very broadly and ambitiously about India's role in the world.
And I often used to say in Indonesia that Indonesia has not yet gone through that transition. They're still not quite at 3%, but they are more 5%, which is good in the current state of affairs around the world, but they need to be growing more like 8% a year if they're going to reduce significantly the number of people living in poverty, which is estimated by many people to be at about 40% of their population live on less than $2.00 a day. So to lift all of those people out of that and into the middle class, they've got to achieve growth rates of about 8% a year for 10 years or more.
And as a result of that, they are intensely focused on internal economic development and raising gross, reducing inequality, and really hardly focused at all on either foreign policy priorities or even military priorities. They've talked for many, many years without raising defense spending to a measly 1.5% of GDP, and even that they haven't been able to attain, because of the focus on infrastructure and other things. So many countries, I think, find themselves in this position, where they're quite reasonably trying to attain a certain level of prosperity for their citizens, and at that point then they can begin to look more ambitiously overseas. Certainly those two fairly important powers are a good example.
ANNE BLACKBURN: That's helpful. Thank you very much. We could take some further questions from the floor. Some of you have been waiting, I know. There's a question here, and there was a question here, I think. Walt, the gentleman on my right. And then we'll come down to the front row.
AUDIENCE: Thanks for your time. One question I have is, as we move into the 21st century, we're seeing larger and larger industries that revolve around internet or non-physical services and trade. I just wanted to hear your thoughts on that, and what role they could play in the near future of the region.
[INTERPOSING VOICES]
AUDIENCE: Actually, I have two questions. The first one is [INAUDIBLE]. --thoughts with the climate and the different things that are happening there. Can you comment on that? And the second one is, I notice the Ambassador there's actually growth in Colombo. You seem to display that a little bit with some of the problems that you're having in government. But I'm more concerned about the tea production in Sri Lanka. Have the estates been kept up after the Tamil skirmishes? I'd want to know, how do you think about that tea production in Sri Lanka?
ANNE BLACKBURN: All right, gentlemen, non-physical trade and the plight of the tea trade.
ROBERT BLAKE: Let me tackle, maybe, the internet, digital economy one, which I think is a great question and a really important opportunity. And I think, again, you see big countries like India now really moving out very, very smartly, putting a lot of resources into expanding broadband and connecting all of the major regions of India. And I think most economists that I know see that as almost kind of a breakthrough for India, in terms of, they now have this national ID card system, the Aadhaar system, and they're going to use that increasingly as kind of a linchpin for this digital economy that's going to proceed. So it is going to, in many ways, hopefully take India to the next step in economic growth.
Indonesia, likewise, just from my own experience there, they want to diversify their economy away from commodity based growth, and they see the digital economy as just a giant opportunity, although on a much smaller scale than what's happening in India. They, too, are looking to expand broadband across the huge archipelago of 6,000 inhabited islands by 2020, and then using that as a way of enhancing connectivity, but also then attracting investment from, particularly, the American big companies. And so already, there are three so-called unicorns in Indonesia, and probably many more are coming because they predict about $50 billion in new investment in that area in growth over the next, really, five years.
So a very important opportunity, I think. To a lesser extent, many of the other countries in the region are trying to do the same thing. It is kind of a great equalizer. It provides lots of opportunities for small and medium sized businesses to start up and, of course, all the app economy, and so forth. So there are significant opportunities in that area and everybody is looking to jump on that bandwagon.
TISSA JAYATILAKA: Yeah, I think that is probably the best answer you could get on that question, because I'm not very good at economics and I wouldn't be able to comment authoritatively on what's happening in Sri Lanka on this front. But I suspect that we might be willing to exploit whatever advantages that may come our way. But I'm sorry, I can't give you a better answer.
ANNE BLACKBURN: Do you want to pick up on the finance side, Tissa, since that's also, in some sense, non-physical trade, imaginary money in circulation?
TISSA JAYATILAKA: I think I'll pass on that one.
ANNE BLACKBURN: OK, fair enough.
TISSA JAYATILAKA: With regard to tea production, I can say something, certainly. It's not doing very well at the present time. The reason is, it had nothing to do with the war. Happily, the war was more in the north and the east of Sri Lanka, and the plantation Tamils were not affected during the war to the extent that the Sri Lankan Tamils living in the north and the east were involved. But what it's suffering from is mismanagement, consequent to the nationalization of tea estates that took place in the early '70s, and as a result of that, our tea production has been adversely affected by mismanagement, primarily.
Secondly, the young people on the plantations no longer want to do the jobs that their mothers and their fathers did. And in fact, there is a mass exodus outside of the plantations, I would argue, than people wanting to actually stay in the plantation areas and work. And so, my brief answer is that our tea trade is in crisis, and how we are going to address it remains to be seen. There are some who advocate handing estates back to the private sector, because the government is also considering a reform of what are called the SOEs, or state-owned enterprises. So it might be that under this package, the tea trade, the estates, the management of the tea estates might also be handed back to the private sector. That's my guess, but I wouldn't say it with any degree of certainty. But that's my guess.
ROBERT BLAKE: And then to answer your question on the Maldives. I think, as you recall, the Maldives had their first truly free and fair elections in 2008, for the very first time. It was quite a remarkable development, and what was even more remarkable was that there was a peaceful transfer of power, so the then-President Gayoom agreed to step down and Mohamed Nasheed became the President. I will say, sadly, that since then, there's been a steady erosion of democracy in the Maldives, and so all of us who have followed this reasonably closely have been disappointed to see that a lot of that initial progress has been squandered, and now they're facing all kinds of new challenges on that front.
And then, of course, they face the longer-term challenge of climate change as well, which is something that they're all deeply concerned about, and rightly so. Very little of the Maldives is more than a few feet above sea level. And during the tsunami, for example, most of the wells in the Maldives were overrun with sea water, and it was a terrible problem.
I might just add on the climate change side, one of the interesting things that people are now watching, in terms of the Indian Ocean, in terms of shipping, is that as global warming has proceeded in the north, in the Arctic, it is now opening up the sea lanes in that area. And so countries like the Russians and the Chinese are now actually actively exploring the Northern Sea passage for their trade with Europe. Which is quite interesting a strategic development, and itself will probably excite new competition, again, for access and for who's going to try to manage these opportunities up in those areas. So that's an interesting issue to watch over the next 10, 20, 30 years.
ANNE BLACKBURN: That's helpful. Are there other questions from the floor? We could take another question. I have a pet question, but I'd rather defer to others in the audience. Yes, please. Walt.
AUDIENCE: One question that I have is, you have been talking about how the US and China have strategic interest in the Indian Ocean. But I believe the major power in the Indian Ocean is India. Does India have a vested interest in promoting that Indian Rim alliance, and to be a driver, for example, in the NAFTA, the North African Free Trade Agreement? US dominated it, and China and Japan, even though are political rivals, are still good trade partners. Can Pakistan and India do the same, and does India have a plan, strategy for all of it?
And also, there still is the Chinese increased involvement in Africa, and also in the Indian Ocean. Is it more of China taking that opportunity which the Western countries are not taking right now? Or does it have a different, for example, a financial, economic track that they're going to need to reach, which is more of a political incentive as well?
ANNE BLACKBURN: Since that's really two questions in one I think we can tackle that one and then come back to the floor.
ROBERT BLAKE: Let me tackle the second one first. I think the Chinese Belt and Road initiative was something that the Chinese developed, or that President Xi developed on his own initiative to advance their own strategic and economic interests. It wasn't really very much to do with-- and again, it was partly to connect China with, I think, 65 different countries in Central Asia, in Africa, and beyond, with this vast network and web of railroads and roads and other infrastructure that will be built.
And the intent is to bring a lot of these natural resources that are now coming via the Indian Ocean, they can come through the Port of Gwadar and elsewhere and then again, across land, is tremendously reducing transport costs for the Chinese, but also parenthetically giving a lot of opportunity for the countries along those routes. Provided they keep their eyes open about not incurring very high levels of debt on projects that won't have very high levels of internal rates of return. So they just need to do this in a proper way, with their eyes open.
I think what's interesting now is that the United States and Japan, as you know, they're about to have this important summit in APEC and the East Asian summit in the next two weeks. One of the interesting things to watch in those summits will be whether there will be any kind of announcement coming out of the United States, and possibly the Japanese and others, about their own parallel effort to rival what the Chinese are doing. The Americans and the Japanese will never be able to match the resources that the Chinese have put into this, but I think there is interest on the part of them doing a more rules-based, transparent infrastructure development fund of some kind.
As Tissa said, the challenge will be where to find the money. As you know, our Congress is already in deep debate about funding tax cuts and so forth here in the United States, and I can't imagine there being an appetite for a billion dollar new fund out in the middle of Asia or something like that. There will be a lot of resistance to that. But maybe the Japanese can cobble together some ADB and other funding, and pull together some kind of initiative which would probably be welcomed, certain countries would welcome that. So watch that space.
The other thing, an interesting point that I'd like to just mention here, for those of you interested in the IOR. I read a really fascinating article by Jeff Sachs a few months ago, from Columbia, and he made the interesting point about the BRI that European trade with Asia has now eclipsed European trade with the United States, which is a pretty major development. Because for years, and years, and years, the United States trade was by far the largest portion of European trade. And he made the point that that is a reflection already of some of the opportunities have been opened up by the Belt and Road initiative. And as those links intensify and grow thicker, you're going to see an even greater preponderance of trade, and that in a way, that sort of world balance of trade is going to shift to the Eurasian land mass, which is quite interesting.
But also interesting because comparatively less will be going on maritime seaborne routes, and more across these rail and other lines. So again, a lot of that is driven by China, and China is-- if you think about it, it's cheaper to just run a rail line from wherever in China straight across to Europe than to go all the way around the Straits of Malacca, and then through the Suez Canal, and so forth. It is, of course, going to be much cheaper in the long run, if they can make it all work. So that's what's driving all that, which is interesting.
ANNE BLACKBURN: Indeed. Of course, if they can make it all work being the operative question. Tissa, do you want to jump in on any of these points?
TISSA JAYATILAKA: Well, basically, I agree with Bob that the Belt and Road initiative, the BRI and the IIB, are Chinese ways of trying to improve their own economy, as well as try to be helpful and be an international global player. But now countries like Sri Lanka, in the past, have made this terrible mistake of taking commercial loans at commercial rates from China, and we are in this severe debt trap with regard to China. And so my point that I would like to make is that future governments of Sri Lanka will not make the mistake that was made by the government of President Rajapaksa. And that we would also like to see Japan coming in through the ADB and trying to be a counter to the Chinese, so that we would have more than a Hobson's choice in these matters in the future.
Your question about India playing a role, as far as Sri Lanka is concerned, we believe that piggybacking with India is going to be of tremendous use to us. But as I said earlier, due to domestic political rivalry, one political party plays the other one against the other and divides the people. But if you look at it from an economic point of view, it makes absolute sense for Sri Lanka to be linked to southern India. The states of Andhra Pradesh, Tamil Nadu, Kerala should be key for Sri Lankan economic growth. There is no doubt in the minds of any rational thinking economist about that. But as you know, politics is not necessarily a rational science, so that's the challenge that we have. If we can get our political act right, we would only stand to gain from closer economic cooperation with India.
ROBERT BLAKE: I would just add, if you look at the opportunities, obviously we've already talked about integration opportunities, and the continuing tensions between India and Pakistan are just such a break on the opportunities for regional connectivity. We've talked about SAARC already. The other one is CPEC, they call it the China-Pakistan Economic Corridor, and India has resisted getting involved in that at all because of concerns about how parts of that run through disputed territory in Jammu and Kashmir. And so, as a result of that, they've completely written themselves off of any opportunities in CPEC, which in a way is kind of a shame.
I understand their political objections, but at the same time, the opportunity cost for them of that policy is pretty high, because there are probably a lot of opportunities for Indian infrastructure companies. And I've often thought that it would be smart for the Chinese to try to figure out ways to get the Indian infrastructure companies more involved in the Belt and Road initiative, as a way to bring them in and reduce tensions.
American companies, by the way, do compete successfully for BRI projects. So for example, General Electric and others have won some quite important subcontracts. There are usually subcontractors for some of these big things, and it's generally the GE subsidiary in China that's competing for these various projects. But that's OK. Every single American Fortune 500 company has an office in Beijing. So I think India would be smart to try to have its own companies compete for some of these projects, and I think China would be smart to allow India to do so and hopefully win some of them. So it would be a nice way to ease some of these tensions and, by the way, increase opportunities.
ANNE BLACKBURN: Thank you very much. We could take one last question from the floor. Do we have one last question from the floor? It's almost time to wrap up here.
Well I would ask then, I suppose, about-- because coming at this as an historian, working on a much earlier period of the Indian Ocean's history, I wonder a little bit about what are the sort of practical building blocks through which countries inhabiting this current Indian Ocean space could move toward some of what Tissa was calling for, or voicing at least, as an aspiration seen from the Sri Lankan perspective, namely a multilateral governing structure for the Indian Ocean. How does one go about building such a thing in, what are we now, 2017? I have some notion of how it might have been done in the 14th century, but help us out here imagining this for the 21st.
ROBERT BLAKE: That's a big question. I think India has resisted providing any kind of role for China in a lot of these things, so far. So for example, China is not a member of the IORA, the Indian Ocean Rim Association. They're not a member of the Indian Ocean Naval Symposium or anything like that. So India's likely to probably resist giving China a seat at the table, because they see this as their sphere of influence and their strategic backyard, much as, again, China sees the South China Sea as its. So I think that's going to be one challenge to overcome.
The way to overcome those challenges, of course, is to have Track Two dialogues and to invite experts together from all of these countries and try to think through how to make this happen. That to me would be the kind of first step to try to figure this out, and one of the great things about India-China is there's a huge network of retired diplomats, and military leaders, and others who are continuously participating in these kinds of things. So they're very used to it, they're very smart, and it would be good to try to get them involved in something like this. And maybe Cornell can help sponsor something like that.
ANNE BLACKBURN: Well, we have an appetite for it, as you can see. Tissa, your thoughts on this?
TISSA JAYATILAKA: Well, as I said in my presentation, the challenge that I see for the Indian Ocean region is the rivalry between India and China, as opposed to the United States and China. So as Bob suggested, unless there's going to be some kind of Track Two diplomatic exchanges between India and China, and they get close together, we are going to see an opportunity wasted.
And that's why some of us think that-- in Sri Lanka, we tend to think that, while we recognize that India and China are the preeminent powers in the Indian Ocean region, we would like the United States and Japan and other countries to also remain involved and have a stake, so that there can be this balance of power. Because we do not want any one country in the region-- that is speaking from a Sri Lankan perspective-- any one country to be a hegemon In the region. So we would like to see, and that's why the aspiration. Whether this can be worked out, given the imponderables in the equation, that remains to be seen. And I couldn't guess what it's going to be like, but I can only hope that we will not repeat the mistakes of the Cold War era by allowing this kind of unhealthy competition. So managing unity and encouraging competition is the challenge of our era.
ANNE BLACKBURN: Those, I think, are just the right words to end on. We can only endorse attempting to avoid the faults of the Cold War era. And I'm deeply grateful to Bob Blake and Tissa Jayatilaka for giving us their time and creative energy today. It's been great fun to hear the renewal of a conversation between Bob and Tissa, and I'm so proud that it's taken place at Ithaca, New York, at Cornell University.
I'm sure that Heike Michelsen will not mind if I say that, on behalf of Heike Michelsen, Associate Director of Academic Programming from the Einaudi Center of International Studies, and myself, from the South Asia Program, we are deeply grateful to today's speakers, and thank you all for joining us on this wonderful occasion.
Robert Blake and Tissa Jayatilaka participated in a roundtable discussion moderated by Anne Blackburn titled “Indian Ocean Politics in the 21st Century,” on Tuesday, October 31, 2017 in Lewis Auditorium, Goldwin Smith Hall. They addressed the contemporary geopolitical dynamics of the Indian Ocean region, with special attention to U.S. and Sri Lankan positions and interests. This roundtable illuminated the nexus of the U.S., Indian, Sri Lankan, and Chinese presence in the Indian Ocean, and the place of the Indian Ocean region in the current and emerging economic and diplomatic policies of key players on the international stage.
