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The Association of Southeast Asian Nations was formed in 1967 to accelerate economic growth, social progress and cultural development in the region. It was also to counter the threat of communism and external powers and promote regional peace and stability. Their progress was so spectacular that the group’s 10 member states were collectively labeled Asia’s “tiger economies.”

The ASEAN region is rich in oil and natural gas, and globalization benefitted it further. The growing demand for energy, raw resources, imports and exports led the member states to develop their maritime capabilities, and shipping companies were permitted to grow at a ferocious pace by local governments eager to corner business opportunities.

But wealth also brought conflict to the region. The maritime boundaries of ASEAN countries were expected to be resolved along principles outlined by the United Nations. However, the rise of China since 1980 has stalled this process.

The Sea of Japan, East China Sea and South China Sea have become potential conflict zones due to major discoveries of oil and gas fields. Squabbling over boundaries, including those that define exclusive economic zones, has been further stoked by major European nations that are expert in building submarines, and anxious to export them.

Large private oil companies have been advising their respective home governments of the need for oil drilling rights in Southeast Asia. It is conservatively estimated that by 2015, East Asian nations will acquire about 50 to 80 diesel-electric submarines. The soft promotion of submarines by the European nations to ASEAN has revived associated industries and shipbuilding yards facing an “export or die” situation.

Each diesel-electric submarine is fitted with modern air-independent propulsion capabilities, sub-launched surface-to-surface missiles, land-attack cruise missiles, torpedoes and mines, and costs around US$400 million. Some of them are also fitted with surface-to-air missiles like the Russian-made IGLA rocket.

As most ASEAN countries are acquiring submarines for the first time for their respective navies, expensive shore-based maintenance and training facilities are also under construction to ensure service for their projected life of 50 years in tropical climates.

Finance is hardly an issue, as leading European banks are more than willing, backed by their respective governments, to provide loans and credit facilities to Asian nations. This has helped countries like Myanmar and Pakistan to acquire submarines from Germany, the United Kingdom and France, where each composite contract is worth over US$1 billion.

However, the proliferation of submarine capabilities in the seas around ASEAN and East Asian nations comes at a price – the transfer of wealth from Asia to Europe, although not by “gunboat” diplomacy or colonization.

The energy needs of developing economies have pushed upstream exploration companies like India’s Reliance Industries and public-sector Oil and Natural Gas Corporation along with Shell, Exxon, BP and Chevron into the deep waters of Asian seas. Oil and gas have been found around the Spratly Islands and Mischief Reef in the South China Sea.

But these areas are under dispute by China, the Philippines, Indonesia and Malaysia, as their maritime boundaries are not resolved. This has spawned a host of new problems, as drilling concessions granted by ASEAN governments have not been accepted by China.

Therefore, foreign oil majors have sought naval protection from their host governments for rigs deployed in the region. In the recent past, a spat between Vietnam and China erupted when Vietnam agreed to an Indian deep-water rig in its exclusive economic zone.

The increasing availability of diesel-electric missile capable submarines in this region could trip China’s plans for hegemony and control in the seas around ASEAN. The latest type of submarines supplied by Russia, France and Germany – like Agosta, Collins, and Scorpene – are more than a match for China’s homegrown submarines and ships. They are virtual black holes under water, silent and difficult to find, as the U.S. Navy realized in a recent war game with a Swedish diesel electric submarine.

China’s PLA Navy’s poor focus on antisubmarine warfare will haunt it for many years. But it is trying to acquire modern antisubmarine warfare capabilities by importing KA–28 ASW helicopters from Russia. Similarly, dipping sonars from international defense manufacturer Thales have been fitted on Chinese helicopters.

ASEAN nations have rapidly attained “sea denial” capabilities in their littoral waters, assisted by European powers. They are unlikely to give up their oil and gas fields, as woven into their payment contracts for acquiring submarine capability, to private oil majors of EU and U.S. subsidiaries. Any reneging on their part would reduce their expensive submarines to junk status, like what Indonesia suffered in the late 1960s when it parted with the former Soviet Union. Its navy, built by former President Sukarno, was rendered unserviceable due to lack of spares and maintenance.

The stalled Thai Canal project, if completed, would have boosted the economy in the region, improved transport and competed directly with ports in the Strait of Malacca area, including Port Klang and Singapore. It would have generated fees from shipping companies, though less than the Suez Canal, which is the gateway to Asia. The project remains inoperative due to environmental concerns.

ASEAN must cooperate to build regional infrastructure. Just as common doctrines, communication procedures and interoperability are hallmarks of regional joint training exercises by the armed forces of ASEAN member states, cooperation in building maritime capabilities for the benefit of the region should also be ASEAN’s prime goals.

ASEAN has realized India’s growing sea and air prowess. Not only are ASEAN member states involved in joint exercises with India, but military officers are also undergoing training in various Indian military academies.

India’s navy has assisted in disaster relief as well as antipiracy patrols in the Malacca Strait and beyond. Its survey ships are also being pressed into service for charting the waters of ASEAN nations and the Indian Ocean region on government-to-government contracts.

European military establishments seem to be back in business thanks to ASEAN’s maritime developmental requirements. In comparison, the United States has been rather passive in engaging with ASEAN on these issues. Reportedly, the U.S. government has buried the production of diesel-electric submarines to Taiwan.

Countries like India are now changing their policies for foreign direct investment in the defense sector. The annual Economic Survey of the Indian government, presented on July 2 to the Indian Parliament, suggested increasing the legal limit of FDI for the defense sector from the current level of 26 percent to 49 percent.

The stage is now set for Asian economies to work under tighter timelines, low inventories, well-planned logistics, six sigma industry production norms and employing skilled labor. Disruption in any one area could cause crippling losses to the country and affect gross domestic product growth. For example, disruption in China’s shipping channels from the Gulf could disrupt its oil imports and cause industrial stoppages, job losses and social unrest.

India too needs to guard against such disruptions, as the maritime sphere has assumed a central role not previously seen. New business opportunities as well as threats have risen and a nation aspiring for strong growth in the 21st century must be a robust maritime nation both militarily and in the merchant marine.

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(Captain Devindra Sethi is an alumnus of India's National Defense Academy, the College of Defense Management, the College of Naval Warfare, and the War College in St. Petersburg, Russia. He is a successful entrepreneur in the maritime industry and fluent in English, Russian and Hindi. ©Copyright Devindra Sethi.)