Li Xin
Senior Research Fellow
Center for Russian & Central Asia Studies
Institute for World Economy Studies Director
Related Articles Commentary Paper SIIS Report
Aug 06 2012
Ponders on the Long-term Strategy of Shanghai Cooperation Organization
By LI Xin

Shanghai Cooperation Organization (SCO), founded in 2001, has undergone a decade of evolution to have had an ever growing international influence and become an important constructive force and a regional cooperation organization to the credit and trust of its member states on the Eurasian continent. Over the past decade, the organization evolved from creation to grown-up, from setting rules and regulations to operating highly effectively, and having soon become an effective mechanism of maintaining regional security and stability and promoting common development of its member states. Now, SCO has largely completed laying down its legal foundation and built up its mechanisms, and the areas of cooperation have extended from initially the security areas to the two major lines of security and economy, both with tremendous achievements.

I. SCO’s Major Achievements and Challenges in the Past Decade

The SCO members had signed the Shanghai Convention against Terrorism, Separatism and Extremism on the very date of its founding on June 15, 2001, a precise judgment on the change of international situation, which was evidenced by the 9/11 event erupted soon afterwards. The bilateral and multilateral joint exercises within the SCO framework one after another in recent years have generated great deterrence against the “three evils” - terrorism, separatism, and extremism. It owed mainly to the selfless cooperation among the SCO member states that prevent the “three evils” from swelling rapidly in Central Asia.

Intra-SCO trade developed fast in the last decade. According to the statistics made by the Ministry of Commerce of China, the volume of China’s trade with other SCO members has grown from $12.22 billion in 2001, the year of the founding of the organization, to $84.7 billion in 2010, and further reached $11.34 billion in 2011, a ten times growth. Of which, $79.2 billion is between China and Russia, 42% higher than a year earlier, and $25 billion is between China and Kazakhstan, 22% higher than a year earlier. Since 2010, China has become the largest trade partner of Russia and Kazakhstan respectively. In terms of energy cooperation, the oil pipelines linking China and Kazakhstan, and linking China and Russia, and a natural gas pipeline linking China, Turkmenistan, Kazakhstan and Uzbekistan have put into operation successively. China and Russia are actively advancing the cooperation of large-scale power station, nuclear power station, and coal. The energy cooperation network within the SCO framework is taking shape. Financial cooperation is deepening to respond to the global economic crisis. SCO Interbank Association is providing SCO members’ multilateral cooperation with a funding platform. Bilateral currency exchange, conducting trade in local currencies, and yuan-ruble direct trade are pushing forward steadily. Jumbo loans and investment are increasing every day.           

We should lose no sight of a range of old and new issues confronting the SCO over the next decade. The “three devils” remain threatening. Drug-trafficking and transnational, organizational crimes are rampant as well. International information security and cyber-criminality become new issues affecting regional security and stability. The member states want to strengthen financial cooperation in response to global financial crisis. New threats and new challenges often imply new opportunities and new prospects. SCO will be in need of pragmatism and wisdom in its cooperation and response. SCO enlargement is put on agenda in addition to building up effective coordination mechanisms. Cooperation on security has remained as the central issue of the organization ever since its founding date. Security and economy, the “two wheels”, are more closely associated. More emphasis should be put on the inseparability of the two. Cooperation in cultural areas should also be strengthened so that SCO develops more balanced and stabilized.

As a critically important regional organization on the Eurasian continent, SCO is becoming more and more attractive to countries in the region. It will become more confident, firm and mature in the new decade.

II. About the Construction of SCO Institutions

SCO is a multifunctional, regional organization with a near complete internal mechanism, laws, important decisions and documents that have been built up and signed since its founding a decade ago. SCO has built up a set of relatively complete organization mechanisms, i.e., the Heads of State Council of the highest decision-making body; the Heads of Government Council of the highest decision-making body and regular meetings on the level of ministers. The Council of National Coordinators of SCO Member States is in charge of coordinating interaction within the SCO framework. The Organization has two permanent bodies – the Secretariat and the Regional Counter-Terrorism Structure.

The most important tasks of the SCO in the next decade in terms of mechanism building are the continual improving and deepening of the internal mechanisms of the SCO and addressing of the issue of SCO enlargement in accordance to the change and development of international configuration. First, SCO should keep improving internal laws and operational mechanisms. On one hand, SCO wants to refine the existent managements and mechanisms, and on the other, it must supplement and refine internal laws and documents to rationalize and restrict the behaviors of the member states, to enhance internal coherence of SCO and to raise external appeal, in time and in accordance to the nature of its own and to the change of international configuration. SCO wants to establish and improve emergency reaction mechanisms to respond to regional and global breaking events like national disasters, epidemic transmissions, terrorist attacks, etc.    

Second, SCO should be scrupulous to the issue of absorbing new members. Preconditions should be applied in absorbing new members on the purpose for serving internal unity and stability. It is a principle to give the priority to accession of new members that meet the preconditions of confirmed, detailed and strict obligations. When and how to absorb new members should be subject to the common interest of the member states and should be conducted by the principle of consultation and consensus. It should be avoided to absorb new members at wrong time, wrong place and by wrong method at the cost of the efficiency of the cooperation of SCO, let alone that SCO be involved in regional conflict at the cost of the interest of the member states. Pakistan and India can be considered to be absorbed as formal member states at an appropriate time so long as the above conditions are satisfied.

III. Strengthening SCO in Security Cooperation

Cooperation in security is one of the most important cooperation areas of SCO. For the last decade, SCO member states have signed security cooperation documents of combating terrorism, illicit drug trafficking, money-laundering and organized crimes, and extended cooperation to strategic security, defense security, law-enforcement security, information security, and so on. Member states have been conducting bilateral and multilateral anti-terrorism exercises on regular terms, and engaged in cooperation in security protection in important international activities, which have played a large role in maintaining regional peace and stability.

Despite little likelihood of eruption of large-scale civil war and armed conflict, challenges in security areas remain realistic in the next decade, and occurrence of unrests are highly likely though in limited areas. SCO is faced with severe challenges of terrorism, religious extremism, transnational crimes, drug trafficking, illegal immigration, eco-disaster among others in non-traditional security areas. Firstly, as U.S. and NATO withdraw from Afghanistan, terrorism in Afghanistan will likely spin off, and collide with Islam Liberation Party in Kyrgyzstan and Tajikistan and with Islamic Movement of Uzbekistan, stepping up the rampant terrorism and transnational crimes in Central Asia. Secondly, political turmoil remains likely in Central Asian countries. The new regime of Kyrgyzstan is still facing north-south contradiction and the likelihood of inter-ethnic conflict. Another round of regime change is not to be ruled out. At the same time, Kazakhstan, Uzbekistan and Tajikistan are confronting the primary domestic political tasks of ensuring a stable power transition, preventing domestic, political turmoil and reducing “Arab spring” effect. Any failure in addressing the issues will lead to chain-effect to the periphery countries. Thirdly, conflict on the use of resources and contradictions on border demarcation among Central Asian countries will likely deteriorate. Tajikistan, Uzbekistan, Kyrgyzstan and Kazakhstan are involved in the conflict on the use of water resources; and Uzbekistan, Kyrgyzstan and Tajikistan are bitterly disputed on the issue of border demarcation.

In order to cope with the above severe challenges, SCO has first of all to reach consensus on the concept of “shared security”. It has to follow the “Shanghai spirit”, carry out the new security concept, promote “shared security” concept, maintain the shared security of member states, and take real actions in implementing the agreement of strengthening cooperation between SCO and Collective Security Treaty Organization. SCO has to further improve law basis of security cooperation to provide combating non-traditional security threat, peace-keeping action, and intelligence exchanges with a sound, legal foundation. For sake of improving security cooperation mechanism, SCO should confine the security cooperation to multilateral cooperation areas, confine the military security cooperation to bilateral areas, and establish rapid reaction mechanism in response to any breaking security threat. SCO should further expand areas of cooperation in order to respond to new situation and new problems, and gradually push for other non-traditional security areas, such as economic security, transportation (pipeline) security, eco-crisis, epidemic prevention, cyber-security, and so on.

IV. Deepening SCO Economic Cooperation

After a decade of development, SCO member states deepen cooperation continuously. Mechanization of economic cooperation is maturing. In order to respond to the global financial crisis in time, member states largely increased their trade, and rapidly expand their mutual investment as well as the areas of the investment. SCO members have become important host countries of FDI from China. Regional economic cooperation should rise to become important cooperation area and to become the driving force of the further development of the organization.

As for the goal of the SCO economic cooperation in 2020, SCO should be based on the achievements realized in the last decade to make joint effort with the emerging Eurasian Economic Union; SCO should follow the principle of free trade to realize free flow of commodity, funds and service that were approved at the founding of the organization; SCO should further boost economic cooperation mechanism, persist in WTO cardinal principles, step up transparency of trade and investment policies, and make it more convenient for trade and investment; SCO should follow the principle of market economy, mutual benefit, common prosperity and development, expand economic cooperation areas, upgrade trade structure and quality, innovate for new economic cooperation means, boost the level of regional economic development; SCO should absorb SCO observers and dialogue states to participate in regional economic cooperation, and handle appropriately its cooperation and competition with the Customs Union of Russia, Belarus and Kazakhstan and with the Eurasian Economic Union, in hope of the two being finally integrated. 

In order to reach the above goals, SCO should engage in cooperation in the following aspects and areas. The first is the further mechanization of economic cooperation. SCO should establish an economic cooperation committee to boost the efficiency of the regional economic cooperation within the framework of SCO, to prevent overlaps and repetition between various mechanisms, and to cut down red tapes and officialdoms (too much paper works and meetings) in order to really implement what the original documents have formulated. Second, SCO has to persist in international standards and rules, to improve and rationalize the custom procedures, to realize trade convenience, to establish and refine mechanisms of implementation and monitor, to raise the scale and quality of inter-member trade, to improve trade structure, to size up the share of the service trade, high-valued products in the total trade, to innovate for new trade patterns, and to develop process trade and intra-industrial trade. Third, SCO has to strengthen investment cooperation, to unify standards, to simplify procedures, to realize convenience of investment cooperation, to transform from direct investment to technology investment and BOT, to extend investment areas from mining and resources to construction of infrastructure, construction, manufacture, agriculture and service, to step up the implementation of the livelihood projects, and to realize the economic prosperity of the region proper. Fourth, SCO is in need of establishing development bank to promote financial cooperation, to strengthen coordination of monetary policies, and to hedge against financial risk of the region. Banks of member states should be allowed to provide loans of local currencies and export buyer credit, to issue Local currency bonds, to establish inter-bank liquidation with local currencies, to bilateral liquidation with local currencies, to promote inter-member currency cooperation, to promote currency exchange, to strengthen liquidation of inter-member trade with local currencies, to explore the possibility of creating the trans-sovereign currency, to promote pluralization of foreign reserves of member states, to promote off-shore currency market and bond market, to develop off-shore financial market, and to support internationalization of the national currencies of the region. In addition, member states shall engage in close cooperation in debt and credit businesses in areas of high-tech industry, traditional energies and new energies, modern agriculture, and infrastructure.

V. Promoting Cultural Cooperation of SCO

Over the last decade, SCO members have made great achievements in cultural areas, holding various bilateral and multilateral cultural exchanges and activities in the SCO framework and actively promoting cultural cooperation through the bond of “silk road”.

Upon entering the next decade, SCO, by drawing on the achievements and experiences of the past decade, will be most necessary to further improve the mechanism of high level dialogues, and actively scale up public diplomacy; to build up cooperation in cultural and educational areas, enhancing the quality of linguistic and cultural educations; to encourage export of cultural products and services with one another of SCO members, and to encourage transnational investment and business in cultural industries; further promote convergence and integration of the Chinese culture, Slavic culture, and Islamic culture; and to absorb observers and dialogue partners of SCO in participating in the cultural cooperation of SCO.     

In order to realize the above goals, SCO should probe on the following aspects. First, it should promote mechanization of the cooperation in cultural and educational fields; it should establish SCO cultural forum and cultural exchange founds; it should promote exchanges and communication of personnel in cultural and educational fields, promote the development of cultural industries of member states, and enhance the quality and effect of cultural exchanges. Second, member states should mutually host “Year of country” activities with one another. They can try to hold various multilateral cultural exchanges such as “joint festival of cultures”, which is good for expanding resources of tourism and good for knowing peoples and cultures of one another. Third, it should promote free flow of cultural products and revival of cultural enterprises, encourage and introduce transnational investment of cultural enterprises in films and TV shows, especially in enterprises of artifacts, animation, online games and various idea industrial parks. Fourth, SCO should expand areas of cultural cooperation, and level up the content of cultural exchanges. It should appropriately promote normal and positive religious cultural exchanges among member states, ensure the leading role of moderate churches of religions, and guide religions to keep pace with the times. Fifth, SCO should comprehensively improve the work of reserving cadres in cultural areas by taking advantage of the existent SCO University and high education institutions of member states to train talents earmarked for the cultural industry of member states.

Source of documents