South China Sea Dispute - Supply Chain Analysis

SOUTH CHINA SEA DISPUTE: SUPPLY CHAIN ANALYSIS

SCM PROJECT

[pic 1]

What actually is South China Sea Dispute?

It is a territorial dispute over a busy waterway. Among the claimants main countries are the ones geographically close to the disputed waterway. China, Brunei, Malaysia, the Philippines, Taiwan and Vietnam all have overlapping claims on the South China Sea.

Then there are countries that are not geographically linked to the waterway, but have their strategic interests. The US regards the South China Sea as international waters, and wants it to be “free” for navigation under the UN maritime law. Japan, in its race to counter China’s growing influence in the region, is also involved. Also the reason of involvement of these many countries over a narrow stretch of waterways is that, goods worth $5.3 trillion pass through the South China Sea, and also South China sea is rich in marine life, thus contributing about 10 percent of the world’s fish trade. (Everything you need to know about the South China Sea conflict – in under five minutes, 2015)

International Laws and Overlapping claims

The United Nations Convention on the Law of the Sea (UNCLOS) sets out that states can control the territorial waters within 200 nautical miles (370 km) off their shores. These are called the Exclusive Economic Zones (EEZ). Where the zones overlap, as in some cases, neighbouring states need to decide on maritime borders. 

Also the convention passed in 1982 states that areas that do not fall under EEZ should be international waters, shared by everyone and free for navigation.  Thus countries cannot claim sovereignty over land masses that are submerged or were submerged but that have now surfaced above high tide level because of illegal construction.

However, China asserts it is entitled to more than the 200 nautical miles from its shores. It’s claim overlaps with the EEZ of Vietnam, the Philippines, Malaysia and Brunei. Beijing says that, several islands in the stretch were discovered and mapped by Chinese sailors thousands of years ago during various naval expeditions and are integral parts of China.

In 1947, China outlined its claim to the disputed waterway by drawing a map with a U-shaped line covering almost 70 percent of the South China Sea.  Referred to as the nine-dash line, it covered the Paracel and Spratly islands, a cluster of more than 30 others. (Egberink, 2017)

[pic 2]

Figure 1: Nine dash line and territorial claims

The Paracel islands are claimed by China and Vietnam. Similarly, the Scarborough Shoal, a 60 square mile (97 km) chain of rocks and reefs is claimed by both China and the Philippines. Philippines bases its claim on geographical proximity and history, arguing they have had claim over the islands for hundreds of years. 

Then there’s the Spratly Islands, of more than 700 reefs, islets, atolls and islands. Six countries have staked claims there: China, Vietnam, Taiwan, Malaysia, Brunei and the Philippines.

Distribution of Port Network

Almost all of the major counties have their port facilities at South China Sea. Of the major port the busiest ones are: Shanghai, Qingdao, Singapore, Tianjin, Hong Kong, Kaohsiung, Shenzhen, Taiwan, Busan, Port Kelang, Ningbo-Zhoushan and Guangzhou Harbor. (South China Sea ports map, n.d.)

Type of Ships Operating in the South china Sea

Ships of all sizes operate in the South China sea, ranging from small fish catching boats to Very Large Crude carriers. Although, many small carriers operate in the South china Sea, the traffic generated is mainly from the large carriers.

Reuters shipping data shows that, counting just Very Large Crude Carrier (VLCC) super-tankers, some 25 VLCCs are passing between the disputed Spratly and Paracel islands at any time, with enough capacity to carry the equivalent of about 11 days' worth of Japanese demand.

[pic 3]

Figure 2: Distribution of Ports in South China Sea

Container size of Carrier Ships

Almost all the shipping companies follow ISO 6346 standard. ISO 6346 is an international standard which use for identification of shipping container. This standard is maintained by the BIC (International Container Bureau) and consists serial no, owner name, country code and size of specific container.

• Standard ISO shipping containers are 8ft(2.43m) wide, 8.5ft(2.59m) high and come in two lengths; 20ft(6.06m) and 40ft(12.2m).
• Extra tall shipping containers called high-cube containers are available at 9.5ft (2.89m) high.
• Smaller 10ft (2.99m) and 8ft(2.43m) containers are also available.
• A standard ISO 20ft shipping container has capacity of 33.1 m3.

Type of Industries operating through South China Sea

Fashion & Footwear Industry: More than 95% of all footwear shipped to the U.S. flows through the South China Sea. Many of the south east Asian countries like Vietnam, Philippines and Indonesia have manufacturing facilities of major footwear brands ranging from Adidas to Puma and Nike to Vans. All of the sweatshops of the major footwear and fashion companies are located in these countries due to their cheap labour. (Press, 2014)

Shipping Industry: Over half of the world’s commercial shipping passes through the waterways of the Indo-Pacific region. The Strait of Malacca, in particular, is one of the most important shipping lanes in the world. The strait links the Indian and Pacific Oceans and carries approximately 25% of all traded goods. It also carries approximately 25% of all oil that travels by sea.