Chapter III. Situation in Each Region and Japan's Relation with Respective Regions
Section 1. Asia-Pacific Region
The Asian region, as a whole, is making progress to stabilization despite negative factors such as confrontation between South and North Koreas on the Korean Peninsula and regional conflicts continuing in Indochina.
The Republic of Korea held a direct presidential election in December 1987 for the first time in 16 years and realized a peaceful change of regime. China is positively promoting the policy of opening to the outside world, and of placing prime emphasis on economic construction. The rapid economic progress of the so-called Asian newly industrializing economies (NIEs) has contributed to activating not only the regional economy of East Asia but also the global economy. The ASEAN countries, with stepped-up intra-regional cooperation, maintain political stability in general and are continuing steady economic progress. The South Asian countries are gaining momentum toward mutual cooperation, led by the South Asian Association for Regional Cooperation (SAARC).
Many countries in the Oceania region are still suffering from economic difficulties which have arisen from sluggish prices of primary products. In Australia and New Zealand, the ruling Labor Parties have won again general elections and are vigorously pushing forward the market-oriented economic policies. South Pacific island nations were rocked with political unrest which drew the world's attention, including a coup in Fiji and problems in New Caledonia.
The Asia-Pacific region attracting world attention in recent years, have increasingly recognized the significance of intra-regional cooperation, while displaying the dynamism of economic progress, notably in the Aisan NIEs, and enhanced interdependence. Against this background, the 6th general meeting of the Pacific Economic Cooperation Conference (PECC) was held in Osaka in May 1988.
1. Korean Peninsula
(1) The Republic of Korea
(a) Domestic politics
(i) On April 13, then President Chun Doo Hwan, judging that it would be impossible to amend the constitution through talks following the split up of the opposition New Democratic Party, announced a policy to freeze debate on constitutional revision until the Seoul Olympic Games. But student and opposition groups sharply reacted against this policy, resulting in large-scale anti-government demonstrations across the country in June. But the situation calmed down after Roh Tae Woo, leader of the ruling Democratic Justice Party, unveiled on June 29 a set of measures featuring the adoption of a direct presidential election to cope with the anti-government uprising.
(ii) The constitutional revision bill cleared the parliament in October and the direct presidential election was held on December 16 for the first time in 16 years.
The presidential election was a four-way battle among Roh, and three opposition leaders - Kim Young Sam, Kim Dae Jung and Kim Jong Pil. After fierce election campaigns, Rob won the presidential election with the runner-up Kim Young Sam garnering nearly two million less votes than Roh.
(iii) The Roh Administration was formally inaugurated on February 25, 1988, when he assumed the presidency. After the first peaceful transfer of power in ROK's history, attention on the political scene shifted to the issue of amending National Assembly member election law. At the extraordinary session on March 8, the National Assembly passed the bill to revise the law, which sets the number of seats allotted for regional constituencies at 224 and that of seats for national constituencies at 75 for a total of 299.
(iv) The National Assembly member elections were held on April 26 and the ruling Democratic Justice Party won 125 seats, the opposition Peace Democracy Party 70 seats, Reunification Democratic Party 59 seats and New Democratic Republican Party 35 seats with the remaining 10 seats allotted to others. The Roh Administration then reshuffled the key posts of the ruling party in May and then part of his cabinet. He also made efforts to improve the ruling party's relations and establish better mutual understanding with the opposition camp.
(i) With regard to U.S.-the Republic of Korea relations in 1987, the United States stepped up its pressure on ROK to further open its market amid a growing surplus in bilateral trade in favor of ROK. In response, ROK adopted a series of market-opening measures. As for the domestic political situation, the United States also continued to seek dialogue and compromise between the ruling and opposition parties and maintained the stance against the military's intervention in political affairs.
(ii) In 1987, ROK saw its relations with socialist countries progress in sports and other areas with a total of a record 161 countries and regions, including the Soviet Union, China and East European countries, expressing intent to participate in the Seoul Olympics, for which entries were closed on January 17, 1988. In the meantime, National Olympic Committee officials of these socialist countries visited ROK one after another. Moreover, ROK agreed with Hungary, Yugoslavia and Czechoslovakia on the establishment of trade offices in each other's country.
(iii) Furthermore, ROK actively carried out diplomatic activities against the background of its smooth economic development, launching economic cooperation with developing countries.
On the back of strong exports and brisk investment in the manufacturing industry, the ROK's economy scored a fast growth of 12.0% in 1987 with per capita GNP reaching $2,826.
Exports, led by textiles, electronic machinery and equipment, machinery, etc., jumped 36.2% from the previous year to $47,300 million, while imports, paced by crude oil and other fuel and mineral products, machinery and equipment, agricultural and marine products, etc., surged 29.7% to $41,000 million. As a result, its current account and trade balances, both of which swung into the black for the first time in 1986, saw their surpluses widen sharply to $9,850 million and $7,660 million, respectively. Against the background of such a trade surplus, ROK's external debts shrank $8,900 million in 1987 to $35,600 million. But on the other hand, its economic friction with the United States and the EC was aggravated.
Though the June 29 declaration on democratization led to labor disputes across the country, labor-related laws were revised later and efforts are being made to form new democratic management-labor relations within the new framework.
(2) North Korea (Democratic People's Republic of Korea)
On the domestic political scene, the leadership of President Kim Il Sung was firmly maintained, while there was no change in the trend of grooming Kim Jung Il, secretary of the Central Committee of the Workers' Party, for his replacement. Moreover, it appears that there has been little basic change in the power structure.
However, it was notable that Politburo member O Guk-ryol was sacked from the post of the Chief of General Staff of the People's Army and that he was succeeded by candidate Politburo member Choi Gwang.
On the diplomatic front, North Korea continued to attach importance to its diplomatic relations with China and the Soviet Union, while striving to strengthen its ties with non-aligned countries.
North Korea maintained its basic policy to striking a balance between China and the Soviet Union. The Soviet Union officially celebrated the 45th birthday of Kim Jung Il in February 1987, the first such celebration ever. Vice President Pak Song-Chol visited the Soviet Union in November to attend the ceremony marking the 70th anniversary of its October Revolution and O Jin-U, the Minister of People's Armed Forces went to that country in February 1988. On tap of such personal exchanges, progress was made in the strengthening of economic and military relations between the two countries.
As regards relations with China, a number of top North Korean leaders went to that country one after another. Visits to China were paid by President Kim Il Sung in May, by O Guk-Ryol, Chief of General Staff of the People's Army in August, by Yang Hung Sap, Chairman of Standing Committee in September, and by Premier Li Gun-Mo in November. On the other hand, a new Chinese consultate-general was established in Chungjin in July. The two countries thus maintained close relations.
In its diplomacy toward non-aligned nations, Kim Yong-Nam, deputy prime minister and concurrently foreign minister, visited Yugoslavia and India, while North Korea invited VIPs of African nations for the events marking the anniversary of President Kim Il Sung in April. Moreover, a special ministerial-level meeting of non-aligned nations on "south-south" cooperation was held in Pyongyang in June.
But in connection with the alleged downing of an ROK jetliner by North Korean agents, St. Vincent and the Granadins, Fiji and Saint Lucia severed diplomatic relations with North Korea.
On the economic front, the third seven-year plan for the people's economic development covering 1987-1993 was decided in April 1987. The plan basically calls for the achievement of the 10 Big Prospective Goals for Socialist Economic Construction, but set the targeted growth for industrial production and other targets at levels generally lower than those under the second seven-year plan. Meanwhile, a general mobilization meeting for the achievement of the plan was held in July, at which a resolution was adopted for the advancement of the implementation of the plan by one year and a half. In February 1988, the government called for the acceleration of the economic construction under the slogan of "200 Day War" movement. The growth of the budget for 1988 was set lower than that for 1987.
(3) Relations between Japan and the Republic of Korea
(i) Japan's relations with the Republic of Korea (ROK) have steadily developed since the normalization of diplomatic relations in 1965, bringing about a healthy and close relationship where bilateral exchange and cooperation are under way in various fields.
The two countries have continued high-level talks, including regular conferences of Foreign Ministers held in May 1987 and March 1988. Through working-level meetings, they also made in-depth discussions on the treatment of Korean residents in Japan trade, fishery and other bilateral problems.
(ii) Prime Minister Takeshita's Visit to ROK
Prime Minister Noboru Takeshita visited Seoul in late February 1988 to attend the inaugural ceremony for President Roh Tae Woo and he conferred with ROK government leaders. Takeshita congratulated ROK on the nation's peaceful change of power based on national consensus. Takeshita agreed with Roh on the need to consolidate and develop friendship and goodwill relations between Japan and ROK and pledged Japan's cooperation for the success of the Seoul Olympics.
(b) Cooperation for Seoul Olympics
Japan has expressed its intention to work for the success of the Seoul Olympics to be attended by 161 countries and areas, including China and the Soviet Union, because the success will surely contribute to relaxing tension on the Korean Peninsula. Japan and the ROK started a series of liaison council meeting in April 1988 to discuss specific security measures for the Olympics, especially measures to combat terrorism.
(c) 21st Century Japan-ROK Committee
Japan and the ROK agreed to hold the first meeting of the 21st Century Japan-ROK Committee (the Wisemen's Committee) in August 1988, which was designed for a long-term, stable development of friendship and amity between the two countries from an international perspective.
(d) Treatment of Korean Residents in Japan
Japan and the ROK held working-level consultations in Tokyo in November 1987 on the treatment of Korean residents in Japan. They also held a bilateral working-level meeting in Seoul in March 1987 on the residency in Japan of Korean residents' descendants to deal with the third and following generations of Korean residents in Japan.
Japan's exports to the ROK totaled $13.2 billion in 1987, while imports from that country amounted to $8.1 billion. The total bilateral trade registered a steep increase for the second consecutive year, rising more than 25% from the previous year. ROK's exports expanded sharply due to the yen's sustained strength and as a result, ROK's trade deficit with Japan decreased 0.6%, showing a sign of improvement in the bilateral trade imbalance, a major problem pending between the two countries. The two governments held the 20th bilateral trade conference in October 1987 and other trade forums.
(f) Industrial Technical Cooperation
Japan has been transferring industrial technologies to ROK through private-level cooperation and direct investment. Statistics show that Japan ranked first among the countries which gave such technologies to ROK in 1987, accounting for 308 of the total 637. The Japanese Government has also been actively extending wide-ranging technical assistance to the ROK under the framework of governmental economic cooperation. It accepted 153 trainees under its fiscal 1987 training program of ROK engineers.
Aviation officials from ROK and Japan, meeting in January 1988, confirmed a plan to allow two other Japanese airlines to enter ROK as designated air carriers. Besides Japan Air Lines, the single Japanese airlines which had served between the two countries, All Nippon Airways and Japan Air System launched regular flights between Tokyo and Seoul in July 1988. Japan and the ROK exchanged notes in Seoul on April 27, 1988, to start flights of ROK's designated airliners on Nagoya-Pusan/Cheju, Nagasaki-Seoul and Sapporo-Seoul routes.
(h) Fishery Issues
Japan and the ROK have maintained generally good relations on fishery under the current bilateral fishery agreement concluded in 1965. Japan has had consultations with the ROK since July 1986 to establish a more efficient order in the two countries' fishery business against the backdrop of changes observed in fishery environment, actual fishing operations and fishery resources.
At that round of consultations, the two countries agreed to strengthen ROK's self-imposed restrictions, effective since 1983, on fishing in waters off Hokkaido, confirming the gradual withdrawal of ROK fishing boats from the waters. They also agreed to impose voluntary restrictions on fishing in waters off western Japan from January 1988, which called for tougher restrictions, directions and controls on fishing activities there. In addition, they decided to continue government-level talks on fishery issues, while watching how these voluntary regulations are observed. Further talks were arranged to seek a new framework which copes better with changes in the environment surrounding the two countries' fishing activities and offers a basis for their fishery cooperation in the future.
The 22nd annual meeting of the Japan-ROK joint fishery committee took place in late March 1988. The two countries discussed problems relating to the implementation of the 1965 Japan-ROK fishery agreement and agreed to properly enforce the voluntary regulations cited above in order to tackle bilateral fishery issues.
(i) Joint Development of Continental Shelf
Japan and the ROK have implemented test drilling at seven points on the basis of physical prospecting in the Joint Development Zone of the continental shelf adjacent to the two countries since 1979. But they discontinued the test drilling in May 1987 without any commercial discovery of oil or natural gas.
Based on the results of the eight-year drilling, the two countries had talks on the review of small development zones and the revision of the obligatory number of winze excavation. They exchanged notes in August 1987 to reduce the small development zones from nine to six and ease the obligation of winze digging on the Joint Development Zone from 11 to seven.
(4) Relations between Japan and North Korea
Japan has no diplomatic relations with North Korea. But private-level exchanges are under way in trade, economic, cultural and other areas.
Japan displayed a rigorous attitude toward North Korea for its alleged explosion of a ROK's jetliner on November 29, 1987 (see International Terrorism), by slapping sanctions against the country on January 26, 1988, to help prevent international terrorism. The sanctions included restrictions on personnel exchange.
Japan has persistently demanded an early release of the captain and chief engineer of a Japanese freighter No. 18 Fujisan Maru, who have been detained in North Korea since November 1983. But North Korea has returned no positive response to the Japanese call, leaving the issue the most knotty problem between the two countries.
(b) Detained Crewmen of No. 18 Fujisan Maru
North Korea captured two crewmen of the Japanese freighter No. 18 Fujisan Maru on spy charges in mid-November 1983 when the ship entered the port of Namp'o. Captain Isamu Beniko and chief engineer Yoshio Kuriura of the freighter, who have since been detained in North Korea for allegedly helping a North Korean soldier enter Japan illegally, were sentenced to the 15-year edificatory labor in the first trial in December 1987. The Japanese Government, with a firm belief in their innocence, has called for an early release of the two seamen and their return to Japan through the Japanese Red Cross Society and third countries. But unfortunately, Japan's strenuous efforts have not borne fruit. The government intends to take every step for an early solution of the issue, the largest problem pending between Japan and North Korea.
(c) Fishery Relations
An interim private Japan-North Korea fishery agreement on Japanese fishing in waters off North Korea expired at the end of 1986. But a similar agreement was reached on December 16, 1987, under which Japanese fishing boats have to pay fees to North Korea to fish there.
North Korea seized four Japanese fishing boats and their crewmen in 1987, but all of them were released later.
(d) Personnel Exchange
A total of 2,202 Japanese people visited North Korea in 1987 for commercial and goodwill exchanges and other purposes, while North Korean people who made visits to Japan for commercial, sports and other purposes totaled 403 that year. A total of 6,200 North Korean residents in Japan were allowed to visit North Korea with re-entry permits for reunions with their relatives, academic, cultural and sports exchanges, commercial, and other purposes.
Japan's trade with North Korea in 1987 increased 35.1% from the previous year to $455 million.
Japan and North Korea have continued negotiations on the pending bilateral problem of North Korea's debt to Japan, but they have only a dim prospect for a solution.
China has promoted reform and open policies since late 1978 and reaffirmed the basic stance to push forward these policies at the 13th National Congress of the Communist Party of China in autumn 1987 and the First Session of the 7th National People's Congress in spring 1988. It also conducted a major reshuffle at the top party and government echelons to select new national leaders who will be the support and driving force of China in the next five years. In diplomatic relations, China restored normal ties with East European nations.
(1) Internal and External Situation
(a) Domestic Politics
The Communist Party of China at the third plenary session of its 11th Central Committee in December 1978 formally adopted a resolution to achieve modernization as the party and the state's main activity policy. Following the decision, China has been taking concrete measures to promote various reforms and an open policy, specifically for economic construction.
(ii) Reforms and Opening
China has launched a campaign against bourgeois liberalization movements after the resignation of General Secretary Hu Yaobang in January 1987. However, deputy General Secretary Zhao Ziyang urged the notion at the "Spring Festival" meeting on January 29 and party's propaganda conference in mid-March that such anti-bourgeois liberalization campaign should be targeted at political principles and basic policy affairs of the party. He, thus, stressed that the campaign is not intended to be linked with economic and farm reforms and tried to calm down the antibourgeois movements. Such political stream became more decisive in Zhao's speech in mid-May which called for the importance of promoting economic construction through reform and open policy. After that, China resumed its basic policy of paying greater importance to reforms and convened the 13th party congress in October.
(iii) The 13th Party's Congress
At the 13th party's congress in October 1987, China reaffirmed further promotion of political reforms and opening program and formed a basic group leadership system headed by General Secretary Zhao (elected as General Secretary at the party's congress) and deputy Premier Li Peng under supervision of Chairman Deng Xiaoping. Moreover, the idea of "the primary stage of socialism" was proposed at the party's congress. It is hoped that the proposal for the idea of political system reforms would make more contributions to assure steady development of China's economic construction.
General Secretary Zhao in his report at the congress made overtures of his political theory that it would take at least a century for China to achieve basic modernization of socialism starting from the time of the 1950s when his country primarily accomplished socialistic reforms of the ownership system of production means. Zhao categorized in his theory this century the primary stage of socialism and it became an ideological base for the current political renovations and opening programs of China. His report, declaring China's strong desire to promote political system reforms, also specified the processes for political system reforms. The processes call for aiming at eliminating hindrances and selecting merits of the present political system in order to establish a social democratic politics featuring Chinese styles.
(iv) The First Session of the Seventh National People's Congress
The First Session of the Seventh National People's Congress, which opened in March 1988, elected new state leaders. The selection of the new leadership has become clearer that Chinese administration will take a stronger initiative for materializing the nation's modernization while taking various necessary steps for reform and open policy.
Following personnel changes at the 13th party's congress in the autumn of 1987, the National Congress confirmed a collective leadership headed by General Secretary Zhao and Premier Li Peng (inaugurated as Premier at the congress) supported by the authority of strongman Deng Xiaoping. Also adopted at the congress were several measures for political and economic reforms. They were among other things administrative reforms of State Council, partial revisions of the constitution, adoption of the corporate law and upgrading Hainan Island to province.
Each report of the National People's Congress in the spring of 1987 and the 13th party congress in the autumn of the same year touched upon only the basic diplomatic policy of China and no specific bilateral relations between Beijing and Tokyo were referred to. This was regarded that Beijing thinks it more important to make its utmost efforts for internal politics. In 1987, China, following the previous year's course, staged positive diplomatic activities. In particular, its summit diplomacy was conspicuous with Europe, above all, East European countries. China also succeeded in establishing formal diplomatic channels with two Latin American countries - Belize in February 1987 and Ecuador in February 1988. Thus, China has clinched official diplomatic routes with a total of 135 countries in the world.
(ii) Relations with the Soviet Union
There have been some prominent progress with the Soviet Union indicating Sino-Soviet relations are improving. One was the re-opening of their border negotiations which had been suspended since 1978 and another incident was that China's state-run political and economic weekly "Liaowang" (outlook) carried an interview with Soviet leader Mikhail Gorbachev in January 1988. However, China remained cautious over the Soviet Union's active diplomatic approaches and reiterated his political stance that Beijing does not agree to holding of summit talks proposed by Gorbachev unless Soviets persuade Vietnam to withdraw its troops from Cambodia.
(iii) Relations with the United States
China saw steady diplomatic relations with the United States in 1987 as a whole. Early in the year, U.S. State Secretary George Shultz paid a visit to China while Vice Chairman of the Central Military Commission Yang Shangkun visited the United States. Later in the year, China strongly criticized the U.S. Congress over turmoil in Tibet in China's southwestern autonomous area. The two countries experienced friction over China's weapon supplies to Iran and the deportation of Chinese diplomats from the United States. However, both sides have dealt with those problems cautiously so that they will not develop into major political issues which undermine their diplomatic ties.
(iv) Relations with North Korea
North Korea's president, Kim Il Sung, visited China for the first time in three years and North Korean Premier Li Gun-Mo also paid visits immediately after the China's 13th party congress in the autumn of 1987. But no Chinese top leaders responded to officials' visits from North Korea. In relation to the Republic of Korea, China declared in January 1988 its participation in the 1988 Seoul Olympic Games. China-ROK merchandise exchanges, including indirect trade, appeared to be expanding gradually.
(v) Relations with Europe
China also took active diplomacy toward European countries following the previous year's stance. Minister of Foreign Affairs Wu Xueqian paid visits to seven European countries and Vice General Secretary and Premier Zhao traveled to five East European nations. President Li Xiannian also made trips to seven Western countries. Government guests from Europe to China included General Secretary Janos Kadar of Hungary, President of State Council Todor Zhivkov and Czechoslovakia Premier Minister Lubomir Strougal. Top leaders' visits between China and East European nations between 1986 and 1987 normalized their relations, including party-to-party level ones, breaking through a long cooling-off period after a break in ties between China and the Soviet Union.
(c) Economic Situations (according to figures of the State Statistics Bureau and Official Financial Reports)
(i) China's economy expanded fast with its Gross National Product (GNP) topping one trillion yuan in 1987. Annual growth rate of the GNP compared with the previous year was a sharp 9.4%. The domestic market became more active and its huge trade deficits since 1985 shrank and the decrease in its foreign reserves showed a slower pace. However, domestic prices of retail goods, including perishable foods, began to soar, causing concern over inflation in China. Another problem is increasing operational losses of business corporations due to worsening economic efficiency.
(ii) China's GNP in 1987 reached one trillion and 92 billion yuan or $293.4 billion. Its per-capita GNP was $272. Of the total GNP, agricultural output accounted for 444.7 billion yuan, showing a 4.7% growth over the previous year. (Grain production amounted to 402.4 million tons or an increase of 10.9 million tons over the previous year.) Industrial output came to one trillion and 378 billion yuan, up 16.5%. (The output growth rate turned out 14.6% if the output value at farm village manufacturers are excluded.)
(iii) China's official financial revenue income was 236.8 billion and 90 million yuan compared with spendings of 244.8 billion and 49 million yuan, chalking up a deficit of 7.9 billion and 59 million yuan. The fixed asset investment, including 132.4 billion yuan for basic construction investment, totaled 226.2 billion yuan, up 12.6% over the previous year. After adjusting the inflation rate, the basic construction investment expansion was significantly held down.
(iv) The retail value of social commercial goods totaled 582 billion yuan, hopping by 17.6%. Retail goods' prices registered a 7.3% gain. Of such goods, meat, chicken and eggs increased 16.5% while vegetables jumped 17.7%.
(v) China's customs-clearance trade in 1987 totaled $82.7 billion, showing a 12% growth over 1986. Exports were $39.5 billion, up 27.8% while imports were $43.2 billion, up 0.7%. The annual trade balance came to $3.7 billion in deficits but the deficit amount fell sharply from a $12 billion deficit of the previous year, showing a great improvement in China's trade imbalance.
Its current account in the year is estimated to have produced a small amount of surplus as non-trade balance was in surplus by $3.39 billion. Its foreign capital introduction, including loans and direct investment from foreign countries, reached $7.57 billion, up 4.3%.
(vi) The living standard of Chinese people nominally stepped up as per-capita net incomes of a farmer increased by 9.2% over the previous year 463 yuan, or $124, and urban residents' disposable incomes grew 10.6% to 916 yuan or $246. However, their real income growth rates, eliminating the inflated price increases, turned out 5.3% and 1.7%, respectively. Moreover, 21% of urban residents suffered declines in their real incomes due to worsening inflation.
(vii) China's population at the end of 1987 came to 1.08 billion, scoring a natural increase of 1.439% over 1986 and continuing to grow since 1985.
(viii) In the aspects of economic reforms, China in 1987 continued to promote various corporate management responsibility systems in the sectors of agency services and leasing business following the previous year's policy aimed at expanding business corporation's management autonomy. The management responsibility systems were already adopted by 78% of major and medium-sized corporations at the end of 1987. Another trial in the economic reforms was introduction of stock system in the communist country. Those reforms and tests are changing China's business corporations to more independent commercial goods producers and the management. The factory-leader responsibility system has been promoted within corporations so as to enhance production norm and cost control. (The pending corporation laws for the People's ownership was taken up in the first conference of the Seventh National People's Congress). Labor management and profit distribution systems were also studied for economic reforms. China also succeeded in not only activating consumers' goods market but also feeding up producers' goods market and carried out reforms in the financial, labor, and real estate markets. Above all, the financial market reforms made substantial progresses leading to opening of call money markets in almost all provinces in China. At the end of 1987, the total issues of various debentures and shares aggregated to 64.6 billion yuan on the whole.
Another development in the year was reform for macroeconomic control. As a result, the range of the administrative economic programs were gradually cut. Instead, more guidance-style economic plans were introduced and economic activities reflecting the market supply-demand forces were expanding.
In calling for more foreign capital access to the Chinese economic market, noteworthy was the proposal (at the first conference of the Seventh National People's Congress) for the strategy for special economic development projects in coastal areas. This is designed to beef up a labor-concentrated industry using a big labor market in China's coastal areas on arrival of industrial structural adjustment time in international communities. The economic development strategy also calls for promoting raw material imports and products exports from the processing industry. It also aims at encouraging investment in China from foreign countries not only for accelerating the coastal areas' economic development but also for a nationwide economic growth. China is expected to take more opening actions for its economic construction.
(2) Relations with Japan
Japan and China activated exchange of leaders' visits in 1987, the 15th anniversary of the normalization of diplomatic relations. Chinese Vice Premier Tian Jiyun visited Japan in January and the fifth Japan-China Ministerial Conference was held in Beijing in June. Visits to China were also made by Health and Welfare Minister Juro Saito in April, Defense Agency Director-General Yuko Kurihara in May, chairman of the Komeito Junya Yano in June, chairman of the Democratic Socialist Party Saburo Tsukamoto in September and chairwoman of the Japan Socialist Party Takako Doi in November. Chinese visitors to Japan included Culture Minister Wang Meng in April Governor of the People's Bank of China Chen Muhua in April, Public Health Minister Chen Minzhang in June and Civil Affairs Minister Cui Naifu in June. Among them, Vice Premier Tian's visit in January drew special attention because it was made immediately after the resignation of Hu Yaobang as General Secretary of the Communist Party of China. Meeting with Prime Minister Yasuhiro Nakasone and Foreign Minister Tadashi Kuranari, Tian explained that Hu's resignation would not mean any change in China's basic policies, including relations with Japan.
The fifth Japan-China Ministerial Conference was attended by seven ministers from Japan, including Foreign Minister Kuranari. Chinese participants were eight ministers including Commissioner of State and Foreign Minister Wu Xueqian, Commissioner of State Gu Mu and two vice ministers. They made frank and fruitful discussions on stepped-up bilateral cooperation in each area.
A number of events were held both in Japan and China around September 29, 1987, celebrating the 15th anniversary of the normalization of diplomatic relations between Japan and China. Leaders of the two countries cabled congratulations to each other. The fourth meeting of the Japan-China Friendship Committee for the 21st Century took place in Beijing in November and December 1987. In this way, Japan and China developed basically sound relations in 1987. But on the other hand, the two neighboring nations were faced with thorny diplomatic issues. China criticized Japan's court ruling in February 1987 concerning the "Kokaryo" dormitory case. It also criticized Japan's non-fulfillment of export contracts in the aftermath of Toshiba Machine Co.'s illegal sales of strategically sensitive products to the Soviet Union in violation of the COCOM export control. It is unavoidable that various problems arise with the development of bilateral relations. But Japan and China share a common view that it is important to make efforts to prevent any adverse effect on the general development of friendship and cooperative relations. As one of the main pillars of its diplomatic policy, Japan attached great importance to a stable, long-term development of Sino-Japanese ties, paying due respect to the 1972 Joint Communique of Japan and China, the 1978 Treaty of Peace and Friendship as well as four principles for promoting Japan-China relations - peace and friendship, equality and reciprocity, mutual trust, and long-term stability.
(b) Economic Relations
(i) Two-way trade between Japan and China totaled about $15.65 billion in 1987, up 0.9% from the previous year. The trade imbalance improved markedly, with Japan's surplus shrinking from about $4.3 billion in 1986 to about $850 million in 1987.
(ii) Japan signed notes of exchange in June 1987 to extend up to \85 billion in loans to China under the fiscal 1987 budget. The loans were part of \470 billion of the second low-interest yen credit which Japan pledged to give China over seven years from 1984 to help finance seven projects involving railway, port and harbor, communications and hydroelectric power generation development.
Japan also decided to provide China with grant aids of up to \7 billion in fiscal 1987 for China's economic development projects, including those for "the second phase construction of a Japan-China Youth Center," "the second phase of improvement of the Water Purification Plant in Changchun city," "the second phase of improvement of equipment for Beijing's Vegetable Research Center" and "improvement of equipment for a balneotherapy hospital in Wulumuqi city."
(iii) In government-level technical assistance to China through the Japan International Cooperation Agency (JICA), Japan accepted Chinese trainees, dispatched specialists and provided equipment for a wide range of areas including transport, management and administration, agriculture and forestry, and health and medical services. A total of 11 projects in China are now subject to Japan's project-type technical assistance, including those for "the Japan-China Friendship Hospital" and "the Corporate Management Training Center." The number of people sent to China under the agreement on the dispatch of the Youth Overseas Cooperation Corps came to 27 as of March 1988. JICA is also cooperating with China in development surveys on a broad front on transport, regional development, agriculture and mineral resources development, plant modernization and other areas.
(c) Personnel and Cultural Exchange
(i) Personnel traffic between Japan and China rose above 490,000 in 1987, a stunning 54-fold increase in 15 years from about 9,000 in 1972 when diplomatic relations were normalized. Besides private-level exchanges, mutual government-level visits have become frequent, including visits of leading figures, foreign ministers' conference and other meetings of cabinet ministers.
Exchange between local governments like prefectures and cities have also become active. Since Kobe and Tianjin entered a sister-city affiliation in 1973, a total of 109 such affiliations, including those between Chinese provinces and Japanese prefectures, have been made by July 1988, the second largest number of Japan's sister-city affiliations with foreign countries, next only to those with the United States.
(ii) Bilateral cultural exchange has been smoothly developing on a government level under the Agreement signed in December 1979 as well as on a private and local government basis. Chinese Culture Minister Wang Meng visited Japan in April 1987 as a guest of the Foreign Ministry. Japan and China held the 4th Inter-Governmental Consultation on Sino-Japanese Cultural Exchange in September. The Japanese Government has promoted exchange of young people, accepted Chinese students, assisted China in Japanese language education and extended cultural grant aid accumulating to \708.5 million to China for 16 cultural projects. The Japan-China Friendship Center was completed in Tokyo in January 1988 as a comprehensive facility for personnel and cultural exchange between the two countries.
Unofficial Relations between Japan and Taiwan
(a) Taiwanese visitors to Japan in 1987 increased 20.1% from the previous year to about 360,000 people, while Japanese visitors to Taiwan totaled about 808,000, up 15.9%.
(b) Bilateral trade in 1986 swelled a sharp 47.3% from the previous year to $18,447 million and Japan's trade surplus with Taiwan came to $4,218 million, according to Japanese statistics.
(4) Hong Kong
(a) With the approach of Hong Kong's return to China in 1997, China has worked to draft the Basic Law regulating the Hong Kong Special Administrative Region at a drafting committee attached to the National People's Congress, and the Law is scheduled to be promulgated in 1990.
(b) Hong Kong's economy remained favorable due mainly to expanding exports stemming from a steep depreciation of the Hong Kong dollar pegged to the U.S. dollar. The healthy economy underlies the stability of Hong Kong now in a transitional stage. Hong Kong's economic relations with Japan is also on an expansionary path.
3. Southeast Asia
From 1987 to mid-1988, South East Asian countries displayed a variety of movements.
Among the ASEAN countries, the Philippines moved toward stability through the election victories of President Aquino's government and by putting down the activities of dissident elements in the military. Despite economic difficulties, the situation in Indonesia remaind stable with President Suharto winning his fifth term in office. In Malaysia, party election of the ruling United Malays National Organization (UMNO) produced a certain level of unsettlement within the party. Thanks to increased direct investment from overseas, Thailand made remarkable economic progress. Gen. Chatichai Choonhavan became prime minister as a result of the general election in July 1988, succeeding Gen. Prem Tinsulanonda, who had served eight years. In September 1987, Japan and Thailand celebrated the centennial anniversary of the Signing of the Declaration of Amity and Commerce as modern nations. Singapore spent the period in economic recovery and in the stable domestic political situation. Brunei also enjoyed stability.
ASEAN, which celebrated the 20th anniversary of its founding in 1987, held the first Meeting of ASEAN Heads of Government in the last 10 years and made steady progress toward intensified intra-regional cooperation.
By contrast, the Cambodian problem remained a cause of anxiety in Indochina. We witnessed various moves toward a political settlement of the intricate problem, but the parties concerned still have to overcome many obstacles to bring peace to war-torn Cambodia. (see Chapter II Section 1-2 Cambodian Problem)
Burma, which had apparently enjoyed a calm situation, saw its economic difficulties become more serious in 1988. The worsened economy fueled social unrest, plunging the country into turmoil.
(1) The Philippines
(a) The Philippines has mostly completed the establishment of its political system one of the major tasks for the Aquino Government since inauguration, through the promulgation of the new constitution in February 1987, the inauguration of a new Congress in July and the local election in January 1988. The Aquino government's landslide victory in the congressional election in May, together with the pro-Aquino partys' victory in the local election, can be regarded as factors contributing to the stability of the government.
The government showed a stern attitude toward the dissident elements in the Armed Forces of the Philippines (AFP) who took over the AFP General Headquarters on August 28, 1987. After overcoming the most serious crisis since inauguration, the Aquino Government shifted its policy toward the communist guerrillas from reconciliatory to one of all-out war, and began to take a line closer to the military than ever.
Regarding its relations with the United States, U.S. Commerce Secretary Malcolm Baldrige and Secretary of State George Shultz visited the Philippines in April and June 1987, respectively, and they promised brisker bilateral trade and enhanced economic assistance. The Philippines and the United States started negotiations in April 1988 to review the Military Based Agreement between the two countries.
In relations with the Soviet Union, Soviet Deputy Foreign Minister Igor Rogachev made a visit to Manila in March 1988 and the "Protocol on Consultations" was signed by both side.
The Philippines successfully hosted the ASEAN Summit Meeting in December 1987, participated also by Japanese Prime Minister Takeshita. The success of the meeting, which demonstrated the stability of the Philippines both domestically and internationally was the greatest diplomatic harvest for the Philippines in 1987.
The Philippine Government activated its diplomacy in 1988. President Aquino visited China and Switzerland in April, Italy and the Vatican City in June. The Philippines was visited by many leaders from various countries as well.
The Philippines registered economic growth of about 5.7% in real terms in 1987, the second consecutive positive annual growth. Although, agricultural production was sluggish because of a drought, other sectors such as construction, food, mining and manufacturing, and service industries achieved high growths, putting the nation's economic recovery on the right track.
On the other hand, in 1987, the country faced economic problems, notably the need for promoting agrarian reform and accumulative external debts. President Aquino signed a presidential decree and an executive order on agrarian reform on July 22. After congressional debates on the details of the reform, both chambers of the Congress approved the 1988 Agrarian Reform Bill on June 7, 1988, which President Aquino signed into law on June 10.
On the nation's accumulative external debts, the Paris Club of creditor nations, at its meeting in January 1987, agreed on the rescheduling of the repayment of official debts falling due between January 1 and June 30, 1988. In March, the Philippines agreed with a group of private banks to reschedule the payment of the debts falling due in 1987-92.
The Philippines has also sought enlarged financial assistance from Japan, the United States and international organizations including the IBRD.
(b) From the standpoint to support the Aquino Government, Japan and other countries have strived to extend effective assistance to the Philippines to bail the nation out of economic difficulties. Japan and the Philippines have promoted exchanges further both at government and private levels. Japan sent the comprehensive Economic Cooperation mission, a government-level mission led by former Foreign Minister Saburo Okita, to the Philippines in June 1987. Foreign Minister Tadashi Kuranari also visited the Philippines in the same month. Among other visitors to the Philippines were an investment promotion mission of the Federation of Economic Organizations (Keidanren) in July and the Japan-Philippines Parliamentarians' Friendship League mission in November.
In the context of the Japan-Philippine relations special attention should be paid to Prime Minister Takeshita's visit to the Philippines in December 1987 to attend the Japan-ASEAN Summit Meeting. The visit impressed the Philippine public with Japan's stance of supporting the Philippines' nation-building efforts.
It also contributed to promoting cooperative relations between the two countries. In April 1988, Philippine Foreign Secretary Raul Manglapus visited Japan and had lively discussions with governmental and business leaders.
(a) In 1987, the ruling GOLKAR Party won by a large majority the first parliamentary election since the "Pancasila" five national principles were adopted in 1985. With little religious and ideological controversy coming up, the election was fought in a fair and secure manner over implementation and improvement of the national development policies. The triumph of the GOLKAR gave President Suharto's administration strong confidence in the management of national politics.
On March 11, 1988, the People's Consultative Assembly unanimously re-elected President Suharto to his fifth consecutive term and elected former GOLKAR President Sudharmono as Vice President. The Assembly adopted a national doctrine stating the national policy principles for the next five years, including the fifth five-year national development plan starting in April 1989. Following this adoption of the doctrine, the fifth Development Cabinet was formed on March 23.
Rejuvenation of military leaders has been almost got over after the completion of military reorganization in 1986.
In view of its severe financial position, which stemmed from increasing burden of its external debt payment due to the dollar's steep depreciation and a fall of crude oil prices, the country has sought to obtain economic assistance and investment from Western countries, while promoting exports to those countries. To facilitate exports of non-oil and natural gas products, Indonesia has diversified its diplomacy by enhancing its economic and trade relations with the Soviet Union and East European countries.
In July 1987, Foreign Minister Mochtar Kusuma-atmadja visited Vietnam and held talks on the Cambodian problem and the informal meeting of the parties concerned on the issue (JIM) was held in Jakarta in July 1988.
Indonesia's economy showed a gradual trend of recovery in 1987, bolstered by rebounding crude oil prices, growing exports of non-oil and non-natural gas products and expansion of domestic and foreign investments.
However, sluggish crude oil prices and the burden of its foreign debt payment since around 1986 which is now about to peak amplified by the recent foreign exchange movements, have been putting extra pressure on the nation's budget and international balance of payments.
(b) Japan and Indonesia saw an active traffic of government leaders in 1987, which helped promote bilateral relations. Indonesian Foreign Minister Mochtar Kusuma-atmadja and Finance Minister Radius Prawiro visited Japan in the year. From Japan, Foreign Minister Sousuke Uno visited Indonesia in 1988 and the then Defense Agency Director General Tsutomu Kawara visited the country in June and July that year, the first incumbent Japanese defense chief to visit there.
Indonesia, faced with increasing burden of debt repayments to Japan, called for Japan's enhanced assistance through talks between Prime Minister Takeshita and President Suharto at the Japan-ASEAN Summit Meeting held in Manila in December 1987 and the visit to Japan by Widjojo Nitisastro, adviser to Indonesia, in January 1988, who came as a special envoy of President Suharto.
(a) Prime Minister Mahathir Mohamad secured his third term as president of the United Malays National Organization (UMNO) at the party election held in April 1987 by a narrow margin over the then Trade and Industry Minister Razaleigh Hamzah. The party election, however, triggered power struggles in the ruling party and introduced negative factors into the nation's political stability. In a court ruling in early February 1988 on the validity of the party election, the UMNO was found illegal under the Societies Act because it included some unregistered local branches. In the wake of the court ruling, tantamount to the denial of its existence, the party was reorganized into a new party, UMNO BARU on February 15 and started its reconstruction under the leadership of Prime Minister Mahathir.
The racial tension between the Malays and non-Malays, the biggest issue since the country's founding, mounted in October 1987, prompting the government to take countermeasures. To forestall possible riots and other disturbances, the government and the security authorities detained parliamentary members of both ruling and opposition parties as well as social activists between late October and mid-November in 1987 under the Internal Security Act.
Economically, Malaysia experienced economic recovery in 1987 due to rising prices of major primary products, expanding domestic demand and strong performance of the manufacturing sectors, and is expected to achieve a real GDP growth of 4.7%, according to an estimate by the nation's central bank. However, Malaysia's unemployment rate remained on the rise, standing at 9.1% in 1987.
(b) Japan accepted students from Malaysia for study at universities and technical colleges as well as industrial technical trainees and the first university students graduated in March 1988. This is part of Japan's support for a Malaysian program of the so-called Look East Policy, designed to breed talents through learning of the development and labor ethics in Japan and the Republic of Korea.
Singapore incurred a negative economic growth in 1985, the first such economic difficulties experienced since its independence. The government made every effort to get out of the difficulties, which resulted in achievement of a 8.8% growth in 1987. The economic recovery, coupled with a stable domestic political situation, gave a boost to the movements for the rejuvenation of leadership advocated by Prime Minister Lee Kuan Yew.
Foreign Minister Sousuke Uno visited Singapore in May 1988, followed by the visit in July by the then Defense Agency Director General Tsutomu Kawara, the first incumbent Japanese defense chief to visit there. Prime Minister Lee Kuan Yew made a visit to Japan also in July.
(a) The domestic politics of Thailand in 1987 moved calmly and stably partly due to a large celebration event for the King's sixtieth birthday in December. The government of Prime Minister Prem entered its ninth year in March 1988. The House of Representatives was dissolved in April 1988 in relation to a dispute over the management of the National Assembly. After the subsequent general election for the House seats in July, Prem declined to be reappointed and Chatichai, leader of the Chart Thai Party, which became the ruling party in the general election, assumed premiership.
Thailand posted an economic growth of an estimated 7.1% in 1987 thanks mainly to steady exports. Investment in Thailand remained favorable, with direct investment from abroad increasing sharply for the second consecutive year. Thailand's current balance of payments, which became the first surplus in 20 years in 1986, swung back into the red in 1987 because of a widening trade imbalance and recovery of domestic economy.
(b) Japan and Thailand held various events both at government and private levels in 1987 to celebrate the establishment of diplomatic relations as modern nations, the first centennial anniversary of friendly relations between Asian countries. On September 26, the two countries held commemorative ceremonies at the same time in each country. A ceremony in Japan was attended by Japanese Crown Prince Akihito, Princess Michiko and Thai Crown Prince Maha Vajiralongkorn who visited Japan as the government's guest. Thailand held another ceremony, with the participation of Japanese Prime Minister Nakasone, who made an official visit to the country, and Thai Prime Minister Prem.
As for bilateral economic relations, Japan and Thailand were in full activity in trade, investment, tourism and other areas in 1987. Particularly notable was a sharp increase of Japan's direct investment in Thailand under the yen appreciation. The value of the applications for project investment approved by the Board of Investment in 1987 is twofold the value of applications over the previous year.
The trade imbalance between the two countries has resumed expanding due mainly to economic recovery in Thailand.
In its diplomatic relations, which has centered on cooperation with the ASEAN nations, Thailand promoted the policy toward Indochina concentrating on the Cambodian problem. While keeping sound relations with the United States and China, Thailand also made efforts to expand its scope of diplomatic relations, for example, by Foreign Minister Siddhi Savetsila's visit to the Soviet Union in May 1987.
Because Thailand is a front-line state the Cambodian problem is the largest problem for the security of Thailand. Thailand has thus taken a rigorous attitude toward Vietnam, whose troops are stationed in Cambodia and confronting Thailand on the boder. Amid fresh movements toward a political settlement of the conflict, including talks between Cambodian resistance coalition leader Prince Norodom Sihanouk and Mr. Hun Sen (Prime Minister of the Heng Samrin regime), Thailand has to answer the problem of how to secure its own security in cooperation with other ASEAN countries.
Thailand has held diplomatic negotiations with Laos after the ceasefire in February 1988 to a battle over their claims to the border area, which broke out in December 1987.
(6) Association of Southeast Asian Nations (ASEAN)
(a) Regional Cooperation
The ASEAN countries have increasingly understood the need of stepped-up intra-regional cooperation to overcome economic problems, especially the decline of economic growth since the mid- 1980s. They held the third Meeting of ASEAN Heads of Government in Manila on December 14-15, 1987, and discussed the international politics and economy, the intra-regional cooperation and the structure of ASEAN. The meeting wound up with the adoption of the Manila Declaration and a press statement.
In politics, the countries stressed their intention to continue and enhance efforts toward a comprehensive political settlement of the Cambodian problem. They also agreed to strive for the realization of a concept to establish the Zone of Peace, Freedom and Neutrality in Southeast Asia.
As for the economy, they took specific steps for the promotion of intra-regional economic cooperation. To expand the intra-regional trade within ASEAN, member countries agreed to reduce the number of products which are not subject to the intra-regional preferential tariffs and to lower the trade volume of such products below 50% of the overall intra-regional trade. They also decided to expand the reduction rate of preferential tariffs applied to the products manufactured by ASEAN industrial joint ventures (AIJV) and increase capital share of the foreign companies investing in this region.
(b) Relations with Japan
Japanese Prime Minister Takeshita attended the Meeting of Heads of Government of Japan and ASEAN held in Manila in December 1987 in his first trip abroad since his inauguration as prime minister in November that year, and Japan's relations with ASEAN strengthened further.
In July 1988, Foreign Minister Uno attended the ASEAN Post-Ministerial Conference in Bangkok and exchanged views with foreign ministers of the ASEAN countries and their dialogue partners outside ASEAN on wide-ranging issues of internal and external affairs of ASEAN and international politics and economy. The Cambodian problem was high on the agenda at the conference.
At the Meeting of Heads of Government of Japan and ASEAN in December 1987, Prime Minister Takeshita proposed three programs as Japan's specific steps to positively support ASEAN. The first was the ASEAN-Japan Development Fund (AJDF), which will supply $2 billion or more in three years to promote private sector of ASEAN and promote further economic cooperation among the ASEAN countries. In the second place, Japan pledged efforts for a comprehensive political settlement of the Cambodian problem through its influence on the countries concerned and continuous support for ASEAN's peace initiative including political dialogue with Vietnam. The third step put forward by Takeshita was the Japan-ASEAN Comprehensive Exchange Program (JACEP), which aims at further promoting mutual exchange between Japan and ASEAN. This program is based on a proposal made by a large-scale Japanese mission sent to Southeast Asia in November 1987.
ASEAN gave high marks to these constructive proposals, expressing hopes, at the same time, that Japan will take even more positive measures in economic and cultural fields.
(a) As expressed in a speech by then Prime Minister Takeo Fukuda in Manila in 1977, Japan's basic foreign policy toward Indochina is to contribute to the peace and stability of Southeast Asia as a whole through cooperation to the ASEAN countries as well as efforts to establish and cherish healthy relations with Indochinese countries based on mutual understanding. But unfortunately, Japan's intention to attain these goals has been interfered with by the Vietnamese troops' invasion of Cambodia in late 1978 and their stationing there to date.
(b) Giving a priority to the rebuilding of its much aggravated economy, the present government of General Secretary Nguyen Van Linh, inaugurated in late 1986, has launched an economic reform program.
There was no major change in Vietnam's foreign policy, which centers on cooperation with the Soviet Union, the Council for Mutual Economic Assistance (Comecon) and three Indochinese countries. On the Cambodian problem, Vietnam remains persistent in the rule by the Hanoi-backed Heng Samrin regime despite its apparent positive stance of seeking an early political settlement.
(c) In view of the yet-to-be-settled Cambodian problem, Japan has no plan for the time being to resume cooperation for economic development to Vietnam. Taking into account Vietnam's importance and potential in Southeast Asia, however, Japan is poised to make preparations for the future developments of relations with Vietnam from a long-term perspective. Vietnamese Vice Foreign Minister Nguyen Dy Nien visited Japan in September 1987, to which Japan replied by the visits of senior officials of the Foreign Ministry. Japan intends to enhance such political dialogue on an annual basis.
(8) Indochinese Refugee Problem
(i) The problem of the Indochinese refugees got through a critical stage in 1979 immediately after the Vietnamese troops' invasion of Cambodia. But it still remains a grave issue which draws international attention, with boat people landing in Thailand increasing about threefold in 1987 compared with the numbers in the previous year.
(ii) The cumulative total of some 1.7 million Indochinese refugees have fled from their homeland since 1979, of which about 1.2 million were resettled in the United States, France, Canada, Australia and other countries. However, there are still about 140,000 refugees staying in Thailand and other Southeast Asian nations. In addition, some 290,000 Cambodian displaced persons, who fled into Thailand on several occasions such as the Vietnamese dry-season attack in late 1984 to early 1985, are under international protection on the Thai-Cambodian border also remaining an unstable factor in Southeast Asia.
(iii) In order to remove the root cause of the Indochinese refugee problem, it is necessary to reach a settlement of the Cambodian problem and the stabilization of three Indochinese countires. The resettlement in third countries has been implemented as an interim solution for the time being, however, the prolonged trend of the problem, coupled with domestic reasons in the recipient countries, caused various obstacles to the resettlement of the refugees in the West.
(b) Measures Taken by Japan
Since the mass Exodus of Indochinese refugees arose in 1979, Japan has been positively promoting assistance to refugees, including financial aid through international organizations, provision of first asylum as well as resettlement in Japan. Japan extended some $50 million as financial assistance to the refugees in fiscal 1987, bringing to about $600 million its accumulative financial aid since 1979.
As for the provision of first asylum, about 144 boat people landed in Japan in 1987. The cumulative total landed in Japan since 1979 exceeded 9,000 people.
On the other hand, Japan is continuing efforts to accept Indochinese refugees in Japan for resettlement. The number of such refugees, including boat people arriving in Japan and refugees received from refugee camps in Southeast Asia, reached 5,457 at the end of February 1988.
(a) The Burmese situation followed a stable course under the regime of U Ne Win, chairman of the ruling Burma Socialist Program Party (BSPP). But on the other hand, it has confronted economic difficulties, such as a substantial decrease of foreign currency earnings due to slack exports, exhaustion of foreign currency reserves, energy shortage resulting from a decline of oil production and increasing burden of external debt repayment under the yen's steep appreciation. The economic crisis triggered student riots around March 1988, boosting social unrest. Amid the hardship, extraordinary meetings of the ruling BSPP and the People's Assembly were held in late July, which decided on the retirement of U Ne Win, Vice Chairman and President U San Yu, and other top party and government leaders. The extraordinary sessions also announced economic improvement measures, including the expansion of the private sector's participation in industries. However, the newly inaugurated government of U Sein Lwin was forced to resign after only 12 days amid mounting protests by students and citizens calling for multiparty government system, and Burma plunged into further turmoil.
(b) Japan has positively extended economic cooperation to Burma, regarding it as a priority country in its overall cooperation program, along with the ASEAN nations, because Burma, a stable force in this region, plays an important role as buffer zone and maintains amicable relations with Japan. Mounting turbulence recently reported in Burma stems mostly from its aggravated economy and Burma badly needs relief measures for its cumulative external debts and assistance from overseas to help attain economic stability. As the largest financial supporter for Burma, Japan is widely expected to play a vital role to bring stability to Burma and should provide as much assistance as possible while closely watching the future developments of the internal situation in that country.
4. South Asia
We have recently observed several new factors in South Asia on top of the broadly recognized polarity between the group consisting of India and the Soviet Union versus the one consisting of Pakistan, the United States and China. These new factors included nuclear development in Pakistan questions associated with renewed U.S. assistance to Pakistan, progress in U.S.-India relations, including one in the military aspect, and movements toward settlement of the Afghan conflict. In addition, many observers often point out the tension between India and the rest of the countries in the region.
Countries in this established the South Asian Association for Regional Cooperation (SAARC) in December 1985, paving the way for intra-regional cooperation. The SAARC has been developing smoothly, as indicated, for example, by its third summit meeting held November 2-4, 1987, where two agreements were concluded, namely, ones on the prevention of terrorism and food stockpiling.
(2) Communal Problems in Sri Lanka
The communal conflicts between the radical element of the Tamils, the minority group and the majority Sinhalese in Sri Lanka is now under tentative control since India's Prime Minister Gandhi visited the country in July 1987 and reached a basic agreement with President Jaywardene on a political settlement. However, the Tamil radical group, the Liberation Tigers for Tamil Eelam (LTTE), resumed military activities in October and entered into an all-out conflict with the Indian Peace Keeping Forces (IPKF) stationed in accordance with the bilateral agreement. The IPKF has captured Jaffna, the LTTE's stronghold in northern Sri Lanka, in late October, but the LTTE has fled to the East and North to continue its resistance.
The governments of India and Sri Lanka are earnestly seeking a political settlement, but whether they will be able to find a solution that satisfies both the Tamils and the Sinhalese is yet to be seen.
(3) India-Pakistan Relations
India and Pakistan have a longstanding dispute over the title to the Kashmir area since their separation and independence. There also exist mutual skepticism and bitterness caused by such questions as those concerning U.S. military assistance to Pakistan and nuclear development by the two countries as well as three rounds of armed conflicts in 1947, 1965 and 1971. Bilateral relations have become further strained due to skirmishes in Kashmir and India's criticism against Pakistan's alleged support for terrorists in Punjab. On the other hand, the two countries have continued dialogue through vice ministers' meetings based on the agreement reached between Indian Prime Minister Gandhi and Pakistani Prime Minister Mohammad Khan Junejo at the SAARC summit meeting in November 1987.
(4) Domestic Politics of India
Prime Minsiter Rajiv Gandhi, who took office in late 1984, concluded the Punjab pact and Assam pact in his first year. However, these agreements met with various obstacles in their implementation, overshadowing the second year of the Gandhi regime. In 1987, the defeat of the Congress Party (I) in a State Assembly election led to the defection of some major cabinet ministers from the Gandhi government, and what is worse, the Prime Minister got involved in a bribery scandal over the procurement of defense equipment, which adversely affected the reputation of Gandhi himself. Moreover, the greatest drought in this century struck India in the middle of 1987, throwing the Gandhi government into the worst ever political predicament.
However, the absence of national leaders who can replace Gandhi both in the ruling party and the opposition camp, along with the predominance of the ruling party in the State Assemblies and his diplomatic initiatives (including the India-Sri Lanka agreement on communal conflict in Sri Lanka), seem to have helped the Gandhi government tide over the difficulties.
(5) Domestic Politics of Pakistan
The government of President Mohammad Zia ul-Haq, formed after a coup in July 1977, shifted itself to a civil administration in December 1985, by lifting martial law which had lasted eight and a hgalf years. Prime Minister Mohammad Kahn Junejo, who took office in April 1985 and was thought to be exercising stable political management was dismissed in late May 1988 on a sudden dissolution of the National Assembly (Lower House) by President Zia ul-Haq. The President inaugurated a provisional Cabinet and announced a general election on November 16.
President Zia, however, was killed in a plane crash an August 17. In accordance with the Constitution Ghulam Ishaq Khan, chairman of the Senate, became acting president and set up an emergency conference comprising federal and provincial government leaders as well as military leaders. Khan proclaimed a state of emergency across the nation and promised to hold a general election as scheduled. Much attention is paid to the question of whether or not the election will be held and if so what the outcome of the election will be.
(6) Relations with Japan
The traditionally friendly relationship between Japan and the South Asian nations have become consolidated further in fiscal 1987. Foreign Minister Kuranari toured India, Sri Lanka and Bangladesh in August of that year and conferred with the leaders of these countries. In his speech delivered in Dacca, Kuranari unveiled a three-pronged Japanese policy toward South Asia, promotion of political dialogue for the stability in Asia, promotion of exchange between peoples for the futherance of mutual understanding, and mutually beneficial cooperative relations. High-level exchange was realized, for example, when Pakistani Prime Minister Mohammad Khan Junejo visited Japan as the government's guest in July 1987, as well as the visit of Indian Prime Minister Rajiv Gandhi in April 1988, who attended the opening ceremony of the Festival of India of which events were held around Japan.
Japan's economic relations with the South Asian nations remain modest, compared with those with the Southeast Asian countries. Despite Japan's rapidly increasing direct investment abroad, investment in South Asia has been sluggish and the countries in this region have cherished strong hope for the investment from Japan. To meet their expectations, the Japanese Government sent a mission, headed by Kenichi Suematsu, vice president of the Mitsui Bank, to Pakistan and India in January 1988 to investigate the countries' investment climate.
As for cultural exchange, the Foreign Ministry held a Japan Month in major cities in India from October to November 1987 to demonstrate an extensive range of Japanese cultural forms, from traditional to modern, to the Indian people. Meanwhile, the Festival of India was held in various cities in Japan from April through October 1987 for a comprehensive presentation of Indian culture to the Japanese people. These events are expected to further invigorate friendship and goodwill between Japan and India.
The ruling Labor Parties won general elections to stay in power both in Australia and New Zealand in the middle of 1987. Economic attention has been riveted to how the two countries tackle problems originating from the economic structure which places chief dependence on the exports of primary products.
Burgeoning unrest in South Pacific island nations, notably a coup in Fiji in May 1987, the first such upheaval in this region, arrested the world's attention.
(2) Movements in Oceania
The current four-year-old Labor government headed by Prime Minister Robert Hawke has taken a realistic middle-of-the-road line, by promoting market-oriented economic policy amid a still severe economic climate. Prime Minister Hawke, took advantage of a confusion in the opposition parties to hold a general election in July 1987, and he won his third term.
The major problem facing the Hawke Government is a long-waited reconstruction of the Australian economy seriously damaged by world-wide sluggish market prices of primary products. Australia has steadily strived for a fundamental economic restructuring and improvement, by making its economy less dependent on the export of primary products, while strengthening the secondary and tertiary industries. The Australian economy began recovering in fiscal 1986-87, thanks to a tighter fiscal policy, various measures to promote adjustment of industrial structures including privatization of public corporations, efforts to promote exports and deregulation of foreign investment in Australia. In a bid to redress speculative and overheating investment in Australian real estate, however, the country reinforced regulations on foreign acquisition of real estate in the developed urban areas in September 1987.
As a member of the Western bloc, the Hawke Government has developed diplomatic policies which place emphasis on relations with the United States through the ANZUS Treaty, those with the largest trade partner Japan, as well as with countries in East Asia and the Pacific, including the ASEAN countries. In this way, Australia basically held on to the past diplomatic policy, while deepening interest in the South Pacific island nations as their neighbor.
Australia has maintained unwavering ties with the United States in political and strategic fields, despite disagreements in agricultural trade. Its relations with France, which were temporarily marred with a dispute over New Caledonia and other problems are showing signs of improvement.
Relations with the Soviet Union also showed progress, demonstrated by Prime Minister Hawke's visit to Moscow in November and December 1987, during which he signed bilateral agreements on trade and the use of outer space.
(b) New Zealand
Since inauguration in July 1984, the Labor Government, headed by Prime Minister David Lange, has promoted economic rebuilding from a medium- and long-term perspective. It actively carried out various reforms under its marked-oriented economic policy, including deregulation, and administrative and fiscal reforms. At the general election held in August 1987 amid the continuing recession, the Lange Government made an appeal for the confidence of the whole nation on its policies described above. The election ended in a victory of the ruling party over the opposition New Zealand National Party, bringing to the Labor Party a second consecutive term, the first successive terms in office in about 40 years for the party.
The diplomatic policy of the Lange Government remained unchanged, including its stance toward ANZUS. It continues to place emphasis on relations with the Asia-Pacific region, while giving a high priority to the economic and trade relations.
(3) Relations with Japan
(a) Japan's relations with Australia, centering on complementary trade have made steady progress to become closer in all areas of trade, investment, tourism, science and technology, and cultural and personnel exchanges. The two countries have maintained frequent contacts between government leaders. Prime Minister Takeshita visited Australia in July 1988 when the country celebrated the bicentennial of the European settlement. He exchanged views with Australian Prime Minister Robert Hawke on cooperation on the diversification of bilateral relations, regional problems and international economic issues. Major visitors from Australia were Prime Minister Hawke in December 1987, Deputy Prime Minister Lionel Bowen in February 1988 and Foreign Minister William Hayden in April 1988. The two countries have also strengthened political cooperation on the South Pacific island nations.
In economic relations, bilateral consultations in many economic fields have made progress. Japan and Australia settled a dispute over Japan's import regime for beef, the largest problem pending between them, in June 1988, and an Australian Tourism and Investment mission headed by Arts, Sport, the Environment, Tourism and Territories Minister John Brown came to Japan in November 1987.
For Australia's bicentennial in 1988, Japan positively participated in related events and offered cooperation. For instance, Japan participated in an international exposition in Brisbane and cooperated for the construction of the National Science and Technology Center.
(b) South Pacific island nations have been seeking to strengthen their relations with Japan, including economic and technical cooperation, amid an unstable internal situation and waning influence of their former suzerains such as the United Kingdom, Australia and New Zealand. Japan has responded positively to the call and relations between Japan and the island countries have rapidly become close.
Following up Foreign Minister Kuranari's speech delivered in Suva, Fiji, in January 1987, Japan has strived for the expansion of economic cooperation to this region and increased personnel exchange.
To establish a framework for dialogue with the South Pacific Forum (SPF), a pivotal organization for regional cooperation in the South Pacific, Japan introduced a program to invite the chairman of the SPF to Japan every year. Based on the program, the chairman of SPF, Vaai Colone, who was also Prime Minister of Western Samoa, visited Japan in August 1987 and had talks with then Prime Minister Nakasone and Foreign Minister Kuranari.
Fijian Prime Minister Kamisese Mara conferred with Prime Minister Takeshita during his visit to Japan in February 1988, which brought relations between Japan and Fiji closer again, after a temporary stalemate in relations, following the coup in Fjji.
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