Chapter III. Regional Situations and Relations with Japan


Section 1. Asia-Pacific


1. The Region in General


Following the abortive coup d'etat by conservatives in the Soviet Union in August 1991, the Communist system collapsed. At the end of 1991 the Soviet Union itself disintegrated. This brought the complete end of the East-West Cold War. Some moves conducive to the relation of tension are appearing in the Asia-Pacific region influenced by the end of the Cold War. For example, a comprehensive peace agreement was reached in October 1991 on the Cambodian conflict, which had long been the biggest destabilizing factor in Southeast Asia. Preparations are being made by the United Nations Transitional Authority in Cambodia (UNTAC) to hold an election of the Constitutional Assembly in May 1993. In November 1992, relations between China and Vietnam, which h ad already shown moves toward improvement, were normalized. Some progress was also made on the Korean Peninsula, such as the simultaneous admission of the two Koreas to the United Nations in September 1991, and the adoption of the "Agreement on Reconciliation, Non-aggression, Exchanges and Cooperation between the South and the North" (the Basic South-North Agreement) and the "Joint Declaration for Denuclearization on the Korean Peninsula" at the 6th South-North Prime Ministerial Meeting in February 1992. Further progress in Russo-ROK relations since the establishment of their diplomatic relations in September 1990 and the establishment of diplomatic relations between the Republic of Korea and China in August 1992 also deserve attention. Efforts toward democracy and market economies are being continued in Mongolia, Nepal and Bangladesh.

The Asia-Pacific region, centering on the Association of Southeast Asian Nations (ASEAN) member countries, the Newly Industrializing Economies (NIEs) and the coastal areas of China, continues to achieve steady economic growth, and forms the world's most dynamic economic region. Stable economic growth is improving the livelihood of the peoples of the region, thereby enhancing the political and social resilience of the countries and economic entities within. This growth is contributing to the stability of the entire region, together with the growing regional interdependence resulting from economic interaction.

On the other hand, unresolved problems remain, such as the Northern Territories Issue, the Korean Peninsula and the problem of the South China Sea. Suspicions over North Korean development of nuclear weapons constitute a grave concern to the security of this region. Furthermore, the Russian armed forces in the region maintain a massive combat capability, including its stockpile of nuclear weapons. Coupled with their uncertain future, these Russian forces remain a destabilizing factor to the security of this region. (For details, see Chapter 2, Section 1, 1)

Unlike in Europe, the Russian pledge to conduct foreign policy based on "law and justice" has regrettably yet to produce concrete results in the Asia-Pacific region. It is very important for the future of this region to resolve the Northern Territories Issue and conclude the peace treaty in order to normalize Japan-Russia relations. With such normalized relations, it will be possible for Russia to become a constructive partner in the Asia-Pacific region and to play a positive role in the peace and stability of this region.

In contrast to the economically dynamic regions mentioned above, there are still many developing countries in this region which suffer from poverty. In light of historically as well as geographically and politically close relations, the Government of Japan has given the region priority in providing Official Development Assistance (ODA). In recent years, 50-60 percent of Japan's bilateral ODA has been extended to countries of this region. Further, in promoting economic prosperity, the importance of the Asia Pacific Economic Cooperation (APEC), a forum for multilateral cooperation, has increased. APEC aims for "regional cooperation open to other regions." Japan has been a full and active participant since APEC's inception.


2. The Korean Peninsula


2-1. Overview


With the end of the Cold War, some progress toward the relaxation of tensions has also been achieved on the Korean Peninsula where the South and the North had severely confronted each other. This progress was particularly encouraged by simultaneous admission of the two Koreas to the United Nations, meetings of the South-North Prime Ministerial Talks and the adoption of the Basic South-North Agreement at one of these meetings. Japan welcomes these developments and makes a contribution to the creation of a favorable environment by urging North Korea to further engage in the process of dialogue. However, it is still early to say that a detente on the Korean Peninsula is firmly settled in view of the cancellation of the 9th Prime Ministerial Talks scheduled for December 1992 as well as the still suspected development of nuclear weapons by North Korea.

Japan has been keeping friendly relationship with the Republic of Korea, while having normalization talks with North Korea since January 1991.

Japan's basic policy toward this peninsula is to strengthen its amicable ties with the Republic of Korea which shares the fundamental values, such as freedom, democracy and the market economy. From this viewpoint, Japan has been endeavoring to settle some remaining issues with the Republic of Korea and to promote mutual understanding between the two peoples. In January 1992, Prime Minister Kiichi Miyazawa officially visited the Republic of Korea as his first foreign visit after assuming office. During this visit, two summit meetings were held, and he delivered a speech in the ROK Parliament for the first time as a Prime Minister of Japan. He also visited the old capital, Kyong-Ju. Convinced that the leaders of the two countries should frequently meet without fanfare and without protocol and have closer communications, President Roh Tae Woo unofficially visited Japan in November 1992. The two leaders frankly exchanged views on various subjects, such as the evolving Northeast Asian situation, the global issues and future Japan-ROK bilateral relations.

On the other hand, Japan has held eight rounds of the normalization talks with North Korea. While the mutual positions have become clearer, no major progress has been seen yet, Japan participates in this negotiation with North Korea on the full understanding that the normalization of Japan-North Korea relations have two aspects: the bilateral aspect being to rectify the anomalous relations in the post-World War II; and the international aspect being to contribute to peace and stability on the Korean Peninsula. However, during the 8th round of the talks in November 1992, North Korea, in violation of the prior agreement, unilaterally terminated the working-level consultation concerning the Lee Un-he problem. The two-day meeting ended with holding only the morning plenary session on the first day. No dates have been fixed for the next round of talks.


2-2. The Korean Peninsula Situation


(1) South-North Korean Relations

The Republic of Korea and North Korea have held South-North Prime Ministerial Talks since September 1990. Having joined the United Nations simultaneously in September 1991, the two parties signed the "Agreement on Reconciliation, Non-aggression, and Exchanges and Cooperation between the South and North" (the Basic Agreement) at the 5th Prime Ministerial Talks in December 1991. This agreement, after completing their respective domestic procedures, came into effect at the 6th Prime Ministerial Talks of February 1992. This agreement, which is comprehensive and forward-looking, contains clauses of mutual respect of each other's systems, non-use of force, efforts in converting the present cease-fire to genuine peace, and the promotion of human and economic exchanges as well as mutual cooperation. The signature of this agreement was an epoch-making step toward the improvement of South-North Korean relations as well as peace and stability in the Korean Peninsula.

In September 1992, the annexes to the agreement were adopted in the 8th Prime Ministerial meeting. The first meetings of the joint committees, which were to become implementing agencies for the agreed items were scheduled in November. But North Korea took up the issue of the U.S.-ROK military maneuvers insisting that discussions could not take place in such a situation. Consequently, meetings of the joint committees and the 9th Prime Ministerial Talks scheduled for December were canceled.

As the South-North dialogue is essentially a matter for the parties involved, the role of Japan is more or less limited. Nevertheless, hoping earnestly for the peaceful unification of the Korean Peninsula, Japan makes its efforts to create an environment conducive to a dialogue between South and North, for example by urging the North to further engage in the process of South-North dialogue through the Japan-North Korea normalization talks.


(2) "Nordpolitik" of the Republic of Korea

The ROK and China fought each other during the Korean War and had no diplomatic links throughout the Cold War era. Against the backdrop of the reduction of tensions in the Korean Peninsula, these two countries established diplomatic relations in August 1992 and President Roh Tae Woo visited China in September. One can view this normalization as the ROK's finalization of the "Nordpolitik" which it had actively pursued to improve relations with the Socialist nations. It also seems that China believed that the rapprochement would contribute to the progress of its reform and openness policies. It is hoped that the establishment of diplomatic relations between the ROK and China which symbolizes the changes of the situation on the Korean Peninsula will contribute not only to the ROK and China, but also to the peace, stability and prosperity of the whole East Asia.

The ROK also established diplomatic relations with the then Soviet Union in September 1990. In November 1992, President Boris Yeltsin visited the ROK and signed the Russo-ROK Basic Relations Treaty.


(3) Problem of North Korea's Nuclear Development

North Korea acceded to the Nuclear Non-proliferation Treaty in 1985. However, it had postponed the conclusion of the full scope Safeguards Agreement with the International Atomic Energy Agency (IAEA), an obligation under the Treaty, for many years by insisting that its conclusion would be realized under such conditions as the withdrawal of "nuclear  weapons of U.S. forces in Korea" (Note) and the simultaneous inspection of the North and South. Since North Korea was suspected of constructing a large-scale nuclear reactor and a reprocessing facility, international concern grew over the North Korean development of nuclear weapons.

Thereafter, a series of constructive measures were taken by the United States and the ROK, such as the nuclear disarmament initiative announced by President George Bush in September 1991 and the declaration by President Roh Tae Woo in December of the absence of nuclear weapons in the ROK. Against such a background, the South and North agreed at the end of December 1991 on the "Joint Declaration for Denuclearization on the Korean Peninsula." The contents of this declaration include the abandonment of the reprocessing and uranium enrichment facility as well as the implementation of mutual inspections by the South and North. Consequently, North Korea concluded the IAEA Safeguards Agreement in April 1992. ThisAgreement came into effect on the date of the conclusion, and IAEA implemented five special inspections during 1992 based on the initial report submitted by North Korea. Mr. Hans Blix, IAEA Director-General visited North Korea in May and inspected nuclear and other facilities in Nyongbyon.

As such, some progress has been made recently on the issue of North Korean nuclear weapons development. Yet, concern still remains. The visit of the IAEA Director-General spotlighted some facts which rather reinforced suspicions over North Korea's nuclear weapons development. These facts are, among others, that North Korea is building a large-scale plant which can be termed as, if completed, a reprocessing facility in Nyongbyon, and it has already succeeded in extracting a tiny amount of plutonium in this facility. As for the question of mutual inspections based on the "Joint Declaration for Denuclearization on the Korean Peninsula," consultation between the South and North was deadlocked over the coverage and methods of the inspection and, as of now, there is no prospect of actual implementation of the inspection.

The issue of North Korean development of nuclear weapons is a matter of grave concern for the security of Japan and the international community. Japan, in close cooperation with countries concerned such as the United States and the ROK, has urged North Korea to abide by the Safeguards Agreement immediately, unconditionally and completely, and to implement the "North-South Joint Declaration for Denuclearization on the Korean Peninsula," through which the concern of the international community could be cleared up. In the Japan-North Korea normalization talks, Japan has repeatedly emphasized that the normalization of diplomatic relations would be difficult unless these issues are resolved.


2-3. The Republic of Korea


(1) Political and Economic Situation

Domestic politics of the ROK is by and large stable, although the ruling Democratic Liberal Party, which had been created by the integration of three parties, was defeated in the March 1992 parliamentary election, losing its majority by one seat. Parliamentary deliberations were suspended for a long time, due to confrontation between the ruling and opposition parties over the implementation of the head of local authority elections. At the end of August 1992, a county official revealed that some policemen had intervened illegally in the parliamentary election campaign. This led to increased public demand for a fair presidential election. In response, President Roh Tae Woo left the Democratic Liberal Party and reshuffled his cabinet in October to form a neutral administration to oversee the election. Mr. Kim Young Sam of the Democratic Liberal Party, Kim Dae Jung of the Democratic Party, Mr. Chung Ju Yung of the Unification National Party and four other candidates ran for the presidential election, which was held in December 1992. Mr. Kim Young Sam was elected President by a landslide victory, defeating his foremost rival, Mr. Kim Dae Jung by a large margin.

The ROK economy, sustained by growth in domestic demand, maintained 8.4 percent growth in 1991, although exports fell since 1989 due to such factors as the decline in the international competitiveness of Korean products. On the other hand, the trade balance deteriorated and the ROK recorded a deficit of $9,650 million on a customs clearance basis. Inflation also accelerated with the rise of consumer prices by 9.3 percent. In 1992, the slowdown of the economy became conspicuous due to declining consumption and investment. As a result, the economic growth rate declined to 4.9 percent. Consequently the trade balance is improving (a deficit of $4,920 million) and inflation is beginning to subside (a consumer price increase of 4.5 percent).

The ROK's trade with Japan recorded a deficit of $ 7,730 million in 1991, which was the largest in history. From January to September 1992, the deficit was $4,850 million, slightly lower than the $5,820 million in the same period of the previous year (both according to Japanese statistics on a customs clearance basis).


(2) Relations with Japan

When Prime Minister Kiichi Miyazawa visited the ROK in January 1992, he and President Roh Tae Woo agreed that the two countries should establish future-oriented relationships from a broader perspective. The leaders discussed in depth both international affairs and the situation on the Korean Peninsula and reaffirmed their shared views on many respects. Prime Minister Miyazawa's policy speech delivered in the Korean Parliament entitled "Japan-Korea Relations in Asia and in the World" appealed broadly to Korean public opinion, elucidating on how the new Japan-ROK relations should be in an evolving international situation.

President Roh Tae Woo came to Japan in November 1992 on an unofficial one-day visit to Kyoto. It was epoch-making that the leaders of the two countries exchanged views frankly without constraints by protocol. This exchange of views covered the international situation and possible Japan-ROK cooperation in the international community. Such cooperation in international fora is an important step for establishing the future-oriented relationship between the two neighboring countries.

To develop friendship between the two countries and the future-oriented relations, it is essential that the two peoples understand and trust each other as well as recognize the importance of Japan-Korea relations. From such perspective, "Japan-Korea 21st Century Faithful Exchange Program" is implemented to promote youth exchanges, communication between municipalities and introduction of cultures of the two countries.

As a bilateral issue between Japan and the ROK, the issue of "comfort women" attracted public attention, when Korean former" comfort women" sued the Japanese Government in December 1991 for apologies and compensation. The Government of Japan, through the statement of then Chief Cabinet Secretary Koichi Kato in January 1992, recognized that some involvements of former Japanese military forces in this problem could not be denied, and expressed sincere apology and remorse to all these who underwent indescribable pain and suffering as comfort women. In the meeting with President Roh Tae Woo of the same month, Prime Minister Kiichi Miyazawa again expressed his apology and remorse. The Government then announced the result of a study made by ministries and agencies concerned in July, in which then Chief Cabinet Secretary Kato confirmed that there was Japanese Government involvement in this matter, and stated that "We would like to consider how best we can express our feelings."

Against the background of ROK's expanding trade deficit with Japan and rising expectations for technology transfers, the ROK placed the highest priority on cooperation in trade, industry and technology at the meeting with Prime Minister Miyazawa of January 1992. The two leaders agreed that an "Action Plan" should be formulated by the end of June of the same year. It is not easy to improve the trade imbalance between the two countries in a short period of time, against such a background as the ROK's industrial and trade structures. However, given the importance of economic relations between the two countries, and convinced that the problem should be approached with the aim of achieving equilibrium by expanding trade, the two governments finalized the plan in the end of June. It includes such measures as the establishment of foundations to promote industrial and technology cooperation, the establishment of Japan-Korea businessmen's forum, improvement in the Korean environment for investment and technology transfers and improvement in the treatment of Japanese trading firms in Korea.

On fishery relations, as voluntary restraints since January 1988 expired at the end of 1991, Japan and the ROK held consultations for their fishery relations after 1992. In the consultations, Japan pro-posed a review of the framework to deal with the changing international fisheries environment and illegal operations of ROK's boats. Discussions were difficult because of strong ROK's opposition to the Japanese proposal, but eventually both sides agreed to reinforce the ongoing voluntary restraints. As fishing by ROK's vessels around the Northern Territories was made possible by the Russo-Korean Fishery Agreement, it became an issue between Japan and ROK atone juncture. However, prospects for a satisfactory solution, in which the ROK will refrain from fishing around the Northern Territories, have emerged from talks between the two governments.

As for the territorial dispute over Takeshima Islets between Japan and the ROK, it is clear on both historical and legal grounds that the islets are a part of Japanese territory. From this standpoint, Japan has made protests against the ROK whenever necessary.


2-4. North Korea


(1) Political and Economic Situation

Despite his advanced age of 80 years, President Kim II Sung seems to be very active and frequently meets with foreign visitors. There were some moves to further solidify the succession of the leadership by his eldest son, Secretary Kim Jong II, including the appointment of the son to be Commander-in-Chief of the People's Army at the end of 1991 and to Field Marshal in April 1992.

It seems that North Korea takes very seriously recent international developments, such as democratization and reforms in the countries of the former Soviet Union and in Central and Eastern European countries as well as the establishment of diplomatic relations by the Republic of Korea with these countries and with China. Moreover, the North Korean economy appears to be in extreme difficulties. Under these circumstances, various efforts were made to strengthen the present North Korean regime. For instance, Secretary Kim Jung Il announced a thesis entitled "On the Fundamental Problem of the Construction of the Revolutionary Party." This thesis stressed the importance of the Party's leading role to maintain socialism, drawing on the breakdown of other socialist regimes. This is a part of the regime consolidation efforts of North Korea.

In external affairs, there were several developments including the simultaneous admission of the two Koreas to the United Nations; certain progress in the South-North dialogue such as the adoption of the Basic South-North Agreement, and some attempts toward improved relations with Western countries and expanded foreign investment. However, North Korea's relations with Western countries are not improving largely because the problem of North Korea's nuclear weapons development remains unsettled.


(2) Relations with Japan

The negotiations to normalize diplomatic relations between Japan and North Korea are taking place with the four agenda items: 1) the basic problems, 2) the economic problems, 3) the international problems and 4) other problems of common interests. Under agenda 1),issues including the validity of historic treaties between Japan and Korea and North Korea's jurisdiction are discussed. Through the talks to date, the positions of both sides have become clearer, but the arguments of the two sides still remain apart. On agenda 2), Japan insists that the economic problem between Japan and North Korea be dealt with as an issue of property and claims, since North Korea was separated and became independent of Japan after 36 years of Japanese colonial rule. North Korea insists that the economic problem is not merely an issue of the property and claims, but also an issue of war reparations because Japan and Korea were at war. In agenda 3), Japan calls for progress in the South-North dialogue and a solution of the problem of North Korea's nuclear weapons development. North Korea argues that fairness and innocence of its nuclear policy has been proved by the inspections of the International Atomic Energy Agency (IAEA). It also insists that Japan takes up this subject because it intends to find an excuse to become a military power and to go nuclear, by stirring up international "suspicion" on North Korea's nuclear development. As for agenda 4), issues of Japanese citizens married to North Koreans and the Korean residents in Japan are discussed. As for the former issue, Japan is vigorously pressing North Korea to allow these Japanese citizens to be reunited with their family in Japan immediately, but North Korea has not yet complied.

Kim Hyon-hui, the criminal responsible for the bombing of a Korean Air aircraft, claimed that a woman named Lee Un-he was her Japanese language teacher in North Korea. Based on police authorities' beliefs that there is a strong possibility of Lee Un-be being a missing Japanese woman, the Government of Japan has been asking since the third round of the normalization talks with North Korea about her whereabouts, with a view to protecting a Japanese national. Since the 4th round of the talks, this problem has been discussed in working level consultations. In the 8th round of talks in November 1992, however, North Korea suspended the working level consultation unilaterally, arguing that North Korea had nothing to do with this problem and that it was not obligated to listen to the Japanese request any more. It did not respond to the repeated requests of the Japanese side to resume the consultation. The two-day meeting therefore ended without holding the rest of the plenary session.


3. China and Mongolia


3-1. China


(1) Domestic Affairs

The dissolution of the Soviet Communist Party and the dramatic changes in the former Soviet Union and Central and Eastern Europe have shocked the Chinese leadership, and contributed to their strong sense of crisis about the future of socialist systems.

It was against the background of this sense of crisis that former Chairman of the State Central Military Commission Deng Xiaoping, visited the southern coastal regions at the beginning of 1992 to deliver a lecture seeking expanded and accelerated reform and openness policies. In response, the Chinese leadership is embarking on even more drastic reforms and open-door policies. The gist of Deng's lecture was as follows: first, China's long-term policies should be centered strictly on economic reconstruction; second, China should boldly expand and accelerate the reform and openness policies as flexibly as possible; and third, it should appoint young and capable people to responsible positions. These were presented as the guiding theory of the Chinese Communist Party. Since around April 1992, the country has moved to the next phase of giving shape to the theory, such as formulating a new omnidirectional open-door system, reorganizing the government sector and transferring autonomous rights to regions and enterprises.

Under these circumstances, the 14th Congress of the Chinese Communist Party was held in October 1992. Against the background of the changing international climate, such as the end of the Cold War, attention was focused on how China's domestic and external policies would be elaborated as the only major socialist country in the world. At the Congress, it was made clear that the aim of Chinese solicialism was to increase its economic strength in line with the above-mentioned lecture. On the political front, emphasis was placed on maintaining the Communist leadership intact well into the future with generational changes in consideration. This centered on the reappointment of Mr. Jiang Zemin as General Secretary. Emphasis was also placed on building leadership which ensures reform and openness policies as well as political stability. As to political reforms, a cautions stance was maintained, limiting them to administrative reform required for the economic reform.

In the economic field, the tight monetary policy pursued since 1988 ended at the end of 1991 as it bad been successful in controlling inflation and restoring demand-supply balance. Accordingly, the policy of promoting external openness and reform was announced again. In particular, this move was further accelerated after the important lecture delivered by the former Chairman of the State Central Military Commission, Deng Xiaoping, in his visit to the southern coastal regions at the beginng of 1992. At the 14th Party Congress, a new guideline was announced in which China's economic system will be "the socialist market economy." As a result, the trend in introducing the market economy has been accelerated.

In addition, since 1991, the 8th National Economic and Social Development Five-year Plan and the 10-year Plan have been introduced. China's economic growth has accelerated toward its goal of quadrupling its GNP figures of 1980 by the year 2000. For instance, real GNP growth rate in 1991 was 7.3 percent but rose to 10 percent during the period of January to September of 1992. For the Chinese economy, it is necessary in the short-term to check the growth rate to prevent the economy from overheating and rekindling inflation. At the same time, there is the long-term need to improve the efficiency of government corporations, one third of which are reported to be losing money, by expanding the market economy; and to establish a system for macro-economic management as well as improving standards of education and training. It is also important to continue to strengthen basic industries such as agriculture, energy, raw materials and transportation along with population control.

The share of the external economy to the national economy continues to expand. For example, the ratio of trade to GNP rose from 9.9 percent in 1978 to 36.9 percent in 1991. Exports by companies of foreign investors account for 16.7 percent of total exports. To strengthen the links with the international economy, measures were taken in 1992 to establish special development zones, in addition to those already opened in the coastal areas, Yangzi Jiang (Yangtse) basin, the border area and inland areas. With a view to acceding to the General Agreement on Tariffs and Trade (GATT), the following institutional reforms in trade are underway: elimination of export subsidies, reduction of items under import/export control, abolition of the import tax and tariff reductions. At present, China's international balance of payments is sound, with a surplus of about $14.1 billion in 1991. Total outstanding external debts at the end of 1991 were approximately $60.6 billion, an increase of $8 billion from the previous year, yet its debt service ratio (Note) is at a low level of 8 percent.


(2) Foreign Affairs

China needs domestic stability to promote the reform and openness policies. It needs external stability to enable promotion of these policies. From this point of view, it has placed emphasis on improving relations with its neighbors. At the same time, China has at-tempted to strengthen its links with the countries of the former Soviet Union and with developing countries as part of its efforts to play a leading role in shaping a new international order in the face of drastic changes in the international arena, such as the end of the Cold War and the collapse of the Soviet Union. In addition to these diplomatic efforts, in response to the international changes, China has also tried to improve relations with the United States and Western European countries. It has been the major task of its foreign policy after the June 4th incident, and some progress has been made.

In Asia, it should be noted that China improved or normalized relations with India and Vietnam, with which it tended to be confronted in the past. As regards India, exchanges of visits by the respective top leaders were made. As for Vietnam, oil exploration by China near Vietnamese waters and the Chinese military landing on a reef of the Spratly Islands intensified tensions even after normalization. However, some progress was made, with Prime Minister Li Peng's visit to Vietnam in December 1992, such as confirmation on the peaceful settlement of the territorial issue and progress in administrative matters. In August 1992, as a finishing step in the series of improving bilateral relations with Asian countries, China established diplomatic relations with the Republic of Korea. In September 1991, China established diplomatic relations with Brunei, enabling China to have diplomatic relations with all ASEAN members. China also participated as an observer in the ASEAN Foreign Ministerial Conference. While the Chinese move in the Spratly Islands heightened the wariness of its neighbors, which also claim the sovereignty of the islands, dialogue among the countries concerned is being sought. In economic matters, China has expressed its interest in cooperation in the Asia-Pacific region. In November 1991, it participated with Taiwan and Hong Kong in the Asia Pacific Economic Cooperation (APEC). It also deserves attention that China is promoting relations with Iran and Myanmar, including military cooperation.

China had made efforts to improve relations with the countries of the former Soviet Union. It recognized the three Baltic states the day after their independence. China also dealt with the dissolution of the Soviet Union in a swift and flexible manner. It completed its establishment of diplomatic relations with all the countries of the former Soviet Union by establishing links with Georgia in June 1992. Active moves between China and the countries of the former Soviet Union were seen such as a meeting between Prime Minister Li Peng and Russia's Boris Yeltsin at the United Nations in January 1992, as well as the visits of leaders of Belorussia, Kazakhstan and Kirgistan to China. The visit by Russian President Boris Yeltsin to China in December 1992 laid the foundation for progress in Russo-China relations, with the announcement of a joint declaration.

As regards the China-U.S. relations, Secretary of State James Baker visited China in November 1991. In January 1992, a meeting between Prime Minister Li Peng and U.S. President George Bush was held at the United Nations for the first time since the June 4th incident. Human rights issues are still the major issues between the two countries, yet there have also been active negotiations on economic issues. In February 1992, China committed itself to adhere to the Missile Technology Control Regime (MTCR), and, subsequently, the United States removed economic sanctions on China which had been in force since June 1991. China also yielded to the United States in talks on the intellectual property problem, contributing to its eventual settlement. In September 1992, during the U.S. presidential election campaign, President Bush announced the sale of F-16 fighters to Taiwan, despite China's vehement opposition. However, in October 1992, it conceded to the United States in negotiations concerning the increased market access under Article 301 of the U.S. Trade Act. In addition, the U.S.-China Economic Committee and bilateral consultations on science and technology, which had been suspended after the June 4th incident, were both resumed in December 1992, through the visit to China by Commerce Secretary Barbara Hackman Franklin and the visit to the United States by Song Jian, the Minister in charge of the State Scientific and Technological Commission.

As for China's relations with Western European countries, in the latter half of 1991, prime ministers of the United Kingdom and Italy visited China. In January 1992, Prime Minister Li Peng visited Italy, Spain, Switzerland and Portugal which helped improve economic relations with these countries. In addition, in November 1992, Vice Premier Zhu Rongji visited the United Kingdom and the Scandinavian countries which had expressed strong concern on the human rights issues in China. Western European countries, while still concerned about human rights in China, are becoming more willing to hold dialogues with China. However, bilateral tensions are seen such as the conflict with the United Kingdom concerning Governor Christopher Patten's proposal on Hong Kong's democratization, and China's demand to France to close down its Consulate-General Office in Guangzhou in protest to France's decision to approve the sale of the mirage fighter jets to Taiwan.

It was also noteworthy that China established diplomatic relations with Israel as China had tended to side with the Arab countries in its relations with the Middle East region.


(3) Relations with Japan

Japan-China relationship is one of the major pillars of Japan's foreign policy. The maintenance and development of favorable and stable relations with China are not only important for the two countries but also for the peace and stability of the Asia-Pacific region as well as the international community. China's relations with Japan and Western countries retrogressed with the June 4th, 1989 incident. As expressed at the subsequent G- 7 Summits, it is not in the interests of the international community as a whole to isolate China, amid the structural changes taking place in the international arena. Based on this recognition, Japan has emphasized to promote political dialogue with China. In August 1991, then Prime Minister Toshiki Kaifu visited China, for the first time as a leader of an industrialized democracy after the June 4th incident. Prime Minister Kaifu held political dialogue on a wide spectrum of issues at the highest level from the viewpoint of "China-Japan Relations within the World." In January 1992, to celebrate the 20th anniversary of normalization of Japan-China relations, Foreign Minister Michio Watanabe visited China, the beginning of exchanges of VIPs between the two countries. From the viewpoint of "China-Japan relations that contribute to the international community," he had frank discussions on issues of common interest to the international community such as arms control and disarmament, human rights, democracy and the global environment. Thereafter, General Secretary Jiang Zemin visited Japan in April and Chairman Wan Li of the Standing Committee of the National People's Congress in May 1992. These visits were a great success, as consensus was reached on the will to pay attention to the broader context of bilateral ties and to nurture the bilateral relations in a balanced and matured fashion. In this respect, it was noteworthy that General Secretary Jiang Zemin particularly referred to the new relations between the two countries by stating "it is important for China to forget the past and look into the future, and it is important for Japan to seriously review its past history and adhere to the road to peaceful development." He also made it clear that China would support Japan's political role in the international community.

In February 1992, China enacted and promulgated a law on the territorial seas and connected water areas. (As it referred to the possession of the Senkaku Islands, which is a territory of Japan, Japan strongly protested and demanded a correction). In June there was an incident in which Japanese journalists were assaulted in Tiananmen Square.

In October 1992, with the repeated courteous invitation of the Government of China, their Majesties the Emperor and Empress of Japan made a historic visit to China. They were warmly welcomed in Beijing, Xian and Shanghai. The success of their Imperial Majesties' visit further promoted the traditionally friendly and good relations between the two peoples, and formed the basis for the further enhancement of these good relations toward the future.

Economic relations between the two countries have also been improving since the latter half of 1990, after they had stalled temporarily because of China's economic adjustments and the June 4th incident. In 1991, trade recorded $22.8 billion, exceeding $20 billion for the first time. Japan's direct investment projects in China in FY 1991 numbered 246, totaling $580 million, a dramatic increase both in volume and value. With its accelerated reforms and openness policies, China's trade and investment with Japan in 1992 are growing, with the pace exceeding the previous year's record. Japan has imported more from China than it has exported since 1988. In 1992, Japan continues to have trade deficits with China as its imports have grown steadily in spite of economic slowdown. In addition to the quantitative expansion, Japan-China trade has also achieved qualitative transformation. In 1991 the ratio of manufactured imports to total imports from China reached nearly 50 percent and a horizontal division of labor in the trade structure is being formed. There has also been the visible effect of investment. For instance, China was exporting manufactured goods produced through Japanese investments to Japan; in turn, Chinese imports of Japanese basic materials and parts expanded. Furthermore, as is seen by the fact that China officially became a member of APEC together with Taiwan and Hong Kong in November 1991 it has become increasingly important to view China-Japan economic relations in the Asia-Pacific context. Since the Houston Summit of July 1990, Japan has been implementing the third Yen Loan Program to China totaling \810 billion over six years; \137.3 billion was to be provided in FY 1992. In addition, an agreement was reached in June 1992 that the Export-Import Bank of Japan would provide \700 billion for energy resources development.


3-2. Hong Kong and Taiwan


(1) Hong Kong

The issue of Hong Kong's new international airport, pending since 1989, was settled when the United Kingdom and China reached agreement during the September visit of Prime Minister John Major to China in September 1991. This improved the mood among all three parties, Britain, Hong Kong and China. Following this, work of the Sino-British joint liaison group concerning the restoration of Hong Kong to China was accelerated. Yet, since the Government of Hong Kong increased the total costs of the airport construction plan in 1992, coordination is underway among the three parties.

New Governor Christopher Patten, who took office in July 1992, made a proposal on democratization of Hong Kong in his policy speech in October. In this speech, he advocated the Institutional Reform for the 1995 legislative council elections. However, China has been reacting strongly against this plan. How the United Kingdom and Hong Kong will proceed with democratization in cooperation with China is being closely watched.

In the economic field, Hong Kong continues to achieve steady growth. With its strengthened ties with Southern China, Hong Kong is expected to play a central role in the economic development of the Asia-Pacific region. Economic relations between Japan and Hong Kong, centering on direct investment, finance and trade are also steadily developing. In November 1992, Governor Patten visited Japan and exchanged views on the Hong Kong situation with Prime Minister Kiichi Miyazawa and Foreign Minister Michio Watanabe. Japan is of the view that it is important for Hong Kong to maintain its prosperity and stability after 1997, through its present economic freedom based on the U.K.-China Joint Declaration and the Basic Law of Hong Kong. This is important for the prosperity and stability of not only the Asia-Pacific region but also the entire international community.


(2) Taiwan

Since the removal of martial law in 1987, Taiwan has taken a series of measures toward political freedom and democracy, as is seen in the establishment of freedom to form political parties and resignation of life-time legislators. At the full-house election of the "parliament" held in December 1992, the opposition parties gained ground, in contrast to the sluggish outcome of the ruling party. Taiwan has achieved rapid economic development in recent years, and its grow this an important element in the prosperity of the entire Asia-Pacific region today. In November 1991, Taiwan successfully participated together with China and Hong Kong in APEC, and through active external activities, is strengthening its international ties. Furthermore, exchanges between China and Taiwan in various fields have become increasingly activated in recent years.

In its relations with Taiwan, Japan firmly adheres to its position expressed in the Japan-China Joint Communique of 1972. This will remain unchanged. On the other hand, there has been rapid growth of economic and cultural exchanges between Taiwan and Japan in recent years. Accordingly, there has been a steady increase in personnel exchanges. Within the basic framework of China-Japan relations, and based on the recent changes involving Taiwan, Japan is promoting working-level relations with Taiwan.


3-3. Mongolia


In Mongolia, reforms which center on democratization and transition to a market economy have made rapid progress since 1989. In July 1990, a general election was held for the first time in history. As a result of this election, the new government came into being in September 1990, while engaging in a coalition with opposition parties, to form a unified front to tackle economic and political reforms. In February 1992, the Government changed the name of the country from "Mongolian People's Republic" to "Mongolia." The expression of "socialism" was also removed from the constitution at the time of its revision. In addition, the Government promulgated a new constitution permitting all forms of ownership and stipulating wide-ranging human rights. This new constitution is significant in legally guaranteeing Mongolia's democratization and transition to a market economy. Based on the new constitution, a general election of the State Great Hural, the newly established legislative body, was held in June 1992. With the growing dissatisfaction of the people against the deteriorating economy, the People's Revolutionary Party won a landslide victory, gaining 71 out of the 76 seats. In July, a new prime minister, Puntsagiin Jasrai, was named and a new cabinet was appointed in August 1992. The new government took into consideration the continuity by reappointing six ministers from the previous cabinet, and made it explicit that basic policies, such as reforms toward democracy and a market economy, as well as its external policies would remain unchanged. Overcoming the economic crisis at an early stage remains the top priority task for the new government.

Japan is actively supporting Mongolia which is steadily undertaking drastic and rapid reforms. In August 1991, Prime Minister Toshiki Kaifu visited Mongolia and announced Japan's active support to Mongolia. It was the first visit by a Japanese Prime Minister. It was also the first for a leader of an industrialized democracy to the country. In September 1991 and May 1992, under the joint chairmanship of the Government of Japan and the World Bank, the Mongolia Assistance Group Meeting was held in Tokyo. The Meeting in May, in which Prime Minister Dashiin Byambasuren and First Deputy Prime Minister D. Ganbold participated, succeeded in obtaining commitments of assistance totaling $320 million, which is estimated to be needed in 1992-1993, from the participating countries and international organizations. Japan's economic cooperation in FY 1990 was slightly over \500 million, but in FY 1991 it rose dramatically to about \8.4 billion. This indicates Japan's active support for Mongolia's reforms. Private-level exchanges are also rapidly expanding. These developments have laid the basis for further promotion of bilateral relations between Japan and Mongolia in wide-ranging fields.


4. Southeast Asia


4-1. Overview


The Association of Southeast Asian Nations (ASEAN) which marked its 25th anniversary in 1992, enhanced its cohesion in the face of such international developments as the Vietnamese invasion of Cambodia in 1978. It has contributed greatly to the promotion of stability and regional cooperation. Now, ASEAN is responding to the change sin the international situation brought by the end of the Cold War.

In January 1992, ASEAN held its fourth Summit Meeting after an interval of five years. The leaders agreed to the expansion of relations with Indochina region and the strengthening of political and security dialogue through the ASEAN Post-Ministerial Conferences. In the economic field, they also agreed to strengthen regional economic cooperation through the establishment of the ASEAN Free Trade Area (AFTA).

Upon invitation by ASEAN, the foreign ministers of China, Russia, Vietnam and Laos took part in the 25th ASEAN Foreign Ministers' meeting held in Manila in July 1992.

ASEAN is an important stabilizing factor in the Asia-Pacific region, and its development is indispensable not only for the peace and stability of the region but also of the world. From this point of view, Japan has endeavored to deepen dialogue and cooperation with the ASEAN countries and to strengthen relations with them in the wide-ranging fields of trade, investment, economic cooperation and cultural exchange. Since 1977, Japan and ASEAN have engaged in dialogues at the foreign ministers level as well as at the working level in the Japan-ASEAN Forum.

As then Prime Minister Toshiki Kaifu stated in his speech during his ASEAN visit from April to May 1991, the relationship between Japan and ASEAN is one between mature partners which think together and act together. For example, at the ASEAN Post-Ministerial Conferences in July 1992, Japan proposed to extend "tripartite cooperation" under which Japan and ASEAN would work together for Cambodian reconstruction by combining Japan's financial and technological capacity with ASEAN's expertise and experience. The proposal drew positive attention from ASEAN and was highly appreciated by it. In the individual meeting (Note) between Japan and ASEAN, Japan explained its positions on security policy, the International Peace Cooperation Law and the Northern Territories Issue, which resulted in further understanding on these issues by the ASEAN countries. In addition, views were exchanged on the economic situation, and economic and cultural cooperation. As Indonesia, Thailand and Malaysia specifically welcomed the International Peace Cooperation Law, no concern whatsoever was expressed from the other countries. In the fall of 1991, the Emperor and Empress visited Indonesia, Thailand, and Malaysia on their first foreign visit after their enthronement.

Concerning the Indochina region, the peace process was launched under the United Nations Transitional Authority in Cambodia (UNTAC) based on the Paris Peace Agreements signed in October 1991 to solve the Cambodian conflict, which had been the most difficult issue in the region. This process, which led to general elections to be held in May 1993 and the ensuing formation of a new Cambodian government, has significantly alleviated the tension in this region. In Vietnam and Laos, economic reform efforts toward a more open economy have been pursued. Vietnam made efforts to strengthen its relations with ASEAN through the visit of Prime Minister Vo Van Kiet to the ASEAN countries from the end of 1991 to the beginning of 1992. In July 1992, Vietnam and Laos joined the "Treaty of Amity and Cooperation in Southeast Asia" (Bali Treaty).

The relations between the Indochinese states and the rest of Southeast Asia have thus become closer over the past years.

Japan believes that it is important for the peace and stability of the whole Southeast Asian region that the Indochinese countries, impoverished from long years of wars and strife, achieve economic development, in cooperation with the countries in the region, including the ASEAN countries. To actively support such efforts, Japan has taken a number of initiatives. In June 1992, it hosted the Ministerial Conference on Rehabilitation and Reconstruction of Cambodia in which the participating countries and international organizations pledged assistance totaling $880 million; Japan pledged aid of $150 million to $200 million. With respect to Vietnam, Japan provided a commodity loan of \45.5 billion in November 1992 to support Vietnam's open-door policy. As for Laos, Japan will continue to support its economic development through grant aid and technical assistance.

As for Cambodia, according to the International Peace Cooperation Law enacted in June 1992, Japan has sent a construction unit of its Self-Defense Forces, civilian police officers and military observers to join UNTAC, thus making human contributions to building a solid foundation for peace, stability and reconstruction of Cambodia.


4-2. Indonesia


In the general election of June 1992, the government party Golkar (a functional group), won an overwhelming victory by scoring 68 percent of the votes. Public attention is now focusing on the presidential and vice-presidential elections scheduled for March 1993. In November 1991, a shooting incident against demonstrators by a security force took place in Dili City in East Timor. President Soeharto took a series of measures, including the dismissal of the commanders concerned. Thereafter, the military officials and civilians involved in the incident were put on trial.

In the economic field, Indonesia has taken structural adjustment and deregulation measures since 1985 to transform the economy which was heavily dependent on petroleum and gas, which consequently led to its steady economic growth.

At the same time, because of the overheating of the economy since the middle of 1990, the government took a series of tight monetary policies, which led to the announcement in October 1991 of a partial freeze of large-scale projects. Unusual weather conditions and other factors made the lack of infrastructure, such as electricity and telecommunications, more keenly felt. There were also numerous cases of labor unrest and demands for wage increases. In consequence, although economic growth in 1991 was still steady at 6.6 percent, it dropped from the previous year's rate. The total trade value in 1991 was $54.7 billion, a 15.2 percent increase. The current account deficit stood at $5.5 billion.

FY 1993 is the final year of the first 25-year long development plan. Now, the main tasks for Indonesia will be the improvement and expansion of the basis for sustained economic growth, as well as the correction of regional economic disparities which have caused a social problem.

As for the framework for aid to Indonesia, there was a shift from the Inter-Governmental Group on Indonesia (IGGI), chaired by the Netherlands, to a new international framework of the Consultative Group on Indonesia (CGI) chaired by the World Bank. In the first CGI meeting in Paris in July 1992, a total aid package of $4,948 million was pledged ($1,820 million of it from Japan).

On the diplomatic front, Indonesia, as the chair of the Non-Aligned Movement (NAM), hosted a Foreign Ministers' meeting of the Movement in Bali in May 1992. It also hosted the 10th Conference of the Movement in Jakarta in September 1992. This contributed significantly to consolidating the moderate and constructive line of dialogue and cooperation. As for the Cambodian problem, Indonesia continued to play a positive role, as co-chair of the First International Conference on Cambodia in Paris in 1989, for example, sending two infantry battalions to UNTAC.

President Soeharto has also been active in summit diplomacy, paying an official visit to five countries, Venezuela [G-15 Summit meeting (Note)], Mexico, Senegal (6th Summit meeting of the Organization of Islamic Conferences), Zimbabwe and Tanzania, from November to December 1991. He delivered a speech at the U.N. General Assembly in September 1992, representing the NAM, and visited Japan on his way back home and met with Prime Minister Kiichi Miyazawa.

Indonesia is a very important country for Japan; it is heavily interdependent with Japan in economic terms; it supplies oil and natural gas to Japan and Japan, for its part, has made direct investment in Indonesia; it is located in the area where there are important international shipping lanes; and it has a strong political influence in Southeast Asia. Also, Indonesia has large development needs. In view of these issues, Japan has been providing maximum cooperation for its stability and development, centering upon economic co-operation. Against this background, there are frequent exchanges of VIP visits between the two countries.

In October 1991, the Emperor and Empress visited Indonesia as part of their first foreign tour since the accession and were warmly welcomed. There were many Indonesian VIP visits to Japan: President Soeharto visited Japan in September 1992 and met with Prime Minister Miyazawa; Vice President Soedharmono in April 1992; and Foreign Minister Ali Alatas in February and June 1992. Working-level meetings are also frequent including the Joint Energy Committee, discussions on forestry and consultations between aero-nautical authorities. It is hoped that political dialogue as well as cultural and personnel exchanges will become more active, which will help further develop the bilateral relationship on a broader and more balanced basis, which has so far centered on economic aspects.


4-3. Singapore


The Goh Chok Tong Government announced in February 1991 " The Next Lap," its policy perspective for the next 25 years. In the general election in August 1991, the ruling People's Action Party diminished its influence in terms of the number of seats and the ratio of votes compared with the previous election. But the People's Action Party's victory in the December 1992 by-election was firm and is believed to indicate the nation's support of Prime Minister Goh's policies.

Singapore's economy slowed down in 1991 due to the slow-down in the industrialized economies and effects of the Gulf War. Most sectors scored a lower growth rate than the previous year. The real economic growth rate was no more than 6.7 percent.

In foreign policy, Singapore used to maintain a firm stance against Vietnam regarding the Cambodian issue. Since the peace agreements were reached on the Cambodian conflict, its relations with Vietnam have rapidly improved, and it established an embassy in Hanoi in September 1992. When U.S. President George Bush visited Singapore in January 1992, the two countries agreed to relocate the U.S. Navy logistics command to Singapore from Subic Base in the Philippines, with due regard for the maintenance of the security of Southeast Asia.

Japan and Singapore enjoy friendly relations with no major outstanding issues between them. It is hoped that this relationship will be promoted through continued dialogue in both the public and private sectors. In 1991 and 1992, Senior Minister Lee Kuan Yew (former Prime Minister) made several visits to Japan. Foreign Minister Wong Kang Seng also visited in June 1992 and Deputy Prime Minister Lee Hsien Loong and Defense Minister Yeo Ning Hong came in November.

Japan is Singapore's second largest trading partner after the United States in terms of the total trade value in 1991. It is also the second largest source of direct investment to Singapore. In 1991, Japan's investment increased slightly by 0.7 percent over the previous year.


4-4. Thailand


The Anand Cabinet, which was established after the coup d'etat of February 1991, was regarded as one of the best Thai governments, as it implemented tax reforms (including introducing a value added tax), deregulated capital and foreign exchange transactions, and took measures actively to tackle unequal income distribution, poverty and environmental problems.

A general election for the House of Representatives was held in March 1992 based on the Constitution promulgated in December 1991, but no political party obtained a majority. As no consensus was reached among political parties on a candidate for prime minister, General Suchinda Kraprayoon, the Army Commander was appointed Prime Minister in April. The opposition parties, mass media and academia opposed his appointment, arguing that the Prime Minister should be a member of the House of Representatives, and campaigned for his resignation. This developed into large-scale anti-government demonstrations which were held with up to 100,000 people joining in. In May, the demonstrators and combined forces of police and military clashed, leading to 40 deaths and over 600 injuries (according to the announcement by Prime Minister Suchinda on May 20). However, with the presence of King Bhumibol Adulyadej, an agreement was reached to resolve the impasse through talks between Prime Minister Suchinda and Chamlong Srimuang who represented the opposition (former leader of the Palang Dharma Party). In May, Prime Minister Suchinda resigned, taking political responsibility for the incident.

In June 1992, the Anand Cabinet was formed, with the expectation both at home and abroad to overcome the political impasse surrounding the May incident and carry out a free and fair election. The major tasks for the administration were to prevent similar incidents and facilitate further the democratization process. Prime Minister Anand dismissed the military officers responsible for the incident and diminished the economic and social roles of the military by, among others, imposing restriction on their appointment to boards of state enterprises.

In September 1992, a general election was held, in which the Democratic Party became the leading party, and four opposition parties critical of the military's political role, as was seen in the appointment of a military officer to Prime Minister, gained the majority. As a result, a government of Prime Minister Chuan Leekpai was formed with a coalition of five parties; that is, four former opposition parties and the Social Action Party. In his policy speech in October, Prime Minister Chuan expressed his determination to push for further democratic reforms. The new Government has placed priority on strengthening relations with other ASEAN members and promoting economic cooperation with other neighboring countries (such as those in the Indochina region and Myanmar). It is thus trying to expand Thailand's international role, by way of making it a regional center for finance and telecommunications. It can be pointed out that the confidence in Thailand both at home and abroad and its international image, which were damaged by the May incident, have mostly been recovered through democratic measures taken under the Anand Administration, the outcome of the general election and the establishment of the Chuan Administration.

The growth of the Thai economy slightly decelerated in 1991 compared with the previous three years, due to the subsiding investment boom, and the growth rate was estimated to be 7.9 percent. With this growth deceleration, inflation was subdued and the deficits in the international balance of payments diminished. In 1992, there was concern that the May incident would affect tourism and investments and damage economic growth. However, with the progress in the democratic process, confidence of investors both at home and abroad bas been rapidly recovering, and the adverse effects of the May incident on the economy appear to be very limited.

Concerning Thailand's relations with Japan, Princess Chulabhorn visited Japan in May, October, November 1991 and January 1992, and Prime Minister Anand also came to Japan in December 1991. Their Majesties Emperor and Empress visited Thailand in September 1991 as their first foreign visit after the enthronement, followed by Prince and Princess Akishino's visit in November 1992. Many other important persons visited Thailand to maintain frequent contacts.

At the time of Prime Minister Anand's visit to Japan, Thailand presented the revised White Paper on the Restructuring of Thai-Japan Economic Relations. In response to this Paper, the third Japan-Thailand Economic Consultation was held in July 1992 for an extensive exchange of views on the future economic relations. Japan and Thailand have also been building new cooperative relationship in the field of foreign policy. For example, both countries cooperated very well at the Conference on Cambodia in 1990. Also, the two countries made joint efforts to persuade the Democratic Kampuchean Party, the Pol Pot faction, which has refused to enter the second phase of the cease-fire, with a view to facilitating the peace process.

In its trade with Japan, Thailand's deficits fell to around $4.2 billion in 1991, a 16 percent decrease from the previous year. Japanese direct investment, based on the reports to the government, also dropped by about 30 percent in FY 1991.

As for economic aid, Japan has regarded Thailand as one of the top priority recipients. In December 1992, the 17th yen loan of about \93 billion was provided.


4-5. Philippines


In domestic politics, the year 1991 marked the final stage of the Aquino Administration, which tried to wrap-up its six-year-long tenure. In the first half of the year, the Aquino Government faced a difficult situation temporarily because of the deteriorating economy and accompanying social instability brought on by such external factors as the Gulf War and the eruption of Mt. Pinatubo. The Government managed to overcome this crisis, and from the latter half of 1991, amidst the tough economic situation, the political tensions subsided because the political focus shifted to the upcoming series of elections (presidential, both houses of Congress and local) of May 1992. In the May 1992 presidential election (in which seven strong candidates ran), former Secretary of Defense Fidel V. Ramos, endorsed by President Corazon Aquino as her successor, won the election after a close contest. In June, President Aquino retired at the completion of her term and Secretary Ramos became the President.

The Ramos Administration is continuing economic reconstruction through liberalization and deregulation policies launched by his predecessor. At the same time, it is actively trying to restore peace and order as well as take measures against the anti-government forces as its priorities.

Though damaged by natural disasters which caused the sluggish economy in 1990, the Aquino Administration promoted during 1991 the "Economic Stabilization Program" agreed with the International Monetary Fund (IMF); it implemented economic reforms, including the promulgation of a new foreign investment law (approving in principle 100 percent foreign ownership) and partial liberalization of foreign exchange.

Despite these efforts by the Government, natural disasters, including frequent typhoons, droughts and damages caused by lava flows from Mt. Pinatubo had adverse effects on the economy, which recorded negative growth of -0.1 percent in 1991. Thanks to the strenuous efforts by the Aquino Administration, the economy has somewhat recovered from the end of 1991, but the growth rate in the first half of 1992 was no more than 0.5 percent due to frequent power outages and other factors.

The Philippines still faces various economic difficulties, such as massive external debts, shortage of foreign currency reserves, high unemployment, inflation and poverty. For the Ramos Administration, which attempts to control inflation as well as attain high growth, the greatest immediate task is to place the economy on track of sustained growth by restoring peace and order, promoting foreign investment and averting fiscal deficits and inflation.

In foreign policy, since the U.S.-Philippine Friendship Cooperation and Security Treaty signed in August 1991 had been rejected by the Philippine Senate in September, the Government of the Philippines negotiated with the United States to conclude the administrative agreement for the withdrawal of the U.S. forces in the Philippines within three years. As it appeared impossible to reach an agreement within the year, the Government of the Philippines issued, based on the consent of the United States, a prior termination notice of the U.S.-Philippine Base Agreement to the U.S. Government in December 1991.

As a result, the withdrawal of U.S. forces in the Philippines by the end of December 1992 was secured. From January 1991, the U.S. bases were successively returned to the Philippines with Clark Air Base handed over in July 1991. Lastly, the Subic Naval Base was handed back in November 1992.

The Ramos Administration has placed its foreign policy priorities on reviewing the relationship with the United States strengthening of its economic diplomacy, and laying a stress on relations with such countries as Japan, the United States, ASEAN and the EC. In this context, the ASEAN Ministerial Conference and the ASEAN Post-Ministerial Conferences were held in Manila in July 1992.

As for its relations with Japan, former Prime Minister Toshiki Kaifu visited the Philippines in June 1992 as Japan's special envoy for the inauguration of President Ramos.

Japan's basic policy to the Philippines, as expressed at the time of Special Envoy Kaifu's visit, is to continue to give as much assistance as possible to the Philippines' determined efforts to reconstruct its economy amid difficulties. Being the largest aid donor to the Philippines, Japan expressed its intention to provide a total of \45.3 billion in Official Development Assistance for FY 1991 in the third Philippines Multilateral Assistance Initiative (MAI) held in February 1992.

Trade between the Philippines and Japan is growing steadily. Japan's direct investment remains still relatively large, though it dropped by 22.3 percent in 1991, occupying the second place to the United Kingdom (Japan was the largest investor in 1990).


4-6. Brunei


The domestic situation of Brunei continues to be stable with its high standard of living. In October 1992, the silver jubilee of the ascension to the throne of Sultan Haji Hassanal Bolkiah was celebrated, with the attendance of high-ranking people from the ASEAN countries and the United Kingdom. It showed both at home and abroad the stability of the present system in which the King is at the helm of national policy.

On the diplomatic front, mutual visits between Brunei and other ASEAN countries are frequent in its efforts to further strengthen its relations with ASEAN.

As Brunei's economy is heavily dependent on exports of oil and natural gas, diversification of the economy is an important policy agenda.

Brunei enjoys favorable relations with Japan, with economic aspects as their main part. Approximately 30 percent of Brunei's crude oil and all of its natural gas (LNG) are exported to Japan. In total, approximately 14 percent of Japan's LNG imports came from Brunei in 1991. These energy-based trade relations remain un-changed.


4-7. Malaysia


Malaysia's domestic situation is basically stable. Prime Minister Datuk Seri Mahathir bin Mohamad had a heart by-pass operation in February 1989. Speculation after the operation as to who would be his successor was short-lived, as he strengthened his leadership, announcing the "Vision 2020" (initiative launched in February 1991 by Prime Minister Mahathir to turn Malaysia into a developed country by the year 2020) and Malaysia is proceeding firmly with national development.

The Sixth Malaysian Plan (1991-1995) was announced in July 1991 to give shape to the new economic policies announced in June 1991. Malaysia's economy continued to be basically brisk in 1991, in spite of the trade deficit registered for the first time since 1982 and of rising consumer prices (4.4 percent in 1991). It recorded a real GDP growth rate of 8.8 percent backed by strong domestic demand.

Domestic stability contributed to its active foreign affairs, including frequent interchanges with VIPs of various countries. Prime Minister Mahathir has played an active role in international fora. Kuala Lumpur was host to the Second Ministerial Conference of Developing Countries on Environment and Development - which he inaugurated with a speech enunciating the position of developing countries held in April before the United Nations Conference on Environment and Development (UNCED) in June 1992. On the conflicts in Bosnia-Herzegovina, Prime Minister Mahathir sharply criticized Serbia and Montenegro for invading Bosnia-Herzegovina. These are a few examples of his efforts to keep expressing his strong views on such issues as human rights and the environment from the standpoint of Malaysia, as a developing and Muslim country.

As regards relations with Japan, the Emperor and the Empress of Japan visited Malaysia as part of their first foreign tour in September to October 1991, which received good coverage from the Malaysian press. Their visit played a significant role in promoting the goodwill and friendship between Japan and Malaysia. In December 1991, Prime Minister Mahathir visited Japan, and in October 1992, Foreign Minister Abdullah visited Japan. They both met with Prime Minister Kiichi Miyazawa and Foreign Minister Michio Watanabe. Exchanges of views at various levels of government are also frequent.

In the economic field, Japan continues to enjoy favorable relations with Malaysia, which center on trade and investment. In 1991, Japan was Malaysia's largest trade partner and the second largest direct investor in Malaysia.

It has been 10 years since the two governments started cooperation on Malaysia's "Look East Policy," (Note) now the major pillar of the bilateral cooperation. Malaysia is seeking further increases in the number of trainees and students coming to Japan. Japan, for its part, is doing what it can to meet such needs.


4-8. Vietnam


In domestic politics, Vietnam continued its policy of economic liberalization and at the same time implemented certain reforms in political and social areas under the leadership of the Communist Party General Secretary Do Muoi, who was elected at the 7th Congress of the Party in June 1991. The constitutional amendment bill which had been prepared since 1989 by the Constitution Revision Committee, passed the Parliament and was promulgated in April 1992.

The most distinctive features of the revised constitution are clearer separation between the Communist Party and the Government, which was previously not very clear, strengthening of democracy and clearer orientation for establishing the rule of law. As a result of this constitutional revision, the Council of State, whose chairman was head of state, was abolished and a new post of President of State as the new head of state was created. As for individual rights, the right to leave the country was guaranteed and the right to receive and transmit information, freedom of speech, press, association and demonstration were stipulated more clearly than before by law. In economic fields, individual freedom to manage enterprises including capitalistic management, the right to transfer and inherit the right to use land were also approved.

In foreign relations, the Cambodian Peace Agreements were signed in October 1991, and the Cambodian conflict, which had been a major obstacle to Vietnam's foreign policy, was resolved and the country moved toward peace. Against this background, Vietnam's relations with China, which had once been hostile, were normalized when General Secretary Do Muoi visited China in November 1991. Territorial disputes with China over the Spratly Islands and the Gulf of Tonkin resurfaced in 1992. Yet, the two countries agreed to settle territorial problems peacefully. And a working-level dialogue has been underway. In December 1992, Chinese Premier Li Peng visited Vietnam for the first time in 21 years. There has been gradual progress on the improvement of Vietnam's relations with the United States, the biggest pending issue for Vietnam. Washington has implemented measures on a step-by-step basis, as was seen in removal of the ban on money transfers and telecommunications links. It also extended humanitarian aid to Vietnam. On the question of missing U.S. servicemen during the Vietnam War, which has been the biggest obstacle to improved U.S.-Vietnam ties, Vietnam agreed to provide the U.S. Government with an enormous amount of information on missing U.S. servicemen including photographs taken by Vietnamese military cameramen during U.S. Special Presidential Envoy General Vessy's visit to Hanoi in October 1992. U.S. President George Bush lauded this agreement as "a significant, a real breakthrough." Subsequently, he announced in December a partial relaxation of the trade embargo against Vietnam, which allows opening of U.S. company representative offices in Vietnam, and signing contracts with the Vietnamese which will take effect when the embargo is completely lifted in the future. Some improvement in relations with the ASEAN countries is also seen. Vietnam became a member of the Treaty of Amity and Cooperation in Southeast Asia, the Bali Treaty, at the ASEAN Ministerial Conference held in Manila in July 1992. Putting all these factors together, the international climate surrounding Vietnam dramatically changed for the better during 1991 and 1992.

In economic fields, in spite of the sharp reduction in assistance from the former Soviet Union and the Central and Eastern European countries, the positive results of the reforms and openness policies called Doi Moi have become evident, and the economy has been gradually improving. Exports, with crude oil being the chief product, is showing brisk growth. Rice production has increased since 1990as a result of liberalization of economic policy. Vietnam imported between 250,000 tons and 500,000 tons of rice annually until 1989, but has now become the world's third largest rice exporter, exporting approximately 1.4 million tons each in 1990 and 1991.

Vietnam is situated in a geographically and historically important location in Southeast Asia and has played an important role in the region's history. Its abundant natural resources, including crude oil, and high quality labor force promise Vietnam a great potential for economic development. Therefore, Vietnam's constructive participation in the dynamic development of the Asia-Pacific region is vital for the medium- and long-term stability and development of this region.

From this point of view, continuous efforts have been made on both sides to further enhance Japan-Vietnam relations which entered a new stage with the visit of the then Foreign Minister Taro Nakayama to Vietnam in June 1991. In April 1992, Chairman of Vietnam's National Assembly Le Quang Dao paid an official visit to Japan. In October 1992 Foreign Minister Nguyen Manh Cam visited Japan on his way home from the U.N. General Assembly. During his visit Mr. Cam paid a courtesy call on Prime Minister Miyazawa and had talks with Foreign Minister Michio Watanabe. As for economic cooperation, notes were exchanged between Japan and Vietnam on grant aid to restore the Cho Ray Hospital in Ho Chi Minh City in July 1992 (amounting to \840 million). Yen loans, which had been suspended since the occurrence of the Cambodian conflict were resumed with the exchange of notes providing Vietnam with a commodity loan of up to \45.5 billion in November 1992. In light of these developments, relations between Japan and Vietnam are expected to improve further.


4-9. Cambodia


Conflicts in Cambodia had continued for 13 years until the Paris Agreements were signed and a cease-fire was realized in October 1991. On the one side of the conflicts was the Phnom Penh regime (State of Cambodia) backed by Vietnam and the then former Soviet Union. On the other side were three factions of the coalition (National Government of Cambodia), including the Pol Pot faction (Democratic Kampuchean Party) supported by the Chinese, the Sihanouk faction (FUNCINPEC) and the Son Sann (KPNLF) faction sup-ported by ASEAN and Western countries. Under the Paris Agreements, the Supreme National Council of Cambodia (SNC) chaired by Prince Norodom Sihanouk and consisting of membership divided equally among the Phnom Penh regime and the three factions of coalition was to serve as the unique legitimate body and source of authority which enshrine the sovereignty of Cambodia, until the new Cambodian Government is established through general elections to be held in May 1993. At the same time, the existing administrative structures of the Phnom Penh regime and the three factions of coalition were to continue to function under the authority of the SNC in their respective areas. The United Nations Transitional Authority in Cambodia (UNTAC) was established to supervise the administration and military affairs by powers delegated by the SNC with a view to securing a neutral political environment for the general elections.

After the signing of the Paris Agreements, Prince Sihanouk, President of the SNC, returned to Phnom Penh in November 1991 for the first time in 12 years. Around the time of his return, Western countries, including Japan, which had not had diplomatic relations with the Phnom Penh regime, sent their Permanent Representatives to Phnom Penh. In the same month, the United Nations Advance Mission in Cambodia (UNAMIC) launched its activities. In January 1992, Mr. Yasushi Akashi U.N. Under Secretary-General, was appointed as the Secretary-General's Special Representative, head of UNTAC. These developments symbolized the arrival of peace in Cambodia.

The major task for Cambodia, during the transitional period, is to faithfully implement the Paris Agreements. In short, its aim is to establish a politically and militarily neutral environment for holding free and fair elections of the constitutional assembly, by taking various measures both in military and administrative aspects. Specifically, in the military field, it is to regroup in cantonments designated by UNTAC and disarm military forces of all four factions, which were supposed to abide by the cease-fire agreement under the Paris Agreements. In the administrative field, the five sectors of public security, finance, foreign affairs, national defense and information are put under the direct control of UNTAC and other matters are also under the supervision and control by UNTAC. Another major task is to repatriate the 370,000 Cambodian displaced persons who, in efforts to escape from long warfare, fled to border camps in Thailand and to other countries, and to enable them to participate in the general elections.

In March 1992, UNTAC started its deployment in Cambodia and began its activities. With the progress in the UNTAC activities, the Phnom Penh regime, the Ranariddh faction (Note) and the Son Sann faction have indicated their willingness to cooperate with UNTAC, permitting, among others, UNTAC personnel to enter the area under their control. They also responded to its calls to disarm their military forces. In contrast, the Pol Pot faction, financially well-off because precious gems and logs are produced in the areas under its control in southwestern and northwestern Cambodia, which borders Thailand, has remained uncooperative, refusing to embark on Phase II of the cease-fire; namely disarming and demobilizing its soldiers.

Japan has increased its diplomatic efforts in the view that the Cambodian problem is Southeast Asia's largest destabilizing factor. Japan strengthened its diplomatic activities: in November 1991, immediately after the signing of the Paris Agreements, it sent Ambassador Yukio Imagawa as its Permanent Representative to the SNC, and in March 1992 reopened its Embassy in Cambodia which had been closed since April 1975. In June, the International Peace Cooperation Law was enacted and it became possible for Japan to make human resource contribution to the U.N. PKO under UNTAC activities, by way of sending its Self-Defense Forces' construction unit, military observers and civilian police officers.

The top priority for Cambodia, in addition to the maintenance of peace, is the rehabilitation and reconstruction of the country which was impoverished by harsh policies of the Pol Pot regime and years of warfare. Toward this end, the Ministerial Conference on Reconstruction and Rehabilitation of Cambodia was held in Tokyo in June under the chairmanship of Japan with the United Nations Development Programme (UNDP) as Co-chairman. Thirty three countries, including Prince Sihanouk and representatives of all of the Cambodian factions, 12 international organizations, including Mr. Yasushi Akashi, Head of the UNTAC and the EC Commission officially participated in the Conference. At the Conference, the Tokyo Declaration on the Rehabilitation and Reconstruction of Cambodia and the Tokyo Declaration on Cambodian Peace Process were unanimously adopted. In addition, $880 million was pledged by the participating countries and international organizations, while Japan announced its efforts to provide aid between $150 million to $200 million. It was also agreed at this Conference that the International Committee on Reconstruction of Cambodia (ICORC) would be established as coordinating mechanism for medium- and long-term reconstruction assistance to Cambodia. Japan will chair the ICORC. Furthermore, taking advantage of the opportunity of having all the parties concerned gathered in Tokyo, the SNC meeting was held with the participation of the representatives of all the Cambodian factions in their efforts to persuade the Pol Pot faction to embark on Phase II of the cease-fire. In addition to this SNC meeting, an expanded SNC meeting with Mr. Akashi, the Special Representative of the Secretary-General, the U.N. Security Council permanent member countries and other countries including Japan was also held. At the expanded SNC meeting, an 11-point proposal, including setting up of a mobile inspection team with observers from all the Cambodian factions to verify the withdrawal of all foreign military forces from Cambodia, was submitted to put an end to the stalemate in the peace process. In this proposal, the concerns of the Pol Pot faction were duly addressed within the framework of the Paris Agreements. Nevertheless, the Pol Pot faction refused to accept the proposal.

Thereafter, resolutions condemning the Pol Pot faction were adopted at the U.N. Security Council twice from July until October. Japan and Thailand jointly held four meetings with the Pol Pot faction to persuade it to enter Phase II of the cease-fire. In the U.N. Security Council resolution adopted in October, appreciation was expressed to Japan and Thailand for their efforts to persuade the Pol Pot faction, and at the same time, a request was made to continue these efforts. In response, the fourth tripartite meeting was held in Phnom Penh at the end of October 1992. Yet, the Pol Pot faction refused to accept the joint proposal by Japan and Thailand on the ground that Vietnamese forces were still inside Cambodia. Japan and Thailand reported this outcome to the U.N. Secretary-General, and to France and Indonesia, which co-chaired the Paris International Conference on Cambodia. In November, a special meeting of the SNC was held in Beijing with the initiative of the co-chairmen to further persuade the Pol Pot faction, but no development was seen.

At the end of November 1992, another resolution condemning the failure of the Pol Pot faction to cooperate with the peace process was adopted at the U.N. Security Council. As measures against the Pol Pot faction, this resolution supported the decision of the SNC to ban exports of logs from Cambodia, and invited UNTAC to establish necessary border check-points, thus expressing the strong determination of the international community. At the same time, it made clear that the door was still open to the Pol Pot faction.


4-10. Myanmar


Since a general election was held in May 1990, specific procedures and definite timing of the transfer of power to a civilian government had not been laid down. In April 1992, Senior General Saw Maung, Chairman of the State Law and Order Restoration Council (SLORC), suddenly resigned from his post for health reasons. General Than Shwe, the then Deputy Chairman of SLORC, succeeded Saw Maung. Immediately afterwards, the Government of Myanmar successively announced a series of positive and encouraging measures, such as setting a date for the meeting of the National Convention, holding dialogues with political party leaders, partial releasing of political prisoners, permitting Ms. Aung San Suu Kyi, under house arrest since July 1989, to meet with her family, and lifting martial law. The Government of Myanmar maintained that a new constitution must be drafted in order to ensure the transfer of power to a civilian government and expressed their intention to hold the National Convention consisting of parliamentarians, representatives of minority groups and intellectuals to discuss the basic principles of the new constitution. The Government had not clarified the timing of the National Convention. Yet, soon after General Than Shwe assumed the post of Chairman, the Government announced that the National Convention would be held from January 9, 1993. Nevertheless, specific procedures and the timing of the transfer of power after the National Convention are yet to be clarified.

In the economic field, Myanmar called FY 1992 the year of the economy and promoted open-door policies, but there is no prospect of resolving economic difficulties.

Japan has pointed out to the Government of Myanmar at every opportunity the importance of making positive efforts to improve the human rights situation as well as to make an early transfer to a civilian government. As for economic cooperation, Japan has suspended its economic cooperation to Myanmar, in principle, in light of the political situation. However, projects which had been implemented before the political changes in September 1988, as well as the assistance of humanitarian emergency nature, have been considered on a case-by-case basis.


4-11. Laos


Under the new Constitution promulgated in August 1991, the political system of Laos led by the Lao People's Revolutionary Party was maintained. In November 1992, its top leader, President and Chairman of the People's Revolutionary Party, Kaysone Phomvihan suddenly died. Chairman Nouhak of the Supreme People's Assembly became the new president, and Prime Minister Khamtai Siphandon succeeded as Chairman of the Party. President Nouhak and Prime Minister Khamtai announced they would inherit the domestic and foreign policies laid out by the late president. A general election for the new Supreme People's Assembly based on the new constitution was held in December 1992 and 85 new parliamentarians were elected.

In the economic field, Laos promoted the introduction of a market economy and strengthened external economic relations under the "New Economic Mechanism" system initiated in 1986.

In foreign affairs, Laos maintained its basic policy to develop friendly relations with all countries, particularly with neighboring countries. In particular, a "special solidarity" with Vietnam was emphasized. A friendship and cooperation treaty was concluded in February 1992 with Thailand, and, ties with China have also been enhanced in various fields. Laos became an observer in the ASEAN in August 1992. On the other hand, since the collapse of the Soviet Union, which provided Laos with economic assistance that ac-counted for more than 50 percent of its total foreign aid, Laos has been actively strengthening its relations with industrialized countries particularly in the field of economic cooperation.

Laos has long maintained friendly relations with Japan. Japan has been providing economic cooperation steadily to Laos, which has made continuous efforts to open its economy to the world as well as to move toward a market-oriented economy, despite the difficulties it faces. High level meetings between the two countries have become more frequent. There were visits by then Prime Minister Kaysone to Japan in 1989, as well as by Foreign Minister Taro Nakayama to Laos in 1990. Chairman of the Supreme People's Assembly, Nouhak  Phoumsavan, visited Japan in January 1992. These visits helped contribute to further strengthening the bilateral relationship.


5. Southwest Asia


5-1. Overview


The changing international situation, especially the collapse of the Soviet Union, independence movements of Islamic Central Asian countries and developments in Afghanistan have a major impact on the foreign and domestic policies of Southwest Asian countries. Between India and Russia, negotiations are underway to replace the Treaty of Peace, Friendship and Cooperation between India and the USSR concluded in 1971 with a new treaty. Trade between the two countries is diminishing because of the unsettled exchange rates between the rupee and the ruble. India has made efforts to promote its relations with the United States, including military ones while relations between the United States and Pakistan are stagnating due to the U.S. suspension of economic aid to Pakistan resulting from the suspicion about Pakistani nuclear programs. Democratization has proceeded in Nepal and Bangladesh. Economic liberalization and deregulation are being pursued in Pakistan and India.

With the unsettled issues including the Kashmir disputes, the relations between India and Pakistan sometimes went through difficult phases such as the postponement of the 6th Deputy Foreign Secretarial-level Talks in New Delhi scheduled in May 1992, which was later held in August, as a result of the mutual expulsions of each other's diplomats. In the meantime, dialogue for building mutual confidence has continued, as the summit meeting between leaders of the two countries took place in June 1992 at the United Nations Conference on Environment and Development (UNCED) in Rio de Janeiro and also in September at the Summit Meeting of Non-Aligned Countries in Jakarta. On the Kashmir problem, Muslim extremists planned a cross-border march from Pakistan into India in February, March and October 1992. Yet the Pakistani Government prevented their march from taking place, thus averting a clash between the two countries.

On regional cooperation, the 6th Colombo Summit Meeting of South Asian Association For Regional Cooperation (SAARC) scheduled in November 1991 was postponed until December. At the Summit Meeting, the need for stronger regional cooperation was reaffirmed. The 7th SAARC meeting, scheduled for December 1992, was postponed twice as the clashes between Hindus and Muslims intensified in India, triggered by the destruction of a mosque in Ayodhya by Hindus in order to build a temple on the site of the birthplace of God Rama.

Southwest Asian countries have traditionally maintained friendly attitudes toward Japan. Also, Japan is the largest aid donor to them. As these countries are reaching the turning point economically and politically, it is expected that Japan will further strengthen economic relations with them, for example by increasing direct investment.

Following up to then Prime Minister Toshiki Kaifu's visit to Southwest Asia in the spring of 1990, the Economic Missions consisting of representatives of major Japanese corporations were dispatched to Bangladesh and Sri Lanka in August and September 1991, and to India and Pakistan in January and February 1991 with the cooperation of the Japan Chamber of Commerce. Based on their discussions with Southwest Asian governments and business leaders, a report including recommendations to the four Southwest Asian and the Japanese Governments and goals for the Japanese private sector was completed in May 1992.

The year 1992 marked the 40th anniversary of diplomatic relations between Japan and India, Pakistan and Sri Lanka. Various commemorative events centering on cultural festivals took place. India's Prime Minister Narasimha Rao visited Japan in June, and Pakistan's Prime Minister Nawaz Sharif visited Japan in December 1992. Their Imperial Highnesses Prince and Princess Akishino visited all of these three countries in November of the same year.

After the visit of then Prime Minister Toshiki Kaifu in 1990, the Southwest Asia Forum (Chaired by Prof. Seizaburo Sato of Keio University), was set up in an effort to seek advice from intellectuals and experts on how to strengthen ties between Japan and the Southwest Asian countries. The Forum came up in June 1992 with its initial recommendation on policies for closer relations, support for regional cooperation, and strengthening of political and economic ties.


5-2. Major Regional Developments


(1) India

Mr. Rao's Indian National Congress Party Administration established by the Lok Sabha (lower house) general election in June 1991 has given priority to the reconstruction of the Indian economy adversely affected by the Gulf Crisis. Since July 1991, they have implemented a series of economic liberalization and deregulation measures. They devalued the rupee (by about 20 percent against the U.S. dollar), giving convertibility to it, and announced the new industrial policy dramatically deregulating the complicated licensing system, and a new trade policy simplifying export and import procedures. These economic reforms are a departure from the previous managed economic system, with an emphasis on public sector, oriented toward import substitution. They now stress the private sector, promote industrialization by inducing foreign capital, and encourage exports by improving international competitiveness. These measures are appreciated as economic liberalization policies oriented toward the further introduction of market principles.

In both the Lok Sabha by-elections in November 1991 and in the Lok Sabha election in Punjab State in February 1992, the Indian National Congress won the election, giving further stability to the Rao Administration. In April 1992, however, the scandal, the illegal loans of a large sum by a financial institution, unfolded. Minister of State for Commerce Chidambaram was consequently forced to resign in July 1992. In the same month, the issue about the construction of the Rama temple (Note) reemerged. As the talks between Hindus and Muslims failed to settle the question, in December the mosque was destructed by Hindus who wanted to build the Rama temple, therefore triggering clashes throughout the country and causing a large number of casualties.

After President Venkataraman completed his term, a presidential election was held in July 1992, and Vice President Sharma was elected as President.

In foreign affairs, India's traditionally stable relations with the countries of the former Soviet Union stagnated with the end of the Cold War and the collapse of the Soviet Union as mentioned earlier. Under the circumstances, India has developed closer relations with industrialized democracies, particularly with the United States. The increasingly active exchanges with the U.S., seen in such a development as the first joint exercise between the naval forces of the two countries in May 1992. Also, bilateral consultations on nuclear non-proliferation were held in June and November of 1992. India's relations with neighboring countries are showing signs of positive changes. As for its relations with Pakistan, as mentioned above, dialogue is continued although along a meandering path. Nepali Prime Minister Girija Prasad Koirala in December 1991, Bangladesh Prime Minister Begum Kbaleda Zia in June 1992, and Sri Lanka's President Ranasighe Premadasa in October 1992, respectively visited India. India's relations with China are improving, as seen in Premier Li Peng's visit in December 1991 as the first Chinese Prime Minister to visit India in 31 years, and in President Venkataraman's visit to China in May 1992 as the first Indian President ever to visit China.

In its relations with Japan, various events were held in 1992 to commemorate the 40th anniversary of the establishment of diplomatic relations between the two countries. In June 1992, Prime Minister Rao visited Japan as an official guest, and exchanged views on the international situation including bilateral affairs, and agreed to hold bilateral talks on nuclear non-proliferation. 


(2) Pakistan

In August 1991, a scandal broke out with disclosures of large loans from a financial cooperative to Prime Minister Sharif's family. Although opposition parties assailed the Sharif Administration, the problem was being settled through such solutions as an investigation by the Judiciary Committee. The most serious challenge for the Sharif Government has been how to restore law and order in Sind Province. Since the end of May 1992, Pakistani military forces have been deployed in a full-scale clean-up operation to combat dacoits (gangs of armed robbers), terrorists and criminals.

In August and September 1992, flood disasters killed more than 1,000 people and severely damaged crops including rice and cotton.

U.S. military and economic assistance to Pakistan has been suspended since October 1990 because of Pakistan's suspected nuclear programs. However, an amendment to the FY 1993 Foreign Assistance Appropriations Act passed by the U.S. Congress in October 1992 permitted the provision of aid for social sector development and food through Non-Governmental Organizations (NGOs). At the same time, the Amendment called on the U.S. Administration to submit reports not only on Pakistan but also on India and China to report on the status of nuclear non-proliferation concerning these countries.

After Afghanistan's President Mohammad Najibullah was ousted in April 1992, Pakistan has actively contributed to the settlement of the Afghan conflict, and has been strengthening its relations with the Muslim countries in Central Asia.

Prime Minister Sharif made an official working visit to Japan in December 1992, and in his meeting with Prime Minister Miyazawa, exchanged views on the international situation as well as on bilateral matters. 


(3) Bangladesh

The Zia Government in July 1991 proposed constitutional amendments to change the presidential system of some 16 years to a parliamentary one. This proposal was unanimously passed by parliament the following month. In the national referendum in September, 85 percent voted for the amendment proposal, which became effective the same month. Following the constitutional amendment, Abdul Rahman Biswas, the former Speaker of the Parliament, was selected by the parliament as the 11th President, and took office in October.

The Zia Government has tried to eradicate injustices and corruption, and put in place policies to break the political, administrative and economic deadlocks. Nevertheless, after the parliamentary elections of February 1991, university campuses were rocked with violence involving shootings and bloodshed as major student organizations allowed the infiltration by terrorists into campuses. Seven opposition parties, including the Awami League in August 1992, brought a no-confidence motion against the government, accusing it of being incapable of both addressing the deteriorating law and order situation and failing to resolve the Myanmar refugee problem. Yet, the motion was rejected by 168 votes to 122. In order to deal with terrorism, the Zia Government promulgated an anti-terrorism ordinance in September 1992, and in November had a law passed with the same intention.

Since 1991, the increasing flow of Muslims from Myanmar to Bangladesh has become a cause for concern. Agreement was reached on the repatriation of refugees during Myanmar Foreign Minister Ohn Gyaw's visit to Bangladesh in April 1992. Nevertheless, repatriation which was scheduled to be completed in six months from May is yet to be attained, as only 49 refugees were repatriated in September, 63 in October and 104 at the end of October, respectively. In September 1992, immediately after Prime Minister Zia's visit to India, 132 illegal "Bangladesh residents" were deported to Bangladesh. Bangladesh has criticized India, claiming that there are no illegal Bangladesh residents in India and that such deportation is an inhumane and unfriendly act. 


(4) Nepal

The Koirala Government established as a result of a general election in May 1991, had faced confrontations with the opposition Communist Party and demonstrations and strikes by the extreme leftists due to controversies over rising inflation and subsequent decline of living standards as well as public service salary hike and utility charge increase. Despite these problems, the ruling Nepali Congress Party won the local elections in cities and villages at the end of May 1992.

In 1992, the Koirala Government showed its willingness to promote economic liberalization. It announced a new industrial policy with the objectives of deregulating the licensing system and privatizing the public sector. It also announced a new trade policy to liberalize trade and gave convertibility to the Nepali rupee against foreign currencies. In addition, in July the same year, it announced the Eighth Plan (1992-1997).

In foreign affairs, Prime Minister Koirala visited India in December 1991, for his first official overseas trip since taking office. The two countries concluded new trade and transit treaties to replace the ones that had expired in 1989. Prime Minister Koirala also made an official visit to China in March 1992.

In recent years, there has been a large influx of Bhutanese of Nepali descent (about 75,000 at the end of September 1992) from the Southern part of Bhutan, against the background of the Government of Bhutan's policy obligating people to wear traditional Bhutan clothes and to use the Dzongkha language for education. This has become a major issue between the two countries.

Under the "Nepali Democratization Assistance" program, which Japan has been implementing since FY 1991, Minister of State for Finance Acharya visited Japan in September 1992. 


(5) Sri Lanka

The conflict persists between the Government forces and the Tamil guerrillas [the Liberation Tigers of Tamil Eelam (LTTE)], in the North and East of Sri Lanka, and little prospects for a peaceful solution have been seen so far. Since the LTTE is suspected of assassinating India's former Prime Minister Rajiv Gandhi, previously sympathetic to the LTTE, is now intensifying the crackdown on the LTTE at home. Encouraged by India's attitude, the Sri Lankan Government is stepping up military operations to clean up the LTTE. At the same time, it has established the parliamentary select committee to give consideration to its political solution. President Ranasighe Premadasa further strengthened his power base by defeating an impeachment motion in August 1992. The President visited six other countries of the South Asian Association for Regional Cooperation (SAARC) as its chairman from September to October 1992, and exchanged views with the other leaders on SAARC cooperation and bilateral relations.


6. Oceania 


6-1. Australia 


(1) Domestic and Foreign Policies

In December 1991, the Labor Party Caucus Meeting of Members of both Houses chose former Treasurer Paul Keating as leader and prime minister, replacing the incumbent Prime Minister Bob Hawke, who had been the leader since 1983. This ended intra-party feuds over the leadership that had been smoldering for a long time, and led to a united front for the next general election (scheduled to be held by May 1993).

The biggest domestic challenge for Prime Minister Keating is to restore public support for Labor, which has fallen sharply against the background of the high unemployment rate (about 11 percent), the worst since World War II. Toward that goal, Prime Minister Keating announced a series of new economic measures. In his policy statement - "One Nation" - in February 1992, Prime Minister Keating launched employment creation measures through large-scale fiscal expansion and tax cut policies. In July, he set up a youth training scheme (which permits lower wages than previously on condition that training is provided) to combat youth unemployment, which is said to have reached 35 percent. The FY 92 budget was announced in August centering upon fiscal measures. The effects of these measures are yet to be seen, yet there are signs of recovery from the recession, which began in the middle of 1990. In the fourth quarter of 1991, the economy showed positive growth, though small, for the first time since the beginning of the recession. In the third quarter of 1992, the real GDP grew by 0.5 percent (annualized rate of 2.0 percent) over the previous period.

In the field of diplomacy, Prime Minister Keating is vigorously promoting the Asia-Pacific oriented policy which was initiated by former Prime Minister Hawke, who regarded Australia as an Asia-Pacific nation. Mr. Keating made his first overseas visits as Prime Minister to Indonesia in April 1992 and Papua New Guinea in May. After participating in the South Pacific Forum held in the Solomon Islands in July, he visited Japan, Singapore and Cambodia in September. He also proposed the Heads of Government meetings based on the Asia Pacific Economic Cooperation (APEC) membership, demonstrating both at home and abroad the importance he attaches to the Asia-Pacific region. In addition to this Asia-Pacific oriented policy, Prime Minister Keating has also appealed to the domestic public that Australians should recognize that their country is an Asia-Pacific nation by advocating that Australia become a republic, ending the constitutional monarchy under which Britain's Queen Elizabeth II is Head of State, and that the Union Jack be removed from Australia's national flag. 


(2) Relations with Japan

The Japan-Australian relations have smoothly advanced, centering on the traditional complementary trade relations. In recent years, other broad links, including cultural and personnel exchanges, have also developed.

Japan is Australia's largest trading partner accounting for approximately 22 percent of Australia's trade by value while Australia is the sixth largest trading partner for Japan, with approximately 3.5 percent of its trade. With its rich mineral resources and large agricultural production, Australia plays a major role in Japan's economic expansion as a stable supplier of resources. Approximately 530,000 Japanese visited Australia in 1991, and more than 100,000 Australians study the Japanese language. Australia opened four consulates in Fukuoka, Nagoya, Sendai and Sapporo in 1992, which are expected to further promote exchanges between the two countries.

With such favorable bilateral relations, Japan and Australia, as industrialized democracies in the Asia-Pacific region, are cooperating to achieve their common goals of peace and prosperity, maintenance and strengthening of the free trading system, and solving such global problems as the environment, arms control and disarmament.

The visit of Prime Minister Keating in September 1992 to Japan provided a meaningful opportunity for the two government leaders to reaffirm the importance of their partnership in the Asia-Pacific region. Prime Minister Miyazawa and Prime Minister Keating ex-changed views on the future of the Asia-Pacific region and, as a result, announced the "Joint Press Statement on Asia-Pacific Perspectives." In this statement, the two leaders confirmed that their enhanced bilateral relations will be beneficial to the future of the Asia-Pacific region and issued their common viewpoints on a variety of issues such as regional situations and the free trading system. For instance, they both recognized that the U.S. involvement is extremely important for the region's prosperity, agreed to give a top priority to an early and successful conclusion of the Uruguay Round, and supported APEC as an essential mechanism for open regional economic cooperation. Prime Minister Miyazawa also welcomed the Australian initiative with regard to the APEC Heads of Government meetings, agreeing that this initiative will be pursued through consultations with other countries in the region. Prime Minister Keating expressed his support for Japan's strengthening its political role in the international community, and welcomed its decision to participate in U.N. Peace-keeping Operations. He confirmed Australia's support for Japan's permanent membership in the U.N. Security Council. 


6-2. New Zealand


In November 1990, the National Party returned to power after a period of six years. Prime Minister James Bolger vigorously pursued economic reforms, centering on the liberalization of the labor market, under the slogan of "From Welfare State to Enterprise State." With a favorable trend in exports, the economy appeared to be on an upward trend, registering a positive GDP growth in the July-September quarter of 1991.

In the domestic political field, main minority parties formed an "alliance" in the domestic political scene which had been dominated by the two major parties, the National Party and the Labor Party. This "alliance" did well in the February 1992 by-election. As a result of the referendum on the electoral system in September 1992, it was decided to have a national referendum again during the next general election scheduled for the fall of 1993 on its electoral system after 1996.

In the diplomatic arena, New Zealand was elected as a non-permanent member of the U.N. Security Council in October 1992. In addition, New Zealand has continued its efforts to improve its relations with the United States damaged by its non-nuclear policy. Regarding the non-nuclear policy, a special committee on the safety of nuclear-powered ships, set up in October 1991, concluded that the stopover of nuclear-powered vessels in New Zealand ports was safe. This report was made public by the Government in December 1992.

Japan and New Zealand enjoy a mutually stable trade relationship based on their complementary economic and trade structures. New Zealand supplies agricultural products to Japan. Japan is the second largest destination for New Zealand exports (15.3 percent by value) and the third largest origin of its imports (15.2 percent). Recently, New Zealand has enjoyed a trade surplus with Japan, which was \99.7 billion in 1991. To make its economy more internationally competitive, New Zealand has been trying to develop closer trade and investment relations with Asia, particularly with Japan, where trade and investment have considerably grown. Personnel and cultural exchanges are also expanding. The number of Japanese visiting New Zealand reached 110,000, and the number of New Zealanders studying the Japanese language exceeded 15,000.

In November 1991, Deputy Prime Minister and Minister of External Relations and Trade, Don McKinnon, visited Japan and exchanged views with Japanese Government leaders including Prime Minister Miyazawa. The New Zealand side expressed its support and cooperation for Japan's participation in the U.N. Peace-keeping Operations. 


6-3. South Pacific Island Countries


As the South Pacific region is a vast oceanic region adjacent to Japan, the peace and stability of this region as well as the development of friendly relations with the countries of the region have an important bearing on Japan.

In recent years, the island countries have increased their regional cooperation on issues of common concern especially on economic development, fishery and the environment issues. The South Pacific Forum (SPF) and the South Pacific Commission (SPC), major organizations for regional cooperation, are endeavoring to overcome economic vulnerability of these countries due to their small and scattered territories. Japan is making efforts to strengthen its relations with these organizations. Specifically, Japan has been participating annually in the Post-Forum dialogues immediately after the meeting of the SPF since 1989. In FY 1992, Japan increased its annual contribution to the Forum Secretariat to $500,000 from its previous amount of $400,000 which had been annually disbursed since 1988. As for the SPC, Japan has been attending its plenary and other sessions as an observer, and extend grant assistance to SPC facilities.

In Papua New Guinea, which has the largest population and economy in the region, the Bougainville issue is yet to be solved. This issue concerns claims for secession by the island of Bougainville. There was also an incident in which Papua New Guinean troops crossed into territory of the Solomon Islands, which adversely affected their relationship.

Fiji, which serves as the center for regional cooperation by hosting many regional cooperation organizations including the SPF Secretariat, held its first general election in May 1992 under the new Constitution promulgated in July 1990 after two coups d'etat in 1987. As a result of the election, the Fijian Political Party became the leading party, and its leader, Mr. Sitiveni Rabuka, was elected as Prime Minister.

In December 1991, the Marshall Islands established an Embassy in Tokyo.


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Note : While the United States takes the policy to neither confirm nor deny the whereabouts of its nuclear weapons, North Korea insisted that U.S. nuclear weapons were deployed in the ROK and demanded their withdrawal.

Note : An indicator on the repayment capability of external debts. It is the ratio of the annual debt repayment amount (the principal and interest payments) to the annual total export value (goods and services).

Note : In the ASEAN Post-Ministerial Conferences, there is a general meeting between ASEAN and seven regional partners (Japan, the United States, Canada, the Republic of Korea, Australia, New Zealand and the EC), as well as individual conferences between the extra-regional countries and ASEAN.

Note : Heads of State/Government level meeting for consultation and cooperation among the developing countries, consisting of 12 NAM countries and Argentina, Brazil and Mexico from the G-77 group of developing countries.

Note : This policy aims to achieve economic development by learning from the work ethics and diligence of the peoples of Japan and South Korea to better develop Malaysian resources. It was proposed by Prime Minister Mahathir in 1981.

Note : Due to Prince Sihanouk's appointment as President of the SNC, his son, Prince Norodom Ranariddh became the leader of his party.

Note : A dispute between Hindus and Muslims over a move to construct a Hindu temple on the sacred land of Ayodhya in North India where a mosque stood.