Diplomatic Bluebook 2001
Chapter III. REGIONAL DEVELOPMENTS

1. ASIA AND THE PACIFIC

A. China and Its Vicinity

1. Domestic Politics and Economy

The year 2000 was the final year of China's three-year plan for the reform of state-owned enterprises, the financial system, and administrative bodies. Reforming state-owned enterprises was foreseen as the most difficult task given the enormous unemployment which would result. However, the government announced in January 2001 that this goal had basically been achieved. The government's overall emphasis in 2000 was on domestic stability in the lead-up to the 10th Five-Year Plan, due to be launched in 2001, and the 16^th National People's Congress in 2002.

At the same time, the further permeation of market economy has been accompanied by increasingly severe cases of government and party corruption. As this bears the potential to shake the government's political footing, the government is working to expose corruption, and has meted out a string of harsh punishments, including the death penalty for some senior party executives. Programs are also underway to tighten up party ideology, among them "education about the importance of studying, being political minded, and being honest and upright," and also the "Three Represents" campaign (according to which the Chinese Communist Party represents (1) advanced productivity, (2) advanced culture, and (3) the fundamental interests of the greater public). Crackdown continued on the Falun Gong group, which was outlawed in 1999.

The minority issue also remains a destabilizing factor in Chinese politics. In the case of Tibet, the 17^th Karmapa, one of China's Living Buddhas, secretly fled China for Northern India in early January, while in June, the Dalai Lama held talks with President Clinton in the United States. China lambasted the Dalai Lama, and used the White Paper on Tibetan Culture and other vehicles to stress the progress Tibet is making as a result of assistance from the government of China.

On the economic front, an investment and consumption recovery and an export boom pushed China's GDP growth rate up to eight percent (preliminary figure), and the balance sheets of state-owned enterprises also improved. Key challenges for the Chinese economy include, however, industrial structural adjustment as China prepares to join the World Trade Organization (WTO), as well as the ongoing issues of promoting market economy and of working out bad debts. In October, the Fifth Plenum of the 15^th Central Committee of the Communist Party of China adopted a resolution on the 10th Five-Year Plan (2001-05), announced that development would be the premise in tackling economic issues, and called for a greater stress on agriculture, the Western China Development project, and the creation of an information society. The Western China Development project, spanning some 30 years, aims for the development of inland areas of China where economy falls far behind the coastal areas. It further aims for sustainable development of the Chinese economy as a whole and for resolving food and resource problems.

2. Foreign Relations

A peaceful international environment and favorable economic cooperation relations with other countries are critical for China to achieve economic development, which is the country's highest priority. China is, therefore, pursuing a vigorous omni-directional foreign policy course embracing its neighbors, the U.S., and Europe, as well as developing countries.

China-U.S. relations soured in 1999 in the wake of incidents such as the accidental bombing of the Chinese Embassy in Yugoslavia, but were gradually restored in 2000 through the resumption of military exchange (January), the U.S.-China Summit Meeting held on the margins of the UN Millennium Summit (September), and the passing of U.S. legislation providing for permanent normal trade relations with China (October). However, a number of unresolved issues remain between the two countries, including the U.S. National Missile Defense program, human rights, and the sale of arms to Taiwan.

China and Russia strengthened both economic and political ties in 2000 through events such as Russian President Putin's July visit to China. Chinese President Jiang Zemin attended the Shanghai Five Meeting (China, Russia, the Kyrgyz Republic, Kazakhstan, and Tajikistan) in July, further deepening ties with Russia and Central Asia.

In terms of relations with neighboring countries, General Secretary of the Korean Workers' Party Kim Jong Il paid an unofficial visit to China in May (and again in January 2001), signaling a swift improvement of China-North Korea relations.

From India, President Kocheril Raman Narayanan visited China in May. (Chairman of the National People's Congress Li Peng visited India in January 2001, the first visit from a Chinese leader in around four years, with China-India relations improving.) Vietnamese President Tran Duc Luong visited China in December, resolving the issue regarding border delineation in the Gulf of Tonkin. Sino-Africa cooperation meetings were held in Beijing in October, strengthening China's cooperative ties with the African countries.

China continues to demonstrate a comparatively forward-looking stance on Asian regional cooperation, particularly in the economic arena, and agreed at the ASEAN+3 (Japan, China, the ROK) Summit in November to regularize the event.

3. Hong Kong and Taiwan

In Hong Kong, the "one country, two systems" principle*1 has basically been functioning smoothly since the reversion of Hong Kong to China's sovereignty in 1997. Although its economy is showing signs of recovery, Hong Kong continues to experience a real estate slump, deflation, and high unemployment.

In terms of China-Taiwan relations, China released the so-called White Paper on Taiwan in February in the lead-up to the March "presidential" elections in Taiwan, indicating that China would use force if Taiwan postponed unification negotiations indefinitely. The March elections were won by the Democratic Progressive Party (DPP) leader Chen Shuibian, displacing the Nationalist Party, or the Kuomintang (KMT), which had held power in Taiwan for more than 50 years. Since his inauguration, the new "President" has taken a cautious stance on cross-Strait relations, and China has expressed disappointment at his failure to explicitly accept the principle of "one China." Prospects therefore remain dim for cross-Strait talks. (However, the Taiwanese authorities partially lifted the ban on direct telecommunications, trade, and navigation with mainland China as of January 2001, applicable only to the two islands of Jinmen Dao and Mazu Liedao ["mini tri-links"].) "President" Chen has not found his term to be plain sailing, with, for example, the ruling DPP holding only around 31 percent of the Taiwanese "Legislative Yuan" (around 51 percent of seats belong to the KMT), and resistance from the opposition in October to the suspension of construction of Taiwan's fourth nuclear reactor.

4. Mongolia

Mongolia held its third general elections in July, sweeping the opposition Mongolian People's Revolutionary Party into power with 72 of the 76 parliamentary seats. The ruling party has retained a stable hold over domestic politics, with the exception of discord among the parliament, the President, and the Constitutional Court over the legality of Constitutional amendments allowing members of parliament to also serve as Ministers. In terms of foreign policy, Russian President Putin became the first Russian leader to visit Mongolia in 26 years, the Soviet Union era included, strengthening ties between the two countries.

B. Korean Peninsula

1. ROK Politics

In April, the Republic of Korea (ROK) held the National Assembly election, which could be regarded as an interim assessment of the Kim Dae Jung administration. Earlier, in February, the United Liberal Democrats (ULD), part of the coalition government since the administration's inception in 1998, left the coalition on the grounds that movements by civilian groups to drive certain politicians out of power had also been targeting Honorary President Kim Jong Pil, probably with the backing of President Kim Dae Jung, and that the Millennium Democratic Party candidates had run in the ULD's constituency. As a result of the election, the opposition Grand National Party became the leading party, albeit without a working majority, placing the ruling Millennium Democratic Party in a difficult position in terms of running the country. After the election, President Kim Dae Jung designated ULD President Lee Han-dong as Prime Minister, effectively restoring de facto cooperative relations with the ULD in the absence of a formal coalition agreement and administering affairs of state accordingly. (Restoration of the coalition with the ULD was formally agreed in January 2001.)

The inter-Korean Summit Meeting in June temporarily boosted the support rating for the current administration, but public criticism of economic deterioration, the biased allocation of political posts,*2 and the government's policy toward North Korea (perceived as an appeasement policy) pulled down the 70-percent support rating enjoyed by the President on his inauguration in late 2000 to around 30 percent by the end of the year. On October 13, it was decided to award the Nobel Peace Prize to President Kim Dae Jung in recognition of his many years of dedication to democratizing the ROK and improving North-South Korean relations. In the days after the announcement, the ROK government hoped to use the festive mood enveloping the country to rally its ailing support, but the existing strong dissatisfaction with the economy saw the bright domestic mood dim even before the award ceremony in December, leaving the government's support rating unchanged.

Confrontation between the ruling and opposition parties deepened in the National Assembly over the handling of various sensitive issues, including a 40-day lull in the middle of the regular September session. Even after the session resumed, the opposition and ruling parties failed to come to terms, and an extraordinary session was convened at the end of the year which ran over the New Year.

2. ROK Economy

Recovering from the 1997 crisis at an astonishing pace, the Republic of Korea (ROK) economy was buoyed up in the first half of 2000 by venture businesses and the Information and Communication Technology (IT) industry, but skyrocketing crude oil prices and the entry of the U.S. stock market into an adjustment phase caused ROK stock prices to tumble from the third quarter onward and persuaded consumers to hold off on their purchases, gradually squeezing the economy. Nevertheless, the macroeconomy is not in a serious condition, maintaining an annual economic growth rate of 8.8 percent (preliminary figure), a US$11.8 billion trade surplus, and foreign reserves of US$96.2 billion as of the end of 2000. Economic conditions are expected to remain robust in 2001, but the impact of growing opposition of domestic labor unions to structural reform needs to be watched.

3. ROK Foreign Relations

The ROK government has sustained liaison and coordination with Japan and the U.S. in pursuing its policy toward North Korea. (In the context of relations with the U.S., bilateral negotiations on amendment of the ROK-U.S. Status of Forces Agreement were concluded in January 2001.) The ROK is also working to strengthen its relations with China, Russia, and other key countries. In terms of regional efforts, the ROK served successfully as Chair of the Third Asia-Europe Meeting (ASEM 3) in October, and, on the margins of the ASEAN+3 Summit in November, the ROK also hosted the Japan-China-ROK Summit, at which leaders agreed to regularize the event.

C. Southeast Asia

1. Association of Southeast Asian Nations (ASEAN)

Completion of the "ASEAN 10" elevated ASEAN into a regional cooperation body embracing all Southeast Asia. On the other hand, the larger grouping has made apparent economic disparities and problems arising from differences in political systems. In addition, the international trends of globalization and the Information and Communications Technology (IT) revolution have also widened intra-regional economic disparities and the digital divide. For ASEAN, it is increasingly important to maintain and strengthen its cohesiveness and to ensure its unity as a group.

At the Fourth Informal ASEAN Summit, held in November in Singapore, the 10 ASEAN leaders gathered around one table with an agenda focused on narrowing the disparities between new and old member countries and ensuring unity. They signed the e-ASEAN Framework Agreement to strengthen ASEAN's competitiveness in the field of IT and to bridge the information disparities within the ASEAN region. Leaders also discussed various projects promoting ASEAN's economic integration, and agreed on the importance of ASEAN's political cohesiveness.

2. Relations with ASEAN members*3

Prime Minister Obuchi visited Cambodia, Laos, and Thailand in January 2000, indicating Japan's willingness to cooperate in redressing intra-ASEAN disparities, to promote regional integration, as well as to continue providing assistance toward the development and prosperity of the ASEAN 10. The Prime Minister also listened to Asian views in the lead-up to the G8 Kyushu-Okinawa Summit. In the case of Cambodia in particular, with consultations between Cambodia and the UN stalling over the Khmer Rouge (KR) trial issue, Prime Minister Obuchi appealed directly to Cambodian Prime Minister Hun Sen to find a solution to the issue in a form which would meet the expectations of the international community, an important achievement in terms of subsequent progress. After Prime Minister Obuchi's visit, a basic agreement was reached in the Cambodia-UN consultations in July.

In Myanmar, the stalemate continued between the ruling State Peace and Development Council (SPDC) and the National League for Democracy (NLD), led by Daw Aung San Suu Kyi. Such promising signs as the re-opening of all universities in July were offset by harsh government measures such as preventing Daw Aung San Suu Kyi from traveling outside the capital in September and placing her under house arrest. A subsequent visit to Myanmar by the UN Secretary-General's Special Envoy Razali Ismail, who met with both high-ranking military government officials and Daw Aung San Suu Kyi, as well as other forms of approach from the international community increased the prospects for dialogue between the government and the NLD.

In the Philippines, President Joseph Estrada took over some of the policies of the former Ramos administration, while also addressing the alleviation of poverty, the restoration of civil order, and the elimination of corruption as key issues on his agenda. However, dissatisfaction with his cronyism caused the President's popularity to wane. An impeachment trial was subsequently held in the Senate in response to allegations that the President had accepted bribes and kickbacks from illegal gambling, provoking an increasingly strident call from the public for the President to be removed from office. (President Estrada was subsequently replaced by President Gloria Macapagal-Arroyo in January 2001.)

President Clinton visited Vietnam in November, which was the first visit by the President of the United States since the unification of North and South Vietnam. His visit provided the crowning touch to the improvement of the bilateral relationship between the United States and Vietnam which had continued since the normalization of their relations in July 1995.

D. Southwest Asia

1. Situation in Southwest Asia

The level of attention to Southwest Asia among the international community is increasing. In particular, India is rapidly developing its relations with Western countries and Southwest Asian countries. India's leading-edge information technology is also drawing attention worldwide.

However, the region still holds a number of unstable factors, such as the tensions between India and Pakistan, nuclear non-proliferation, and missile-launching tests. In particular, the tensions continued between India and Pakistan following the armed conflict in Kashmir in May 1999. Despite some positive moves,*4 full-fledged bilateral dialogue has been suspended.

In Pakistan, a military coup which took place in October 1999 was followed by the establishment of a military regime. The government has declared its intention to hold national elections before October 2002, and efforts have been made for democratization. As for Pakistan's economy, its international balance of payments had been deteriorating since the summer of 2000. In November of that year, International Monetary Fund (IMF) credit*5 to support the balance of payment was approved in relation to Pakistan, averting a critical situation for the time being.

In terms of the nuclear issue, India and Pakistan have continued to work to forge a national consensus in favor of signing the Comprehensive Nuclear-Test-Ban Treaty (CTBT).

2. Relations with Japan

In August, Prime Minister Mori visited Bangladesh, India, and Pakistan, marking the first visit to these three countries by a Japanese Prime Minister in 10 years. He also visited Nepal, which was the first visit ever by a Japanese Prime Minister. Prime Minister Mori was warmly welcomed by the people of these countries. This served as a reminder of the cordial relations between Japan and Southwest Asian countries and of these countries' high expectations of Japan. The main purpose of the visits was to enhance friendly and cooperative relations with these countries as the region becomes more important to Japan. In particular, Prime Minister Mori and Indian Prime Minister Vajpayee agreed to build a "Global Partnership between Japan and India in the 21st Century" which covers multifaceted cooperation in a wide range of areas. As part of the Global Partnership, the two leaders also agreed to promote IT-related cooperation.*6

Each country which Prime Minister Mori visited expressed high expectations regarding measures aimed at narrowing the digital divide and at countering infectious diseases-Japan's initiatives at the G8 Kyushu-Okinawa Summit. The countries also expressed high praise and appreciation to Prime Minister Mori for his announcement of various Japan-Southwest Asia exchange programs.*7 The leaders agreed to hold commemorative events in 2002 to mark the 50th anniversary of Japan's establishment of diplomatic relations with India, Pakistan, and Sri Lanka, and the 30th anniversary with Bangladesh. It is necessary to steadily implement these programs.

In terms of the nuclear issue, Japan continually urges India and Pakistan to make progress on issues relating to nuclear non-proliferation. Japan maintains economic measures against both countries. Prime Minister Mori urged anew the leaders of India and Pakistan to make progress in the areas of nuclear disarmament and non-proliferation, including the signing of the CTBT, regarding which the leaders confirmed the continuation of the nuclear test moratorium until the CTBT enters into force. Prime Minister Mori then pledged additional yen loans to two existing projects in India. In Pakistan, Prime Minister Mori expressed his willingness to consider positive steps for an additional yen loan to an existing project, taking into account such factors as the country's economic situation. In addition, before the Prime Minister's visit, Japan had tenaciously and strongly urged India and Pakistan at high levels to make progress on the nuclear issue, using every opportunity such as the visit by Ryutaro Hashimoto, Senior Foreign Policy Advisor to the Prime Minister, to India in February.

In terms of India-Pakistan relations, Japan hopes that both countries will continue their efforts toward a peaceful solution of the Kashmir issue through dialogue in accordance with the spirit of the Lahore Declaration.

E. Oceania

1. Situation in Oceania

Although Australia's response to the East Timor issue has caused some tensions between Australia and Indonesia since 1999, Australia continued its efforts to improve bilateral relations. Leaders of the two countries met in June and November 2000, and in December 2000, the Fifth Australia-Indonesia Ministerial Forum was held in Canberra where a joint plan of action was adopted to promote Indonesia's economic recovery.

The government of Australia reviewed its defense policies in 2000, a process which also involved public consultations and resulted in the December announcement of "Defense 2000: Our Future Defense Force," the first such White Paper in seven years. The White Paper identified five strategic objectives: (1) national defense; (2) fosterage of the stability, integrity, and cohesion of neighboring countries; (3) cooperation with Southeast Asian countries toward the promotion of stability and cooperation; (4) contribution to maintaining strategic stability in the Asia-Pacific region as a whole; and (5) cooperation with the international community, and especially the UN, to uphold global security. Defense spending was to grow by an average of about three percent per annum in real terms over the next 10 years to increase Australia's defense capability.

In New Zealand, the Clark administration took power at the end of 1999 on a platform of industrial promotion, public superannuation system review, higher-quality education, and environmental protection. It has since instituted such policies as increasing income tax rates and superannuation benefits for the elderly and canceling the purchase of F-16 fighters.

In the Pacific island region, Fiji faced a political crisis in May, followed by one in the Solomon Islands in June. In Fiji, the parliament was occupied by the armed group led by George Speight, a civilian advocating greater political advantage for indigenous Fijians, with 30 hostages taken including Prime Minister Mehendra Chaudhry (Indo-Fijian). The army subsequently seized power and abolished the existing Constitution. An interim civilian government headed by Laisenia Qarase was established in July. In the Solomon Islands, an anti-government armed group detained Prime Minister Bartholomew Ulufa'alu in his home in June. He later resigned, and Manasseh Sogavare, the leader of the opposition party, was elected as the new prime minister.

2. Relations with Japan

On April 22, Japan invited leaders and ministers from the 16 countries and regions belonging to the South Pacific Forum (now the Pacific Islands Forum (PIF)) to Miyazaki to attend the Pacific Island Leaders' Meeting (PALM 2000). Prime Minister Mori, who chaired the meeting, announced that Japan would advance the Pacific Common Frontiers Initiatives based on the keywords of "youth," "ocean," and "future," and also revealed a string of policies which Japan would take to realize these initiatives. At PALM 2000, the Miyazaki PALM Declaration and the Statement on Environment in the Pacific were adopted. The meeting marked a major step forward toward the further development of the partnership between Japan and the Pacific islands.

In November, State Secretary Katsuhito Asano participated in the 12th Post Forum Dialogue of the PIF in Kiribati. He discussed with leaders and ministers in the region how to further strengthen ties between Japan and the Pacific islands and sent a clear message of Japan's commitment to the Pacific Common Frontiers Initiatives.

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