Background Notes on Selected East Asian and Pacific Countries from the Department of State


Australia

PEOPLE

Australia's aboriginal inhabitants, a hunting-gathering people generally referred to as Australoids or Aborigines, arrived about 40,000 years ago. Although their technical culture remained static--depending on wood, bone, and stone tools and weapons--their spiritual and social life was highly complex. Most spoke several languages, and confederacies sometimes linked widely scattered tribal groups. Aboriginal population density ranged from 1 person per square mile along the coasts to 1 person per 35 square miles in the arid interior. Food procurement was usually a matter for the nuclear family and was very demanding, since there was little large game and they had no agriculture.

Australia may have been sighted by Portuguese sailors in 1601, and Capt. James Cook claimed it for the United Kingdom in 1770. At that time, the native population may have numbered 300,000 in as many as 500 tribes speaking many different languages. The aboriginal population currently numbers more than 300,000, representing about 1.7% of the population. Since the end of World War II, efforts have been made both by the government and by the public to be more responsive to aboriginal rights and needs.

Today, tribal aborigines lead a settled traditional life in remote areas of northern, central, and western Australia. In the south, where most aborigines are of mixed descent, movement to the cities is increasing.

Immigration has been essential to Australia's development since the beginning of European settlement in 1788. For generations, most settlers came from the British Isles, and the people of Australia are still predominantly of British or Irish origin, with a culture and outlook similar to those of Americans. However, since the end of World War II, the population has more than doubled; non-European immigration, mostly from the Middle East, Asia, and Latin America, has increased significantly since 1960 through an extensive, planned immigration program. From 1945 through 1996, nearly 5.5 million immigrants settled in Australia, and about 80% have remained; nearly one of every four Australians is foreign-born. Britain and Ireland have been the largest sources of post-war immigrants, followed by Italy, Greece, New Zealand, and the former Yugoslavia.

The 1970s saw progressive reductions in the size of the annual immigration program due to economic and employment conditions; in 1969-70, 185,000 persons were permitted to settle, but by 1975-76 the number had dropped to 52,700. Immigration has slowly risen since. In 1995-96, Australia accepted more than 99,000 regular immigrants. In addition, since 1990 about 7,500 New Zealanders have settled in Australia each year.

Australia's refugee admissions of about 12,000 per year are in addition to the normal immigration program. In recent years, refugees from Indochina and the former Yugoslavia have comprised the largest single element in Australia's refugee program.

Although Australia has scarcely more than two persons per square kilometer, it is one of the world's most urbanized countries. Less than 15% of the population live in rural areas.

Cultural Achievements

Much of Australia's culture is derived from European roots, but distinctive Australian features have evolved from the environment, aboriginal culture, and the influence of Australia's neighbors. The vigor and originality of the arts in Australia--films, opera, music, painting, theater, dance, and crafts--are achieving international recognition.

Australia has had a significant school of painting since the early days of European settlement, and Australians with international reputations include Sidney Nolan, Russell Drysdale, and Arthur Boyd. Writers who have achieved world recognition include Thomas Keneally, Colleen McCullough, Nevil Shute, Morris West, Jill Ker Conway, and Nobel Prize winner Patrick White. Australian movies are also well known.

HISTORY

Australia was uninhabited before stone-culture peoples arrived, perhaps by boat across the waters separating the island from the Indonesia archipelago about 40,000 years ago. Portuguese, Spanish, Dutch, and English explorers observed the island before 1770, when Captain Cook explored the east coast and claimed it for Great Britain (three American colonists were crew members aboard Cook's ship, the Endeavor).

On January 26, 1788 (now celebrated as Australia Day), the First Fleet under Capt. Arthur Phillip landed at Sydney, and formal proclamation of the establishment of the Colony of New South Wales followed on February 7. Many but by no means all of the first settlers were convicts, condemned for offenses that today would often be thought trivial. The mid-19th century saw the beginning of government policies to emancipate convicts and assist the immigration of free persons. The discovery of gold in 1851 led to increased population, wealth, and trade.

The six colonies that now constitute the states of the Australian Commonwealth were established in the following order: New South Wales, 1788; Tasmania, 1825; Western Australia, 1830; South Australia, 1836; Victoria, 1851; and Queensland, 1859.

Settlement had preceded these dates in most cases. Discussions between Australian and British representatives led to adoption by the British Government of an act to constitute the Commonwealth of Australia in 1900.

The first federal Parliament was opened at Melbourne in May 1901 by the Duke of York (later King George V). In May 1927, the seat of government was transferred to Canberra, a planned city designed by an American, Walter Burley Griffin. The first session of Parliament in that city was opened by another Duke of York (later King George VI). Australia passed the Statute of Westminster Adoption Act on October 9, 1942, which officially established Australia's complete autonomy in both internal and external affairs. Its passage formalized a situation that had existed for years. The Australia Act (1986) eliminated the last vestiges of British legal authority.

GOVERNMENT

The Commonwealth government was created with a constitution patterned partly on the U.S. Constitution. The powers of the Commonwealth are specifically defined in the constitution, and the residual powers remain with the states.

Australia is an independent nation within the Commonwealth. Queen Elizabeth II is the sovereign and since 1973 has been officially styled "Queen of Australia." The Queen is represented throughout Australia by a governor general and in each state by a governor.

The federal Parliament is bicameral, consisting of a 76-member Senate and a 148-member House of Representatives. Twelve senators from each state and two from each territory are elected for 6-year terms, with half elected every 3 years. The members of the House of Representatives are allocated among the states and territories roughly in proportion to population. In ordinary legislation, the two chambers have coordinate powers, but all proposals for appropriating revenue or imposing taxes must be introduced in the House of Representatives. Under the prevailing Westminster parliamentary system, the leader of the political party or coalition of parties that wins a majority of the seats in the House of Representatives is named prime minister. The prime minister and the cabinet wield actual power and are responsible to the Parliament, of which they must be elected members. General elections are held at least once every 3 years; the last general election was in October 1998.

Each state is headed by a premier, who is the leader of the party with a majority or a working minority in the lower house of the state legislature. Australia also has two self-governing territories, the Australian Capital Territory (where Canberra is located) and the Northern Territory, with political systems similar to those of the states.

At the apex of the court system is the High Court of Australia. It has general appellate jurisdiction over all other federal and state courts and possesses the power of constitutional review.

POLITICAL CONDITIONS

Three political parties dominate the center of the Australian political spectrum: the Liberal Party (LP), nominally representing urban business-related groups; the National Party (NP), nominally representing rural interests; and the Australian Labor Party (ALP), nominally representing the trade unions and liberal groups. Although embracing some leftists, the ALP traditionally has been moderately socialist in its policies and approaches to social issues. All political groups are tied by tradition to domestic welfare policies, mostly enacted in the 1980's, which have kept Australia in the forefront of societies offering extensive social welfare programs. Australia's social welfare safety net has been reduced in recent years, however, in response to budgetary pressures and a changing political outlook. There is strong bipartisan sentiment on many international issues, including Australia's commitment to its alliance with the United States.

The Liberal Party/National Party coalition came to power in the March 1996 election, ending 13 years of ALP government and electing John Howard Prime Minister. Re-elected in October 1998, the coalition now holds 80 seats (64 Liberal/16 National) in the House of Representatives, against 68 for the ALP and 1 independent. In the Senate, the Liberal/National coalition holds 37 seats (31 Liberal/6 national), against 28 for the ALP, 7 for the Australian Democrats, 2 for the Greens, and 2 for independents. The new Senators take their seats on July 1, 1999. Lacking a majority in the Senate, the Liberal/National coalition has relied on the smaller parties and independents to enact legislation. Howard's conservative coalition has moved quickly to reduce Australia's government deficit and the influence of organized labor, placing more emphasis on workplace-based collective bargaining for wages. The Howard government also has accelerated the pace of privatization, beginning with the government-owned telecommunications corporation. The Howard government has continued the foreign policy of its predecessors, based on relations with four key countries: the United States, Japan, China, and Indonesia. The Howard government strongly supports U.S. engagement in the Asia-Pacific region.

ECONOMY

The ongoing region-wide Asian financial crisis, which began in 1997, has created uncertainty and instability in Australia's economy.

Historically, the Australian economy has consisted of export-oriented agricultural and mining sectors coupled with a diversified manufacturing-service sector dedicated to domestic requirements. That pattern is changing slowly. Australia's developed economy is dominated by its services sector (65% of GDP), but it is the agriculture and mining sectors (8% of GDP) that account for the bulk of goods and services exports (57% in 1997). The Australian economy and balance of payments are strongly influenced by world prices for primary products.

Australia has immense mineral and energy resources. It is the world's leading exporter of coal and one of the world's leading producers and exporters of aluminum, alumina, bauxite, cobalt, copper, industrial diamonds, gold, iron ore, lead, nickel, silver, and uranium. In addition, abundant supplies of natural gas, liquid petroleum gas, and uranium make Australia a net exporter of energy products.

The manufacturing sector has been limited by Australia's small domestic market and labor force and relatively high labor costs fostered by strong unions. A broad-based manufacturing sector was developed, nonetheless, partly due to an extensive range of tariffs and other protective measures. The trade barriers that insulated domestic industry from foreign competition are, today, seen as having restrained the growth of industrial modernization and productivity. Since 1984, successive Australian governments have reduced or eliminated tariffs and sectoral-assistance measures. More recent macroeconomic reforms have boosted economic diversification, export orientation, and the manufacturing industries. Exports of elaborately transformed products are growing, and manufactures' share of total exports has increased. However, the relative size of the manufacturing sector has declined for several decades and in 1998 accounted for just under 14% of GDP.

Since the Australian dollar was floated and allowed to fall dramatically from 1984 to 1987, successive Australian governments have begun to make the manufacturing sector more competitive with imports and more capable of exporting overseas. Corporate taxes have been significantly reduced. Unions have agreed to gradual reductions in real wages. The financial sector has been liberalized and exposed to international competition. The national air carrier, QANTAS, and the Commonwealth Bank have been fully privatized. The national telecommunications carrier, Telstra, was one-third privatized in November 1997. By 1996, a program begun in 1988 had reduced most tariffs to 5%.

Foreign investment has been vital in the development of Australian ranching, transport, and manufacturing. The Australian Government welcomes foreign investment congenial to the Australian community, particularly if it is for export-oriented industries and creates employment opportunities. Some restrictions on foreign ownership exist for the media, civil aviation, mining, and certain kinds of real estate. In 1998, cumulative U.S. investment in Australia--the single-most important source of direct foreign investment in that country--totaled more than $72 billion and accounted for 24% of total foreign investment.

Australia suffered a significant recession in 1990-91, followed by rapid growth in 1992-94. Growth has slowed somewhat since, with the Australian economy experiencing a cyclical downturn during 1996-97. Real GDP growth is expected to reach 2.8% in 1998. Inflation, which reached 5.1% during the recovery, has now fallen significantly; in 1997 Australia recorded the first annual price deflation in 35 years. Unemployment continues to hover stubbornly above 8.0%, however, despite some job creation in the second half of 1997. The Howard government inherited a substantial budget deficit in 1996, but has since embarked on an ambitious fiscal consolidation program, which relies primarily on cutting government spending. The government announced an underlying budget surplus, which removes debt repayments and assets from the headline balance, of $1.6 billion for FY 1998-99, and a substantial headline budget surplus. Australia's trade deficit fell during 1995 and 1996, but is projected to reach $3 billion in 1998. Australia's net foreign debt has averaged 30%-40% of GDP for several decades and totaled $150 billion (39.7% of GDP) at the end of 1997. Australia's external public debt was $38 billion at the end of 1997. The public sector accounts for 26% of Australia's gross external debt; the remainder is the responsibility of the private sector.

Over the long term, Australia's economic prospects generally are bright. The successful conclusion of the GATT Uruguay Round of trade liberalization negotiations should boost overall economic activity, exports, and employment. In addition, the integration of the Australian economy into the rapidly growing Asia-Pacific region and increasing emphasis on using the Asia-Pacific Economic Cooperation (APEC) forum to advance regional economic liberalization should boost future growth.

FOREIGN RELATIONS

Australia has been active in international affairs since World War II. Its first major independent foreign policy action was to conclude an agreement in 1944 with New Zealand dealing with the security, welfare, and advancement of the people of the independent territories of the Pacific (the ANZAC pact). After the war, Australia played a role in the Far Eastern Commission in Japan and supported Indonesian independence during that country's revolt against the Dutch (1945-49). Australia was one of the founders of both the United Nations and the South Pacific Commission (1947), and in 1950, it proposed the Colombo Plan to assist developing countries in Asia. In addition to contributing to UN forces in Korea (it was the first country to announce it would do so after the United States), Australia sent troops to assist in putting down the communist revolt in Malaya in 1948-60 and later to combat the Indonesian-supported invasion of Sarawak in 1963-65. Australia also sent troops to assist South Vietnamese and U.S. forces in Vietnam and joined coalition forces in the Persian Gulf conflict in 1991. Australia has been active in the Australia-New Zealand-U.K. agreement and the Five-Power Defense Arrangement--successive arrangements with Britain and New Zealand to ensure the security of Singapore and Malaysia.

One of the drafters of the UN Charter, Australia has given firm support to the United Nations and its specialized agencies. It was a member of the Security Council in 1986-87, a member of the Economic and Social Council for 1986-89, and a member of the UN Human Rights Commission for 1994-96. Australia takes a prominent part in many other UN activities, including peacekeeping, disarmament negotiations, and narcotics control. Australia also is active in meetings of the Commonwealth Regional Heads of Government and the South Pacific Forum, and has been a leader in the Cairns Group (countries pressing for agricultural trade reform in the Uruguay Round of the General Agreement on Tariffs and Trade (GATT) negotiations) and in the APEC forum.

Australia has devoted particular attention to relations between developed and developing nations, with emphasis on the countries of the Association of South East Asian Nations (ASEAN)--Indonesia, Singapore, Malaysia, Thailand, the Philippines, and Brunei--and the island states of the South Pacific. Australia is an active participant in the ASEAN Regional Forum (ARF), which promotes regional cooperation on security issues. Australia has a large bilateral aid program (about $1.3 billion for 1997-98, mostly in the form of grants) under which some 60 countries receive assistance. Papua New Guinea (PNG), a former Australian trust territory, is the largest recipient of Australian assistance. In 1997, Australia contributed to the IMF program for Thailand, and assisted Indonesia and PNG with regional environmental crises.

ANZUS AND DEFENSE

The Australia, New Zealand, United States (ANZUS) security treaty was concluded at San Francisco on September 1, 1951, and entered into force on April 29, 1952. The treaty bound the signatories to recognize that an armed attack in the Pacific area on any of them would endanger the peace and safety of the others. It committed them to consult in the event of a threat and, in the event of attack, to meet the common danger in accordance with their respective constitutional processes. The three nations also pledged to maintain and develop individual and collective capabilities to resist attack.

In 1985, the nature of the ANZUS alliance changed after the Government of New Zealand refused access to its ports by nuclear-weapons-capable and nuclear-powered ships of the U.S. Navy. The United States suspended defense obligations to New Zealand, and annual bilateral meetings between the U.S. Secretary of State and the Australian Foreign Minister replaced annual meetings of the ANZUS Council of Foreign Ministers. The first bilateral meeting was held in Canberra in 1985. At the second, in San Francisco in 1986, the United States and Australia announced that the United States was suspending its treaty security obligations to New Zealand pending the restoration of port access. Subsequent bilateral Australia-U.S. Ministerial (AUSMIN) meetings have alternated between Australia and the United States. The 12th AUSMIN meeting took place in Sydney in July 1998.

The U.S.-Australia alliance under the ANZUS treaty remains in full force. Defense ministers of one or both nations often have joined the annual ministerial meetings, which are supplemented by consultations between the U.S. Commander in Chief Pacific and the Australian Chief of Defense Force. There also are regular civilian and military consultations between the two governments at lower levels.

Unlike NATO, ANZUS has no integrated defense structure or dedicated forces. However, in fulfillment of ANZUS obligations, Australia and the United States conduct a variety of joint activities. These include military exercises ranging from naval and landing exercises at the task-group level to battalion-level special forces training, assigning officers to each other's armed services, and standardizing, where possible, equipment and operational doctrine. The two countries also operate several joint defense facilities in Australia.

The Australian Defense Force numbers about 56,600 personnel on active duty, but projected cuts will reduce that force to 50,000 by 2000. Personnel strength is currently 25,600 in the Army, 14,300 in the Navy, and 16,700 in the Air Force. The Royal Australian Navy's front-line fleet currently comprises 3 guided-missile destroyers, 6 guided-missile frigates (including the first of the new Australian-built ANZAC class), 1 destroyer escort and 4 submarines--2 of the older Oberon-class and 2 of the new, indigenous Collins class. Up to 6 Collins-class vessels are to be built. The F/A-18 fighter, built in Australia under license from the U.S. manufacturer, is the principal combat aircraft of the Royal Australian Air Force, backed by U.S.-built F-111 strike aircraft.


Hong Kong

HISTORY

According to archaeological studies initiated in the 1920s, human activity on Hong Kong dates back over five millennia. Excavated Neolithic artifacts suggest an influence from northern Chinese Stone Age cultures, including the Longshan. The territory was settled by Han Chinese during the seventh century, A.D., evidenced by the discovery of an ancient tomb at Lei Cheung Uk in Kowloon. The first major migration from northern China to Hong Kong occurred during the Song Dynasty (960-1279).

The British East India Company made the first successful sea venture to China in 1699, and Hong Kong's trade with British merchants developed rapidly soon after. Despite Chinese laws prohibiting opium since 1799, the British pursued and monopolized its trade until 1834. Concerned about the rapid increase of opium in China, the Qing Government sought to eradicate the drug trade. When Chinese officials seized and destroyed large quantities of opium, the British sent forces in 1840 to support demands for a commercial treaty or cession of an island for the safety of British nationals; this sparked the First Opium War. China lost the war; subsequently, Britain and other Western powers, including the United States, forcibly occupied "concessions" and gained special commercial privileges. Hong Kong was ceded to Britain in 1842 under the Treaty of Nanking.

Disputes over former treaties and the Chinese boarding of the British ship Arrow started the Second Opium War (also known as the Lorcha Arrow War), which lasted from 1856 to 1858. The Convention of Beijing, signed in 1860, formally ended the hostilities and granted the British a perpetual lease on the Kowloon Peninsula. The United Kingdom was concerned that Hong Kong could not be defended unless surrounding areas were also under British control; in 1898, it executed a 99-year lease of the New Territories, significantly expanding the size of the Hong Kong colony.

In the late 19th century and early 20th centuries, Hong Kong developed as a warehousing and distribution center for U.K. trade with southern China. After the end of World War II and the communist takeover in mainland China in 1949, hundreds of thousands of people emigrated from China to Hong Kong. This helped Hong Kong become an economic success and a manufacturing, commercial, and tourism center. High life expectancy, literacy, per capita income, and other socioeconomic measures attest to Hong Kong's achievements over the last four decades.

GOVERNMENT

The Hong Kong Special Administrative Region (SAR) is headed by Chief Executive Tung Chee Hwa. Mr. Tung assumed office on July 1, 1997 following his election by a 400-member Selection Committee comprised of prominent Hong Kong residents. In May 1998, Hong Kong voters elected 60 members of the SAR's first Legislative Council. The Basic Law, Hong Kong's "mini-Constitution," states that the first Legislative Council shall consist of 20 directly elected members, 30 members elected by functional (occupational) constituencies, and 10 elected by an electoral college. The May 1998 elections were seen as free, open and widely contested, despite discontent among mainly pro-democracy politicians over the Government's "rollback" of the franchise in some functional constituencies and limitation on the number of directly elected seats. The Civil Service maintains its quality and neutrality, operating without discernible direction from Beijing.

POLITICAL CONDITIONS

On July 1, 1997, China resumed the exercise of sovereignty over Hong Kong, ending more than 150 years of British colonial control. The government of Chief Executive Tung Chee Hwa was also installed on that date. Thus far, the transition to Chinese sovereignty has been smooth. Hong Kong remains a free, open society with an independent judiciary.

The Sino-British Joint Declaration, signed in December 1984 after 2 years of negotiations, provided the framework for this peaceful transfer of sovereignty. The agreement stipulated that Hong Kong would become a Special Administrative Region of the People's Republic of China on July 1, 1997 but would retain a high degree of autonomy in all matters except foreign and defense affairs. The Joint Declaration further stated that for 50 years after reversion Hong Kong would retain its political, economic, and judicial systems, and could continue participating in international agreements and organizations under the name, "Hong Kong, China."

The Basic Law, which established Hong Kong's post-reversion political and legal structure and serves as a mini-constitution for the Hong Kong Special Administrative Region, was promulgated by the Chinese National People's Congress in April 1990 after 5 years of deliberation.

ECONOMY

The ongoing region-wide Asian financial crisis, which began in 1997, has created uncertainty and instability in Hong Kong's economy. Hong Kong is in recession, with 1998 GDP expected to decline 4% and both stock market and property prices off 50%. Private consumption, after increasing by 6.7% in 1997, is expected to decline by 4.5% in 1998. Unemployment is up to 5% from 2.2% in 1997. In August 1998, the government intervened in the stock, futures, and currency markets to fend off "manipulators," terming the move a one-time divergence from its usual adherence to non-interventionist, market-oriented policies. The banking sector remains solid and the government is committed to the U.S./Hong Kong dollar link.

Hong Kong has little arable land and virtually no natural resources, including water for agriculture. Agriculturally, it is less than 20% self-sufficient, with shortages of rice and wheat. However, its magnificent harbor has facilitated rapid development of foreign trade. Hong Kong's principal trading partners include China, the United States, Japan, Taiwan, Germany, Singapore, and South Korea. With its modern communications, transportation, and banking facilities, as well as extensive expertise in trade and investment with China, Hong Kong has joined the front ranks of East Asia's newly industrialized economies. In 1997, Hong Kong's gross domestic product (GDP) was $172 billion.

After a period of very rapid growth between 1986-88, economic austerity and the Chinese Government's crackdown in Tiananmen Square in 1989 reduced Hong Kong's growth to 2.6% in 1989 and 3.4% in 1990. Growth rebounded to more than 5.1% in 1991 and to 6.1% in 1993 and continued to grow steadily until the first quarter of 1998, when Hong Kong experienced negative growth for the first time since 1984, with declines in construction, retail sales and tourism.

Hong Kong has enjoyed economic growth in the past because of its strong manufacturing sector, but in recent years the service sector has surpassed it in importance. The major components of Hong Kong's service trade are shipping, civil aviation, tourism, and various financial services.

FOREIGN RELATIONS

Hong Kong's foreign relations and defense are the responsibility of China.

China has granted Hong Kong considerable autonomy in economic and commercial relations. Hong Kong continues to be an active, independent member of the World Trade Organization (WTO) and the Asia-Pacific Economic Cooperation (APEC) forum.


Indonesia

PEOPLE

Indonesia's 201 million people make it the world's fourth-most populous nation. The island of Java is one of the most densely populated areas in the world, with more than 107 million people living in an area the size of New York State. Indonesia includes numerous related but distinct cultural and linguistic groups, many of which are ethnically Malay. Since independence, Bahasa Indonesian (the national language, a form of Malay) has spread throughout the archipelago and has become the language of most written communication, education, government, and business. Many local languages are still important in many areas, however. English is the most widely spoken foreign language.

Education is free and compulsory for children between ages 6 and 12. Although about 92% of eligible children are enrolled in primary school, a much smaller percentage attend full time. About 44% of secondary school-age children attend junior high school, and some others of this age group attend vocational schools.

Constitutional guarantees of religious freedom apply to the five religions recognized by the state, namely Islam (87%), Protestantism (6%), Catholicism (3%), Buddhism (2%), and Hinduism (1%). In some remote areas, animism is still practiced.

HISTORY

By the time of the Renaissance, the islands of Java and Sumatra had already enjoyed a 1,000-year heritage of advanced civilization spanning two major empires. During the 7th-14th centuries, the Buddhist kingdom of Srivijaya flourished on Sumatra. At its peak, the Srivijaya Empire reached as far as West Java and the Malay Peninsula. Also by the 14th century, the Hindu Kingdom of Majapahit had risen in eastern Java. Gadjah Mada, the empire's chief minister from 1331 to 1364, succeeded in gaining allegiance from most of what is now modern Indonesia and much of the Malay archipelago as well. Legacies from Gadjah Mada's time include a codification of law and an epic poem.

Islam arrived in Indonesia sometime during the 12th century and, through assimilation, supplanted Hinduism by the end of the 16th century in Java and Sumatra. Bali, however, remains overwhelmingly Hindu. In the eastern archipelago, both Christian and Islamic proselytizing took place in the 16th and 17th centuries and, currently, there are large communities of both religions on these islands.

Beginning in 1602, the Dutch slowly established themselves as rulers of present-day Indonesia, exploiting the weakness of the small kingdoms that had replaced that of Majapahit. The only exception was East Timor which remained under Portugal until 1975. During 300 years of Dutch rule, the Dutch developed the Netherlands East Indies into one of the world's richest colonial possessions.

During the first decade of this century, an Indonesian independence movement began and expanded rapidly, particularly between the two World Wars. Its leaders came from a small group of young professionals and students, some of whom had been educated in the Netherlands. Many, including Indonesia's first president, Sukarno, were imprisoned for political activities.

The Japanese occupied Indonesia for 3 years during World War II and, for their own purposes, encouraged the nationalist movement. Many Indonesians took up positions in the civil administration that had been closed to all but token rulers under the Dutch. On August 17, 1945, 3 days after the Japanese surrender to the Allies, a small group of Indonesians, led by Sukarno -- the country's first truly national figure and first president (1945-1967) -- proclaimed independence and established the Republic of Indonesia. Dutch efforts to reestablish complete control met strong resistance. After 4 years of warfare and negotiations, the Dutch transferred sovereignty to a federal Indonesian Government. In 1950, Indonesia became the 60th member of the United Nations.

Shortly after hostilities with the Dutch ended in 1949, Indonesia adopted a new constitution providing for a parliamentary system of government in which the executive was chosen by and made responsible to parliament. Parliament was divided among many political parties before and after the country's first nationwide election in 1955, and stable governmental coalitions were difficult to achieve.

At the time of independence, the Dutch retained control over the western half of New Guinea, known as Irian Jaya. Negotiations with the Dutch on the incorporation of West Irian into Indonesia failed, and armed clashes broke out between Indonesian and Dutch troops in 1961. In August 1962, the two sides reached an agreement, and Indonesia assumed administrative responsibility for Irian Jaya on May 1, 1963. An Act of Free Choice, held in Irian Jaya under UN supervision in 1969, confirmed the transfer of sovereignty to Indonesia.

From 1524 to 1975, East Timor was a Portuguese colony on the island of Timor, separated from Australia's north coast by the Timor Sea. As a result of political events in Portugal, Portuguese authorities abruptly withdrew from Timor in 1975, exacerbating power struggles among several Timorese political factions. An avowedly Marxist faction called "Fretilin" achieved military superiority. Fretilin's ascent in an area contiguous to Indonesian territory alarmed the Indonesian Government, which regarded it as a threatening movement. Following appeals from some of Fretilin's Timorese opponents, Indonesian military forces intervened in East Timor and overcame Fretilin's regular forces in 1975-1976. Small-scale guerrilla activity persists to this day. Indonesia declared East Timor its 27th province in 1976.

Unsuccessful rebellions on Sumatra, Sulawesi, and other islands beginning in 1958 plus a long succession of short-lived national governments weakened the parliamentary system. Consequently, in 1959, when President Sukarno revived the 1945 constitution, which gave broad presidential powers, he met little resistance.

From 1956 to 1965, President Sukarno imposed an authoritarian regime under the label of "Guided Democracy." He also moved Indonesia's foreign policy toward nonalignment. Advocated by the leaders of other former colonies, these nonaligned countries were founders of what became known as the Non-Aligned Movement. President Sukarno closely worked with Asian communist states and increasingly tilted toward the Indonesian Communist Party (PKI) in domestic affairs.

By 1965, the PKI controlled many of the mass organizations that Sukarno had established to mobilize support for his regime and, with Sukarno's acquiescence, embarked on a campaign to establish a "fifth armed force" by arming its supporters. Army leaders resisted this campaign. On October 1, 1965, PKI sympathizers within the military, including elements from Sukarno's palace guards, occupied key locations in Jakarta and kidnapped and murdered six senior generals.

The army executed the coup plotters within a few days, but unsettled conditions persisted through 1966. Violence swept throughout Indonesia. Rightist gangs killed tens of thousands of alleged communists in rural areas. Estimates of the number of deaths range between 160,000 and 500,000. The violence was especially brutal in Java and Bali. The emotions and fears of instability created by this crisis persist.

In the aftermath, President Sukarno vainly attempted to restore his political position and shift the country back to its pre-October 1965 position. Although he remained president, in March 1966, Sukarno had to transfer key political and military powers to General Soeharto, the general who rallied the military to defeat the coup attempt. In March 1967, the People's Consultative Assembly (MPR) named General Soeharto acting president. Sukarno ceased to be a political force and lived quietly until his death in 1970.

President Soeharto proclaimed a "New Order" in Indonesian politics and dramatically shifted foreign and domestic policies away from the course set in Sukarno's final years. The New Order established economic rehabilitation and development as its primary goals and pursued its policies through an administrative structure dominated by the military but with advice from Western-educated economic experts.

In 1968, the MPR formally selected Soeharto to a full 5-year term as President, and he was reelected to additional 5-year terms in 1973, 1978, 1983, 1988, and 1993. In the midst of a severe drought, dropping world petroleum prices, regional financial instability and increasing social unrest, Soeharto was again re-elected as President in March 1998.

A plummeting rupiah, soaring inflation, massive capital flight, widespread corruption and nepotism continued to exacerbate Indonesia's economic and political turmoil. In a series of demonstrations led first by students, the Indonesian people called for President Soeharto's resignation. Widespread civil unrest, rioting and public pressure led Soeharto to resign in May 1998. Upon his resignation, Soeharto handed power to his handpicked Vice President, B.J. Habibie.

President Habibie quickly distanced himself from his predecessor's authoritarian "New Order" regime. He moved quickly to assemble a cabinet with a strong economic team; released a number of prominent political dissidents; initiated an investigation into those responsible for the rioting and looting; and lifted controls on the press, political parties, and labor unions. Habibie pledged to rewrite the political laws and hold elections. A preliminary timeline calls for parliamentary elections in mid-1999 followed by Parliament's selection of a President in December 1999.

GOVERNMENT AND POLITICAL CONDITIONS

Indonesia is a republic based on the 1945 constitution providing for a limited separation of executive, legislative, and judicial power. The Habibie government has been fashioning political reform legislation that -- without changing the 1945 Indonesian Constitution -- will formally set up new rules for the electoral system, the House of Representatives (DPR), the People's Consultative Assembly (MPR), and political parties. A separate law redefining the term limits for the presidency is also on the drawing board. Substantial restructuring has occurred since President Soeharto's resignation.

The president, elected for a 5-year term, is still the dominant government and political figure. He is selected along with the vice president (a position left vacant by the ascension of Habibie to the presidency) by the MPR. The president has the authority to conduct the administration of the government and is accountable only to the MPR. The president appoints a 41-member Cabinet to assist him.

A new mixed district/proportional system is expected to result in a more representative House of Representatives (DPR), which might more effectively serve as a balance to the presidency. Under the government proposal, the House of Representatives will increase in size (by 50) to 550 members. 420 members are to be elected on a "first past the post" basis from districts, 210 located in Java and Bali, and 210 more in other islands. Another 75 seats will be allotted proportionally to parties on the basis of nation-wide showings, a mechanism to provide for some minority representation. Fifty-five legislative slots will be reserved for the military (ABRI). ABRI members will not be permitted to vote in the general election.

The MPR will still select the president and vice president of Indonesia. Its members traditionally had been appointees hand picked by President Soeharto. Under current proposals, the new MPR will be reduced from 1000 to 700 members, with no presidential appointees. It will consist of the 550 members of the DPR, plus 81 members elected from provincial parliaments, and 69 appointed by social and community groups.

Under the Soeharto regime, the ruling "functional group" (not party) GOLKAR dominated, and the United Development Party (PPP), and the Indonesian Democratic Party (PDI) were the main opposition parties. In the new system there is theoretically to be no limit on competitive political parties. Since May 1998, some 80 parties have emerged. Most new parties, however, are small and local, and probably will fail to satisfy party registration criteria. These criteria include a requirement to have party branch offices in at least 14 of Indonesia's 27 provinces or to demonstrate support by collecting a million signatures.

The armed forces have shaped and staffed Soeharto's New Order since it came to power in the wake of the abortive 1965 uprising. Military officers, especially from the army, have been key advisers to Soeharto and have great influence on policy. Under the dual function concept, military officers serve in the civilian bureaucracy at all government levels, although there has been a recent tendency to somewhat reduce the military's direct involvement in the civilian bureaucracies. Public calls for an end to the military's dual role have increased since Soeharto's resignation.

ECONOMY

Indonesia has a free-market economy that is dominated by the private sector. The government still plays a significant role in the economy, however, through state-owned firms and the imposition of price controls in selected industries.

During the 30 years of President Soeharto's rule, Indonesia's economy grew steadily, from a per capita GNP of $70 to a per capita GNP of about $1000. It was recognized as a newly industrializing economy. Annual real GDP growth averaged close to 7% from 1987-1997. By employing a restrictive monetary policy and a conservative fiscal stance, the government held inflation in the 5%-10% range. With strong export performance and manageable import growth, Indonesia saw a trade surplus of about $3 billion in 1995.

Indonesia has been hit hard by the Asian financial crisis. A year after its onset, the Government of Indonesia is working to prevent economic collapse. Analysts fear that economic deterioration could undermine Habibie's fragile Presidency. President Habibie's economic team has declared the government's commitment to work with the IMF in moving forward with economic reforms, including increased transparency and open markets.

The effects of the financial crisis have been severe. The economy is projected to contract by over 15% in 1998; unemployment could reach 35% and will worsen as the real economy feels the financial crisis. Indonesia's 1998 rate of inflation is expected to near 100%. The destruction of banks and small shops in wake of the May 1998 riots and flight of ethnic Chinese businessmen added to significant capital flight.

Petroleum remains one of Indonesia's major exports; thus, Indonesia has been hit especially hard by both the financial crisis and by the recent drop in world oil prices. However, following a fall in oil prices in the 1980s, Indonesia successfully managed to diversify its economy and to attract manufacturing to create a more diverse and stable economic climate.

In the mid-1980s, the government began eliminating regulatory obstacles to economic activity. These steps primarily have been directed at the external and financial sectors and were designed to stimulate growth in non-oil exports and revenues and to strip away import substitution barriers. The May 1994 and May 1995 deregulation packages helped level the playing field for competition. The January 1996 package helped cut tariffs. The most important, unfinished deregulation steps are removal of non-tariff barriers, the privatization of key industries, and the removal of domestic subsidies and export restrictions.

In late 1997, Indonesia agreed to a 3-year stabilization/structural adjustment program with the international financial institutions. This program is designed to stabilize the rupiah in foreign exchange markets by the government's adoption of tight fiscal and monetary policies. Non-viable banks have been closed, and a broad range of structural reforms have been implemented including liberalization of foreign trade and investment; dismantling of domestic monopolies; allowing greater private sector participation in provision of infrastructure; and expanding the privatization program.

Indonesia's public sector debt presently stands at $65.6 billion dollars, comprising $54.4 billion in governmental debt and $11.2 billion in state enterprises' debt. Indonesia currently is saddled with approximately $80 billion in private debt. Sovereign debt is expected to rise with the infusion of international funds into the economy. The World Bank, the Asian Development Bank, the International Monetary Fund, and other bilateral and multilateral development agencies have also contributed their technical expertise and approximately $118 billion dollars in the hopes of maintaining political and economic stability for Indonesia. However, with an estimated 80% depreciation in the value of the rupiah since July 1997, loan repayment has become even more burdensome.

Oil and Minerals Sector

By FY 1996/97 the oil and gas sector, including refining, contributed approximately 8% to GDP and 18% to government revenues. Although the sector's share of export earnings and government revenue has since dropped to about 10%, it remains an important part of the economy in which many U.S. companies have heavily invested. Crude and condensate output averaged 1.5 million barrels per day (bpd) in 1996. With domestic demand for petroleum fuels expanding, Indonesia will become a net importer of oil by the next decade unless new reserves are found. In 1996, Indonesian imports of crude oil and petroleum products totaled $1.5 billion dollars while Indonesian exports of crude oil and oil products totaled $12.5 billion dollars. The Asian financial crisis has taken a tremendous toll on the Indonesian economy's terms of trade. Not only have Indonesia's oil prices tumbled by 30%, but its markets in East Asia are themselves experiencing a sharp slowdown, affecting demand.

The state owns all oil and mineral rights. Foreign firms participate through production sharing and work contracts. Contractors are required to finance all exploration, production, and development costs in their contract areas; they are entitled to recover operating, exploration, and development costs out of the oil and gas produced.

Although production traditionally centered on bauxite, silver, and tin production, Indonesia is expanding its copper, nickel, gold, and coal output for export markets. Total coal production reached 41 million tons in 1996, including exports of 27 million tons. In mid-1993, the Department of Mines and Energy reopened the coal sector to foreign investment. Indonesian coal production in the range of 70-80 million tons by the end of the decade is possible.

Investment

The Indonesian economy is in dire straits; thus the major push by the Indonesian Government to actively encourage foreign investment. In 1996, Indonesia's Capital Investment Coordinating Board (Badan Koordinasi Pernanaman Modal or BKPM) gave domestic investment approval for the initiation or expansion of 810 projects representing a total investment of approximately $41 billion dollars. This compares with 775 projects and $28 billion respectively in 1995. As of May 15th, approvals for the calendar year 1997 covered 269 projects totaling $19 billion. Most approved investment during the last 5 years has been in manufacturing, especially in the textile, pulp and paper, and chemical industries. While the United States is by far the largest participant in the oil and gas sector, Japan has traditionally been the leader in terms of value of BKPM-approved investment. In 1997, the BKPM approved approximately $33.8 billion dollars in foreign investment. While Japan remains the biggest foreign investor in Indonesia, other major foreign investors include the United Kingdom, Singapore, the Netherlands, Hong Kong, Taiwan and South Korea.

In the years prior to the financial crisis, Indonesia made numerous changes in its regulatory framework to improve the business climate and encourage foreign investment. The passage of intellectual property protection laws in addition to already-implemented deregulation measures and a movement to privatize previously restricted sectors such as tollroads, electric power, and telecommunications have improved the investment climate in Indonesia.

The devastating effects of the Asian financial and environmental crisis have highlighted the areas in which major reform is needed. More openness, transparency, adherence to competitive processes, international accounting standards and disclosure are all key issues that Habibie's economic team is attempting to address. Despite the Government's encouragement of foreign investment, a lack of confidence in domestic economic and political stability has kept foreign investors from investing in Indonesia.

FOREIGN RELATIONS

Since independence, Indonesia has espoused a "free and active" foreign policy, seeking to play a role in regional affairs commensurate with its size and location but avoiding involvement in conflicts among major powers.

Indonesian foreign policy under the "New Order" government of President Soeharto moved from the stridently anti-Western, anti-American posturing which characterized the Sukarno era. Under President Habibie, Indonesia will likely preserve its non-aligned position while seeking constructive, responsible relations with many nations.

A cornerstone of Indonesia's contemporary foreign policy is its participation in the Association of Southeast Asian Nations (ASEAN), of which it was a founding member in 1967 with Thailand, Malaysia, Singapore, and the Philippines. Since then, Brunei, Vietnam, Laos, and Burma also have joined ASEAN. While organized to promote common economic, social, and cultural goals, ASEAN acquired a security dimension after Vietnam's invasion of Cambodia in 1979; this aspect of ASEAN expanded with the establishment of the ASEAN Regional Forum in 1994, which comprises 18 countries, including the U.S.

Indonesia was also one of the founders of the Non-Aligned Movement (NAM) and has taken moderate positions in its councils. As NAM Chairman in 1992-95, it led NAM positions away from the rhetoric of North-South confrontation, advocating instead the broadening of North-South cooperation in the area of development.

Indonesia has the world's largest Muslim population, but it is a secular state. It is a member and current chairman of the Organization of the Islamic Conference (OIC), and while it carefully considers the interests of Islamic solidarity in its foreign policy decisions, it has been an influence for moderation in the OIC.

Since 1966, Indonesia has welcomed and maintained close relations with the donor community, particularly the United States, Western Europe, Australia, and Japan, through the Intergovernmental Group on Indonesia (IGGI) and its successor, the Consultative Group on Indonesia (CGI), which have provided substantial foreign economic assistance. Until recently, Indonesia had no diplomatic relations with Portugal, due to Indonesia's unilateral incorporation of the former Portuguese colony of East Timor. Under the auspices of the United Nations, Indonesia and Portugal now meet regularly to discuss East Timor. In August 1998, Indonesia and Portugal agreed to open reciprocal interest sections.

Indonesia restored diplomatic relations with China in 1989 and, with the end of the Cold War, has supported efforts to gradually expand a regional security dialogue, under the aegis of the ASEAN Regional Forum, to all Asia-Pacific nations. Indonesia has advocated the eventual expansion of ASEAN to include all the nations of Southeast Asia.

Indonesia has been a strong supporter of the Asia-Pacific Economic Cooperation (APEC) forum. Largely through the efforts of President Soeharto at the 1994 meeting in Bogor, Indonesia, APEC members agreed to implement free trade in the region by 2010 for industrialized economies and 2020 for developing economies.

National Security

Indonesia's armed forces (ABRI) total about 420,000 members, including the national police and the traditional military services (army, navy, marines, and air force). The army is by far the largest, with 215,000 active-duty personnel. With defense spending at 1.48% of GDP for 1995-96, Indonesia ranks among those countries that spend least on their armed forces.

With Indonesia lacking a credible external threat in the region, ABRI sees itself as a unifying force among the various ethnic, religious, and political elements in Indonesia. The military views its prime mission as assuring internal security. Under Soeharto, the Indonesian military maintained an explicit role in the nation's political and social affairs. Traditionally a significant number of cabinet members had military backgrounds, while active duty and retired military personnel occupied a large number of seats in the parliament. Commanders of the various territorial commands played influential roles in the affairs of their respective regions.

Indonesia is at a relative peace with its neighbors although competing South China Sea claims, where Indonesia has large natural gas reserves, concern the Indonesians. During the Soeharto years, economic development took precedence over the military budget. Recently, however, the armed forces, particularly the navy, have undertaken measures to upgrade the overall preparedness to project force beyond Indonesia's borders.\


Japan

PEOPLE

Japan is one of the most densely populated nations in the world, with some 330 persons per square kilometer (almost 860 persons per sq. mi.). For 1997, the population growth rate was about 0.23%. Japan's growth rate in recent years has raised concerns about the social implications of an aging population.

The Japanese are a Mongoloid people, closely related to the major groups of East Asia. However, some evidence also exists of admixture with Malayan and Caucasoid strains. About 750,000 Koreans and much smaller groups of Chinese and Caucasians reside in Japan.

Buddhism is important in Japan's religious life and has strongly influenced fine arts, social institutions, and philosophy. Most Japanese consider themselves members of one of the major Buddhist sects.

Shintoism is an indigenous religion founded on myths, legends, and ritual practices of the early Japanese. Neither Buddhism nor Shintoism is an exclusive religion. Most Japanese observe both Buddhist and Shinto rituals: the former for funerals and the latter for births, marriages, and other occasions. Confucianism, primarily an ethical system, profoundly influences Japanese thought as well.

About 1.3 million people in Japan are Christians, of whom 60% are Protestant and 40% Roman Catholic.

Japan provides free public schooling for all children through junior high school. Ninety-four percent of students go on to three-year senior high schools, and competition is stiff for entry into the best universities. Japan enjoys one of the world's highest literacy rates (99%), and nearly 90% of Japanese students complete high school.

HISTORY

Traditional Japanese legend maintains that Japan was founded in 600 BC by the Emperor Jimmu, a direct descendant of the sun goddess and ancestor of the present ruling imperial family. About AD 405, the Japanese court officially adopted the Chinese writing system. During the sixth century, Buddhism was introduced. These two events revolutionized Japanese culture and marked the beginning of a long period of Chinese cultural influence.

From the establishment of the first fixed capital at Nara in 710 until 1867, the emperors of the Yamato dynasty were the nominal rulers, but actual power was usually held by powerful court nobles, regents, or "shoguns" (military governors).

Contact With the West

The first contact with the West occurred about 1542, when a Portuguese ship, blown off its course to China, landed in Japan. During the next century, traders from Portugal, the Netherlands, England, and Spain arrived, as did Jesuit, Dominican, and Franciscan missionaries. During the early part of the 17th century, Japan's shogunate suspected that the traders and missionaries were actually forerunners of a military conquest by European powers. This caused the shogunate to place foreigners under progressively tighter restrictions. Ultimately, Japan forced all foreigners to leave and barred all relations with the outside world except for severely restricted commercial contacts with Dutch and Chinese merchants at Nagasaki. This isolation lasted for 200 years, until Commodore Matthew Perry of the U.S. Navy forced the opening of Japan to the West with the Convention of Kanagawa in 1854.

Within several years, renewed contact with the West profoundly altered Japanese society. The shogunate was forced to resign, and the emperor was restored to power. The "Meiji restoration" of 1868 initiated many reforms. The feudal system was abolished, and numerous Western institutions were adopted, including a Western legal system and constitutional government along quasi-parliamentary lines.

In 1898, the last of the "unequal treaties" with Western powers was removed, signaling Japan's new status among the nations of the world. In a few decades, by creating modern social, educational, economic, military, and industrial systems, the Emperor Meiji's "controlled revolution" had transformed a feudal and isolated state into a world power.

Wars With China and Russia

Japanese leaders of the late 19th century regarded the Korean Peninsula as a "dagger pointed at the heart of Japan." It was over Korea that Japan became involved in war with the Chinese Empire in 1894-95 and with Russia in 1904-05. The war with China established Japan's dominant interest in Korea, while giving it the Pescadores Islands and Formosa (now Taiwan). After Japan defeated Russia in 1905, the resulting Treaty of Portsmouth awarded Japan certain rights in Manchuria and in southern Sakhalin, which Russia had received in 1875 in exchange for the Kurile Islands. Both wars gave Japan a free hand in Korea, which it formally annexed in 1910.

World War I to 1952

World War I permitted Japan, which fought on the side of the victorious Allies, to expand its influence in Asia and its territorial holdings in the Pacific. The postwar era brought Japan unprecedented prosperity. Japan went to the peace conference at Versailles in 1919 as one of the great military and industrial powers of the world and received official recognition as one of the "Big Five" of the new international order. It joined the League of Nations and received a mandate over Pacific islands north of the equator formerly held by Germany.

During the 1920s, Japan progressed toward a democratic system of government. However, parliamentary government was not rooted deeply enough to withstand the economic and political pressures of the 1930s, during which military leaders became increasingly influential.

Japan invaded Manchuria in 1931 and set up the state of Manchukuo. In 1933, Japan resigned from the League of Nations. The Japanese invasion of China in 1937 followed Japan's signing the "anti-Comintern pact" with Nazi Germany the previous year and was part of a chain of developments culminating in the Japanese attack on the United States at Pearl Harbor, Hawaii on December 7, 1941.

After almost 4 years of war, resulting in the loss of 3 million Japanese lives and including the atomic bombings of Hiroshima and Nagasaki, Japan signed an instrument of surrender on the U.S.S. Missouri in Tokyo Harbor on September 2, 1945. As a result of World War II, Japan lost all of its overseas possessions and retained only the home islands. Manchukuo was dissolved, and Manchuria was returned to China; Japan renounced all claims to Formosa; Korea was granted independence; southern Sakhalin and the Kuriles were occupied by the U.S.S.R.; and the United States became the sole administering authority of the Ryukyu, Bonin, and Volcano Islands. The 1972 reversion of Okinawa completed the United States' return of control of these islands to Japan.

After the war, Japan was placed under international control of the Allies through the Supreme Commander, General Douglas MacArthur. U.S. objectives were to ensure that Japan would become a peaceful nation and to establish democratic self-government supported by the freely expressed will of the people. Political, economic, and social reforms were introduced, such as a freely elected Japanese Diet (legislature). The country's Constitution took effect on May 3, 1947. The April 28, 1952, Treaty of Peace with Japan afforded a progressive and orderly transition to the restoration of full sovereignty from the stringent controls immediately following the surrender.

Recent Political Developments

The post-World War II years saw tremendous economic growth in Japan, with the political system dominated by the Liberal Democratic Party (LDP). That total domination lasted until the Diet Lower House elections on July 18, 1993. The LDP, in power since the mid-1950s, failed to win a majority and saw the end of its four-decade rule. A coalition of new parties and existing opposition parties formed a governing majority and elected a new Prime Minister, Morihiro Hosokawa, in August 1993. His government's major legislative objective was political reform, consisting of a package of new political financing restrictions and major changes in the electoral system. The coalition succeeded in passing landmark political reform legislation in January 1994.

Under the 1994 legislation, the lower house electoral system was changed to one in which 300 members are elected in single-member districts and another 200 members on proportional slates in 11 regions. The new electoral system also reduced the number of seats in overrepresented rural areas and shifted them to some urban areas.

In April 1994, Prime Minister Hosokawa resigned. Prime Minister Tsutomu Hata formed the successor coalition government, Japan's first minority government in almost 40 years. Prime Minister Hata resigned less than 2 months later. Prime Minister Tomiichi Murayama formed the next government in June 1994, a coalition of his Japan Socialist Party (JSP), the LDP, and the small Sakigake Party. The advent of a coalition containing the JSP and LDP shocked many observers because of their previously fierce rivalry. Prime Minister Murayama served from June 1994 to January 1996. He was succeeded by Prime Minister Ryutaro Hashimoto, who served from January 1996 to July 1998. Prime Minister Hashimoto headed a loose coalition of three parties until the July 1998 Upper House election, when the two smaller parties cut ties with the LDP. Hashimoto resigned due to a poor electoral showing by the LDP in those Upper House elections. He was succeeded as party president of the LDP and Prime Minister by Keizo Obuchi, who took office on July 30, 1998.

GOVERNMENT AND POLITICAL CONDITIONS

Japan is a constitutional monarchy with a parliamentary government. There is universal adult suffrage with a secret ballot for all elective offices. The executive branch is responsible to the Diet, and the judicial branch is independent. Sovereignty, previously embodied in the emperor, is vested in the Japanese people, and the emperor is defined as the symbol of the state.

Japan's Government is a parliamentary democracy, with a House of Representatives and a House of Councillors. Executive power is vested in a cabinet composed of a prime minister and ministers of state, all of whom must be civilians. The prime minister must be a member of the Diet and is designated by his colleagues. The prime minister has the power to appoint and remove ministers, a majority of whom must be Diet members.

Japan's judicial system, drawn from customary law, civil law, and Anglo-American common law, consists of several levels of courts, with the Supreme Court as the final judicial authority. The Japanese Constitution includes a bill of rights similar to the U.S. Bill of Rights, and the Supreme Court has the right of judicial review. Japanese courts do not use a jury system, and there are no administrative courts or claims courts. Because of the judicial system's basis, court decisions are made in accordance with legal statutes. Only Supreme Court decisions have any direct effect on later interpretation of the law.

Japan does not have a federal system, and its 47 prefectures are not sovereign entities in the sense that U.S. states are. Most depend on the central government for subsidies. Governors of prefectures, mayors of municipalities, and prefectural and municipal assembly members are popularly elected to four-year terms.

The membership of the current Diet's more powerful chamber, the Lower House, was elected October 20, 1996, in the first election held under the new districting system. Prime Minister Hashimoto led the ruling coalition--made up of the LDP, SDP and Sakigake--into that election, but his LDP fell short of a majority and its coalition partners opted afterward for a loose cooperative arrangement rather than a full-scale coalition. All cabinet members thereafter hailed from the LDP. The two smaller parties broke from that arrangement on the eve of an election to fill half of the seats in the Upper House on July 12, 1998, and the LDP's dismal showing in that vote forced the Prime Minister's resignation. Keizo Obuchi succeeded him in late July. Without coalition partners, Prime Minister Obuchi has been courting the cooperation of various opposition parties on a case-by-case basis to pursue his legislative agenda. (By mid-1998, the LDP had gained a majority in the Lower House due to defections from the opposition, but had insufficient numbers in the Upper House--before or after the July balloting--to control the Diet agenda on its own.)

ECONOMY

The ongoing region-wide Asian financial crisis, which began in 1997, has created uncertainty and instability in Japan's economy. Japan does, however, retain significant economic strength in the world economy.

Japan's reservoir of industrial leadership and technicians, well-educated and industrious work force, high savings and investment rates, and intensive promotion of industrial development and foreign trade have produced a mature industrial economy. Along with North America and Western Europe, Japan is one of the three major industrial complexes among the market economies.

Japan has few natural resources, and trade helps it earn the foreign exchange needed to purchase raw materials for its economy. In 1997, the country's exports amounted to about 12% of its GDP.

After achieving one of the highest economic growth rates in the industrialized world during most of the 1980s, Japan's economy slowed considerably in the early 1990s. Plummeting stock and real estate prices marked the end of the fragile, so-called "bubble economy" of the late 1980s. More recently, the ongoing region-wide Asian financial crisis that began in 1997 has shaken Japan's economic stability. However, Japan's long-term economic prospects are considered good.

For information on Japan's economic relations with the United States, see "Economic Relations" section under "U.S.-Japan Relations."

Agriculture, Energy, and Minerals

Only 15% of Japan's land is suitable for cultivation. The agricultural economy is highly subsidized and protected. With per-hectare crop yields among the highest in the world, Japan maintains an overall agricultural self-sufficiency rate of about 50% on fewer than 5.6 million cultivated hectares (14 million acres). Japan normally produces a slight surplus of rice but imports large quantities of wheat, sorghum, and soybeans, primarily from the United States. As part of the General Agreement on Tariffs and Trade (GATT) Uruguay Round, Japan agreed to open its agricultural markets further, including partial liberalization of the rice market.

Given its heavy dependence on imported energy, Japan has aimed to diversify its sources. Since the oil shocks of the 1970s, Japan has reduced dependence on petroleum as a source of energy from more than 75% in 1973 to about 57% at present. Other important energy sources are coal, liquefied natural gas, nuclear power, and hydro power.

Deposits of gold, magnesium, and silver meet current industrial demands, but Japan is dependent on foreign sources for many of the minerals essential to modern industry. Iron ore, coke, copper, and bauxite must be imported, as must many forest products.

Transportation

Japan has a well-developed international and domestic transportation system, although highway development still lags. Tokyo and Osaka International Airports and the ports of Yokohama, Osaka, Kobe, and Nagoya are important terminals for air and sea traffic in the western Pacific. However, greatly increased traffic in the Pacific markets is putting a severe strain on Japan's airports.

The domestic transportation system depends on a recently privatized rail network. National rail transportation is supplemented by private railways in metropolitan areas, a developing highway system, coastal shipping, and several airlines. The rail system is efficient and well distributed and is maintained throughout the country. The super express "bullet trains" take as little as 3 hours between Tokyo and Osaka, a distance of 520 kilometers (325 mi.).

Labor

Japan's labor force consists of some 67 million workers, 40% of whom are women. Labor union membership is about 12 million. The unemployment rate is currently at a record high 4.3%. In 1989, the predominantly public sector union confederation SOHYO (General Council of Trade Unions of Japan) merged with RENGO (Japanese Private Sector Trade Union Confederation) to form the Japanese Trade Union Confederation, also called RENGO, which has more than 7 million members.

FOREIGN RELATIONS

Despite its current slow economic growth, Japan remains a major economic power both in the region and globally. Japan has diplomatic relations with nearly all independent nations and has been an active member of the United Nations since 1956. Japanese foreign policy has aimed to promote peace and prosperity for the Japanese people by working closely with the West and supporting the United Nations.

After World War II, the Allies disarmed and occupied Japan. Article IX of the Japanese constitution provides that "land, sea, and air forces, as well as other war potential, will never be maintained." During the 1950-53 Korean war, a national police reserve force was established. Before the end of the U.S. occupation of Japan in 1952, the first steps had been taken to expand and transform the force into the Self-Defense Force (SDF). At the same time, the Japanese Government accepted Article 51 of the UN Charter that each nation has the right of self-defense against armed attack. This doctrine was consistent with Article IX of the Japanese constitution.

In 1954, the Japan Defense Agency was created with the specific mission of defending Japan against external aggression. Ground, maritime, and air self-defense forces were established.

In recent years, the Japanese public has shown a substantially greater awareness of security issues and increasing support for the SDF. This is in part due to its success in disaster relief efforts at home and its participation in peacekeeping operations in Cambodia in the early 1990s. However, there are still significant political and psychological constraints on strengthening Japan's defense.

Although a military role for Japan in international affairs is precluded by its constitution and government policy, Japanese cooperation with the United States through the 1960 U.S.-Japan security treaty has been important to the peace and stability of East Asia. All postwar Japanese governments have relied on a close relationship with the United States as the foundation of their foreign policy and have depended on the mutual security treaty for strategic protection. (Also see "Security Relations" section under "U.S.-Japan Relations.")

While maintaining its relationship with the United States, Japan has diversified and expanded its ties with other nations. Good relations with its neighbors continue to be of vital interest. After the signing of a peace and friendship treaty with China in 1978, ties between the two countries developed rapidly. The Japanese extend significant economic assistance to the Chinese in various modernization projects. At the same time, Japan has maintained economic but not diplomatic relations with Taiwan, where a strong bilateral trade relationship thrives.

Japanese ties with South Korea have improved since an exchange of visits in the mid-1980s by their political leaders. ROK President Kim Dae-jung had a very sucessful visit to Japan in Octoeber 1998. Japan has limited economic and commercial ties with North Korea. Japanese normalization talks halted when North Korea refused to discuss a number of issues with Japan. Japan strongly supports the U.S. in its efforts to encourage Pyongyang to abide by the nuclear Non-Proliferation Treaty and its agreements with the International Atomic Energy Agency (IAEA). Despite the August 31, 1998 North Korean missile test which overflew the Home Islands, Japan has repeated its support for the Korean Energy Development Organization (KEDO) and the Agreed Framework, which seek to freeze the North Korean nuclear program.

Russo-Japanese relations have warmed considerably since 1996, despite the fact that Russia continues to claim and occupy the Northern Territories, small islands off the coast of Hokkaido occupied by the U.S.S.R. at the end of World War II. But recent summits in 1997 and 1998 between former PM Hashimoto and President Yeltsin have accelerated work on a peace treaty which would set settle the Northern Territories dispute and normalize bilateral realtions. To further mutual confidence and trust, Japan has pledged about $4 billion to various programs designed to bolster Russian democracy and economic reform.

Beyond its immediate neighbors, Japan has pursued a more active foreign policy in recent years, recognizing the responsibility that accompanies its economic strength. It has expanded ties with the Middle East, which provides most of its oil. Japan increasingly is active in Africa and Latin America and has extended significant support to development projects in both regions. And a Japanese-conceived peace plan became the foundation for nationwide elections in Cambodia in 1998.

After the Iraqi invasion of Kuwait in August 1990, Japan adopted tough sanctions against Iraq and strongly supported the UN effort against the aggression. Japanese financial support for the Gulf war reached $14 billion. Japan actively supported the Israel-Palestine peace framework. From October 1993, Japan has contributed $300 million to Palestinian reconstruction. Under the framework of the Middle East Peace Process, Japan chairs the multilateral working group on environment and participates in other working groups.

In the 1990s, Japanese military and police forces as well as civilians have participated in a wide variety of UN peacekeeping missions. These have included Cambodia (two Japanese citizens were killed in that effort), Mozambique, the Golan Heights, and relief efforts for Rwandan refugees in what was then Zaire (now Congo). Japan did not send any Self-Defense Force units to Somalia but financed much of the effort there with a $100 million contribution.

Development assistance is a major tool of Japan's foreign policy. Japan has been the world's largest aid donor since 1989, with aid levels of $9 billion. Japanese aid to other Asian countries exceeds that of the United States, and Japan is also a major donor to Central and Eastern Europe, Latin America, and the Middle East. Japan and the United States hold regular consultations to coordinate foreign assistance programs. The United States supports Japan's efforts to open its markets to developing nations' products.

 


Laos

PEOPLE

Laos' population was estimated at about 5.2 million in 1997, dispersed unevenly across the country. Most people live in valleys of the Mekong River and its tributaries. Vientiane prefecture, the capital and largest city, had about 489,000 residents as of 1992. The country's population density is 21.5/sq. km.

About half the country's people are ethnic Lao, the principal lowland inhabitants and politically and culturally dominant group. The Lao are descended from the Tai people who began migrating southward from China in the first millennium A.D. Mountain tribes of Sino-Tibetan (Hmong, Yao, Akha, and Lahu) and Tai ethno-linguistic heritage are found in northern Laos. Collectively, they are known as Lao Sung or highland Lao. In the central and southern mountains, Mon-Khmer tribes, known as Lao Theung or midland Lao, predominate. Some Vietnamese and Chinese minorities remain, particularly in the towns, but many left in two waves, after independence in the late 1940s and again after 1975.

The predominant religion is Theravada Buddhism. Animism is common among the mountain tribes. Buddhism and spirit worship coexist easily. There is also a small number of Christians and Moslems.

The official and dominant language is Lao, a tonal language of the Tai linguistic group. Midland and highland Lao speak an assortment of tribal languages. French, once common in government and commerce, has declined in usage, while knowledge of English -- the language of the Association of Southeast Asian Nations (ASEAN) -- has increased in recent years.

HISTORY

The first recorded history of the Lao begins with the unification of Laos in 1353 by King Fa Ngum. King Fa Ngum established his capital at Luang Prabang and ruled a kingdom called Lane Xang (literally, "million elephants") which covered much of what today is Thailand and Laos. His successors, especially King Setthathirat in the 16th century, helped establish Buddhism as the predominant religion of the country.

In the 18th century, Lane Xang entered a period of decline caused by dynastic struggle and conflicts with Burma, Siam (now Thailand), Vietnam, and the Khmer kingdom.

In the 19th century, the Siamese established hegemony over much of what is now Laos. The region was divided into principalities centered on Luang Prabang, Vientiane, and Champassak. Vietnamese influence was felt in Xieng Khouang and northwest Laos. Late in the century, the French supplanted the Siamese. France integrated all of Laos into the French empire as directly ruled provinces, except for Luang Prabang, which was ruled as a protectorate. The Franco-Siamese treaty of 1907 defined the present Lao boundary with Thailand.

During World War II, the Japanese occupied French Indochina, including Laos. King Sisavang Vong of Luang Prabang was induced to declare independence from France in 1945, just prior to Japan's surrender. In September 1945, Vientiane and Champassak united with Luang Prabang to form an independent government under the Free Lao (Lao Issara) banner. In 1946, French troops reoccupied the country and conferred limited autonomy on Laos following elections for a constituent assembly.

France formally recognized the independence of Laos within the French Union in 1949, and Laos remained a member of the Union until 1953. Pro-Western governments held power after the 1954 Geneva peace conference until 1957, when the first coalition government, led by Prince Souvanna Phouma, was formed. The coalition government collapsed in 1958, amidst increased polarization of the political process. Rightist forces took over the government, and a communist insurgency resumed in 1959.

In 1960, Kong Le, a paratroop captain, seized Vientiane in a coup and demanded formation of a neutralist government to end the fighting. The neutralist government was once again led by Souvanna Phouma but was driven from power later that same year by rightist forces under General Phoumi Nosavan. In response, the neutralists allied themselves with the communist insurgents, and began to receive support from the Soviet Union. Phoumi Nosavan's rightist regime received support from the U.S.

A second Geneva conference was held in 1961-1962, and provided for the independence and neutrality of Laos. Soon after accord was reached, the signatories accused each other of violating the terms of the agreement, and with superpower support on both sides, the civil war soon resumed.

In 1972, the communist people's party renamed itself the Lao People's Revolutionary Party (LPRP), which went on to join a new coalition government in Laos soon after the Vientiane agreement of February 21, 1973 went into effect that same year. Nonetheless, the political struggle between communists, neutralists and rightists continued. The collapse of Saigon and Phnom Penh in 1975 hastened the decline of the coalition. On December 2, 1975, the king renounced his throne in the constitutional monarchy and entrusted his power to the Lao people, but the LPRP dissolved the coalition cabinet and the communist Lao People's Democratic Republic (LPDR) was established.

The new communist government imposed centralized economic decision-making and broad security measures, including control of the media and the arrest and incarceration of many members of the previous government and military in "re-education camps". These draconian policies and deteriorating economic conditions, along with government efforts to enforce political control, prompted an exodus of lowland Lao and ethnic Hmong from Laos. About 10% of the Lao population sought refugee status after 1975. Many have since been resettled in third countries, including nearly 250,000 who have come to the United States.

The situation of Lao refugees is nearing its final chapter. Over time, the Lao government closed the re-education camps and released most political prisoners. From 1975 to 1996, the U.S. resettled some 250,000 Lao refugees from Thailand including 130,000 Hmong. By the end of 1997, 27,600 Hmong and lowland Lao had repatriated to Laos: 3,500 from China, the rest from Thailand. Through the Office of the United Nations High Commissioner for Refugees (UNHCR), the International Organization for Migration (IOM), and non-governmental organizations, the U.S. has supported a variety of reintegration assistance programs throughout Laos. UNHCR monitors returnees and reports no evidence of systemic persecution or discrimination to date. As of August 1998, there were 1,300 Hmong and lowland Lao remaining at Ban Napho camp in Thailand who were being screened by the Thai Government and UNHCR.

GOVERNMENT

The only legal political party is the Lao People's Revolutionary Party (LPRP). The head of state is President Khamtay Siphandone. The head of government is Prime Minister Sisavath Keobounphanh, who is also Chairman of the LPRP. Government policies are determined by the party through the all-powerful nine-member Politburo and the 49 member Central Committee. Important government decisions are vetted by the Council of Ministers.

Laos adopted a constitution in 1991. The following year, elections were held for a new 85-seat National Assembly with members elected by secret ballot to 5-year terms. This National Assembly, expanded in 1997 elections to 99 members, approves all new laws, although the Executive branch retains authority to issue binding decrees. The most recent elections took place in December 1997.

The legal system is a mixture of traditional customary law, French legal norms, and socialist practices with the 1991 Constitution as its foundation. The 1998 central government budget plan calls for revenue of $277 million and expenditures of $407 million, including capital expenditures of $208 million. The Lao flag has a red band at the top and bottom with a larger blue band between them; a large white circle is centered. Laos' major holidays are National Day (proclamation of the Lao People's Democratic Republic) on December 2; Independence Day (from France) on July 19; Lao New Year in mid-April; and the beginning and end of Buddhist Lent in early July and early October, respectively.

ECONOMY

Laos is a poor, landlocked country with a purchasing power parity annual per capita GDP estimated in 1996 at $1,150, an inadequate infrastructure, and a largely unskilled workforce. Agriculture, mostly subsistence rice farming, dominates the economy, employing 80% of the population and producing 56% of national income. Domestic savings are low, so Laos relies heavily on foreign assistance and concessional loans as investment sources for economic development.

Following its accession to power in 1975, the communist government imposed a harsh, Soviet-style command economy system, replacing the private sector with state enterprises and cooperatives; centralizing investment, production, trade, and pricing; and creating barriers to internal and foreign trade.

Within a few years, the Lao Government realized these types of economic policies were preventing, rather than stimulating, growth and development. No substantive reform was introduced, however, until 1986 when the government announced its "new economic mechanism" (NEM). Initially timid, the NEM was expanded to include a range of reforms designed to create conditions conducive to private sector activity. Prices set by market forces replaced government-determined prices. Farmers were permitted to own land and sell crops on the open market. State firms were granted increased decision-making authority and lost most of their subsidies and pricing advantages. The government set the exchange rate close to real market levels, lifted trade barriers, replaced import barriers with tariffs, and gave private sector firms direct access to imports and credit.

In 1989, the Lao Government reached agreement with the World Bank and the International Monetary Fund on additional reforms. The government agreed to expand fiscal and monetary reform, promote private enterprise and foreign investment, privatize or close state firms, and strengthen banking. The government also agreed to maintain a market exchange rate, reduce tariffs, and eliminate unneeded trade regulations. The government also enacted a liberal foreign investment code which appears to be slowly making its impact felt. In an attempt to stimulate further international commerce, the Lao Government accepted Australian aid to build a bridge across the Mekong River to Thailand. The Friendship Bridge, between Vientiane prefecture and Nong Khai, Thailand, was inaugurated in April 1994. The bridge has created additional commerce although the Lao Government does not yet permit a completely free flow of traffic across the span. For 1996, the country's foreign debt was estimated at $2.3 billion.

All of these liberalizing reforms have led to a growing economy and an increased availability of goods. However, the Asian financial crisis which began in 1997 has challenged the Lao Government's ability to manage the economy, and inflation increased dramatically in the first half of 1998; for the period June 1997 to June 1998, the inflation rate was estimated at 100%. The economy continues to be dominated by an unproductive agricultural sector operating largely outside the money economy and in which the public sector continues to play a dominant role.

FOREIGN RELATIONS

The new government that assumed power in December 1975 aligned itself with the Soviet bloc and adopted a hostile posture toward the West. In ensuing decades, Laos maintained close ties with the former Soviet Union and its eastern bloc allies, and depended heavily on the Soviets for most of its foreign assistance. Laos also maintained a "special relationship" with Vietnam, formalized in a 1977 treaty of friendship and cooperation, and contributing toward greater animosity with China.

With the collapse of the Soviet Union, and with Vietnam's decreased ability to provide assistance, Laos sought to improve relations with other countries. Laos is bordered by Burma, Cambodia, China, Thailand, and Vietnam. The Lao Government has focused its efforts on Thailand, Laos' principal means of access to the sea and its primary trading partner. Within a year of serious border clashes in 1987, Lao and Thai leaders signed a communique, signaling their intention to improve relations. Since then, they have made slow but steady progress, notably the construction and opening of the "Friendship Bridge" between the two countries.

Laos also has improved relations with China. Although the two were allies during the Vietnam war, the China-Vietnam conflict in 1979 led to a sharp deterioration in Sino-Lao relations. These relations began to improve in the late 1980s, and then-Prime Minister Kaysone's October 1989 visit to China resulted in complete normalization of bilateral relations.

Laos has also sought to end its international isolation through improved and expanded relations with others such as Australia, France, Japan, and India. Laos was admitted into the Association of Southeast Asian Nations (ASEAN) in July 1997.


Malaysia

PEOPLE

Malaysia's population of 21.7 million (1997 -- estimated) continues to grow at a rate of 2.3% per annum; about 35% of the population is under the age of 15.

Malaysia's population comprised many ethnic groups, with the politically dominant Malays comprising a plurality. By Constitutional definition, all Malays are Muslim. More than a quarter of the population is Chinese. They have historically played an important role in trade and business.

Malaysians of Indian descent comprise about 7% of the population and includes Hindus, Muslims, Buddhists and Christians. About 85% of the Indian community is Tamil.

Non-Malay indigenous groups make up more than half of Sarawak's population and about 66% of Sabah's. They are divided into dozens of ethnic groups but they share some general patterns of living and culture. Until the 20th century, most practiced traditional beliefs, but many have become Christian or Muslim.

The "other" category includes Malaysians of, inter alia, European and Middle Eastern descent.

Population distribution is uneven, with some 15 million residents concentrated in the lowlands of Peninsular Malaysia, an area slightly smaller than the state of Michigan.

HISTORY

In the first century AD, two far-flung but related events helped stimulate Malaysia's emergence in international trade in the ancient world. At that time, India had two principal sources of gold and other metals: the Roman Empire and China. The overland route from China was cut by marauding Huns, and at about the same time, the Roman Emperor Vespasian cut off shipments of gold to India. As a result, India sent large and seaworthy ships, with crews reported to have numbered in the hundreds, to Southeast Asia, including the Malayan Peninsula, to seek alternative sources. In the centuries that followed, rich Malaysian tin deposits assumed great significance in Indian Ocean trade, and the region prospered. As maritime trade among Middle Eastern, Indian, and Chinese ports flourished, the peninsula benefited from its location as well as from development of its diverse resources, including tropical woods and spices. Malay ships became prominent in that trade, and Malay ports served as transshipment centers. Indian trade brought Indian culture, economy, religion, and politics, with historic results for what is now Malaysia.

The early Buddhist Malay kingdom of Srivijaya, based at what is now Palembang, Sumatra, dominated much of the Malay Peninsula from the 9th to the 13th centuries AD. The powerful Hindu kingdom of Majapahit, based on Java, gained control of the Malay Peninsula in the 14th century. Conversion of the Malays to Islam, beginning in the early 14th century, accelerated with the rise of the state of Malacca under the rule of a Muslim prince in the 15th century.

Malacca was a major regional entrepot, where Chinese, Arab, Malay, and Indian merchants traded precious goods. Drawn by this rich trade, a Portuguese fleet conquered Malacca in 1511, marking the beginning of European expansion in Southeast Asia. The Dutch ousted the Portuguese from Malacca in 1641 and, in 1795, were themselves replaced by the British, who had occupied Penang in 1786.

In 1826, the British settlements of Malacca, Penang, and Singapore were combined to form the Colony of the Straits Settlements. From these strong points, in the 19th and early 20th centuries, the British established protectorates over the Malay sultanates on the peninsula. Four of these states were consolidated in 1895 as the Federated Malay States.

During British control, a well-ordered system of public administration was establish, public services were extended, and large-scale rubber and tin production was developed. This control was interrupted by the Japanese invasion and occupation from 1942 to 1945 during World War II.

Popular sentiment for independence swelled during and after the war and, in 1957, the Federation of Malaysia, established from the British-ruled territories of Peninsular Malaysia in 1948, negotiated independence from the United Kingdom under the leadership of Tunku Abdul Rahman, who became the first prime minister. The British colonies of Singapore, Sarawak, and Sabah (called North Borneo) joined the Federation to form Malaysia on September 16, 1963. Singapore withdrew from the Federation on August 9, 1965 and became an independent republic. Neighboring Indonesia objected to the formation of Malaysia and pursued a program of economic, political, diplomatic, and military "confrontation" against the new country, which ended only after the fall of Indonesia's President Sukarno in 1966.

Following World War II, local communists, nearly all Chinese, launched a long, bitter insurgency, prompting the imposition of a state of emergency in 1948 (later lifted in 1960). Small bands of guerrillas remained in bases along the rugged border with southern Thailand, occasionally entering northern Malaysia. These guerrillas finally signed a peace accord with the Malaysian Government in December 1989. A separate small-scale communist insurgency that began in the mid-1960s in Sarawak also ended with the signing of a peace accord in October 1990.

GOVERNMENT

Malaysia is a constitutional monarchy, nominally headed by the Yang di-Pertuan Agong ("paramount ruler"), customarily referred to as the king. Kings are elected for 5-year terms from among the nine sultans of the peninsular Malaysian states. The king also is the leader of the Islamic faith in Malaysia.

Executive power is vested in the cabinet led by the prime minister; the Malaysian constitution stipulates that the prime minister must be a member of the lower house of parliament who, in the opinion of the Yang di-Pertuan Agong, commands a majority in parliament. The cabinet is chosen from among members of both houses of parliament and is responsible to that body.

The bicameral parliament consists of the Senate (Dewan Negara) and the House of Representatives (Dewan Rakyat). All 69 Senate members sit for 6-year terms; 26 are elected by the 13 state assemblies, and 43 are appointed by the king. Representatives of the House are elected from single-member districts by universal adult suffrage. The 192 members of the House of Representatives are elected to maximum terms of 5 years. Legislative power is divided between federal and state legislatures.

The Malaysian legal system is based on English common law. The Federal Court reviews decisions referred from the Court of Appeals; it has original jurisdiction in constitutional matters and in disputes between states or between the federal government and a state. Peninsular Malaysia and the East Malaysian states of Sabah and Sarawak each have a high court.

The federal government has authority over external affairs, defense, internal security, justice (except civil law cases among Malays or other Muslims and other indigenous peoples, adjudicated under Islamic and traditional law), federal citizenship, finance, commerce, industry, communications, transportation, and other matters.

POLITICAL CONDITIONS

Malaysia's predominant political party, the United Malays National Organization (UMNO), has held power in coalition with other parties since Malaya's independence in 1957. In 1973, an alliance of communally based parties was replaced with a broader coalition--the Barisan Nasional--composed of 14 parties. In 1995, the most recent general election, the Barisan Nasional was returned with an overwhelming majority, winning 162 out of the 192 parliamentary seats. In addition to the federal government, Barisan Nasional has also held power continuously in most state governments, though an Islamic opposition party now controls the state of Kelantan. In August 1998, Prime Minister Mahathir sacked Deputy Prime Minister Anwar Ibrahim and accused Anwar of immoral and corrupt conduct. Anwar said his ouster actually owed to political differences and led a series of demonstrations advocating political reforms. In September, the government detained Anwar and many of his supporters without trial under the Internal Security Act. Anwar and most of his associates were later released from ISA detention though Anwar remained imprisoned pending trial on criminal charges. Peaceful public demonstrations on behalf of Anwar continued after his arrest. Anwar's ouster and prosecution will affect UMNO party elections scheduled for 1999 and Malaysia's general elections, which must be held before April 2000.

ECONOMY

After a decade of sustained economic growth, during which real GDP grew by more than 8% annually, Malaysia's economy in the second half of 1998 was in recession. GDP will contract by an estimated 4.8% for the year. Malaysia since July 1997 has been buffeted by the economic and financial downturn that began with the Thai financial crisis in July 1997 and quickly spread throughout the region and now the globe. By August 1998, the Malaysian ringgit had lost 40% of its value and the Kuala Lumpur stock exchange had lost 60% of its capitalization.

After generally following the IMF prescription of tight fiscal and monetary policies, Malaysia on September 1 announced a series of capital and currency controls designed to insulate Malaysia's economy from the effects of the global financial crisis. The new measures include fixing the exchange rate at 3.8 ringgit to the U.S. dollar (it had been trading at about RM 4.2/USD 1); ending the free convertibility of the ringgit but requiring Central Bank authorization for all exchange transactions; and ending the flow of short-term "hot money" into and out of Malaysia. With the ringgit protected from speculative pressures, the Malaysian Government has lowered interest rates to encourage business activity.

Malaysia remains an important trading partner for the United States. In 1997, two-way bilateral trade totaled US$28 billion, with U.S. exports totaling US$10 billion and imports from Malaysia totaling US$18 billion. Malaysia was the United States' 11th-largest trading partner and its 16th-largest export market. In 1997, the United States became Malaysia's largest trading partner.

At independence, Malaysia inherited an economy dominated by two commodities -- rubber and tin. In the 40 years thereafter, Malaysia's economic record had been one of Asia's best. From the early 80s through the mid-90s , the economy experienced a period of broad diversification and sustained rapid growth averaging almost 8% annually. By 1997, nominal per capita GNP had reached $4,816. New foreign and domestic investment played a significant role in the transformation of Malaysia's economy. Manufacturing grew from 13.9% of GDP in 1970 to 35.7% in 1997, while agriculture and mining, which together had accounted for 42.7% of GDP in 1970, dropped to 18.5% in 1997.

Despite the toll taken by the global financial crisis, most market analysts and economists remain generally positive about Malaysia's long-term prospects, especially if the Malaysian government uses this opportunity to undertake financial sector reform.

Manufacturing accounts for 35.7% of GDP (1997). Major products include electronic components (Malaysia is the world's largest exporter of semiconductor devices), electrical goods, and appliances.

The government encourages foreign direct investment, particularly in the manufacturing sector. In 1997, U.S. became the largest investor in Malaysia, surpassing Japan. Germany and Taiwan rank third and fourth, respectively. The cumulative value of U.S. private investment in Malaysia probably exceeds $10 billion, 60% of which is in the oil and gas and petrochemical sectors with the rest in manufacturing, especially semiconductors and other electronic products.

Malaysia's New Economic Policy (NEP), first established in 1971, seeks to eradicate poverty and end the identification of economic function with ethnicity. In particular, it was designed to enhance the economic standing of ethnic Malays and other indigenous peoples (collectively known as "bumiputras" in Bahasa Malaysia). Rapid growth through the mid-90s made it possible to expand the share of the economy for bumiputras without reducing the economic attainment of other groups. One controversial NEP goal was to alter the pattern of ownership of corporate equity in Malaysia, with the government providing funds to purchase foreign-owned shareholdings on behalf of the bumiputra population. In June 1991, after the NEP expired, the government unveiled its National Development Policy, which contained many of the NEP's goals, although without specific equity targets and timetables.

DEFENSE

Malaysia has undertaken a major program to expand and modernize its armed forces, with significant procurement of state of the art equipment, including FA-18's and MIG fighters. Budgetary constraints imposed by the financial crisis have slowed procurement. In August, 1998 Malaysia suspended its participation in the Five Power Defense Arrangement with the United Kingdom, Australia, New Zealand, and Singapore. In October 1998 the Defense Minister announced a major review of defense policy (including participation in the Five Power Defense Arrangement) to ensure that the country's defense needs will be met into the next century.

FOREIGN RELATIONS

As a founding member of the Association of Southeast Asian Nations (ASEAN -- established 1967), Malaysia views regional cooperation as the cornerstone of its foreign policy. Malaysia was a leading advocate of expanding ASEAN's membership to include Laos, Vietnam, and Burma, arguing that "constructive engagement" with these countries, especially Burma, will help bring political and economic changes. In world affairs, Malaysia maintains close, cordial relations with the United States, the European Union, and Japan. Malaysia is an active member of the Commonwealth, the UN, the Organization of Islamic Conference, and the Non-Aligned Movement. Malaysia is also a member of APEC, and will host the 1998 APEC Leader's Meeting. Malaysia maintains diplomatic relations with North Korea.

International Affiliations: UN and many of its specialized agencies, including UNESCO; World Bank, International Monetary Fund, International Atomic Energy Agency; General Agreement on Tariffs and Trade; Association of Southeast Asian Nations; Asian Development Bank; Five-Power Defense Arrangement; South-South Commission (G-15); Asia-Pacific Economic Cooperation (APEC); Commonwealth; Non-Aligned Movement; Organization of Islamic Conference; and INTELSAT.

U.S.-MALAYSIAN RELATIONS

The United States has maintained friendly relations with Malaysia since its independence in 1957. The U.S. and Malaysia have a solid record of cooperation in many areas including trade and investment, counter-terrorism, and counter-narcotics. In 1997 the United States was Malaysia's top trading partner and leading investor. The United States also has supported Malaysia's defense efforts by providing for Malaysian participation in U.S. military education training programs and purchases of equipment under the foreign military sales program.

Cultural and educational exchanges have been another fruitful area of cooperation. Malaysians studying in the U.S., now numbering about 14,000, still represent one of the largest foreign student groups enrolled in American colleges and universities. The United States has taken several steps to assist Malaysian students in the U.S. through the uncertainties of the recent economic downturn.


New Zealand

PEOPLE

Most of the 3.7 million New Zealanders are of British origin. About 14% claim descent from the indigenous Maori population, which is of Polynesian origin. Nearly 75% of the people, including a large majority of the of the Maoris, live on the North Island. In addition, 167,000 Pacific Islanders also live in New Zealand.

During the late 1870s, natural increase permanently replaced immigration as the chief contributor to population growth and has accounted for more than 75% of population growth in the 20th century. Nearly 85% of New Zealand's population lives in urban areas, where the service and manufacturing industries are growing rapidly.

HISTORY

Archaeological evidence indicates that New Zealand was populated by fishing and hunting people of East Polynesian ancestry perhaps 1,000 years before Europeans arrived. Known to some scholars as the Moa-hunters, they may have merged with later waves of Polynesians who, according to Maori tradition, arrived between 952 and 1150. Some of the Maoris called their new homeland "Aotearoa," usually translated as "land of the long white cloud."

In 1642, Abel Tasman, a Dutch navigator, made the first recorded European sighting of New Zealand and sketched sections of the two main islands' west coasts. English Captain James Cook thoroughly explored the coastline during three South Pacific voyages beginning in 1769. In the late 18th and early 19th centuries, lumbering, seal hunting, and whaling attracted a few European settlers to New Zealand. In 1840, the United Kingdom established British sovereignty through the Treaty of Waitangi signed that year with Maori chiefs.

In the same year, selected groups from the U.K. began the colonization process. Expanding European settlement led to conflict with Maoris, most notably in the Maori land wars of the 1860s. British and colonial forces eventually overcame determined Maori resistance. During this period, many Maoris died from disease and warfare, much of it intertribal.

Constitutional government began to develop in the 1850s. In 1867, Maoris won the right to a certain number of reserved seats in parliament. During this period, the livestock industry began to expand, and the foundations of New Zealand's modern economy took shape. By the end of the 19th century, improved transportation facilities made possible a great overseas trade in wool, meat, and dairy products.

By the 1890s, parliamentary government along democratic lines was well established, and New Zealand's social institutions assumed their present form. Women received the right to vote in national elections in 1893. The turn of the century brought sweeping social reforms that built the foundation for New Zealand's version of the welfare state.

Maoris gradually recovered from population decline and, through interaction and intermarriage with settlers and missionaries, adopted much of European culture. In recent decades, Maoris have become increasingly urbanized and have become more politically active and culturally assertive.

New Zealand was declared a dominion by a royal proclamation in 1907. It achieved full internal and external autonomy by the Statute of Westminster Adoption Act in 1947, although this merely formalized a situation that had existed for many years.

GOVERNMENT

New Zealand has a parliamentary system of government closely patterned on that of the United Kingdom and is a fully independent member of the Commonwealth. It has no written constitution.

Executive authority is vested in a cabinet led by the prime minister, who is the leader of the political party or coalition of parties holding the majority of seats in parliament. All cabinet ministers must be members of parliament and are collectively responsible to it.

The unicameral parliament (House of Representatives) has 120 seats, five of which currently are reserved for Maoris elected on a separate Maori roll. However, Maoris also may run for, and have been elected to, non-reserved seats. Parliaments are elected for a maximum term of three years, although elections can be called sooner.

The judiciary consists of the Court of Appeals, the High Court, and the District Courts. New Zealand law has three principal sources--English common law, certain statutes of the U.K. Parliament enacted before 1947, and statutes of the New Zealand Parliament. In interpreting common law, the courts have been concerned with preserving uniformity with common law as interpreted in the United Kingdom. This uniformity is ensured by the maintenance of the Privy Council in London as the final court of appeal and by judges' practice of following British decisions, even though, technically, they are not bound by them.

Local government in New Zealand has only the powers conferred upon it by parliament. The country's 12 regional councils are directly elected, set their own tax rates, and have a chairman elected by their members. Regional council responsibilities include environmental management, regional aspects of civil defense, and transportation planning. The 74 "territorial authorities"--15 city councils, 58 district councils in rural areas, and one county council for the Chatham Islands--are directly elected, raise local taxes at rates they themselves set, and are headed by popularly elected mayors. The territorial authorities may delegate powers to local community boards. These boards, instituted at the behest either local citizens or territorial authorities, advocate community views but cannot levy taxes, appoint staff, or own property.

POLITICAL CONDITIONS

The conservative National Party and left-leaning Labour Party have dominated New Zealand political life since a Labour government came to power in 1935. During 14 years in office, the Labour Party implemented a broad array of social and economic legislation, including comprehensive social security, a large-scale public works program, a 40-hour workweek, a minimum basic wage, and compulsory unionism. The National Party won control of the government in 1949 and adopted many welfare measures instituted by the Labour Party. Except for two brief periods of Labour governments in 1957-60 and 1972-75, National held power until 1984. After regaining control in 1984, the Labour government instituted a series of radical market-oriented reforms in response to New Zealand's mounting external debt. It also enacted anti-nuclear legislation that effectively brought about New Zealand's suspension from the ANZUS security alliance with the United States and Australia.

In October 1990, the National Party was again elected, capturing 67 of 97 parliamentary seats in a landslide victory. To the disappointment of some supporters, National continued the economic reforms introduced by Labour. National was narrowly re-elected in November 1993. Two seats each were won by two new opposition parties, the Alliance and New Zealand First. In a simultaneous referendum, New Zealanders changed their electoral system to a form of proportional representation designed to give smaller parties a larger voice in parliament. In the 1996 election, the first under the new "mixed-member-proportional" (MMP) system, the National Party, at 34% (44 Parliament seats) barely edged out Labour (28%-37% seats) as the top party. New Zealand First (13%), with its 17 seats, opted to join National in a coalition government.

ECONOMY

The ongoing regionwide Asian financial crisis, which began in 1997, has created uncertainty and instability in the New Zealand economy.

New Zealand enjoys a high level of prosperity based on exports from its efficient agricultural system. Leading agricultural exports include meat, forest products, fruit and vegetables, fish, wool, and dairy products. The country has substantial hydroelectric power and sizable reserves of natural gas. Leading manufacturing sectors are food processing, metal fabrication, and wood and paper products.

New Zealand was a direct beneficiary of many of the reforms achieved under the Uruguay Round. New Zealand agriculture, and the dairy sector in particular, have enjoyed many new trade opportunities. Since 1984, government subsidies have been eliminated; import regulations have been liberalized; exchange rates have been freely floated; controls on interest rates, wages, and prices have been removed; and marginal rates of taxation reduced. Tight monetary policy and major efforts to reduce the government budget deficit have cut inflation from an annual rate of more than 18% in 1987 to about 1.6% in 1997. The restructuring and sale of government-owned enterprises has reduced government's role in the economy and permitted the retirement of some public debt. However, the reforms led to economic dislocations with unemployment reaching 11% in 1991. An improving economy brought unemployment down to 6.2% by March 1996, but unemployment remains a significant social concern and has been rising for the past year to 7.7% in June 1998.

Economic growth has slowed substantially since an unsustainable peak of over 6% in 1994, in response to tighter monetary policy. At the same time, by early 1998, real GDP growth was approaching 2%, and economists believe that the Asian financial crisis could postpone New Zealand's long-expected economic recovery until perhaps 1999. Business and consumer confidence are trending downward, negatively impacting both business investment and retail sales.

New Zealand's exports were hurt by the rapid appreciation of the N.Z. dollar from late 1994 to mid-1997 in response to tight monetary policy. With the loosening of monetary conditions throughout 1997, the N.Z. currency lost all of its gains against the U.S. dollar, boosting exports in the second half of 1997. However, the Asian financial crisis has begun to bite into such key foreign exchange earners as tourism from Asia, forestry exports, and educational services. Dairy and meat exports to Asia also are expected to suffer in 1998, while manufactured products are holding up well. New Zealand commodity exporters are looking to U.S. and European markets to replace lost Asian customers. The current account has been deteriorating substantially in the last few years and is expected to create a downward risk for the N.Z. currency.

Prices and access to foreign markets are a constant concern to New Zealand. Exports also have been helped by improving economic relations with Australia. Australia and New Zealand are partners in "Closer Economic Relations" (CER), which allows for free trade in goods and most services. Since 1990, CER has created a single market of more than 20 million people, and this has provided new opportunities for New Zealand exporters. Australia is now the destination of 19.7% of New Zealand's exports, compared to 14% in 1983. Extending CER to product standardization and taxation policy also is under consideration.

U.S. goods and services are increasingly competitive in New Zealand. The market-led economy offers many opportunities for U.S. exporters and investors. Investment opportunities exist in chemicals, food preparation, finance, tourism and forest products, as well as in franchising. The best sales prospects are for computers, software, medical equipment, chemicals, sporting goods, and telecommunications and transportation equipment.

New Zealand welcomes and encourages foreign investment without discrimination. Approval by its Overseas Investment Commission(OIC) is required for foreign investments over $6.4 million or investments of any size in two specific sectors--commercial fishing and rural land. Foreign investment in commercial fishing is limited to a 25% holding, unless an exemption is granted by the Ministry of Agriculture and Fisheries. While the level of ownership is not restricted for rural land, foreign purchasers are required to demonstrate that the purchase is beneficial to New Zealand. In practice, OIC approval requirements have not been an obstacle for U.S. investors. No performance requirements are attached to foreign direct investment. Full remittance of profits and capital is permitted through normal banking channels.

A number of U.S. companies have subsidiary branches in New Zealand. Many companies operate through local agents, and some are in association in joint ventures. The U.S. Government recognized the generally liberal trading environment in New Zealand by signing a bilateral Trade and Investment Framework Agreement in 1992 providing for periodic government-to-government consultations on bilateral and multilateral trade and investment issues and concerns.

NATIONAL SECURITY

New Zealand has three defense policy objectives: 1) defend New Zealand against low-level threats; 2) contribute to regional security; and 3) play a part in global security efforts. New Zealand considers its own national defense needs to be modest. New Zealand's 1997 defense budget provides for significant updgrades in equipment over the next five years.

New Zealand states it maintains a "credible minimum force" to reassure its neighbors and allies of its commitment to regional stability, although critics maintain that the country's defense forces have fallen below this standard. With a claimed area of direct strategic concern that extends from Australia to Southeast Asia to the South Pacific, and with defense expenditures that total less than 1.4% of GDP, New Zealand necessarily places substantial reliance on its defense relationship with larger countries. Before the ANZUS rift over New Zealand's anti-nuclear legislation, its defense relationship with the U.S. was very important to New Zealand. In recent years, New Zealand has coordinated its defense efforts more closely with Australia.

New Zealand is an active participant in multilateral peacekeeping. It has taken a leading role in trying to bring peace to Bougainville, brokering a cease-fire and leading the "truce monitoring group" composed of New Zealand, Australia, Fiji, and Vanuatu. New Zealand maintains a contingent in the Sinai Multinational Force and Observers and has contributed to UN peacekeeping operations in Angola, Cambodia, Somalia, and the former Yugoslavia. It has also participated in the Multilateral Interception Force in the Persian Gulf.

New Zealand participates in Mutual Assistance Programs (MAP), sharing training facilities and exchanges of personnel, and conducting joint exercises with the Philippines, Thailand, Indonesia, Papua New Guinea, Malaysia, Singapore, Brunei, Fiji, Tonga, and other South Pacific states. In addition to its MAP partners, the country exercises with its Five Power Defense Arrangement partners (Australia, the United Kingdom, Malaysia, and Singapore), as well as with Korea.

Due to New Zealand's anti-nuclear policy, defense cooperation with the U.S., including training exercises has been significantly restricted since 1986.

FOREIGN RELATIONS

New Zealand's foreign policy is oriented chiefly toward developed democratic nations and emerging Pacific economies. The country's major political parties have generally agreed on the broad outlines of foreign policy, and the current coalition government has been active in multilateral fora on issues of recurring interest to New Zealand: trade liberalization, disarmament, and arms control.

New Zealand values the United Nations and its participation in that organization. It also values its participation in the World Trade Organization (WTO); World Bank; International Monetary Fund (IMF); Organization for Economic Cooperation and Development (OECD); International Energy Agency; Asian Development Bank; South Pacific Forum; The Pacific Community; Colombo Plan; Asia Pacific Economic Cooperation (APEC); INTELSAT; and the International Whaling Commission. New Zealand also is an active member of the Commonwealth. Despite the 1985 rupture in the ANZUS alliance, New Zealand has maintained good working relations with the United States and Australia on a broad array of international issues.

In the past, New Zealand's geographic isolation and its agricultural economy's general prosperity tended to minimize public interest in world affairs. However, growing global trade and other international economic events have made New Zealanders increasingly aware of their country's dependence on stable overseas markets.

New Zealand's economic involvement with Asia has been increasingly important, first through aid, mainly to Southeast Asia, and through expanding trade with the growing economies of Asia. New Zealand is a "dialogue partner" with the Association of South East Asian Nations (ASEAN) and an active participant in APEC.

As a charter member of the Colombo Plan, New Zealand has provided Asian countries with technical assistance and capital. It also contributes through the Asian Development Bank and through UN programs. It is a member of the UN Economic and Social Council for Asia and the Pacific.

New Zealand has focused its bilateral economic assistance resources on projects in the South Pacific island states. It has taken a special interest in facilitating peace and reconciliation on Bougainville Island I Papua New Guinea. The country's long association with Samoa (formerly known as Western Samoa), reflected in a treaty of friendship signed in 1962, and its close association with Tonga have resulted in a flow of immigrants and visitors under work permit schemes from both countries. New Zealand administers the Tokelau Islands and provides foreign policy and economic support when requested for the freely associated self-governing states of the Cook Islands and Niue. Inhabitants of these areas hold New Zealand citizenship.

In 1947, New Zealand joined Australia, France, the United Kingdom, and the United States to form the South Pacific Commission, a regional body to promote the welfare of the Pacific region. New Zealand has been a leader in the organization. In 1971, New Zealand joined the other independent and self-governing states of the South Pacific to establish the South Pacific Forum, which meets annually at the "heads of government" level.

 


North Korea

Historical and Cultural Highlights

The Korean peninsula was first populated by peoples of a Tungusic branch of the Ural-Altaic language family who migrated from the northwestern regions of Asia. Some of these peoples also populated parts of northeast China (Manchuria); Koreans and Manchurians still show physical similarities.

Koreans are racially and linguistically homogeneous. Although there are no indigenous minorities in North Korea, there is a small Chinese community (about 50,000) and some 1,800 Japanese wives who accompanied the roughly 93,000 Koreans returning to the North from Japan during 1959-62.

Korean is a Ural-Altaic language and is related to Japanese and remotely related to Hungarian, Finnish, Estonian, and Mongolian. Although dialects exist, the Korean spoken throughout the peninsula is mutually comprehensible. In North Korea, the Korea alphabet (hangul) is used exclusively, unlike in South Korea, where a combination of hangul and Chinese characters is used as the written language.

Korea's traditional religions are Buddhism and Shamanism. Christian missionaries arrived as early as the 16th century, but it was not until the 19th century that they founded schools, hospitals, and other modern institutions throughout Korea. Major centers of 19th-century missionary activity included Seoul and Pyongyang, and there was a relatively large Christian population in the north before 1945. Although religious groups exist in North Korea, most available evidence suggests that the government severely restricts religious activity.

According to legend, the god-king Tangun founded the Korean nation in 2333 BC. By the first century AD, the Korean peninsula was divided into the kingdoms of Silla, Koguryo, and Paekche. In 668 AD, the Silla kingdom unified the peninsula. The Koryo dynasty--from which Portuguese missionaries in the 16th century derived the Western name "Korea"--succeeded the Silla kingdom in 935. The Choson dynasty, ruled by members of the Yi clan, supplanted Koryo in 1392 and lasted until the Japanese annexed Korea in 1910.

Throughout most of its history, Korea has been invaded, influenced, and fought over by its larger neighbors. Korea was under Mongolian occupation from 1231 until the early 14th century and was plundered by Japanese pirates in 1359 and 1361. The unifier of Japan, Hideyoshi, launched major invasions of Korea in 1592 and 1597. When Western powers focused "gunboat" diplomacy on Korea in the mid-19th century, Korea's rulers adopted a closed-door policy, earning Korea the title of "Hermit Kingdom."

Though the Choson dynasty paid fealty to the Chinese court and recognized China's hegemony in East Asia, Korea was independent until the late 19th century. At that time, China sought to block growing Japanese influence on the Korean peninsula and Russian pressure for commercial gains there. This competition produced the Sino-Japanese War of 1894-95 and the Russo-Japanese War of 1904-05. Japan emerged victorious from both wars and in 1910 annexed Korea as part of the growing Japanese empire.

Japanese colonial administration was characterized by tight control from Tokyo and ruthless efforts to supplant Korean language and culture. Organized Korean resistance during the colonial era--such as the March 1, 1919, Independence Movement--was unsuccessful, and Japan remained firmly in control until the end of World War II in 1945.

Japan surrendered in August 1945, and Korea was liberated. However, the unexpectedly early surrender of Japan led to the immediate division of Korea into two occupation zones, with the U.S. administering the southern half of the peninsula and the U.S.S.R taking over the area to the north of the 38th parallel. This division was meant to be temporary and to facilitate the Japanese surrender until the U.S., U.K., Soviet Union, and China could arrange a trusteeship administration.

At a meeting in Cairo, it was agreed that Korea would be free "in due course;" at a later meeting in Yalta, it was agreed to establish a four-power trusteeship over Korea. In December 1945, a conference convened in Moscow to discuss the future of Korea. A five-year trusteeship was discussed, and a joint Soviet-American commission was established. The commission met intermittently in Seoul but deadlocked over the issue of establishing a national government. In September 1947, with no solution in sight, the United States submitted the Korean question to the UN General Assembly.

Initial hopes for a unified, independent Korea quickly evaporated as the politics of the Cold War and domestic opposition to the trusteeship plan resulted in the 1948 establishment of two separate nations with diametrically opposed political, economic, and social systems and the outbreak of war in 1950 (see, under Foreign Relations, Korean War of 1950-53).
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ECONOMY

North Korea's faltering economy and the breakdown of trade relations with the countries of the former socialist bloc--especially following the fall of communism in Eastern Europe and the disintegration of the Soviet Union--have confronted Pyongyang with difficult policy choices. Other centrally planned economies in similar difficulties have opted for domestic economic reform and liberalization of trade and investment. Despite its recent moves toward limited economic opening, North Korea's leadership seems determined to maintain tight political and ideological control.

About 80% of North Korea's terrain consists of moderately high mountain ranges and partially forested mountains and hills separated by deep, narrow valleys and small, cultivated plains. The most rugged areas are the north and east coasts. Good harbors are found on the eastern coast. Pyongyang, the capital, near the country's west coast, is located on the Taedong River.

Although most North Korean citizens live in cities and work in factories, agriculture remains a rather high 30% of total GNP, although output has recently been falling. While trade with the South has expanded since 1988, no physical links between the two remain, and the infrastructure of the North is generally poor and outdated.

North Korea suffers from chronic food shortages, which were exacerbated by record floods in the summer of 1995. In response to international appeals, the United States, from September 1995 through June 1996, has provided four tranches of humanitarian aid totaling $8.5 million for international agencies' relief activities in the D.P.R.K.

Colonial Rule and Postwar Division

Beginning in the mid-1920s, the Japanese colonial administration concentrated its industrial development efforts in the comparatively underpopulated and resource-rich northern portion of Korea, resulting in a considerable movement of people northward from the agrarian southern provinces of the Korean peninsula.

This trend was reversed after the end of World War II, when more than 2 million Koreans moved from North to South following the division of the peninsula into Soviet and American military zones of administration. This southward exodus continued after the establishment of the D.P.R.K. in 1948 and during the 1950-53 Korean war. The North Korean population is now 21.8 million, compared with 44.5 million in South Korea.

The post-World War II division of the Korean peninsula resulted in imbalances of natural and human resources, with disadvantages for both the North and the South. By most economic measures, after partition the North was better off in terms of industry and natural resources. The South, however, had two-thirds of the work force. In 1945, about 65% of Korean heavy industry was in the North but only 31% of light industry, 37% of agriculture, and 18% of the peninsula's total commerce.

North and South both suffered from the massive destruction caused during the Korean war. In the years immediately after the war, North Korea mobilized its labor force and natural resources in an effort to achieve rapid economic development. Large amounts of aid from other communist countries, notably the Soviet Union and China, helped the regime achieve a high growth rate in the immediate postwar period.

Efforts at Modernization

During the early 1970s, North Korea, probably noting the more rapid economic development of the South, attempted a large-scale modernization program through the importation of Western technology, principally in the heavy industrial sectors of the economy. Unable to finance its debt through exports that shrank steadily after the worldwide recession stemming from the oil crisis of the 1970s, the D.P.R.K. became the first communist country to default on its loans from free market countries.

In 1979, North Korea was able to renegotiate much of its international debt, but in 1980 it defaulted on all of its loans except those from Japan. By the end of 1986, the North's hard-currency debt had reached more than $4 billion. It also owed nearly $2 billion to communist creditors. The Japanese also declared the North in default. By 1993, North Korea's debt was estimated at $10 billion.

Largely because of these debt problems but also because of a prolonged drought and mismanagement, North Korea's industrial growth slowed and per capita GNP fell below that of the South. By the end of 1979, per capita GNP in the North was about one-third of that in the South. The causes for this relatively poor performance are complex, but a major factor is the disproportionately large percentage of GNP (possibly as much as 25%) that the North devotes to the military.

In April 1982, Kim Il Sung announced a new economic policy giving priority to increased agricultural production through land reclamation, development of the country's infrastructure--especially power plants and transportation facilities--and reliance on domestically produced equipment. There was also more emphasis on trade.

In September 1984, North Korea promulgated a joint venture law to attract foreign capital and technology. The new emphasis on expanding trade and acquiring technology, however, was not been accompanied by a shift in priorities away from support of the military. Today, North Korea has an international trade share--exports plus imports--of 12% of GNP, well below South Korea's figure of 55%.

In 1991, the D.P.R.K. announced the creation of a Special Economic Zone (SEZ) in the northeast regions of Najin, Chongjin, and Sonbong. Investment in this SEZ has been slow in coming. Problems with infrastructure, bureaucracy, and uncertainties about investment security and viability have hindered growth and development.

Most recently, the D.P.R.K. announced in December 1993 a three-year transitional economic policy placing primary emphasis on agriculture, light industry, and foreign trade.

North-South Economic Ties

The two Koreas have begun to develop economic ties. Following a 1988 decision by the South Korean Government to allow trade with the D.P.R.K. (see, under Foreign Relations, Reunification Efforts Since 1971), South Korean firms began to import North Korean goods. Direct trade with the South began in the fall of 1990 after the unprecedented September 1990 meeting of the two Korean Prime Ministers. Trade between the countries increased from $18.8 million in 1989 to $174 million in 1992.

During this period, the chairman of the South Korean company Daewoo--Kim Woo Choong--visited the North, and an agreement was created to build a light industrial complex at Nampo. In other negotiations, there were discussions to develop tourism and build road and rail links in Korea. Economic contacts continued to develop until the spring of 1993, when North Korea's withdrawal from the NPT slowed the expansion of North-South economic cooperation.

South Korean President Kim Young Sam prohibited substantial direct investment in the North until the nuclear issue was resolved, although inter-Korean trade continued, with South Korea becoming one of the D.P.R.K.'s largest trading partners. With the signing of the U.S.-D.P.R.K. agreed framework on October 21, 1994, President Kim announced he would again allow discussions for investments.

GOVERNMENT AND POLITICAL CONDITIONS

North Korea has a centralized government under the rigid control of the communist Korean Worker's Party (KWP), which all government officials belong to. A few minor political parties are allowed to exist in name only, presumably to present a facade of representative government to the outside world. Kim Il Sung, commonly referred to as "Great Leader," dominated the government from 1948 until his death in July 1994. Kim served both as Secretary General of the KWP and as President of North Korea.

Little is known about the actual lines of power and authority in the North Korean Government despite the formal structure set forth in the constitution. Following the death of Kim Il Sung, his son--Kim Jong Il--appears to have inherited supreme power. However, 11/2 years after his father's death, Kim Jong Il has not formally assumed Kim Il Sung's two main titles: North Korean President and Secretary General of the KWP.

An inner core of ranking members of the Korean Workers' Party, including an increasing number of Kim Jong Il's followers, dominates the political system and the economy through an elaborate party structure and through the civilian and military bureaucracies. A pervasive personality cult has developed around Kim Jong Il, who was groomed for many years to succeed his father. Kim's continuing media buildup suggests that he eventually will succeed his father in one or both of his positions.

North Korea's 1972 constitution was reportedly amended in late 1992, but the D.P.R.K. has never publicized the changes. The government is led by the president and, in theory, a super-cabinet called the Central People's Committee (CPC).

The constitution designates the CPC as the government's top policymaking body. It is headed by the president, who also nominates the other committee members. The CPC makes policy decisions and supervises the cabinet, or State Administration Council (SAC). The SAC is headed by a premier and is the dominant administrative and executive agency.

Officially, the legislature, the Supreme People's Assembly (SPA), is the highest organ of state power. Its members are elected every four years. Usually only two meetings are held annually, each lasting a few days. A standing committee elected by the SPA performs legislative functions when the Assembly is not in session. In reality, the Assembly serves only to ratify decisions made by the ruling KWP.

North Korea's judiciary is "accountable" to the SPA and the president. The SPA's standing committee also appoints judges to the highest court for four-year terms that are concurrent with those of the Assembly.

Administratively, North Korea is divided into nine provinces and four provincial-level municipalities--Pyongyang, Chongjin, Nampo, and Kaesong. It also appears to be divided into nine military districts.

Principal Party and Government Officials

Kim Jong Il--KWP Politburo Standing Committee member; KWP Secretary; Supreme Commander of the People's Armed Forces; Chairman of the National Defense Commission; son of Kim Il Sung and de facto heir.
Kang Song San--SAC Premier; KWP Politburo member
Kim Yong Nam--Foreign Minister; SAC Vice Premier; KWP Politburo member
Kim Hyong U--Ambassador to the UN

FOREIGN RELATIONS

North Korea's relationship with the South has informed much of its post-World War II history and still drives much of its foreign policy. North and South Korea have had a difficult and acrimonious relationship in the four decades since the Korean war.

North Korea occupies the northern portion of a mountainous peninsula projecting southeast from China, between the Sea of Japan and the Yellow Sea. Japan lies east of the peninsula across the Sea of Japan. North Korea shares borders with the People's Republic of China along the Yalu River and with China and Russia along the Tumen River.

The military demarcation line (MDL) of separation between the belligerent sides at the close of the Korean war forms North Korea's boundary with South Korea. A demilitarized zone (DMZ) extends for 2,000 meters (just over one mile) on either side of the MDL. Both the North and South Korean Governments hold that the MDL is only a temporary administrative line, not a permanent border.

During the postwar period, both Korean Governments have repeatedly affirmed their desire to reunify the Korean peninsula, but until 1971, the two governments had no direct, official communications or other contact. They have yet to have a presidential-level summit. During former U.S. President Carter's 1994 visit, Kim Il Sung agreed to a first-ever North-South summit. The two sides went ahead with plans for a meeting in July but had to shelve it because of Kim's death.

Korean War of 1950-53

As noted, differences developed after World War II over the issue of establishing a Korean national government. The Soviet Union and Korean authorities in the North refused to comply with the UN General Assembly's November 1947 resolution on elections and blocked entry of the United Nations Temporary Commission on Korea into the North.

Despite this refusal, elections were held in the South under UN observation, and on August 15, 1948, the Republic of Korea was established in the South. Syngman Rhee, a Korean nationalist leader, became the Republic's first president. On September 9, 1948, the North established the Democratic People's Republic of Korea headed by then-Premier Kim Il Sung, known for his anti-Japanese guerrilla activities in Manchuria during the 1930s. Both administrations claimed to be the only legitimate government on the peninsula.

After the establishment of the two states, South Korea experienced several violent uprisings by indigenous, pro-North Korean leftist guerrillas. As Soviet troops left in late 1948 and U.S. troops in the spring of 1949, border clashes along the 38th parallel intensified.

North Korean forces invaded South Korea on June 25, 1950. The United Nations, in accordance with the terms of its Charter, engaged in its first collective action, and established the UN Command (UNC), to which 16 member nations sent troops and assistance. Next to South Korea, the United States contributed the largest contingent of forces to this international effort. The battle line fluctuated north and south, and after large numbers of Chinese "People's Volunteers" intervened to assist the North, the battle line stabilized north of Seoul near the 38th parallel.

Armistice negotiations began in July 1951, but hostilities continued until July 27, 1953. On that date, at Panmunjom, the military commanders of the North Korean People's Army, the Chinese People's Volunteers, and the UNC signed an armistice agreement. Neither the United States nor South Korea is a signatory to the armistice per se, although both adhere to it through the UNC.

The armistice called for an international conference to find a political solution to the problem of Korea's division. This conference met at Geneva in April 1954 but, after seven weeks of futile debate, ended without agreement or progress. No comprehensive peace agreement has replaced the 1953 armistice pact; thus, a condition of belligerency still exists on the peninsula.

Reunification Efforts Since 1971

In August 1971, North and South Korea agreed to hold talks through their respective Red Cross societies with the aim of reuniting the many Korean families separated following the division of Korea and the Korean war. After a series of secret meetings, both sides announced on July 4, 1972, an agreement to work toward peaceful reunification and an end to the hostile atmosphere prevailing on the peninsula. Officials exchanged visits, and regular communications were established through a North-South coordinating committee and the Red Cross.

However, these initial contacts broke down and ended in 1973 following South Korean President Park Chung Hee's announcement that the South would seek separate entry into the United Nations and after the kidnapping from Tokyo of South Korean opposition leader Kim Dae Jung by the South Korean intelligence service. There was no other significant contact between North and South Korea until 1984.

The breakdown of these talks characterized the intermittent nature of inter-Korean dialogue. Basic differences in approach--North Korea insisting on immediate steps toward reunification before discussing specific, concrete issues and South Korea maintaining that, given the long history of mutual distrust, reunification must be a gradual, step-by-step process--made improved North-South relations an elusive aim.

Dialogue was renewed on several fronts in September 1984, when South Korea accepted the North's offer to provide relief goods to victims of severe flooding in South Korea. Red Cross talks to address the plight of separated families resumed, as did talks on economic and trade issues and parliamentary-level discussions. However, the North then unilaterally suspended all talks in January 1986, arguing that the annual U.S.-South Korea "Team Spirit" military exercise was inconsistent with dialogue. There was a brief flurry of negotiations on cohosting the 1988 Seoul Olympics, which ended in failure and was followed by the 1987 KAL flight 858 bombing.

In a major initiative in July 1988, South Korean President Roh Tae Woo called for new efforts to promote North-South exchanges, family reunification, inter-Korean trade, and contact in international forums. Roh followed up this initiative in a UN General Assembly speech in which South Korea offered for the first time to discuss security matters with the North.

Initial meetings that grew out of Roh's proposals started in September 1989. In September 1990, the first of eight prime minister-level meetings between North Korean and South Korean officials took place in Seoul, beginning an especially fruitful period of dialogue. The prime ministerial talks resulted in two major agreements: the Agreement on Reconciliation, Nonaggression, Exchanges, and Cooperation (the "basic agreement") and the Declaration on the Denuclearization of the Korean Peninsula (the "joint declaration").

The basic agreement--signed on December 13, 1991--calling for reconciliation and nonaggression established four joint commissions. These commissions--on South-North reconciliation, South-North military affairs, South-North economic exchanges and cooperation, and South-North social and cultural exchange--were to work out the specifics for implementing the general terms of the basic agreement. Subcommittees to examine specific issues were created, and liaison offices were established in Panmunjom, but in the fall of 1992, the process came to a halt because of rising tension over the nuclear issue.

The joint declaration on denuclearization was initialed on December 31, 1991. It forbade both sides to test, manufacture, produce, receive, possess, store, deploy, or use nuclear weapons and forbade the possession of nuclear reprocessing and uranium enrichment facilities. A procedure for inter-Korean inspection was to be organized and a North-South Joint Nuclear Control Commission (JNCC) was mandated with verification of the denuclearization of the peninsula.

On January 30, 1992, the D.P.R.K. also signed a nuclear safeguards agreement with the IAEA, as it had pledged to do in 1985 when acceding to the Nuclear Non-Proliferation Treaty. This safeguards agreement allowed IAEA inspections to begin in June 1992. In March 1992, the JNCC was established in accordance with the joint declaration, but subsequent meetings failed to reach agreement on the main issue of establishing a bilateral inspection regime.

As the 1990s progressed, concern over the North's nuclear program became a major issue in North-South relations and between North Korea and the U.S. The lack of progress on implementation of the joint nuclear declaration's provision for an inter-Korean nuclear inspection regime led to reinstatement of the U.S.-South Korea Team Spirit military exercise for 1993. The situation worsened rapidly when North Korea, in January 1993, refused IAEA access to two suspected nuclear waste sites and then announced in March 1993 its intent to withdraw from the NPT. During the next two years, the U.S. held direct talks with the D.P.R.K. that resulted in a series of agreements on nuclear matters (see, under U.S. Policy Toward North Korea, U.S. Efforts on Denuclearization).

Defense and Military Issues

North Korea now has the fourth-largest army in the world. The North has an estimated 1.2 million armed personnel, compared to about 650,000 in the South. Military spending equals 20-25% of GNP, with about 20% of men ages 17-54 in the regular armed forces. North Korean forces have a substantial numerical advantage over the South (approximately 2 or 3 to 1) in several key categories of offensive weapons--tanks, long-range artillery, and armored personnel carriers.

The North has perhaps the world's second-largest special operations force (55,000), designed for insertion behind the lines in wartime. While the North has a relatively impressive fleet of submarines, its surface fleet has a very limited capability. Its aging air force has twice the number of aircraft as the South; but except for a few advanced fighters, the North's air force is obsolete. The North--like the South--deploys the bulk of its forces well forward, along the DMZ. Several North Korean military tunnels under the DMZ were discovered in the 1970s.

In 1953, the Military Armistice Commission (MAC) was created to oversee and enforce the terms of the armistice. The Neutral Nation Supervisory Committee (NNSC)--originally made up of delegations from Poland and Czechoslovakia on the D.P.R.K.-Chinese People's Volunteers side and Sweden and Switzerland on the UN side--monitors the activities of the MAC.

In recent years, North Korea has sought to dismantle the MAC in a push for a new "peace mechanism" on the peninsula. In April 1994, it declared the MAC void and withdrew its representatives. Prior to this, it had forced the Czechs out of the NNSC by refusing to accept the Czech Republic as the successor state to Czechoslovakia, an original member of the NNSC. In September 1994, at the D.P.R.K.'s urging, China "recalled" the Chinese People's Volunteers representatives to the MAC, and in early 1995, North Korea forced Poland to remove its representatives to the NNSC from the North Korean side of the DMZ.

In April 1996, the D.P.R.K. declared that it would no longer fulfill its obligation under the military armistice agreement to maintain the DMZ. This was followed by three nights of minor incursions into the northern sector of the Joint Security Area at Panmunjom, after which the situation returned to normal.

Also over the last several years, North Korea has moved even more of its rear-echelon troops to hardened bunkers closer to the DMZ. Given the proximity of Seoul to the DMZ (some 25 miles), South Korean and U.S. forces are likely to have little warning of any attack. The United States and South Korea continue to believe that the U.S. troop presence remains an effective deterrent against North Korean aggression.

Relations Outside the Peninsula

After 1945, the Soviet Union supplied the economic and military aid that enabled North Korea to mount its invasion of the South in 1950. Soviet aid and influence continued at a high level during the Korean war; as mentioned, the Soviet Union was largely responsible for rebuilding North Korea's economy after the cessation of hostilities. In addition, the assistance of Chinese "volunteers" during the war and the presence of these troops until 1958 gave China some degree of influence in North Korea. In 1961, North Korea concluded formal mutual security treaties with the Soviet Union (inherited by Russia) and China, which have not been formally ended.

In the 1970s and early 1980s, the establishment of diplomatic relations between the United States and China, the Soviet-backed Vietnamese occupation of Cambodia, and the Soviet occupation of Afghanistan created strains between China and the Soviet Union and, in turn, in North Korea's relations with its two major communist allies. North Korea tried to avoid becoming embroiled in the Sino-Soviet split, obtaining aid from both the Soviet Union and China and trying to avoid dependence on either. Following Kim Il Sung's 1984 visit to Moscow, there was a dramatic improvement in Soviet-D.P.R.K. relations, resulting in renewed deliveries of advanced Soviet weaponry to North Korea and increases in economic aid.

The establishment of diplomatic relations by South Korea with the Soviet Union in 1990 and with the PRC in 1992 put a serious strain on relations between North Korea and its traditional allies. Moreover, the fall of communism in Eastern Europe in 1989 and the disintegration of the Soviet Union in 1991 resulted in a significant drop in communist aid to North Korea. Despite these changes and its past reliance on this military and economic assistance, North Korea proclaims a militantly independent stance in its foreign policy in accordance with its official ideology of juche, or self-reliance.

At the same time, North Korea maintains membership in a variety of multilateral organizations. It became a member of the UN in September 1991. North Korea also belongs to the Food and Agriculture Organization; the International Civil Aviation Organization; the International Postal Union; the UN Conference on Trade and Development; the International Telecommunications Union; the UN Development Program; the UN Educational, Scientific, and Cultural Organization; the World Health Organization; the World Intellectual Property Organization; the World Meteorological Organization; the International Maritime Organization; the International Committee of the Red Cross; and the Nonaligned Movement.

Terrorism

The D.P.R.K. is not known to have sponsored any terrorist acts since 1987, when KAL 858 was bombed in flight. The D.P.R.K. has made several statements condemning terrorism, most recently a May 1994 Foreign Ministry spokesman statement "opposing any act encouraging and supporting terrorism." The D.P.R.K. and South Korea pledged in their 1991 reconciliation agreement to "refrain from all acts destroying and overthrowing the other side" and not use arms against one another. North Korea appears to be respecting a promise to the Philippine Government to suspend its support for the communist New People's Army.

Normalization talks with Japan have been complicated by North Korea's refusal to respond to questions concerning the status of a Korean resident of Japan allegedly kidnapped by North Koreans in the 1980s to teach Japanese to D.P.R.K. agents. Pyongyang continues to provide sanctuary to members of the Japanese Communist League-Red Army Faction who participated in the hijacking of a Japan Airlines flight to North Korea in 1970.


Philippines

PEOPLE

The majority of Philippine people are of Malay stock, descendants of Indonesians and Malays who migrated to the islands long before the Christian era. The most significant ethnic minority group is the Chinese, who have played an important role in commerce since the ninth century, when they first came to the islands to trade. As a result of intermarriage, many Filipinos have some Chinese and Spanish ancestry. Americans and Spaniards constitute the next largest alien minorities in the country.

About 90% of the people are Christian; most were converted and Westernized to varying degrees during nearly 400 years of Spanish and American rule. The major non-Hispanicized groups are the Muslim population, concentrated in the Sulu Archipelago and western Mindanao, and the mountain groups of northern Luzon. Small forest tribes live in the more remote areas of Mindanao.

About 87 native languages and dialects are spoken, all belonging to the Malay-Polynesian linguistic family. Of these, eight are the first languages of more than 85% of the population. The three principal indigenous languages are Cebuano, spoken in the Visayas; Tagalog, predominant in the area around Manila; and Ilocano, spoken in northern Luzon. Since 1939, in an effort to develop national unity, the government has promoted the use of the national language, Pilipino, which is based on Tagalog. Pilipino is taught in all schools and is gaining acceptance, particularly as a second language.

English, the most important non-native language, is used as a second language by almost half of the population, including nearly all professionals, academics, and government workers. Spanish is spoken by few Filipinos, and its use is decreasing.

Despite this multiplicity of languages, the Philippines has one of the highest literacy rates in the East Asian and Pacific area. About 90% of the population 10 years of age and older are literate.

HISTORY

The history of the Philippines may be divided into four distinct phases: the pre-Spanish period (before 1521); the Spanish period (1521-1898); the American period (1898-1946); and the years since independence (1946-present).

Pre-Spanish Period

The first people in the Philippines, the Negritos, are believed to have come to the islands 30,000 years ago from Borneo and Sumatra, making their way across then-existing land bridges. Subsequently, people of Malay stock came from the south in successive waves, the earliest by land bridges and later in boats called barangays. The Malays settled in scattered communities, also called barangays, which were ruled by chieftains known as datus. Chinese merchants and traders arrived and settled in the ninth century A.D. In the 14th century, Arabs arrived, introducing Islam in the south and extending some influence even into Luzon. The Malays, however, remained the dominant group until the Spanish arrived in the 16th century.

Spanish Period

Ferdinand Magellan claimed the Philippines for Spain in 1521, and for the next 377 years, the islands were under Spanish rule. This period was the era of conversion to Roman Catholicism. A Spanish colonial social system was developed, complete with a strong centralized government and considerable clerical influence. The Filipinos were restive under the Spanish, and this long period was marked by numerous uprisings. The most important of these began in 1896 under the leadership of Emilio Aguinaldo and continued until the Americans defeated the Spanish fleet in Manila Bay on May 1, 1898, during the Spanish-American War. Aguinaldo declared independence from Spain on June 12, 1898.

American Period

Following Admiral Dewey's defeat of the Spanish fleet in Manila Bay, the United States occupied the Philippines. Spain ceded the islands to the United States under the terms of the Treaty of Paris (December 10, 1898), which ended the war.

A war of resistance against U.S. rule, led by Revolutionary President Aguinaldo, broke out in 1899. Although Americans have traditionally used the term "the Philippine Insurrection," Filipinos refer to these hostilities as the Philippine-American War (1899-1902). In 1901, Aguinaldo was captured and swore allegiance to the United States, which ultimately crushed the resistance.

U.S. administration of the Philippines was always declared to be temporary and aimed to develop institutions that would permit and encourage the eventual establishment of a free and democratic government. Therefore, U.S. officials concentrated on the creation of such practical supports for democratic government as public education and a sound legal system.

The first legislative assembly was elected in 1907. A bicameral legislature, largely under Philippine control, was established. A civil service was formed and was gradually taken over by the Filipinos, who had effectively gained control by the end of World War I. The Catholic Church was disestablished, and a considerable amount of church land was purchased and redistributed.

In 1935, under the terms of the Tydings-McDuffie Act, the Philippines became a self-governing commonwealth. Manuel Quezon was elected president of the new government, which was designed to prepare the country for independence after a 10-year transition period. World War II intervened, however, and in May 1942, Corregidor, the last American stronghold, fell. U.S. forces in the Philippines surrendered to the Japanese, placing the islands under Japanese control.

The war to regain the Philippines began when Gen. Douglas MacArthur landed on Leyte on October 20, 1944. Filipinos and Americans fought together until the Japanese surrender in September 1945. Much of Manila was destroyed during the final months of the fighting, and an estimated 1 million Filipinos lost their lives in the war.

As a result of the Japanese occupation, the guerrilla warfare that followed, and the battles leading to liberation, the country suffered great damage and a complete organizational breakdown. Despite the shaken state of the country, the United States and the Philippines decided to move forward with plans for independence. On July 4, 1946, the Philippine Islands became the independent Republic of the Philippines, in accordance with the terms of the Tydings-McDuffie Act. In 1962, the official Independence Day was changed from July 4 to June 12, commemorating the date independence from Spain was declared by General Aguinaldo in 1898.

Post-Independence Period

The early years of independence were dominated by U.S.-assisted postwar reconstruction. A communist-inspired Huk Rebellion (1945-53) complicated recovery efforts before its successful suppression under the leadership of President Ramon Magsaysay. The succeeding administrations of Presidents Carlos P. Garcia (1957-61) and Diosdado Macapagal (1961-65) sought to expand Philippine ties to its Asian neighbors, implement domestic reform programs, and develop and diversify the economy.

In 1972, President Ferdinand E. Marcos (1965-86) declared martial law, citing growing lawlessness and open rebellion by the communist rebels as his justification. Marcos governed from 1973 until mid-1981 in accordance with the transitory provisions of a new constitution that replaced the commonwealth constitution of 1935. He suppressed democratic institutions and restricted civil liberties during the martial law period, ruling largely by decree and popular referenda. The government began a process of political normalization during 1978-81, culminating in the re-election of President Marcos to a 6-year term that would have ended in 1987. The Marcos' government's respect for human rights remained low despite the end of martial law on January 17, 1981. His government retained its wide arrest and detention powers. Corruption and favoritism contributed to a serious decline in economic growth and development under Marcos.

The assassination of opposition leader Benigno (Ninoy) Aquino upon his return to the Philippines in 1983,after a long period of exile, coalesced popular dissatisfaction with Marcos and set in motion a succession of events that culminated in a snap presidential election in February 1986. The opposition united under Aquino's widow, Corazon Aquino, and Salvador Laurel, head of the United Nationalist Democratic Organization (UNIDO). The election was marred by widespread electoral fraud on the part of Marcos and his supporters. International observers, including a U.S. delegation led by Senator Richard Lugar (R-Indiana), denounced the official results. Marcos was forced to flee the Philippines in the face of a peaceful civilian-military uprising that ousted him and installed Corazon Aquino as president on February 25, 1986.

Fidel Ramos was elected president in 1992. Early in his administration, Ramos declared "national reconciliation" the highest national priority. He legalized the communist party and created the National Unification Commission (NUC) to lay the groundwork for talks with communist insurgents, Muslim separatists, and military rebels. In June 1994, President Ramos signed into law a general conditional amnesty covering all rebel groups, as well as Philippine military and police personnel accused of crimes committed while fighting the insurgents. In October 1995, the government signed an agreement bringing the military insurgency to an end. Although the other peace talks have not fully resolved outstanding differences and many of the underlying social problems have yet to be addressed, the communist and Muslim insurgencies no longer pose a threat to the government. A peace agreement with one major Muslim insurgent group was signed in 1996.

GOVERNMENT AND POLITICAL CONDITIONS

The Philippines has a representative democracy modeled on the U.S. system. The 1987 constitution, adopted during the Aquino administration, established a presidential system of government with a bicameral legislature and an independent judiciary. The president is limited to one 6-year term. Provision also was made in the constitution for autonomous regions in Muslim areas of Mindanao and in the Cordillera region of northern Luzon.

The Philippine Senate is elected at large. There are currently 23 senators rather than the usual 24, since Senator Gloria Macapagal-Arroyo became Vice President in the May 1998 elections and a replacement could not be chosen without a national election. Two hundred six of a possible 250 members of the House of Representatives are elected from the single-member districts. The remainder of the House seats are designated for sectoral representatives elected at large through a complex "party list" system.

Joseph Estrada took office June 30, 1998, succeeding Fidel Ramos, under whom he had served as Vice President. Despite coalitions and party identification, members of the Philippine Congress tend to be independent, changing party affiliation with ease. Following his election, President Estrada formed the LAMP Party out of a tripartite alliance that had helped him get elected. Some members of former President Ramos's Lakas Party defected to LAMP. President Estrada has publicly declared that the battles against poverty and corruption will be his highest priority.

ECONOMY

Since the end of the Second World War, the Philippine economy has had a mixed history of growth and development. Over the years, the Philippines has gone from being one of the richest countries in Asia (following Japan) to being one of the poorest. Growth immediately after the war was rapid, but slowed over time. A severe recession in 1984-85 saw the economy shrink by more than 10%, and perceptions of political instability during the Aquino administration further dampened economic activity. During his administration, President Ramos introduced a broad range of economic reforms and initiatives designed to spur business growth and foreign investment. As a result, the Philippines saw a period of rapid sustained growth, but the spreading Asian financial crisis has slowed economic development in the Philippines once again. President Estrada has repeatedly said that he will resist protectionist measures and continue the reforms begun by the Ramos administration.

Important sectors of the Philippine economy include agriculture (making up one-fifth of economic production) and industry (particularly food processing, textiles and garments, electronics, and automobile parts). Most industries are concentrated in the urban areas around metropolitan Manila. Mining is also important in the Philippines, which possesses significant reserves of chromite, nickel, and copper. Recent natural gas finds off the islands of Palawan add to the country's substantial geothermal, hydro, and coal energy reserves.

Today's Economy

For the past year, the Philippines has been less severely affected by the Asian financial crisis than its neighbors. While that remains true, the continuing crisis has taken its toll on the Philippines. The government has recently reiterated its target of 2%-3% real GNP growth (about one percentage point lower for GDP), but private forecasts range as low as negative 2% real GDP growth or lower. Technically, the Philippines is already in recession, having seen negative GDP growth (quarter on quarter, based on seasonally adjusted figures) for the first two quarters of 1998.

Agricultural output in the first half of 1998 was down 7.5% from the same period in 1997, because of the El Nino-related drought. Agriculture accounts for one-fifth of the Philippine economy. A sharp rebound in the second half of 1998 is possible, but is not guaranteed.

The Philippines continues to record monthly export figures up significantly on year-earlier levels, but examination of the month-by-month export figures had suggested that the export boom is running out of steam. Monthly exports were roughly flat from September 1997 to June 1998, but have resumed growth since then. Electronic and auto parts exports in particular still record strong growth, but reports from the U.S. suggests slowing demand for computers and other electronic equipment. The Philippines' traditional exports are stagnant or declining.

The financial sector has been buffeted by higher interest rates which, combined with the region-wide economic slowdown, have pushed the level of commercial banks' non-performing loans (NPL's) to 9.6% of total loan portfolio. This is still far below the levels in several neighboring countries. Analysts expect the level of NPL's to reach 15%, a level which will be painful but will not threaten collapse of the financial sector.

The Philippine peso has lost over 40% of its value vis-à-vis the U.S. dollar since mid-1997. The peso will probably continue to weaken as the government and the central bank concentrate monetary policy on reducing interest rates. The Philippines' inflation rate of near 10% means that continued depreciation will be necessary to maintain the currency's relative value. Despite these near-term problems, the Philippines' longer term prospects remain bright. The Aquino and Ramos administrations opened up the relatively closed Philippine economy and provided a firmer base for sustainable economic growth. President Estrada and his cabinet have stated repeatedly that they will continue with, and expand, liberalization and market-based policies and reforms. If the new government is able to overcome transition-related uncertainties resulting from sometimes conflicting policy signals, it can successfully build on its predecessors' accomplishments to position the Philippines for a period of sustained growth.

Agriculture and Forestry

Arable farmland comprises an estimated 26% of the total land area. Although the Philippines is rich in agricultural potential, inadequate infrastructure, lack of financing, and past government policies have limited productivity gains. Philippine farms produce food crops for domestic consumption and cash crops for export. The agricultural sector employs about 47% of the work force but only provides about 22% of GDP.

Decades of uncontrolled logging and slash-and-burn agriculture in marginal upland areas have stripped forests, with critical implications for the ecological balance. The government has instituted conservation programs, but deforestation remains a severe problem.

With its 7,107 islands, the Philippines has a very diverse range of fishing areas. Notwithstanding good prospects for the aquaculture subsector, the fishing industry continues to face a bleak future due to destructive fishing methods, a lack of funds, and an absence of government support.

Industry

Industrial production is centered on processing and assembly operations of the following: food, beverages, tobacco, rubber products, textiles, clothing and footwear, pharmaceuticals, paints, plywood and veneer, paper and paper products, small appliances, and electronics. Heavier industries are dominated by the production of cement, glass, industrial chemicals, fertilizers, iron and steel, and refined petroleum products.

The industrial sector is concentrated in the urban areas, especially in the metropolitan Manila region and has only weak linkages to the rural economy. Inadequate infrastructure, transportation, communication, and electrical power shortages have so far inhibited faster industrial growth.

Mining

The country is well-endowed with mineral and thermal energy resources. A recent discovery of oil and gas reserves off Palawan Island offers potential in that sector, as well. Philippine chromite, nickel, and copper deposits are among the largest in the world. Other important minerals include iron, silver, manganese, coal, gypsum, sulfur, mercury, and gold. Significant deposits of clay, limestone, dolomite, feldspar, marble, silica, and phosphate exist. Fifty-nine percent of total mining production is accounted for by the mining of copper concentrate and gold.

In steady decline since 1989, the value of both mineral production ($810 million) and mineral exports ($672 million) of the Philippine mining industry declined by 14% in 1992. Low metal prices, high production costs, and lack of investment in infrastructure have contributed to the mining industry's decline.

FOREIGN RELATIONS

In its foreign policy, the Philippines cultivates constructive relations with its Asian neighbors, with whom it is linked through membership in ASEAN, the ASEAN Regional Forum, and the Asia-Pacific Economic Cooperation forum. The Philippines is a member of the UN and some of its specialized agencies, the Non-Aligned Movement since 1992 and has observer status in the Organization of Islamic Conference. The Philippines has played a key role in ASEAN in recent years and also values its relations with the countries of the Middle East, in no small part because hundreds of thousands of Filipinos are employed in that region. The fundamental Philippine attachment to democracy and human rights is reflected in its foreign policy.

U.S.-PHILIPPINE RELATIONS

U.S.-Philippine relations are based on shared history and commitment to democratic principles, as well as on economic ties. The historical and cultural links between the Philippines and the U.S. remain strong. The Philippines modeled its governmental institutions on those of the U.S., and continues to share a commitment to democracy and human rights. At the most fundamental level of bilateral relations, human links continue to form a strong bridge between the two countries. There are an estimated 2 million Americans of Philippine ancestry in the United States and more than 100,000 American citizens in the Philippines.

Until November 1992, pursuant to the 1947 Military Bases Agreement, the United States maintained and operated major facilities at Clark Air Base, Subic Bay Naval Complex, and several small subsidiary installations in the Philippines. In 1983 and 1988, the United States and the Philippines completed successful reviews and extensions of the Military Bases Agreement, as amended. In August 1991, negotiators from the two countries reached agreement on a draft treaty providing for use of Subic Bay Naval Base by U.S. forces for 10 years. The draft treaty did not include use of Clark Air Base, which had been so heavily damaged by the 1991 eruption of Mt. Pinatubo that the U.S. decided to abandon it.

On September 16, 1991, the Philippine Senate rejected the bases treaty, and despite further efforts to salvage the situation, the two sides could not reach agreement. As a result, the Philippine Government informed the U.S. on December 6, 1991, that it would have 1 year to complete withdrawal. That withdrawal went smoothly and was completed ahead of schedule, with the last U.S. forces departing on November 24, 1992. On departure, the U.S. Government turned over assets worth more than $1.3 billion to the Philippines, including an airport and ship-repair facility. Agencies formed by the Philippine Government have converted the former military bases for civilian commercial use, with Subic Bay serving as a flagship for that effort.

The post-U.S. bases era has seen U.S.-Philippine relations improved and broadened, focusing more prominently on economic and commercial ties while maintaining the importance of the security dimension. Philippine domestic political stability has resulted in increased U.S. investment in the country, while a strong security relationship rests on the U.S.-Philippines Mutual Defense Treaty. Although U.S. aid to the Philippines has taken on a far less prominent role than in the past, assistance programs continue, highlighted by the July 1996 opening of a major airport and harbor project in General Santos City with U.S. Agency for International Development funding. Then-President Ramos underscored the strength of the bilateral relationship by declaring July 4, 1996 to be Philippine-American Friendship Day in commemoration of the 50th anniversary of Philippine independence. Ramos visited the United States in April 1998.


Singapore

PEOPLE

Singapore is one of the most densely populated countries in the world. The annual growth rate for 1997 was 3.5%.

Singapore has a varied linguistic, cultural, and religious heritage. Malay is the national language, but Chinese, English, and Tamil also are official languages. English is widely used in professions, businesses, and schools.

The government has mandated that English be the primary language used at all levels of the school systems, and it aims to provide at least 10 years of education for every child. In 1998, primary and secondary school students totaled almost 470,000, or 12% of the entire population. In 1998, enrollment at the National University of Singapore is approximately 22,300 (both undergraduate and graduate) and approximately 53,553 at Singapore Polytechnic and Singapore's three other polytechnics. The practical engineering-oriented Nanyang Technological University, established in 1981, has 15,661 students. The country's literacy rate is 91%.

Singapore generally allows religious freedom, although religious groups are subject to government scrutiny and some religious sects are restricted or banned. Almost all Malays are Muslim; other Singaporeans are Hindus, Sikhs, Taoists, Buddhists, Confucianists, or Christians.

HISTORY

Although Singapore's history dates from the 11th century, the island was little known to the West until the 19th century, when in 1819, Sir Thomas Stamford Raffles arrived as an agent of the British East India Company. In 1824, the British purchased Singapore Island, and by 1825, the city of Singapore had become a major port, with trade exceeding that of Malaya's Malacca and Penang combined. In 1826, Singapore, Penang, and Malacca were combined as the Straits Settlements to form an outlying residency of the British East India Company; in 1867, the Straits Settlements were made a British Crown Colony, an arrangement that continued until 1946.

The opening of the Suez Canal in 1869 and the advent of steamships launched an era of prosperity for Singapore as transit trade expanded throughout Southeast Asia. In the 20th century, the automobile industry's demand for rubber from Southeast Asia and the packaging industry's need for tin helped make Singapore one of the world's major ports.

In 1921, the British constructed a naval base, which was soon supplemented by an air base. But the Japanese captured the island in February 1942, and it remained under their control until September 1945, when it was recaptured by the British.

In 1946, the Straits Settlements was dissolved; Penang and Malacca became part of the Malayan Union and Singapore became a separate British Crown Colony. In 1959, Singapore became self-governing, and, in 1963, it joined the newly independent Federation of Malaya, Sabah, and Sarawak (the latter two former British Borneo territories) to form Malaysia.

Indonesia adopted a policy of "confrontation" against the new federation, charging that it was a "British colonial creation," and severed trade with Malaysia. The move particularly affected Singapore, since Indonesia had been the island's second-largest trading partner. The political dispute was resolved in 1966, and Indonesia resumed trade with Singapore.

After a period of friction between Singapore and the central government in Kuala Lumpur, Singapore separated from Malaysia on August 9, 1965, and became an independent republic.

GOVERNMENT

According to the constitution, as amended in 1965, Singapore is a republic with a parliamentary system of government. Political authority rests with the prime minister and the cabinet. The prime minister is the leader of the political party or coalition of parties having the majority of seats in parliament. The president, who is chief of state, previously exercised only ceremonial duties. As a result of 1991 constitutional changes, the president is now elected and exercises expanded powers over legislative appointments, government budgetary affairs, and internal security matters.

The unicameral parliament consists of 83 members elected on the basis of universal adult suffrage. In the last general election, in January 1997, the governing People's Action Party (PAP) won 81 of the 83 seats. The President may appoint up to six nominated members of parliament (NMP) from among nominations by a special select committee. NMPs enjoy the same privileges as MPs but cannot vote on constitutional matters or expenditures of funds. The maximum term of any one parliament is 5 years. Voting has been compulsory since 1959.

Judicial power is vested in the High Court and the Court of Appeal. The High Court exercises original criminal and civil jurisdiction in serious cases as well as appellate jurisdiction from subordinate courts. Its chief justice, senior judge, and six judges are appointed by the president. Appeals from the High Court are heard by the Court of Appeal. The right of appeal to the Privy Council in London was abolished effective April 1994.

POLITICAL CONDITIONS

The ruling political party in Singapore, in power since 1959, is the People's Action Party (PAP), now headed by Prime Minister Goh Chok Tong. Goh succeeded Lee Kuan Yew, who served as Singapore's prime minister from independence through 1990. Since stepping down as prime minister, Lee has remained influential as Senior Minister.

The PAP has held the overwhelming majority of seats in Parliament since 1966, when the opposition Barisan Sosialis Party (Socialist Front), a left-wing group that split off from the PAP in 1961, resigned from parliament, leaving the PAP as the sole representative party. In the general elections of 1968, 1972, 1976, and 1980, the PAP won all of the seats in an expanding parliament.

Workers' Party Secretary General J.B. Jeyaretnam became the first opposition party MP in 15 years when he won a 1981 by-election. Opposition parties gained small numbers of seats in the general elections of 1984 (2 seats out of a total of 79), 1988 (1 seat of 81), 1991(4 seats of 81) and 1997 (2 seats of 81). Meanwhile, the PAP share of the popular vote declined from 78% in 1980 to 65% in 1997.

ECONOMY

The ongoing region-wide Asian financial crisis, which began in 1997, has created uncertainty and instability in Singapore's economy.

Singapore's strategic location on major sea lanes and industrious population have given the country an economic importance in Southeast Asia disproportionate to its small size. Upon independence in 1965 Singapore was faced with a lack of physical resources and a small domestic market. In response, the Singapore Government developed an international business outlook and an export-oriented economic policy framework that encouraged two-way flows of trade and investment. Singapore's economic strategy proved a success, producing real growth that averaged 8.3% from 1960 to 1993. The economy appeared to have achieved a soft landing in 1991 and 1992 with growth rates of 6.7% and 5.8% respectively, the lowest since the 1986 recession. In 1993, the economy rebounded with a growth rate of 9.9%, largely because of the recovery in the U.S. and the fast-growing market for disk drives and other computer peripherals. In 1995, the growth rate was 8.8%; in 1996, it was 7.0%; and in 1997, the growth rate was 7.2%. The latest forecasts indicate that only minimal growth will be achieved in 1998 as a result of the global economic slowdown.

Singapore's honest government, willing workforce, and modern and efficient infrastructure have attracted investments from more than 3,000 multinational corporations (MNCs) from the United States, Japan, and Europe. Foreign firms are found in almost all sectors of the economy. MNCs account for more than two-thirds of manufacturing output and direct export sales.

Manufacturing and financial and business services are the twin engines of the Singapore economy, and accounted for 23% and 29% respectively of Singapore's gross domestic product in 1997. Tourism is also a major income generator for the economy. The electronics industry leads Singapore's manufacturing sector, accounting for 45.5% of Singapore's total industrial output.

To maintain its competitive position despite rising wages and a strengthening Singapore dollar, the government has been promoting higher value-added activities in the manufacturing and services sectors. In addition, as part of its regionalization strategy, the government is now actively encouraging firms to invest abroad. Singapore's total direct investments abroad reached $26 billion by the end of 1995. The two largest of Singapore's investments in 1995 were in Malaysia (20%) and Hong Kong (14%). There was also significant increased investment in Indonesia (19%) and a move toward heavy investment in China (rising 57% over 1992 to $275 million in 1993). Singapore has also been strengthening its regional economic ties as a member of the newly launched ASEAN Free Trade Area (AFTA) and as host to the Asia-Pacific Economic Cooperation (APEC) secretariat.

Trade, Investment, and Aid

Singapore's total trade in 1997 amounted to $382 billion, nearly three times its GDP. Singapore imported $196 billion and exported $185 billion worth of merchandise. Japan was Singapore's main import source (21% of the market), while the U.S. was Singapore's largest market, absorbing 18.4% of Singapore's exports. Reexports accounted for 42% of Singapore's total exports in 1997. Singapore's principal exports are office and data machines, machinery, petroleum products, telecommunication apparatus, chemicals, textiles and garments, and transport equipment. Singapore's main imports are aircraft, crude oil and petroleum products, electrical machinery, manufactured goods, chemicals, foodstuffs, and textiles and garments.

Singapore continues to attract investment funds on a large scale despite its relatively high-cost operating environment. The U.S. leads foreign investment, accounting for 38% of new commitments to the manufacturing sector in 1996. In 1997, cumulative investment by American companies in Singapore reached approximately $15 billion (total assets). The bulk of U.S. investment is in electronics manufacturing, oil refining and storage, and the chemical industry.

The U.S provides no bilateral aid to Singapore.

Labor

In 1997, Singapore had a work force of just under 1.9 million. The National Trades Union Congress (NTUC), the sole trade union federation, comprises almost 99% of total organized labor. Extensive legislation covers general labor and trade union matters. The Industrial Arbitration Court handles labor-management disputes that cannot be resolved informally through the Ministry of Labor. The Singapore Government has stressed the importance of cooperation between unions, management, and government ("tripartism"), as well as the early resolution of disputes. There has been only one minor strike in the past 15 years.

Singapore enjoys virtually full employment with an unemployment rate of around 2% in 1997. The Singapore Government and the NTUC have tried a range of programs to increase lagging productivity and boost the labor force participation rates of women and older workers. But labor shortages persist in the service sector and in many low-skilled positions in the construction and electronics industries. Foreign workers help make up this shortfall. In 1997, there were about 360,000 foreign workers in Singapore, constituting 22% of the total work force.

Transportation and Communications

Situated at the crossroads of international shipping and air routes, Singapore is a center for transportation and communication in Southeast Asia. Singapore is a regional aviation hub served by 64 international airlines. Changi International Airport, opened in 1980, is being expanded. The country also is linked by road and rail to Malaysia and Thailand.

Telecommunications and telephone facilities are modern and comprehensive, providing high-quality communications with the rest of the world. Radio and television stations, though government-owned and -operated, have been corporatized, with a view to privatizing them in the future. Daily newspapers are published in English, Chinese, Malay, and Tamil.

FOREIGN RELATIONS

Singapore is nonaligned. As a small country heavily dependent on world trade, it has a special interest in maintaining wide international contacts. It is a member of the United Nations and several of its specialized and related agencies, and also of the Commonwealth. Singapore has participated in UN peacekeeping/observer missions in Kuwait, Angola, Namibia, and Cambodia. Singapore supports the concept of Southeast Asian regionalism and plays an active role in the Association of Southeast Asian Nations (ASEAN) and APEC.

DEFENSE

Singapore relies primarily on its own defense forces, which are continuously being modernized. Approximately 49% of government operating expenditures are devoted to the defense budget. For 1997, total military forces were estimated at 756,900. Reserve forces total about 250,000. Singapore defense forces engage in joint training with all the ASEAN nations and other economies, including the U.S., Australia, New Zealand, Taiwan, and India.

Singapore is a member of the Five Power Defense Arrangement together with the United Kingdom, Australia, New Zealand, and Malaysia. Designed to replace the former defense role of the British in the Singapore-Malaysia area, the arrangement obligates members to consult in the event of external threat and provides for stationing Commonwealth forces in Singapore.

Singapore has consistently supported a strong U.S. military presence in the Asia-Pacific region. In 1990, the U.S. and Singapore signed a Memorandum of Understanding (MOU) which allows the U.S. access to Singapore facilities at Paya Lebar Airport and the Sembawang port. Under the MOU, a U.S. navy logistics unit was established in Singapore in 1992; U.S. fighter aircraft deploy periodically to Singapore for exercises; and a number of U.S. military vessels visit Singapore.


South Korea

PEOPLE

The origins of the Korean people are obscure. Korea was first populated by a people or peoples who migrated to the peninsula from the northwestern regions of Asia, some of whom also settled parts of northeast China (Manchuria). Koreans are racially and linguistically homogeneous, with no sizable indigenous minorities, except for some Chinese (approximately 20,000).

South Korea's major population centers are in the northwest area and in the fertile southern plain of Seoul-Inchon. The mountainous central and eastern areas are sparsely inhabited. The Japanese colonial administration of 1910-45 concentrated its industrial development efforts in the comparatively under-populated and resource-rich north, resulting in a considerable migration of people to the north from the southern agrarian provinces. This trend was reversed after World War II as Koreans returned to the south from Japan and Manchuria. In addition, more than 2 million Koreans moved to the south from the north following the division of the peninsula into U.S. and Soviet military zones of administration in 1945. This migration continued after the Republic of Korea was established in 1948 and during the Korean war (1950-53). About 10% of the people now in the Republic of Korea are of northern origin. With 46 million people, South Korea has one of the world's highest population densities--much higher, for example, than India or Japan--while the territorially larger North Korea has only about 22 million people. Ethnic Koreans now residing in other countries live mostly in China (1.9 million), the United States (1.52 million), Japan (681,000), and the countries of the former Soviet Union (450,000).

Language

Korean shares several grammatical features with Japanese, but is not linguistically related. Strong similarities with Mongolian exist, but the exact relationship between the two languages is unclear. Although regional dialects exist, the language spoken throughout the peninsula and in China is comprehensible by all Koreans. Chinese characters were used to write Korean before the Korean Hangul alphabet was invented in the 15th century. Chinese characters are still in limited use in South Korea, but the North uses Hangul exclusively. Many older people retain some knowledge of Japanese from the colonial period, and many educated South Koreans can speak and/or read English, which is taught in all secondary schools.

Religion

Korea's traditional religions are Buddhism and Shamanism. Buddhism has lost some influence over the years, but is still followed by about 27% of the population. Shamanism--traditional spirit worship--is still practiced. Confucianism remains a dominant cultural influence. Since the Japanese occupation, it has existed more as a shared base than as a separate philosophical/religious school. Some sources place the number of adherents of Chondogyo--a native religion founded in the mid-19th century that fuses elements of Confucianism and Christianity--at more than 1 million.

Christian missionaries arrived in Korea as early as the 16th century, but it was not until the 19th century that they founded schools, hospitals, and other modern institutions throughout the country. Christianity is now one of Korea's largest religions. In 1993, nearly 10.5 million Koreans, or 24% of the population, were Christians (about 76% of them Protestant)--the largest figure for any East Asian country except the Philippines.

HISTORY

According to Korean legend, the god-king Tangun founded the Korean nation in BC 2333. By the first century AD, the Korean Peninsula was divided into the kingdoms of Silla, Koguryo, and Paekche. The Silla kingdom unified the peninsula in 668 AD. The Koryo dynasty (from which the Western name "Korea" is derived) succeeded the Silla kingdom in 935. The Choson dynasty, ruled by members of the Yi clan, supplanted Koryo in 1392 and lasted until the Japanese annexed Korea in 1910.

Throughout most of its history, Korea has been invaded, influenced, and fought over by its larger neighbors. It has suffered approximately 900 invasions during its 2,000 years of recorded history. Korea was under Mongolian occupation from 1231 until the early 14th century and was repeatedly ravaged by Chinese (government and rebel) armies. The Japanese warlord Hideyoshi launched major invasions in 1592 and 1597.

China had by far the greatest influence of the major powers and was the most acceptable to the Koreans. The Choson Dynasty was part of the Chinese "tribute" system, under which Korea was independent in fact, but acknowledged China's theoretical role as "big brother." China was the only exception to Korea's long closed-door policy, adopted to ward off foreign encroachment, which earned it the name of "Hermit Kingdom" in the 19th century.

Korea's isolation finally ended when the major Western powers and Japan sent warships to forcibly open the country. At the same time, Japanese, Chinese, and Russian competition in Northeast Asia led to armed conflict and foreign intervention in Korea's domestic and foreign policy. Japan defeated its two competitors and established dominance in Korea, formally annexing it in 1910.

The Japanese colonial era was characterized by tight control from Tokyo and ruthless efforts to supplant Korean language and culture. Organized Korean resistance, notably the 1919 Independence Movement, was unsuccessful and Japan remained firmly in control until the end of World War II.

Near the end of the war, the April 1945 Yalta Conference agreed to establish a four-power trusteeship for Korea. The trusteeship of the U.S., U.K., Soviet Union, and China was intended as a temporary administrative measure pending democratic elections for a Korean government. With the unexpected early surrender of Japan in September 1945, the United States proposed--and the Soviet Union agreed--that Japanese troops surrender to U.S. forces below the 38th parallel and to Soviet forces above.

At a December 1945 foreign ministers' conference in Moscow, it was proposed that a 5-year trusteeship be established in Korea. The Moscow conference generated a firestorm of protest in the South. Some if its most critical opponents were Korean leaders associated with the provisional government established in Shanghai in 1919 by Korean nationalists living abroad. Most notable among them was nationalist leader Syngman Rhee.

The joint Soviet-American commission provided for by the Moscow Conference met intermittently in Seoul but became deadlocked over the issue of free consultations with representatives of all Korean political groups for establishment of a national government. The U.S. submitted the Korean question to the UN General Assembly for resolution in September 1947. In November, the General Assembly ruled that UN-supervised elections should be held.

The Soviet Union and Korean authorities in the North ignored the UN General Assembly resolution on elections. Nonetheless, elections were carried out under UN observation in the South, and on August 15, 1948, the Republic of Korea (R.O.K.) was established. Syngman Rhee became the Republic of Korea's first president. On September 9, 1948, the Democratic People's Republic of Korea (D.P.R.K.) was established in the North under Kim Il Sung. Both administrations claimed to be the only legitimate government on the peninsula.

Armed uprisings in the South and clashes between Southern and Northern forces along the 38th parallel began and intensified during 1948-50. Although it continued to provide modest military aid to the South, the U.S. withdrew its occupation forces by June 1949, leaving behind only a military advisory group of 500.

Korean War of 1950-53

On June 25, 1950, North Korean forces invaded South Korea. The UN, in accord with its Charter, engaged in its first collective action by establishing the UN Command (UNC), under which 16 member nations sent troops and assistance to South Korea. At the request of the UN Security Council, the United States, contributor of the largest contingent, led this international effort.

After initially falling back to the southeastern Pusan perimeter, UN forces conducted a successful surprise landing at Inchon and rapidly advanced up the peninsula. As the main UN force approached the northern Yalu River, however, large numbers of "Chinese People's Volunteers" intervened, forcing UN troops to withdraw south of Seoul. The battle line seesawed back and forth until the late spring of 1951, when a successful offensive by UN forces was halted to enhance cease-fire negotiation prospects. The battle line thereafter stabilized north of Seoul near the 38th parallel.

Although armistice negotiations began in July 1951, hostilities continued until 1953 with heavy losses on both sides. On July 27, 1953 the military commanders of the North Korean Army, the Chinese People's Volunteers, and the UNC signed an armistice agreement at Panmunjom. Neither the United States nor South Korea is a signatory of the armistice per se, though both adhere to it through the UNC. No comprehensive peace agreement has replaced the 1953 armistice pact; thus, a condition of belligerency still technically exists on the divided peninsula.

The Military Armistice Commission (MAC) was created in 1953 to oversee and enforce the terms of the armistice. The Neutral Nation Supervisory Committee (NNSC)--originally made up of delegations from Poland and Czechoslovakia on the D.P.R.K. side and Sweden and Switzerland on the UN side--monitors the activities of the MAC. In recent years, North Korea has sought to undermine the MAC by various means. In April 1994 it declared the MAC void and withdrew its representatives. Prior to this it had forced the Czechs out of the NNSC by refusing to accept the Czech Republic as the successor state of Czechoslovakia, an original member of the NNSC. In September 1994 China recalled the Chinese People's Volunteers representatives to the MAC, and in early 1995 North Korea forced Poland to remove its representatives to the NNSC from the North Korean side of the DMZ.

Toward Democratization

Syngman Rhee served as president of the Republic of Korea until April 1960, when unrest led by university students forced him to step down. Though the constitution was amended and national elections were held in June, Maj. Gen. Park Chung Hee led an army coup against the successor government and assumed power in May 1961. After 2 years of military government under Park, civilian rule was restored in 1963. Park, who had retired from the army, was elected president and was reelected in 1967, 1971, and 1978 in highly controversial elections.

The Park era, marked by rapid industrial modernization and extraordinary economic growth, ended with his assassination in October 1979. Prime Minister Choi Kyu Ha briefly assumed office, promising a new constitution and presidential elections. However, in December 1979 Maj. Gen. Chun Doo Hwan and close military colleagues staged a coup, removing the army chief of staff and soon effectively controlling the government. University student-led demonstrations against Chun's government spread in the spring of 1980 until the government declared martial law, banning all demonstrations, and arresting many political leaders and dissidents. Special forces units in the city of Kwangju dealt particularly harshly with demonstrators and residents, setting off a chain of events which left at least 200 civilians dead. This became a critically important event in contemporary South Korean political history. Chun, by then retired from the army, officially became President in September 1980. Though martial law ended in January 1981, his government retained broad legal powers to control dissent. Nevertheless, an active and articulate minority of students, intellectuals, clergy, and others remained critical of the Chun government and demonstrated against it.

In April 1986 the President appeared to yield to demands for reform--particularly for a constitutional amendment allowing direct election of his successor. However, in June 1987 Chun suspended all discussion of constitutional revision, and the ruling Democratic Justice Party (DJP) approved Chun's hand-picked successor, Roh Tae Woo. In response, first students and then the general public took to the streets in protest. Then in a surprise move, on June 29, ruling party presidential candidate Roh Tae Woo announced the implementation of democratic reforms. The constitution was revised in October 1987 to include direct presidential elections and a strengthened National Assembly consisting of 299 members.

The main opposition forces soon split into two parties--Kim Dae-jung's Peace and Democracy Party (PPD) and Kim Young Sam's Reunification Democratic Party (RDP). With the opposition vote split, Roh Tae Woo subsequently won the December 1987 presidential election--the first direct one since 1971--with 37% of the vote.

The new constitution entered into force in February 1988 when President Roh assumed office. Elections for the National Assembly were held on April 26. President Roh's ruling Democratic Justice Party was then able to win only 34% of the vote in the April 1988 National Assembly elections--the first time the ruling party had lost control of the Assembly since 1952.

GOVERNMENT AND POLITICAL CONDITIONS

South Korea is a republic with powers shared between the president and the legislature. The president is chief of state and is elected for a term of 5 years. The 299 members of the unicameral National Assembly are elected to 4-year terms. South Korea's judicial system comprises a Supreme Court, appellate courts, and a Constitutional Court. The country has nine provinces and six administratively separate cities (Seoul, Pusan, Inchon, Taegu, Kwangju, and Taejon). Political parties include the National Congress for New Politics (NCNP), Grand National Party (GNP), United Liberal Democrats (ULD), New Party of the People (NPP), and Democratic Party (DP). Suffrage is universal at age 20.

South Korean politics were changed dramatically by the 1988 legislative elections, the Assembly's greater powers under the 1987 constitution, and the influence of public opinion. After 1987 there was significant political liberalization, including greater freedom of the press, greater freedoms of expression and assembly, and the restoration of the civil rights of former detainees. The new opposition-dominated National Assembly quickly challenged the president's prerogatives.

The trend toward greater democratization continued. In free and fair elections in December 1992, Kim Young Sam, the former opposition leader who joined the ruling party of Roh Tae Woo, received 43% of the vote and became Korea's first civilian president in nearly 30 years. In June 1995, Korea held direct elections for local and provincial executive officials (mayors, governors, county and ward chiefs) for the first time in more than 30 years. In August 1996, ex-Presidents Chun and Roh were convicted on corruption and treason charges but were pardoned by President Kim Young Sam in December 1997.

Kim Dae-jung of the National Congress for New Politics (NCNP) won the December 1997 presidential election, defeating Lee Hoi Chang of the renamed ruling party, the Grand National Party (GNP), and the New Party for the People (NPP) candidate Rhee In Je. Kim's 1997 win was the first true opposition party victory in a Korean presidential election. Kim had previously been a political prisoner who narrowly escaped assassination and execution on several occasions, and who spent time in exile in Japan and the U.S. Kim's political opponents have long charged that he was sympathetic to the D.P.R.K., most recently during the presidential election campaign. Such charges are rooted more firmly in Korea's no-holds-barred political culture than in fact. Kim has articulated an engagement policy toward the North based on the separation of economic and political issues, but which takes a firm line on security, mandating zero tolerance for provocations from the D.P.R.K.

ECONOMY

The ongoing region-wide Asian financial crisis, which began in 1997, has drastically affected Korea's economy. Prior to this crisis, the Republic of Korea's economic growth over the past 30 years was spectacular. Despite the need to maintain a large military, South Korea, one of the world's poorest countries only a generation ago, is now the United States' seventh-largest trading partner and, until the economic crisis of late 1997, was ranked as the 11th-largest economy in the world.

The division of the Korean Peninsula in 1945 created two unbalanced economic units. North Korea inherited most of the peninsula's mineral and hydroelectric resources and most of the heavy industrial base built by the Japanese. South Korea was left with a large, unskilled labor pool and most of the peninsula's limited agricultural resources. Both North and South suffered massive destruction in the Korean war, but an influx of refugees added to the South's economic woes.

South Korea began the postwar period with a per capita gross national product (GNP) far below that of the North. It received large amounts of U.S. foreign assistance for many years, although all direct aid from the United States ended in 1980.

South Korea's meager mineral resources include tungsten, anthracite coal, iron ore, limestone, kaolinite, and graphite. There is no oil, and energy is a continuing concern for the R.O.K.'s economic planners. An ambitious program to develop nuclear power is well underway; Korea currently has 12 nuclear plants in operation, with four others under construction.

The nation's successful industrial growth program began in the early 1960s, when the Park government instituted sweeping economic reforms emphasizing exports and labor-intensive light industries. The government also carried out a currency reform, strengthened financial institutions, and introduced flexible economic planning. In the 1970s Korea began directing fiscal and financial policies toward promoting heavy and chemical industries, as well as consumer electronics and automobiles.

From 1963 to 1978, real GNP rose at an annual rate of nearly 10%, with average real growth of more than 11% for the years 1973-78. While Korea's economic growth continued at a rapid pace throughout the 1960s and 1970s, the annual population growth rate declined to slightly below 1%, resulting in a 20-fold increase in per capita GNP. Per capita GNP, which only reached $100 for the first time in 1963, exceeded $10,000 in 1997, or 10 times that of North Korea.

Strong economic growth has largely continued since 1978. Korea's global trade and current account surpluses and its bilateral surplus with the U.S. have declined since 1989, which yielded a trade deficit with the U.S. for the first time in 1994. At the beginning of this decade, government stabilization policies clamped down on construction, private consumption, and investment. Consequently, real GNP growth slowed to approximately 5% in 1992. Increases in private consumption and investment spending, particularly by the large conglomerates, or chaebol, drove a new period of expansion which peaked in 1995 when annual GDP growth reached 9%.

Following the R.O.K.'s 1988 decision to allow trade with the D.P.R.K., South Korean firms began to import North Korean goods, all via third-country contracts. The D.P.R.K. does not acknowledge this trade. Nevertheless, the North publicized a late January 1989 visit by Hyundai Corporation founder Chung Ju Yong, as well as a private protocol he signed to develop tourism and other projects in the North. Trade between the two Koreas increased 16-fold from $18.8 million in 1989 to $310 million in 1995. During this period of greater economic cooperation, Daewoo chairman Kim Woo Choong visited the North and reached an agreement to build a light industrial complex at Nampo. The establishment of road and rail links has been addressed in other discussions. The first contract directly negotiated by businesspeople of both sides was signed in the spring of 1993. While inter-Korean trade has remained substantial, military tensions and economic problems in North Korea have contributed to a slowdown. In 1996 inter-Korean trade measured approximately $250 million.

In December 1997 the R.O.K. entered a severe financial crisis as foreign exchange reserves became inadequate for meeting short-term obligations and numerous private-sector conglomerates faced the possibility of bankruptcy. As of late October 1998, a far-reaching economic reform program launched by President Kim, in conjunction with assistance from the IMF, had stabilized the financial situation, and a financial and corporate restructuring program had begun. However, the economic situation remained grim, with unemployment of 8% and negative 7% GDP growth. Reform of the large industrial/commercial conglomerates (chaebol), whose excessive debt levels and non-market-based investments played a part in bringing about the financial crisis, will be central to Korea's economic recovery.

FOREIGN RELATIONS

In August 1991, South Korea joined the United Nations along with North Korea, and since then has been active in most UN specialized agencies and many international fora. The Republic of Korea has also hosted major international events such as the 1988 Summer Olympics and has been chosen to co-host the 2002 World Cup (with Japan). South Korea became a member of the Organization for Economic Cooperation and Development (OECD) in 1996 and completed a term as a non-permanent member on the UN Security Council at the end of 1997.

South Korea maintains diplomatic relations with more than 170 countries and a broad network of trading relationships. Former President Roh's policy of Nordpolitik--the pursuit of wide-ranging relations with socialist nations and contact with North Korea--has been a remarkable success. The R.O.K. now has diplomatic ties with all the countries of Eastern and Central Europe, as well as the former Soviet republics. The R.O.K. and the People's Republic of China established full diplomatic relations in August 1992.

Since normalizing relations in 1965, Japan and Korea have developed an extensive relationship centering on mutually beneficial economic activity. Although historic antipathies have at times impeded cooperation, relations at the government level have improved steadily and significantly in the past several years. Korea, Japan, and the U.S. consult very closely during periodic U.S.-D.P.R.K. negotiations over the North Korean nuclear issue.

Economic considerations have a high priority in Korean foreign policy. The R.O.K. seeks to build on its economic accomplishments to increase its regional and global role, including playing an increasingly important part in Pacific Rim political and economic activities. It is a founding member of the Asia-Pacific Economic Cooperation (APEC) forum.

Korean Peninsula: Reunification Efforts Since 1971

Though both Korean governments have repeatedly affirmed their desire for reunification of the Korean Peninsula, the two had no official communication or other contact until 1971. At that time they agreed to hold talks through their respective Red Cross societies with the aim of reuniting the many Korean families separated following the division of Korea and the Korean war. After a series of secret meetings, both sides announced a 1972 agreement to work toward peaceful reunification and an end to the hostile atmosphere prevailing on the peninsula. These initial contacts ended in August 1973 following President Park's announcement that the South would seek separate entry into the United Nations, and the kidnapping of South Korean opposition leader Kim Dae-jung from Tokyo by the South Korean intelligence service. The breakdown reflected basic differences in approach, with Pyongyang insisting on immediate steps toward reunification before discussing specific issues and Seoul maintaining that, given the long history of mutual distrust, reunification must come through a gradual, step-by-step process.

Tension between North and South Korea increased dramatically in the aftermath of the 1983 North Korean assassination attempt on President Chun in Burma, which killed six members of the R.O.K. cabinet. South Korea's suspicions of the North's motives were not diminished when Pyongyang accepted an earlier U.S.-R.O.K. proposal for tripartite talks on the future of the Korean Peninsula, in which "South Korean authorities" would be permitted to participate. North Korea's provision of relief goods to victims of severe flooding in South Korea in September 1984 led to revived dialogue on several fronts: Red Cross talks to address the plight of separated families, economic and trade talks, and parliamentary talks. However, in January 1986, the North suspended all talks, arguing that annual R.O.K.-U.S. military exercises were inconsistent with dialogue. The North resumed its own large-scale exercises in 1987.

In July 1988, South Korean President Roh Tae Woo called for new efforts to promote exchanges, family reunification, inter-Korean trade, and contact in international fora. President Roh called on Korea's friends and allies to pursue contacts with the North and said that the South intended to seek better relations with the U.S.S.R. and China. The two sides then met several times at Panmunjom in an unsuccessful attempt to arrange a joint meeting of the two Korean parliaments. Meetings to discuss arrangements for prime ministerial-level talks led to a series of such meetings starting in 1990. In late 1991 the two sides signed the Agreement on Reconciliation, Non-aggression, Exchanges and Cooperation and the Joint Declaration on the Denuclearization of the Korean Peninsula. Nevertheless, there was little progress toward the establishment of a bilateral nuclear inspection regime, and dialogue between the South and North stalled in the fall of 1992.

In 1992 the North agreed to accept International Atomic Energy Agency (IAEA) safeguards as well as a series of IAEA inspections of North Korea's nuclear facilities. In practice though, the North refused to allow special inspections of two areas suspected of holding nuclear waste, and threatened to withdraw from the Nuclear Non-Proliferation Treaty (NPT)--bringing North-South progress to an abrupt halt in the process. After a period of high tension brought on by failure to resolve the nuclear issue, as well as UN Security Council discussion of sanctions against the D.P.R.K., former President Carter's visit to Pyongyang in June 1994 helped to defuse tensions and resulted in renewed South-North talks.

The sudden death of North Korean leader Kim Il Sung on July 8, 1994 halted plans for a first ever South-North presidential summit and led to another period of inter-Korean animosity. U.S.-D.P.R.K. bilateral talks, which began in the spring of 1993, finally resulted in a framework agreement signed by representatives of both nations in Geneva on October 21, 1994. This Agreed Framework committed North Korea to freeze its graphite-moderated reactors and related facilities which could be used to produce plutonium for nuclear weapons development. In addition, under the Agreed Framework, North Korea agreed to hold expert talks with the U.S. to decide on specific arrangements for the storage of the D.P.R.K.'s spent nuclear fuel rods (which otherwise could be reprocessed into weapons-grade plutonium). In return, the D.P.R.K. was to receive alternative energy, initially in the form of heavy oil, and eventually two proliferation-resistant light water reactors (LWR).

The 1994 agreement also included gradual improvement of relations between the U.S. and the D.P.R.K., and committed North Korea to engage in South-North dialogue. A few weeks after the signing of the Agreed Framework, President Kim Young Sam loosened restrictions on South Korean firms wanting to pursue business opportunities with the North. Although North Korea continued to refuse official overtures by the South, economic contacts appeared to expand gradually. Shortly after his inauguration, President Kim Dae-jung declared that restraints on investment and communication with North Korea by private entities would be significantly eased.

In recent years, several milestones have been reached regarding the implementation of the Agreed Framework. On March 9, 1995, the Governments of the United States, Republic of Korea and Japan agreed to establish the Korean Peninsula Energy Development Organization, commonly referred to as KEDO. KEDO's task is to implement the LWR and heavy fuel oil (HFO) commitments of the Agreed Framework. Since its inception, eight other countries have joined KEDO, making the organization truly international. On December 15, 1995, KEDO concluded a Supply Agreement with the D.P.R.K. concerning the details of implementing the LWR project. Six protocols to the Supply Agreement have already been concluded over the past 2 years. Groundbreaking on the LWR project took place on August 19, 1997. The 15-member European Union joined KEDO and become an executive board member on September 19, 1997. The U.S. Department of Energy at the end of October 1997 essentially completed the safe storage of North Korea's spent nuclear fuel rods. The freeze on North Korea's graphite-moderated reactors and related facilities has now been in effect since November 1994.

On April 16, 1996, Presidents Clinton and Kim invited the D.P.R.K. and the People's Republic of China to participate in Four-Party peace talks with the U.S. and R.O.K. on the future of the Korean Peninsula. Following six preparatory meetings, the first Four-Party plenary session took place in Geneva in December 1997, the second in March 1998, and the third in October 1998.


Taiwan

PEOPLE

Taiwan has a population of 21.5 million. More than 18 million, the "native" Taiwanese are descendants of Chinese who migrated from Fujian and Guangdong Provinces on the mainland, primarily in the 18th and 19th centuries. The "mainlanders," who arrived on Taiwan after 1945, came from all parts of mainland China. About 370,000 aborigines inhabit the mountainous central and eastern parts of the island and are believed to be of Malayo-Polynesian origin.

Education

A 9-year public educational system has been in effect since 1979. Six years of elementary school and three years of junior high are compulsory for all children. About 90.7% of junior high graduates continued their studies in either a senior high or vocational school. Reflecting a strong commitment to education, in FY 1997 15% of Taiwan's budget was allocated for education.

Taiwan has an extensive higher education system with over 100 institutions of higher learning. Each year over 100,000 students take the joint college entrance exam, about 61.9% of the candidates are admitted to a college or university. Opportunities for graduate education are expanding in Taiwan, but many students travel abroad for advanced education, including 13,000 who study in the United States annually.

Languages

A large majority of people on Taiwan speak Mandarin Chinese, which has been the medium of instruction in the schools for more than four decades. Native Taiwanese and many others also speak one of the Southern Fujianese dialects, Min-nan, also known as Taiwanese. Recently there has been a growing use of Taiwanese in the broadcast media. The Hakka who are concentrated in several counties throughout Taiwan have their own distinct dialect. As a result of the half century of Japanese rule, many people over age 60 can also speak Japanese. The method of Chinese romanization most commonly used in Taiwan is the Wade-Giles system.

Religions

According to Taiwan's Interior Ministry figures, there are approximately 11.2 million religious believers in Taiwan, with over 75% identifying themselves as Buddhists or Taoists. At the same time there is a strong belief in Chinese folk religion throughout the island. These are not mutually exclusive, and many people practice a combination of the three. Confucianism is also an honored school of thought and ethical code.

Christian churches have been active on Taiwan for many years, and today the island has more than 600,000 Christians, a majority of whom are Protestant.

Culture

Taiwan's culture is a blend of its distinctive Chinese heritage and Western influences. Fine arts, folk traditions, and popular culture embody traditional and modern, Asian and Western motifs.

One of Taiwan's greatest attractions is the Palace Museum, which houses over 650,000 pieces of Chinese bronze, jade, calligraphy, painting, and porcelain. This collection was moved from the mainland in 1949 when Chiang Kai-shek's Nationalist Party (KMT) fled to Taiwan. The collection is so extensive that only 1% is on display at any one time.

HISTORY

Taiwan's aboriginal peoples, who originated in Austronesia and southern China, have lived on Taiwan for 12,000 to 15,000 years. Significant migration to Taiwan from the Chinese mainland began as early as A.D. 500. Dutch traders first claimed the island in 1624 as a base for Dutch commerce with Japan and the China coast. Two years later, the Spanish established a settlement on the northwest coast of Taiwan which they occupied until 1642 when they were driven out by the Dutch. Dutch colonists administered the island and its predominantly aboriginal population until 1661. The first major influx of migrants from the Chinese mainland came during the Dutch period, sparked by the political and economic chaos on the China coast during the Manchu invasion and the end of the Ming Dynasty.

In 1664, a Chinese fleet led by the Ming loyalist Cheng Ch'eng-kung (Zheng Chenggong, known in the West as Koxinga) retreated from the mainland and occupied Taiwan. Cheng expelled the Dutch and established Taiwan as a base in his attempt to restore the Ming Dynasty. He died shortly thereafter, and in 1683 his successors submitted to Manchu (Qing Dynasty) control. From 1680 the Qing Dynasty ruled Taiwan as a prefecture and in 1875 divided the island into two prefectures, north and south. In 1887 the island was made into a separate Chinese province.

During the 18th and 19th centuries, migration from Fujian and Guangdong provinces steadily increased, and Chinese supplanted aborigines as the dominant population group. In 1895, a weakened Imperial China ceded Taiwan to Japan in the Treaty of Shimonoseki following the first Sino-Japanese war.

During its 50 years (1895-1945) of colonial rule, Japan expended considerable effort in developing Taiwan's economy. At the same time, Japanese rule led to the "Japanization" of the island including compulsory Japanese education and forcing residents of Taiwan to adopt Japanese names.

At the end of World War II in 1945, Taiwan reverted to Chinese rule. During the immediate postwar period, the Nationalist Chinese (KMT) administration on Taiwan was repressive and corrupt, leading to local discontent. Anti-mainlander violence flared on February 28, 1947, prompted by an incident in which a cigarette seller was injured and a passerby was shot to death by Nationalist authorities. The island-wide rioting was brutally put down by Nationalist Chinese troops, who killed thousands of people. Until recently, accounts of this episode in Taiwan history had been suppressed by the KMT. As a result of the February 28 Incident the native Taiwanese felt a deep-seated bitterness to the Mainlanders. In 1995 a monument was dedicated to the victims of the "2-28 Incident," and for the first time Taiwan's leader, President Lee Teng-hui, publicly apologized for the Nationalists' brutality.

From the 1930s onward a civil war was underway on the mainland between Chiang Kai-shek's KMT government and the Chinese Communist Party led by Mao Zedong. When the civil war ended in 1949, two million refugees, predominately from the Nationalist government, military, and business community, fled to Taiwan. In October 1949 the People's Republic of China (P.R.C.) was founded on the mainland by the victorious communists, several months before Chiang Kai-shek had established in December 1949 a "provisional" KMT capital in Taipei.

During the 1950s, the KMT authorities implemented a far-reaching and highly successful land reform program on Taiwan. They redistributed land among small farmers and compensated large landowners with commodities certificates and stock in state-owned industries. Although this left some large landowners impoverished, others turned their compensation into capital and started commercial and industrial enterprises. These entrepreneurs were to become Taiwan's first industrial capitalists. Together with refugee businessmen from the mainland, they managed Taiwan's transition from an agricultural to a commercial, industrial economy.

Taiwan has developed steadily into a major international trading power with more than $218 billion in two-way trade. Tremendous prosperity on the island was accompanied by economic and social stability. Chiang Kai-shek's successor, his son Chiang Ching-kuo, began to liberalize Taiwan's political system, a process that has continued since President Lee Teng-hui took office in 1988.

ADMINISTRATION

The authorities in Taipei exercise control over Taiwan, Kinmen, Matsu, and the Penghus (Pescadores), and several of the smaller islands. Taiwan's two major cities, Taipei and Kaohsiung, are centrally administered municipalities. The rest of Taiwan and the Penghu Islands are administered together as the Province of Taiwan. Kinmen, Matsu, and smaller nearby islands are administered by the Taiwan authorities as counties of Fujian Province.

From 1949 until 1991, the authorities on Taiwan claimed to be the sole legitimate government of all of China, including the mainland. In keeping with that claim, when the Nationalists moved to Taiwan in 1949, they re-established the full array of central political bodies, which had existed on the mainland. While much of this structure remains in place, the authorities on Taiwan in 1991 have abandoned their claim of governing mainland China, stating that they do not "dispute the fact that the P.R.C. controls mainland China."

The first National Assembly, elected on the mainland in 1947 to carry out the duties of choosing the President and amending the constitution, was re-established on Taiwan when the KMT moved. Because it was impossible to hold subsequent elections to represent constituencies on the mainland, representatives elected in 1947-48 held these seats "indefinitely." In June l990, however, the Council of Grand Justices mandated the retirement, effective December, 1991, of all remaining "indefinitely" elected members of the National Assembly and other bodies.

The second National Assembly, elected in 1991, was composed of 325 members. The majority was elected directly; 100 were chosen from party slates in proportion to the popular vote. This National Assembly amended the constitution in 1994, paving the way for the direct election of the President and Vice President that was held in March 1996. The third National Assembly, also elected in March 1996, comprises 334 members serving 4-year terms. The National Assembly's powers now are to amend the constitution, recall or impeach the President and the Vice President, and ratify certain senior-level presidential appointments.

The President is both leader of Taiwan and commander-in-chief of its armed forces. The President has authority over the five administrative branches (Yuan): Executive, Legislative, Control, Judicial, and Examination. The President appoints the Premier, the head of the Executive Yuan. The Executive Yuan comprises the Premier and the cabinet members who are responsible for policy and administration.

The main lawmaking body, the Legislative Yuan (LY), was originally elected in the late 1940s in parallel with the National Assembly. The first LY had 773 seats and was viewed as a "rubber stamp" institution. The second LY was elected in 1992. The third LY, elected in 1995, has 157 members serving three-year terms. The LY has greatly enhanced its standing in relation to the Executive Yuan and has established itself as an important player on the central level. This growing influence can be seen in the expected expansion of this institution predicted for the end of 1998. Along with increasing strength and size this body is beginning to reflect the recently liberalized political system. In the 1992 and 1995 elections, the main opposition party -- the Democratic Progressive Party (DPP) -- challenged the KMT dominance on control of the Legislature. In both elections the DPP won a significant share of the LY seats, and the KMT now holds only half the seats in the LY.

As the National Assembly took action in 1994 to allow for the popular election of the President, the LY in 1994 passed legislation to allow for the direct election of the governor of Taiwan Province and the mayors of Taipei and Kaohsiung Municipalities. These elections were held in December 1994, with the KMT winning the governor and Kaohsiung mayor posts, and the DPP winning the Taipei mayor's position. In a move to streamline the administration, the position of elected governor and many other elements of the Taiwan Provincial Government are being eliminated at the end of 1998. In November 1997 local elections, the DPP won 12 of the 23 county magistrate and city mayor contests to the KMT's 8, outpolling the KMT for the first time in a major election.

The Control Yuan (CY) monitors the efficiency of public service and investigates instances of corruption. The 29 Control Yuan members are appointed by the President and approved by the National Assembly; they serve 6-year terms. In recent years, the Control Yuan has become more activist, and it has conducted several major investigations and impeachments.

The Judicial Yuan (JY) administers Taiwan's court system. It includes a 16-member Council of Grand Justices (COGJ) that interprets the constitution. Grand Justices are appointed by the President, with the consent of the National Assembly, to nine-year terms.

The Examination Yuan (ExY) functions as a civil service commission and includes two ministries: the Ministry of Examination, which recruits officials through competitive examination, and the Ministry of Personnel, which manages the civil service. The President appoints the Examination Yuan's head.

POLITICAL CONDITIONS

Lee Teng-hui succeeded Chiang Ching-kuo as President when Chiang died on January 13, 1988. Lee was elected by the National Assembly to a 6-year term in 1990, marking the final time a President was elected by the National Assembly. In 1996 Lee Teng-hui was elected President and Lien Chan Vice-President in the first direct election by Taiwan's voters.

This change in the political process is the result of the liberalizing trend that began in the 1980s under President Chiang Ching-kuo. In 1987, he lifted the emergency decree, which had been in place since 1948 and which had granted virtually unlimited powers to the President for use in the anti-Communist campaign. This decree provided the basis for nearly four decades of martial law under which individuals and groups expressing dissenting views were dealt with harshly. Expressing views contrary to the authorities' claim to represent all of China or supporting independent legal status for Taiwan was treated as sedition.

Since ending martial law, Taiwan has taken dramatic steps to improve respect for human rights and create a democratic political system. Most restrictions on the press have ended, restrictions on personal freedoms have been relaxed, and the prohibition against organizing new political parties has been lifted.

Until 1986, Taiwan's political system was effectively controlled by one party, the KMT, the chairman of which has also been Taiwan's President. Many top political officials are members of the party's Central Standing Committee, which is the most influential organ within the party. The KMT claims 2.1 million members, about two-thirds of whom are of Taiwanese origin. The party's net assets are reputed to total more than NT $61.2 billion, and profits from KMT-operated businesses help fund party organizations and operations. As the ruling party, the KMT was able to fill appointed positions with its members and maintain political control of the island.

Since 1986 the KMT's hold on power has been challenged by the emergence of competing political parties. Before 1986, candidates opposing the KMT ran in elections as independents or "nonpartisans." Before the 1986 island-wide elections many "nonpartisans" grouped together to create Taiwan's first new political party, the Democratic Progressive Party (DPP). Despite the official ban on forming new political parties, Taiwan authorities did not prohibit the DPP from operating, and in the 1986 Island-wide elections DPP and independent candidates captured more than 20% of the vote.

The Civic Organizations Law passed in 1989 allowed for the formation of new political parties, thereby legalizing the DPP, and its support and influence increased. Currently it has approximately 90,000 members. In the 1992 Legislative Yuan elections, the DPP won 51 seats in the 161-seat body. While this was only half the number of KMT seats, it made the DPP's voice an important factor in legislative decisions. Winning the Taipei mayor's position in December, 1994, significantly enhanced the DPP's image. The DPP continued its strong showing in the 1995 LY race winning 45 of the 157 seats to the KMT's 81. The DPP for the first time succeeded in outpolling the KMT in the November 1997 local elections, gaining 12 of the 23 magistrate and mayoral seats as opposed to the KMT's 8 and winning 43% of the vote versus the KMT's 41%.

The DPP membership is made up largely of native Taiwanese. Its platform includes outspoken positions on some of the most sensitive issues in Taiwan politics. For example, the DPP maintains that Taiwan is an entity separate from mainland China, in contrast to the KMT position that Taiwan and the mainland, though currently divided, are both part of "one China." In sharp contrast to the tenets of both KMT and P.R.C. policy, a number of ranking DPP officials openly advocate independence for Taiwan. The recent downplaying of Taiwan independence by the DPP as a party, however, led to the formation by hard-line advocates of a new political party called the Taiwan Independence Party in December 1996.

The second major opposition party, the Chinese New Party (CNP), was formed in August 1993, by a group made up largely of second-generation mainlander KMT members who were unhappy both with corruption in the KMT and with what they saw as the "Taiwanization" of KMT ideology and leadership. The CNP emphasizes "clean government" and the original KMT focus on reunification with the mainland. CNP influence remains modest; it won 21 of the 164 LY seats in the 1995 elections. The CNP claimed 72,000 members in 1996.

Although some friction between mainlanders and native Taiwanese still exists, it has abated with time and the gradual melding of the two communities. In 1972, then Premier Chiang Ching-kuo began a concentrated effort to bring Taiwanese into more senior position in the central administration and the KMT. Since his accession to the Presidency in January 1988, Lee Teng-hui, who is native Taiwanese, has continued this process. Recent steps by the authorities to redress past wrongs such as setting up a memorial to the victims of the February 28 Incident have contributed to this process.

ECONOMY

Through nearly five decades of hard work and sound economic management, Taiwan has transformed itself from an underdeveloped, agricultural island to an economic power that is a leading producer of high-technology goods. Taiwan is now a creditor economy, holding one of the world's largest foreign exchange reserves of more than $80 billion in 1998. Despite the Asian financial crisis, the economy continues to expand at about 5% per year, with virtually full employment and low inflation. The population also enjoys an annual average income equal to U.S. $13,130 (1997).

In the 1960s, foreign investment in Taiwan helped introduce modern, labor-intensive technology to the island, and Taiwan became a major exporter of labor-intensive products. In the 1980s, focus shifted toward increasingly sophisticated, capital-intensive and technology-intensive products for export and toward developing the service sector. At the same time, the appreciation of the New Taiwan Dollar (NT$), rising labor costs, and increasing environmental consciousness in Taiwan caused many labor-intensive industries, such as shoe manufacturing, to move to the Chinese mainland and Southeast Asia.

Taiwan has transformed itself from a recipient of U.S. aid in the 1950s and early 1960s to an aid donor and major foreign investor, especially in Asia. Private Taiwan investment in the P.R.C. is estimated to total more than $30 billion, and Taiwan has invested a comparable amount in Southeast Asia.

Foreign Trade

Foreign trade has been the engine of Taiwan's rapid growth during the past 40 years. Taiwan's economy remains export-oriented, so it depends on an open world trade regime and remains vulnerable to downturns in the world economy. The total value of trade increased more than five-fold in the 1960s, nearly ten-fold in the 1970s, and doubled again in the 1980s. The 1990s has seen a more modest, slightly less than two-fold, growth. Export composition has changed from predominantly agricultural commodities to industrial goods (now 98%). The electronics sector is Taiwan's most important industrial export sector and is the largest recipient of U.S. investment. Taiwan is the world's largest supplier of computer monitors and is a leading PC manufacturer. Textile production, though of declining importance as Taiwan loses its competitive advantage in labor-intensive markets, is another major industrial export sector. Imports are dominated by raw materials and capital goods, which account for more than 86% of the total. Taiwan imports most of its energy needs.

The United States is Taiwan's largest trading partner, taking 24% of Taiwan's exports and supplying 20% of its imports. Taiwan is the U.S.'s seventh-largest trading partner and seventh-largest export market. In 1997, Taiwan's two-way trade with the U.S. amounted to U.S. $53.0 billion. Imports from the U.S. consist mostly of agricultural and industrial raw materials. Exports to the U.S. are mainly electronics and consumer goods.

The United States, Hong Kong (including indirect trade with the P.R.C.), and Japan account for 60% of Taiwan's exports, and the U.S. and Japan provide over half of Taiwan's imports. As Taiwan's per capita income level has risen, demand for imported, high-quality consumer goods has increased. This trend has driven imports to rise faster than exports and has cut into Taiwan's global trade surplus. Another important factor in the substantial increase in Taiwan's imports has been industrial upgrading, which has pushed up imports of capital goods, raw materials, parts, and components. Taiwan's l997 trade surplus with the United States was $12.2 billion, a significant amount, but a decline from a high of $17 billion in 1987.

The lack of formal diplomatic relations with all but 27 of its trading partners appears not to have seriously hindered Taiwan's rapidly expanding commerce, and Taiwan is currently the world's 14th-largest trading economy. Taiwan maintains trade offices in more than 58 countries with which it does not have official relations. Taiwan is a member of the Asian Development Bank, and it is engaged in negotiations to join the World Trade Organization (WTO) as a special customs territory. In 1991 Taiwan, under the name "Chinese Taipei," became a member of the Asia-Pacific Economic Cooperation (APEC) forum. These developments reflect Taiwan's economic importance and its desire to become further integrated into the global economy.

Agriculture

Taiwan's agricultural sector is extremely productive. Although only about one-quarter of its land area is arable, virtually all farmland is intensely cultivated, with some areas suitable for two and even three crops a year. However, increases in agricultural production have been much slower than industrial growth. Agriculture only comprises approximately 2.7% of Taiwan's GDP. Taiwan's main crops are rice, betel nuts, sugar cane, and corn.

Although self-sufficient in rice production, Taiwan imports large amounts of wheat, mostly from the United States. Meat production and consumption are rising sharply, reflecting a rising standard of living. Taiwan has exported large amounts of frozen pork, although this was affected by an outbreak of hoof and mouth disease in 1997. Other agricultural exports include fish, aquaculture and sea products, canned and frozen vegetables, and grain products. Imports of agriculture products are expected to increase due to the approaching WTO accession, which will open previously protected agricultural markets.

Economic Outlook

Taiwan now faces many of the same economic issues as other developed economies. With the prospect of continued relocation of labor-intensive industries to countries with cheaper work forces, Taiwan's future development will have to rely on further transformation to a high technology and service-oriented economy. In recent years, Taiwan has successfully diversified its trade markets, cutting its share of exports to the U.S. from 49% in 1984 to 24% in l997. Taiwan's dependence on the U.S. market should continue to decrease as its exports to Southeast Asia and the P.R.C. grow and its efforts to develop European markets produce results. Taiwan's bid to join the WTO and its desire to become an Asia-Pacific "regional operations center" are spurring further economic liberalization.

DEFENSE

Taiwan maintains a large military establishment, which will absorb about 2.86% of the GNP and accounted for 21.0% of the central budget in FY99. The military's foremost mission is the defense of Taiwan, a defense primarily against the P.R.C., which is seen as the predominant threat and which has not renounced the use of force against Taiwan. Taiwan's armed forces number approximately 430,000, and reserves reportedly total 3,870,000. Taiwan has implemented a force reduction program to scale down its military to a level of 400,000 by FY 2001. Conscription remains universal for qualified males reaching age 18.

Taiwan's armed forces are equipped with weapons obtained primarily from the United States. In recent years, however, Taiwan has also procured some weapons from other Western nations and has stressed military "self-reliance," which has resulted in the growth of indigenous military production in certain fields. Taiwan adheres to the principles of the Nuclear Nonproliferation Treaty and has stated that it does not intend to produce nuclear weapons.

FOREIGN RELATIONS

The People's Republic of China replaced Taiwan at the United Nations in 1971, and Taiwan's diplomatic position eroded, as many countries changed their official recognition from Taipei to Beijing. In mid-l998, Taiwan had formal diplomatic ties with 27 countries.

At the same time, Taiwan has cultivated informal ties with most countries to offset its diplomatic isolation and to expand its economic relations. A number of nations have set up unofficial organizations to carry out commercial and other relations with Taiwan. Between its official overseas missions and its unofficial representative and/or trade offices, Taiwan is represented in 149 countries. Recently, Taiwan has lobbied strongly for admission into international organizations such as the UN. The P.R.C. opposes Taiwan's membership in such organizations, most of which require statehood for membership, because Beijing considers Taiwan to be a province of China, not a separate sovereign state.

 


Vietnam

PEOPLE

Ethnic Vietnamese constitute almost 90% of the population. Originating in what is now southern China and northern Vietnam, the Vietnamese people pushed southward over several centuries to occupy the entire eastern seacoast of the Indochinese Peninsula. This expansion began in 939 AD, after a millennium of Chinese occupation. Although Vietnamese culture was strongly influenced by traditional Chinese civilization, the struggle for political independence from China instilled a strong sense of national identity in the Vietnamese people. Nearly 100 years of French rule (1858-1954) introduced important European elements, but the Vietnamese still attach great importance to the family and continue to observe rites honoring their ancestors, indicating the persistence of tradition.

Various ethnic groups make up the remaining 10% of the population, with the approximately 1.2 million Chinese, concentrated in southern Vietnam, being the most numerous. The Chinese have long been important to the Vietnamese economy, having been active in rice trading, milling, real estate, and banking in the south and shopkeeping, stevedoring, and mining in the north. Various restrictions on economic activity in the years following reunification seriously affected the Chinese business community congregated in the Cholon section of Ho Chi Minh City.

The general deterioration in Vietnamese-Chinese relations also strained relations between the Socialist Republic of Vietnam (SRV) and the Chinese minority. In 1978-79, some 450,000 ethnic Chinese left Vietnam by boat as refugees (many officially encouraged and assisted) or were expelled across the land border with China.

The second-largest minority grouping of Central Highland peoples, commonly termed Montagnards (mountain people), comprises two main ethnolinguistic groups--Malayo-Polynesian and Mon-Khmer. About 30 groups of various cultures and dialects are spread over the highland territory.

The third-largest minority is the Khmer Krom (Cambodians), numbering about 600,000, who are concentrated in southern provinces near the Cambodian border and at the mouth of the Mekong River. Most are farmers. Other minority groups include Chams (remnants of the once-mighty Kingdom of Champa, destroyed by the Vietnamese in the 16th century), Hmong, and Thai, in the north.

The government administers virtually all educational facilities. Literacy is high among the general population and most Vietnamese have at least a primary school education. However, government efforts to upgrade school facilities and improve the educational infrastructure have been hampered by Vietnam's high birth rate and continuing economic problems. The number of parochial and private schools has grown as the Vietnamese education system has deteriorated. Educational emphasis is on applied sciences and vocational training. In the 1980s, over 200,000 Vietnamese were sent to the Soviet Union and East European countries in a labor and training program. In addition, since 1986, Vietnam has sent both skilled and unskilled workers to Algeria and Iraq, expanding the presence of Vietnamese labor to countries in the Middle East and North Africa. A large number of temporary workers live in Germany and other former East Bloc countries. Growing numbers of Vietnamese students are now traveling to Western Europe, Australia and the United States to study.

HISTORY

In BC 111, ancestors of the present-day Vietnamese, inhabiting part of what is now southern China and northern Vietnam, were conquered by forces of China's Han dynasty. Chinese rule lasted more than 1,000 years (until 939 AD) when the Vietnamese ousted their conquerors and began a southward expansion that, by the mid-18th century, reached the Gulf of Siam.

Despite their military achievements, the Vietnamese continued to suffer from internal political divisions. Throughout most of the 17th and 18th centuries, contending families in the north and south struggled to control the powerless kings of the Le dynasty. During this period, Vietnam was effectively divided near the 17th parallel, just a few kilometers above the demarcation line established at the 1954 Geneva conference.

French Rule

Vietnam was reunited following a devastating civil war in the 18th century but soon fell prey to the expansion of European colonialism. The French conquest of Vietnam began in 1858 with an attack on what is now the city of Danang. France imposed control gradually, meeting heavy resistance, and only in 1884 was Vietnam officially incorporated into the French empire.

Fiercely nationalistic, the Vietnamese never truly accepted the imposition of French rule. By 1930, the Vietnamese Nationalist Party had staged the first significant armed uprising against the French, but its virtual destruction in the ensuing French repression left the leadership of the anti-colonial movement to those more adept at underground organization and survival-- the communists.

In that same year, the recently formed Indochinese Communist Party (ICP) took the lead in setting up short-lived "soviets" in the Nghe An and Ha Tinh Provinces in northern Vietnam, an action that identified the ICP with peasant unrest. The ICP was formed in Hong Kong in 1930 from the amalgamation of the Vietnamese and the nascent Lao and Khmer communist groups, and it received its instructions from the Moscow-based Communist International (Comintern).

Communist Movement

The Vietnamese communist movement began in Paris in 1920, when Ho Chi Minh, using the pseudonym Nguyen Ai Quoc, became a charter member of the French Communist Party. Two years later, Ho went to Moscow to study Marxist doctrine and then proceeded to Canton as a Comintern representative. While in China, he formed the Vietnamese Revolutionary Youth League, setting the stage for the formation of the Indochinese Communist Party in 1930. French repression of nationalists and communists forced some of the insurgents underground, and others escaped to China. Other dissidents were imprisoned, some emerging later to play important roles in the anti-colonial movement.

Ho Chi Minh was abroad at that time but was imprisoned later in Hong Kong by the British. He was released in 1933, and in 1936 a new French government released his compatriots who, at the outset of World War II, fled to China. There they were joined by Ho, who organized the Viet Minh-- purportedly a coalition of all anti-French Vietnamese groups. Official Vietnamese publications state that the Viet Minh was founded and led by the ICP.

Because a Vichy French administration in Vietnam during World War II cooperated with occupying Japanese forces, the Viet Minh's anti-French activity was also directed against the Japanese, and, for a short period, there was cooperation between the Viet Minh and Allied forces. When the French were ousted by the Japanese in March 1945, the Viet Minh began to move into the countryside from their base areas in the mountains of northern Vietnam. By the time Allied troops--Chinese in the north and British in the south--arrived to take the surrender of Japanese troops, the Viet Minh leaders had already announced the formation of a Democratic Republic of Vietnam (DRV) and on September 2, 1945, proclaimed Vietnam's independence.

Deep divisions between Vietnamese communist and non-communist nationalists soon began to surface, however, especially in the south, and with the arrival of Allied forces later in September, the DRV was forced to begin negotiations with the French on their future relationship. The difficult negotiations broke down in December 1946, and fighting began with a Viet Minh attack on the French in Hanoi.

Civil War

A prolonged three-way struggle ensued among the Vietnamese communists (led by Ho Chi Minh), the French, and the Vietnamese nationalists (nominally led by Emperor Bao Dai). The communists sought to portray their struggle as a national uprising; the French attempted to reestablish their control; and the non-communist nationalists, many of whom chose to fight alongside the French against the communists, wanted neither French nor communist domination. Ho Chi Minh's Viet Minh forces fought a highly successful guerrilla campaign and eventually controlled much of rural Vietnam. The French military disaster at Dien Bien Phu in May 1954 and the conference at Geneva, where France signed the Agreement on the Cessation of Hostilities in Vietnam on July 20, 1954, marked the end of the 8-year war and of French colonial rule in Indochina.

1954 Cease-Fire Agreement and Partition

The 1954 cease-fire agreement negotiated in Geneva provided for provisional division of the country at approximately the 17th parallel; a 300-day period for free movement of population between the two "zones" established thereby; and the establishment of an International Control Commission--representatives of Canada, India, and Poland--to supervise its execution. The cease-fire agreements also referred to "general elections" that would "bring about the unification" of the two zones of Vietnam. The agreement was not accepted by the Bao Dai government, which agreed, however, to respect the cease-fire.

Following the partition of Vietnam under the terms of the Geneva agreements, there was considerable confusion in the south. Although Bao Dai had appointed a well-known nationalist figure, Ngo Dinh Diem, as prime minister, Diem initially had to administer a country plagued by a ruined economy and by a political life fragmented by rivalries of religious sects and political factions. He also had the problem of coping with 850,000 refugees from the north. The communist leaders in Hanoi expected the Diem government to collapse and come under their control. Nevertheless, during his early years in office, Diem was able to consolidate his political position, eliminating the private armies of the religious sects and, with substantial U.S. military and economic aid, build a national army and administration and make significant progress toward reconstructing the economy.

Meanwhile, the communist leaders consolidated their power in North Vietnam and instituted a harsh "agrarian reform" program. In the late 1950s, they reactivated the network of communists who had stayed in the south (the Viet Cong) with hidden stocks of arms, reinfiltrated trained guerrillas who had been regrouped in the north after 1954, and began a campaign of terror against officials and villagers who refused to support the communist cause. The communists also exploited grievances created by mistakes of the Diem government as well as age-old shortcomings of Vietnamese society, such as poverty and land shortages.

By 1963, the North Vietnamese communists had made significant progress in building an apparatus in South Vietnam. Nevertheless, in 1964 Hanoi decided that the Viet Cong (VC) cadres and their supporters were not sufficient to take advantage of the political confusion following the overthrow of Diem in November 1963. Hanoi ordered regular troops of the North Vietnamese army (People's Army of Vietnam--PAVN) into South Vietnam, first as "fillers" in VC units, then in regular formations. The first regimental units were dispatched in the fall of 1964. By 1968, PAVN forces were bearing the brunt of combat on the communist side.

U.S. Assistance

In December 1961, President Diem requested assistance from the United States. President Kennedy sent U.S. military advisers to South Vietnam to help the government deal with aggression from the North. In March 1965, President Johnson sent Marine units to the Danang area to defend U.S. installations. In July 1965, he decided to commit up to 125,000 U.S. combat troops to Vietnam. By the spring of 1969, the United States had reached its greatest troop strength--543,000--in Vietnam.

The U.S. bombing of North Vietnam, which began in March 1965, was partially halted in 1968. U.S. and North Vietnamese negotiators met in Paris on May 15, 1968, to discuss terms for a complete halt and to arrange for a conference of all "interested parties" in the Vietnam war, including the Government of the Republic of Vietnam (GVN) and the National Liberation Front. President Johnson ordered all bombing of the North stopped effective November 1, 1968, and the four parties met for their first plenary session on January 25, 1969.

The Paris meetings, which began with so much hope, moved slowly. Beginning in June 1969, the United States began a troop withdrawal program concurrent with the assumption by GVN armed forces of a larger role in the defense of their country. While the United States withdrew from ground combat by 1971, it still provided air and sea support to the South Vietnamese until the signing of the cease-fire agreements. The peace agreement was concluded on January 27, 1973.

After the 1973 Peace Agreement

While Hanoi continued to proclaim its support of the peace agreement, it illegally sent thousands of tons of materiel into South Vietnam, including sophisticated offensive weaponry new to the South. Tens of thousands of PAVN troops infiltrated South Vietnam to join the 160,000 there at the time of the cease-fire. Numerous attacks were carried out against installations, lines of communication, economic facilities, and, occasionally, population centers.

At the beginning of 1975, the North Vietnamese began a major offensive in the South that succeeded in breaking through the central highlands defenses. After taking over provincial capitals in that area, a combination of forces from the demilitarized zone area and the highlands routed South Vietnamese defenders. Pressures from the highlands and from the Cambodian border region led to a general GVN military collapse, which in turn resulted in the fall of Saigon itself by the end of April. Faced with the threat of a takeover by a communist regime, tens of thousands of Vietnamese fled the country.

Reunification

For the first few months after the war, separate governments were maintained in the northern and southern parts of the country. However, in mid-November 1975, the decision to reunify the country was announced, despite the vast social and economic differences remaining between the two sections. Elections were held in April 1976 for the National Assembly, which was convened the following June. The assembly ratified the reunification of the country and on July 2 renamed it the Socialist Republic of Vietnam (SRV). It also appointed a committee to draft a new constitution for the entire country. The party Central Committee approved the constitution in September 1980. New National Assembly elections were held in April 1981.

The fourth congress of the Vietnam Worker's Party, held December 4- 20, 1976, selected a new party leadership and established major national policies. It reelected Secretary General Le Duan who, in effect, had led the party since Ho Chi Minh's death in 1969. In addition, the fourth party congress voted to enlarge the Politburo and the full Central Committee by about 60%. While many of the new members were young and had technical and administrative expertise, top positions went to established leaders from the north, assuring connection with the past. Similarly, the fifth party Congress (1982) maintained continuity by reconfirming the top leadership, despite its age, while expanding the Central Committee to bring in new members who were younger and had more economic experience.

In 1986, the death of Secretary General Le Duan, as well as alarm over the economy's downward spiral, set the stage for the watershed sixth party congress (December 1986). Spearheaded by Nguyen Van Linh, who was named the new party leader, the congress endorsed the need for sweeping economic reform and "renovation" of the party, as well as a policy of "openness" patterned, to a degree, on the policies being promoted in the U.S.S.R. While reaffirming Vietnam's alliance with the Soviet Union, the congress softened Hanoi's anti-Beijing posture and called for more attention to developing relations with non-communist nations. The balance of power in the leadership shifted to the "reformers," with the remaining "conservatives" arguing for a slower pace. Economic reforms were deepened in 1989 and a stabilization campaign to control rampant inflation was implemented.

As communism came under attack in Eastern Europe, the former Soviet Union, and China in the late 1980s, Vietnam tightened domestic political controls, cracking down on political dissidents before the seventh party congress in June 1991. The congress itself introduced significant leadership changes while avoiding specifics on the details of economic reform or swinging power significantly to the side of either advocates of economic and political liberalization or to orthodox communists. However, given a certain amount of stress over the collapse of Vietnam's communist allies, senior figures in the security apparatus gained representation. Seven members of the 12 man ruling Politburo, including Secretary General Nguyen Van Linh, were dropped from their posts. (Linh was replaced by Do Muoi, the Prime Minister, whose old position was given to Vo Van Kiet, a liberal southerner.) Limited political reform appeared on the agenda but did not threaten the political primacy of the Communist Party in Vietnamese society. However, plans for internal democratization of the Party were agreed upon. On economic issues, the congress was vague, instead focusing on questions of party ideology in the face of the collapse of Communism in Eastern Europe. The removal of Foreign Minister Nguyen Co Thach, who had opposed closer ties with China, signaled Vietnam's willingness to improve relations with its northern neighbor.

A new constitution was approved in April 1992, reaffirming the role of the Communist Party as the leading force of state and society but also promulgating government reorganization and increased economic freedom. At the midterm Party conference in January 1994, four new members were appointed to the Politburo, tipping the balance of political power toward those who favored more rapid and thoroughgoing economic reform. In late 1997, a new President, Prime Minister and party General Secretary were named. There were changes in the Politburo as well. While the leadership says it is committed to reform, the pace of that reform continues to be debated. In the 1990s, though Vietnam remains a one party state, adherence to ideological orthodoxy has become less important than economic development as a national priority.

GOVERNMENT AND POLITICAL CONDITIONS

A new constitution, approved in April 1992, introduced a major restructuring of the government while reaffirming the role of the Communist Party of Vietnam as the leading force of State and society.

The new constitution states that the Party should operate within the framework of the constitution and the laws of the country and that it should no longer be allowed to direct the day-to-day operation of the government. The National Assembly, which was granted an increase in its power and independence, is designated as the highest representative body of the people and the only body with legislative powers. The constitution promulgates an expansion of the body's oversight powers as well as an extension of choice in the balloting process for elections to the National Assembly, which for the first time permitted non-party members to be elected in 1992. The collective Council of State, which had served as the parliament's standing committee and whose chairman acted as ceremonial head of state, was abolished. It was replaced by an office of the President with real administrative powers, authority over the armed forces and the power to recommend the dismissal of government officials (subject to the approval of the National Assembly). The revised constitution also replaced the cumbersome Council of Ministers with a cabinet headed by the Prime Minister.

In Vietnam, governmental policy is largely the prerogative of the communist leadership, with policy being set by the Politburo and carried out by the five-man Standing Board, the party organ which oversees day-to-day policy implementation. The most important political institution in Vietnam is the Vietnamese Communist Party (formerly the Vietnam Worker's Party) headed by Secretary General Le Kha Phieu. The large and unwieldy Party Congress, which is supposed to gather every 5 years, last met in 1996. The Central Committee membership, which is elected from this group, represents less than 10% of the national congress and meets about twice a year. The Party's influence appears to be diminishing throughout Vietnam as the rate of new membership has decreased since the 1980s.

Many major policy directives are issued as Central Committee resolutions but are formulated by the all-powerful Politburo; many others emanate directly from the Politburo. The Standing Board oversees the implementation of these decisions. Overlapping party and state positions continue to be held even though there has been some effort to discourage both that practice and direct party interference in government affairs. Many of the 19 party Politburo members concurrently hold high positions in the government and 85% of the deputies in the National Assembly are Party members. This is also the case at lower levels, where provincial, district, and village party officials dominate the administrative councils.

The most important powers within the Vietnamese Government--as opposed to the Communist Party--are the executive agencies: the offices of the President and the Prime Minister (most of whose members are also on the Communist Party Central Committee). The Vietnamese president, Tran Duc Luong, functions as head of state but also serves as commander of the armed forces and chairman of the Council on National Defense and Security. According to the constitution, these bodies, as well as the heads of ministries and commissions, are elected by the National Assembly. The Prime Minister of Vietnam is Phan Van Khai who heads a cabinet composed of five Deputy Prime Ministers as well as the directors of the country's 31 ministries and commissions. Three members of the Prime Minister's cabinet are concurrently members of the Politburo.

The highest legislative organ of the government is the National Assembly, members of which are elected, according to the constitution, every 5 years. The chairman of the National Assembly is Nong Duc Manh, the first member of an ethnic minority to hold this post and the first to simultaneously command a position in the Vietnamese Politburo. The assembly meets twice yearly and theoretically exercises wide lawmaking and appointive authority. In the past, it has simply given formal approval to proposals from the executive organs. The constitutional amendments of 1992 strengthened the legislative and oversight authority of the National Assembly, granting it authority over defense and security policy, as well as financial matters. The Assembly's Standing Committee and permanent committees were also granted new powers. Local legislative bodies, called people's councils, are elected at provincial, district, and village levels. The councils choose administrative committees that handle routine business on the local level and are ultimately responsible to the office of the Prime Minister. Their function is more executive than legislative. The National Assembly has exercised greater authority in the past 2 years.

ECONOMY

The period after reunification from 1975 to 1985 was marked by economic stagnation; the Vietnamese made little progress in raising output and living standards beyond the levels of the 1960s. Development was hampered by the centrally planned economic model applied by Vietnam's communist government, poor economic management and endemic weaknesses. The economy also was seriously disrupted by Vietnam's occupation of Cambodia, which led most non-communist industrial countries to halt aid to Vietnam and diverted Vietnamese resources and leadership attention from economic tasks at home.

Distortions in the Vietnamese economy resulted in the onset of an economic crisis by the mid-1980s. With inflation running at 700% in 1986, Vietnam recognized the pressing need to reorient its economic policy. That year, the sixth party congress approved strategies for substantial reforms in areas such as the exchange rate, foreign investment, and government budget management. This marked the beginning of a major economic reform effort, which the Vietnamese refer to as "doi moi" or renovation. Major reforms undertaken during the decade 1986-96 included: decollectivization of agriculture; land reform that created greater security of land tenure; a reorientation of investment away from heavy industry to agriculture, light industry and exports; price reforms, including elimination of virtually all administered prices; liberalization of foreign trade and foreign investment; interest rate liberalization; exchange rate unification; and progress toward establishment of a legal framework for the encouragement of private-sector led growth.

During much of this period, party leaders and government officials gave top priority to implementing reforms addressing the severe economic problems that plagued the country with impressive results. Vietnam became one of the fastest growing economies in the world, averaging around 8% annual GDP growth from 1990 to 1997. Vietnam's inflation rate, which stood at an annual rate of over 300% in 1987, fell steeply; in 1997, inflation was less than 4%. During this same period, there was a three-fold increase in investment and a five-fold increase in domestic savings. Agriculture production doubled, transforming Vietnam from a net food importer to the world's second largest exporter of rice. Economic reforms also resulted in a dramatic increase in foreign trade, which now represents about 80% of GDP, and foreign direct investment inflows, equivalent to 8% of GDP in 1997. Progress that has been made away from a centrally planned economy towards a more market-oriented economic model has resulted in an improvement in the quality of life for many Vietnamese. Per capita income, which was $220 in 1994, rose to $320 by 1997 with a related reduction in the share of the population living in acute poverty.

With the departure of Vietnamese occupation forces from Cambodia by the end of September 1989, Vietnam's relations with the West, China and its regional neighbors improved. Bilateral and multilateral aid to Vietnam resumed in 1993 when the Clinton administration rescinded its ban on international financial institution lending to the country. Donors pledged $2.4 billion in assistance to Vietnam in 1997.

The striking economic progress that, to date, has marked the 1990s is not expected to continue in the remaining years of the decade. Vietnam is facing twin challenges from the East Asian economic crisis and a loss in the momentum of growth as the impact of the first generations of reforms is fading. Structural reforms has slowed during the past 2 years, and investors have expressed increasing concern about reversal of policy reforms and the lack of transparency. Among the serious structural problems that the Vietnamese government must address immediately are its perennially high current account deficit, a relatively high level of external indebtedness at 23% of GDP in 1997, and rising levels of non-performing loans in the banking sector. In addition, Vietnam's national savings rate, at under 18% in 1997, is among the lowest in East Asia and must be raised to fund much needed public investment.

Continued pervasive government control of the economy and a non-convertible currency protected Vietnam from the early impact of the East Asian crisis, but with the deepening of the regional recession, it is becoming increasingly obvious that the impact will be severe. In recent years, 60% of Vietnam's exports have gone to Asian countries and 70% of its foreign direct investment has come from the region. As a result, the economists anticipate that GDP growth will fall to 4-5% in 1998. Export growth and foreign direct investment inflows are also expected to fall this year. In the first nine months of 1998, exports rose by 4% as compared with 20-30% in previous years. During that same period, approvals for new foreign direct investment fell by more than 50% over the already depressed 1997 figures. These trends are expected to continue into the beginning of next century.

The international community has told Vietnamese leaders that the situation calls for a bold new round of structural economic reforms. While the Asian financial crisis has helped focus the new leadership on the importance of a continuing commitment to economic reform, the reforms implemented to date have not adequately addressed the core issues. These are privatization of state enterprises, financial sector reform, trade liberalization and adoption of a flexible exchange rate system. To date, however, the country's leadership has chosen to follow a less ambitious, slow-paced reform program.

Overall systemic economic reform has been limited by both Vietnam's communist ideology and a bureaucracy which views reform as a threat to the status quo. Economic reforms have stalled in some parts of the country because powerful political and bureaucratic interests feel their access to government largess threatened, and because the state fears losing its support should it proceed all the way with liberalization. On the other hand, the fact that Vietnam's state sector is smaller than that in many other socialist economies in transition could help make reform comparatively less difficult.

Should economic growth, exports and foreign investment inflows decrease as expected, the country will have to tackle a rising unemployment problem or suffer social unrest. Layoffs in the state sector and foreign-invested enterprises together with the lasting effects of an earlier military de-mobilization have exacerbated an already serious unemployment problem. Official unemployment increased from 3.4% in 1989 to 7% in 1998 though unofficially it is believed that 20% or more of the workforce may be unemployed or underemployed. (These statistics are even higher in urban areas.) Any substantial long-range policy aimed at the reform of Vietnam's economy will necessarily involve a great degree of political risk-taking on the part of the country's leadership.

Agriculture and Industry

Increases in agricultural procurement prices and private production have contributed to agricultural recovery since 1980. Despite shortages of fertilizer, insecticides, and farm equipment, good weather and incentives led to record harvests and Vietnamese claims of self-sufficiency in 1989. Land reform and the decollectivization of agriculture produced further improvements in agricultural productivity in the 1990s, and the country became the second-largest exporter of rice in the world. However, Vietnamese agriculture is close to the limit of its ability to feed Vietnam's population which is growing at 1.8% a year. Vietnam often has to suspend rice exports due to domestic shortages caused by smuggling, severe weather conditions such as floods and droughts, and concerns about food security.

Vietnam is heavily dependent on exports such as rice, coffee, tea, cashews and rubber for its future economic development. Earnings from rice and other agricultural exports are seen as an important factor in funding Vietnamese industrialization, although the sustainability of rice production remains an open question due to environmental factors and population growth. Nonetheless, agriculture's share of economic output has declined, falling as a share of GDP from 42% in 1989 to 26% in 1997, as production in other sectors of the economy rises.

Paralleling its efforts to increase agricultural output, Vietnam has sought with some success to revitalize industrial production. Industry contributed nearly 32% of GDP in 1997. However, most branches of heavy industry -- cement, phosphate, steel, etc. -- have stagnated or declined. State-owned enterprises which comprise most of the limited modern industrial sector are marked by low productivity and inefficiency, the result of a command-style economic system applied in an underdeveloped country. Southern industry -- largely composed of textiles, food processing and light manufacturing -- is somewhat more efficient. Of late, Vietnam has achieved some success in increasing exports of some labor-intensive manufactures, and the export structure has become more oriented toward light industrial products. Subsidies have been cut to some inefficient state enterprises. The government has also repeatedly stated its intent to privatize -- or "equitize" as it is known locally -- state enterprises, although few enterprises have been privatized to date. These reforms have not been sufficient to significantly increase Vietnam's industrial competitiveness. For the time being, the low quality of the current output of state enterprises will continue to prevent Vietnam from becoming a world competitor in advanced manufactured goods.

Trade and Balance of Payments

From the late 1970s until the 1990s, Vietnam was heavily dependent on the Soviet Union and its allies for trade and economic assistance. To compensate for drastic cuts in Soviet-block support after 1989, Vietnam liberalized trade, devalued its exchange rate to increase exports, and embarked on a policy of regional and international economic re-integration. As Vietnam's integration into the global community progress, bilateral and multilateral aid to the country resumed.

As a result of these reforms, exports expanded significantly, growing by 20-30% per year. By 1997, exports accounted for 35% of GDP. However, imports also rose during the same period leading to persistent trade and current account deficits. Despite strong export growth and considerable efforts to control import growth, Vietnam ran a $2.4 billion trade deficit in 1997. Prospects for Vietnamese exports and overall current account performance will improve once the country has completed discussions currently underway on accession to the World Trade Organization and for a Bilateral Trade Agreement with the United States, which must be completed and approved by Congress before Vietnam receives normal trading rights (formerly known as "most-favored nation" treatment).

Foreign investment in Vietnam has ballooned in recent years. By the end of 1997, more than 2,200 investment licenses had been issued to foreign firms valued at $31.4 billion, with firms from East Asia predominating. As of December 1997, Singapore firms have received licenses to invest $4.9 billion in Vietnam. Other important international sources of investment include Taiwan, Hong Kong, Japan and South Korea. The United States is the eighth largest source of foreign investment with licenses to invest over $1.1 billion in the country. Foreign direct investment inflows reached an all time high of $2.6 billion in 1997, more than covering the country's $2 billion current account deficit. However, structural economic problems and the Asian financial crisis have begun taking a toll, causing foreign investment license applications and approvals to fall dramatically and warning of potential future balance of payments problems.

The country's persistent current account deficit, its inability to cut imports without significantly reducing its own output and incomes, and declining foreign investment inflows will probably ensure the need for concessional assistance well into the next century if Vietnam is to avoid significant balance of payments problems.

FOREIGN RELATIONS

During the second Indochina war, North Vietnam balanced relations with its two major allies, the Soviet Union and China, and forged closer links to the communist parties of Cambodia and Laos, which had been formed in the early 1950s out of the Indochinese Communist Party. By 1975, with the end of the war and Beijing increasingly viewing Vietnam as a potential Soviet instrument to encircle China, Beijing began increasing its support for the Khmer Rouge and pushing Hanoi to side with China on Sino-Soviet disputes. In turn, Vietnam viewed the Khmer Rouge as an instrument by which China was seeking to outflank Vietnam on its southwest border. Thus, Hanoi attached a high priority to persuading China to distance itself from the Khmer Rouge and permit Vietnam to steer an independent course between the two communist giants. After the death of Mao Tse-tung and the arrest of the "Gang of Four" in China, Hanoi renewed its diplomatic efforts to persuade the Chinese leadership to distance itself from the Khmer Rouge. Only after those initiatives failed, as did similar efforts to persuade the Khmer Rouge to distance itself from China, did Hanoi turn decisively to the Soviet Union. The Soviet strategy of "containing" China dovetailed perfectly with Vietnam's putative requirement to defend itself against its large neighbor with which it has shared a complex and often stormy relationship going back over 2,000 years.

Shortly after the fall of Saigon and the capture of Phnom Penh by the communist Khmer Rouge in 1975, Vietnamese and Khmer Rouge troops clashed over disputed offshore islands in the Gulf of Thailand. Negotiations failed to resolve festering disputes along the land border and, in April 1977, Phnom Penh stepped up attacks on Vietnamese settlers and villages on both sides of the border, to which Hanoi responded with a mix of offers to negotiate and gradually escalated counterattacks. Although an erstwhile communist ally of Vietnam during the "anti-imperialist" struggle, the vicious attacks of Pol Pot's Khmer Rouge were a feckless attempt to regain territory lost to the more powerful Vietnamese in previous centuries. Breaking relations with Hanoi in December 1977, Phnom Penh protested Vietnam's forceful attempt to create an "Indochina federation." Hanoi responded with charges of "unprovoked" Cambodian attacks on Vietnamese territory.

In December 1978, some 200,000 Vietnamese troops invaded Cambodia, installing a regime led by Heng Samrin in Phnom Penh in early 1979. Several Khmer groups, including forces loyal to the ousted Democratic Kampuchea regime, continued to resist the Vietnamese installed regime. A loosely organized resistance coalition formed in mid-1982 included non-communist organizations led by Prince Norodom Sihanouk and former Prime Minister Son Sann--respectively, the coalition's president and prime minister--and the Khmer Rouge, under the nominal leadership of Khieu Samphan.

Vietnamese-Chinese relations, which deteriorated during the mid-1970s as Beijing's ties with the Khmer Rouge regime in Cambodia grew, took a precipitous turn for the worse following Hanoi's announcement in March 1978 of a ban on private trade which most affected Sino-Vietnamese. Charging that this policy deliberately "persecuted" ethnic Chinese, Beijing accused Vietnam of drawing closer to the Soviet Union against China and of harboring aggressive designs toward Cambodia. Hanoi responded with a counterclaim that Beijing had not only fomented the exodus of Sino-Vietnamese but also incited Khmer Rouge attacks on innocent Vietnamese civilians. Beijing terminated all economic assistance to Vietnam in July 1978. Following Hanoi's December 1978 invasion of Cambodia, Chinese troops launched a month-long expedition in February across the Sino-Vietnamese border to "punish" Vietnam for its overthrow of China's ally in Cambodia. In fact, the Vietnamese forces acquitted themselves very well; it is doubtful that Hanoi "learned its lesson."

As relations with China worsened, Vietnam looked increasingly to the Soviet Union for support. A treaty signed in November 1978 provided a basis for increased military aid, which was expanded after the Vietnamese occupation of Cambodia and the Chinese incursion in 1979. Through the 1980s, Vietnam received nearly $3 billion dollars a year in economic and military aid from the Soviet Union and conducted most of its trade with the USSR and other Council for Mutual Economic Assistance (CEMA) countries.

In the 1980s, the United States worked closely with the Association of Southeast Asian Nations and other interested parties to achieve a comprehensive political settlement in Cambodia. By 1989 Vietnam had withdrawn most of its troops from the country facilitating the 1991 Paris Agreements, which led to a UN-governed ceasefire in Cambodia and preparation for free and fair nationwide elections in 1993. The accord also precipitated the normalization of diplomatic and economic relations between Vietnam and ASEAN as well as the countries of Western Europe and Northeast Asia. China reestablished full diplomatic ties with Vietnam in 1991.

Vietnam's reorientation of foreign policy actually preceded its 1989 withdrawal from Cambodia. Since the sixth party congress in December 1986, Vietnam has attempted to open and run its economy in a more rational and less political manner and adjust its international relations to reflect the evolving international economic and political situation in Southeast Asia. Political relations have been oriented away from Eastern Europe and Russia to the West and the non-communist nations of Southeast Asia. Vietnam has stepped up its efforts to attract foreign capital from the West and regularize relations with the world financial system. In the 1990s, following the lifting of the American ban on multilateral loans to the country, Vietnam became a member of the World Bank, the International Monetary Fund and the Asian Development Bank. The country has expanded trade with its East Asian neighbors as well as with countries in Western Europe and North America. While agriculture and forestry products remain Vietnam's largest exports (36%, 1994), light industrial exports, such as textiles, are growing in importance (up from 14% in 1991 to 19% in 1994). By 1994, Vietnam's top five trading partners were all Asian--Japan, Singapore, Hong Kong, South Korea and China. Vietnam became a member of ASEAN in July 1995. Vietnam joined APEC in November 1998.

However, border tensions still occasionally arise between Vietnam and its neighbors (especially China). Vietnam and China as well as the Philippines, Malaysia, Taiwan, Indonesia and Brunei each claim part or all of the Spratley Islands, an archipelago in a potentially oil-rich area of the South China Sea. Conflicting claims have produced over the years small-scale armed altercations in the area. China's assertion of control over the Spratleys and the entire South China Sea has elicited concern from Vietnam and its Southeast Asia neighbors.

Membership in International Organizations

Vietnam belongs to the UN and some of its specialized agencies: Food and Agriculture Organization (FAO), International Bank for Reconstruction and Development (IBRD), International Civil Aviation Organization (ICAO), International Monetary Fund (IMF), UN Development Program (UNDP), UN Educational, Scientific, and Cultural Organization (UNESCO), World Health Organization (WHO), International Maritime Organization (IMO), World Intellectual Property Organization (WIPO)--Asian Development Bank (ADB), Colombo Plan, Economic and Social Commission for Asia and the Pacific, INTELSAT, Mekong Committee, Nonaligned Movement, Pacific Economic Cooperation Council; the Asia-Pacific Economic Cooperation (APEC) forum; observer status in the WTO. Vietnam obtained membership in the Association of Southeast Asian Nations in July 1995.

U.S.-VIETNAM RELATIONS

President Clinton announced the normalization of diplomatic relations with Vietnam on July 11, 1995. This followed the establishment of Liaison Offices in Hanoi and Washington, DC in January 1995 and the lifting of the U.S. trade embargo on Vietnam in February 1994. The Liaison Offices were upgraded to Embassies in August 1995. In 1997, the U.S. opened a Consulate General in Ho Chi Minh City, and Vietnam opened its own Consulate in San Francisco. Most recently, President Clinton granted a Jackson-Vanik waiver to Vietnam in March 1998 which made certain U.S. trade and investment support programs available in Vietnam. The Jackson-Vanik waiver is also required along with Congressional approval of a bilateral trade agreement in order to grant Vietnam normal trading rights. This waiver must be renewed annually.

American companies have entered the Vietnamese market and the U.S. is now the 8th largest foreign investor in Vietnam with over $530 million committed in 34 projects as of June 1995.

The U.S. maintains ongoing full cooperation with Vietnam on the issue of Americans missing from the war in Vietnam. It has been U.S. policy since the early 1980s that normalization of relations with Vietnam be based on continued cooperation on the prisoner of war/missing in action (POW/MIA) issue and other humanitarian concerns.

In the 1980s, despite the constraints posed by the Cambodian situation, the United States and Vietnam developed and sustained an active relationship on a range of humanitarian issues, in particular on a matter which the United States deemed of the highest national priority--achieving the fullest possible accounting of Americans missing and unaccounted for in Indochina. The two countries agreed to handle these issues as a separate, humanitarian agenda, without reference to political differences.

From 1987 through 1990, Gen. John Vessey, Jr., the President's special emissary to Vietnam, proposed an initiative which sparked increased repatriations; over this four-year period 122 remains were identified. The removal of Vietnamese troops from Cambodia in 1989 lead to an improvement in U.S.-Vietnamese relations. In June 1993, progress in repatriating the remains of American servicemen increased and an office was established in Ho Chi Minh City to facilitate better accounting operations in the south. A month later, the U.S. dropped its objection to bilateral and multilateral lending to Vietnam. In 1994, based on significant cooperation on the part of the Vietnamese on POW/MIA issues, President Clinton removed the American trade embargo on Vietnam.

Since 1992, Vietnam has unilaterally, or through U.S./Vietnamese recovery team operations returned 281 sets of remains believed to be American to the U.S.; 104 were subsequently identified as previously unaccounted-for Americans. Additionally, the Department of Defense has confirmed the fate of all but 43 out of 196 individuals last known to be alive in Vietnam. Often referred to as discrepancy cases, these 196 individuals were last seen alive in Vietnam, but were not repatriated alive, nor had their remains been repatriated. At the end of hostilities in 1973, 2,583 Americans were unaccounted for. There are 2,079 Americans still unaccounted for from the war in Southeast Asia; of that total, 1,552 are unaccounted-for in Vietnam. As of October 1998, 504 Americans have been recovered, identified, and returned to their families-375 of them from Vietnam. The United States Government remains committed to achieving the fullest possible accounting for those American citizens who did not return from the war in Southeast Asia, and whose fates remain unknown.