REPORT ON THE PROCEEDINGS OF THE 20TH ANNUAL NATIONAL DEFENSE UNIVERSITY PACIFIC SYMPOSIUM

Sponsored by the United States Pacific Command and
the Asia Pacific Center for Security Studies

March 1–2, 1999

Honolulu, Hawaii

Prepared By

James R. Corcoran

University of Hawaii History Department

 

EXECUTIVE SUMMARY

Key Symposium Observations:

The National Defense University’s 20th Annual Pacific Symposium on "U. S. Engagement Policy in a Changing Asia: A Time for Reassessment?" was held in Hawaii on March 1 and 2, 1999. Its purpose was to analyze the current situation in select Asian countries in light of the economic crisis that began in late 1997 and quickly spread across the region. Participants were also asked to address the future prospects of these countries and to consider the impact of the crisis on U.S. policy. The following general observations were offered:

• Future of Asia. On balance, the Asia-Pacific scene warrants cautious optimism. As the 21st century opens, the prospect for peace among Asian nations is considerably stronger than it had been at the beginning of the 20th century. Violence will occur, but it will likely be domestic and, in some cases, perpetrated by individuals or by small groups of terrorists. Failing states will be a problem, and without the proper mechanisms to handle a crisis, the regionalization of a domestic conflict remains a risk.

The 21st century will witness Asia’s continued rise; the basic ingredients for its development are present across the region: governments committed to rapid growth and, through experiment, to discovering appropriate strategies; an increasingly educated citizenry; and the enhanced capacity to acquire advanced technology and capital through the process of globalization. For some nations, resources will constitute an increasing problem, but the greater application of science and technology and the use of multiple sources of energy should make these problems manageable, at least through mid-century.

Northeast Asia will continue to rely on a bilateral framework for political, economic, diplomatic, and military stability. Japan and South Korea should recover from the economic crisis in four to five years. Eventually, Russia will resume its development, and that will lead to a more active role in Northeast Asia. Alarms were expressed about China. If the economic crisis hits China, or China were to devalue its currency, the impact on Asia and the United States could be disastrous. Although China’s economy continues to grow, structural problems exist and indicate a significant risk of collapse that should not be ignored. Should it successfully restructure its economy, China could play an increasingly significant and involved role in the region and globally.

Cautious optimism was expressed for the future recovery of Thailand, Malaysia, and Singapore over the next few years. Indonesia will remain problematic and even may generate massive turbulence. Now that India and Pakistan have convincingly demonstrated their nuclear capabilities to each other, the prospect that they could work together to resolve South Asia’s troubles has improved. Overall, symposium participants felt the post-Cold War strategic relationship of the major powers in the Asia-Pacific region—China, Japan, India, Russia, and the United States—is basically stable. Hope was expressed that the United States would be able to assert a leadership role in Southeast Asia.

• U.S. Security Commitment. The U.S. security commitment to the Asia-Pacific region will continue to be the indispensable anchor of security, insofar as it is conducive to peace and stability and prevents an arms race. Beijing will oppose the U.S. military presence in the region if it fails to curb Japan’s militaristic tendencies or if it interferes with reincorporation of Taiwan. The United States will be better able to address conflicts in the region by maintaining forward-deployed forces through 2005 or so. It should make every effort to keep its trilateral relationship with Japan and China stable and strengthen defense cooperation with Japan and South Korea. South Asia may hold the highest risk of major conflict. The United States should prepare for an array of scenarios, since it will become harder to predict strategic and operational requirements in the region. It should seek to contain damage from the economic crisis to prevent global economic deflation and domestic instability.

• U.S. Strategic Engagement Policy. The U.S. Department of Defense East Asia Strategic Report (EASR98) was considered positive. Washington should develop a more refined process for assessing the strategic significance of events in Asia and deciding the weight to give each policy and economic response to pivotal episodes—such as the Asian economic crisis—that will determine Asia’s strategic, economic, and political future.

Policy makers still weigh strategic significance in Cold War terms. For example, South Korea received quick and significant economic assistance because it faced a communist North armed with nuclear weapons. Indonesia did not get quick and significant assistance; because the Cold War is over; it is no longer useful as a bastion against communism. The United States should cease allocating economic support based on strategic values from the Cold War and devise new tenets for engagement. Greater seriousness regarding participating in and building institutions in Asia that goes beyond mere multilateralism should be shown. The United States should stress the usefulness of a "concert of power" as well as a balance of power. Restructuring the forward deployment of U.S. military forces in the region will be necessary, but the United States should engage countries in the region in discussions that would help to define the nature and scope of forward deployment in the future.

It should be noted that the United States will seek to respond to armed conflicts in the most domestically acceptable way, with air power and sea power, in order to avoid the possibility of ground force casualties. Strategists must consider (in accord with Carl von Clausewitz’s "remarkable trinity" of the people, the military, and the government) the degree of popular support in America for scenarios that may result in significant casualties. The United States should move toward a strategy for its military presence in Asia based on the "three R’s": regular joint exercises, ready bases in Asia, and rapid deployment.

U.S. ENGAGEMENT POLICY IN A CHANGING ASIA:
A TIME FOR REASSESSMENT?

The National Defense University’s 20th Annual Pacific Symposium on "U. S. Engagement Policy in a Changing Asia: A Time for Reassessment?" took place in Hawaii on March 1 and 2, 1999. The purpose of the symposium was to bring together analysts and experts on countries in the Asia-Pacific region to discuss and analyze the current situation in selected Asian nations in the wake of the economic crisis that began in late 1997 and quickly spread across the region. Participants were asked to look at the prospects for those countries, and the Asia-Pacific region as a whole, in the near term and to consider the impact of these developments on U.S. policy.

The symposium participants specifically considered Japan, China, and Korea; the strategic environment in Indonesia and Southeast Asia; India within the setting of South Asia; and finally, Asia’s future from European, Latin American, Asian-Pacific, Russian, and American perspectives. The most important themes of these proceedings are, in keeping with the symposium policy of nonattribution, condensed and presented as a summation of the participants’ views.

PANEL I: JAPAN

• Economic Recovery. Japan’s recovery from the economic crisis was addressed at many levels. Its economic crisis was described in terms of negative economic growth rates (-0.4 percent for 1997 and -2.2 percent for 1998), declining consumer purchasing, falling real estate values, lower levels of investment, stagnating foreign trade, and rising unemployment.

Although the Government of Japan instituted policies to pull the country out of its economic recession (some would say "depression"), it may not be moving fast enough or doing enough. Japan is faced with choosing between conducting "business as usual" or making massive changes in its political, social, and economic structure. It must consider structural reforms that will change its entire economic system—from a government-controlled economy to one that is market led. Perhaps its most serious challenge in restoring the economy to health will be the restructuring of capital stocks and the related employment structure (with such features as guaranteed lifetime employment, duplication of functions, promotions based solely on seniority, and guaranteed retirement and bonuses).

Japan, the world’s largest creditor nation, has the world’s second largest economy and the world’s greatest favorable balance of trade. It accounts for about 65 percent of the overall Asian economy. It has $220 billion in foreign exchange reserves, a $130 billion favorable trade balance, and $1 trillion in foreign investments. Japan also has 1,223 trillion yen in financial capital, total savings deposits of 1,200 trillion yen, and $1 trillion worth of recurring foreign trade.

Participants generally agreed that Japan’s economy will recover; but how, to what level, and when were the subjects of debate. One view expressed is that Japan eventually will return to a growth profile, but at a low sustainable level. Another view is that the economy will recover within one or two years and grow steadily after that; and it will return to its former social and economic levels within four to five years. Prime Minister Keizo Obuchi reportedly declared that the Japanese economy will recover a positive growth rate of 0.5 percent for fiscal year (FY) 1999. Nonetheless, most research institutions in Japan and elsewhere predict a negative growth rate for 1999. Thus, Japan’s role in helping to salvage its Asian partners from serious recession in the aftermath of the Asian crisis is limited.

• Relations with China. There were differing perspectives regarding Japan’s relations with China. One view is that China President Jiang Zemin’s state visit to Japan in November 1998 was successful, and relations have progressed since then. This was the first such visit to Japan by a Chinese head of state. Leaders for both countries declared their intention to develop a friendly and cooperative relationship of peace and economic development, looking ahead but heeding the lessons of history. This view posits that China and Japan have their differences, but they also have many common interests and areas for cooperation in bilateral economic, regional, and international affairs. As a part of President Jiang’s visit, Japan announced it would provide $3.6 billion in new economic assistance to China.

The opposing view is that President Jiang harmed relations by repeatedly mentioning that Japan had not yet apologized to the Chinese people for the atrocities it committed during World War II. Jiang even tried to coerce the Japanese government to include a formal apology in the Joint Communiqué for the visit, and to proclaim publicly the "three no’s" relating to Taiwan [no independence, no support for "two Chinas, or "one China, one Taiwan," and no participation in international organizations]. President Jiang even stated at the Emperor’s banquet that Japanese militarism brought suffering to the Chinese people and Japan should forever be reminded of this historic lesson. Thus, the Japanese public, which is beginning to suffer from "apology fatigue," viewed Jiang’s visit with resentment.

Signs that relations between Japan and China are strained can be found in their weakened economic ties. Bilateral trade plummeted from $63.8 billion to $56.9 billion in 1998. Japanese direct investment in China during the first six months of 1998 declined by 28 percent from the same period in 1997. Contraction of economic ties can be partially attributable to Japan’s deepening economic recession and China’s economic slowdown. Japan’s trade and investment sectors distrust China’s economic infrastructure. Structural imbalance in China’s economic system is characterized by a lack of the rule of law and transparency, rampant corruption, pressing unemployment problems, inefficiency of the state-owned enterprises, and mounting bad loans. These problems caused the Japanese government in 1998 to revise its procedures for granting economic assistance packages to China. The past twenty-year-old practice of reviewing the packages every five or six years became a year-by-year scrutiny.

Overall, participants held strikingly different views regarding the relationship between Japan and China.

• U.S.–Japan Security Agreement. Symposium views differed as well on Japan’s role in its security agreement with the United States (the U.S.–Japan Defense Cooperation Guidelines). One view is that the greatest diplomatic challenge for Japan as it moves into the 21st century will have to do with its security policy. The United States wants Japan to share the defense burdens of promoting peace and stability in the region while Japan remains under the U.S. security umbrella. The Liberal Democratic Party (LDP) in Japan intends to enact new guidelines for the security treaty in the forthcoming ordinary session of the Diet (parliament). Despite a general agreement on to the value of the U.S.–Japan Security Agreement, the statement of the LDP Party leader in January 1999 that the periphery of the U.S.–Japan Defense Cooperation Guidelines included China and Taiwan raised concern. Concern was also expressed over the inclusion of Russian territory in the U.S.–Japan Security Agreement.

• Theater Missile Defense (TMD). Theater missile defense (TMD) generally was discussed within the larger issue of the U.S.–Japan Security Agreement. Concern was expressed over North Korea’s recent demonstration of its missile delivery capability, because of its alleged attempts to acquire nuclear weapons capabilities. The launch of the Taepo Dong-1 missile over Japan on August 31, 1998, and the discovery last year of a suspected nuclear site in North Korea represent an expanding security threat to Northeast Asia and, increasingly, to the Middle East, Europe, and even the United States. This threat is the impetus behind Japan’s new joint undertaking with the United States regarding a TMD program. Concerns expressed about this TMD program ranged from the possible offensive capability of a defensive system to the TMD’s territorial span.

• Domestic Concerns. The above concerns also influence Japan’s domestic political, social, and economic situation. It is unclear to what degree and in what ways life will change for the Japanese people, businesses, and government as a result of the forces brought into play by the economic crisis and events such as the end of the Cold War, the rise of China, a new relationship with Russia, the emergence of the United States as sole superpower, and the threat from North Korea’s missiles and nuclear progress. Participants agreed that Japan’s socioeconomic structure will change greatly, and already may shows signs of such change.

Since 1992, when the economic slump began and the "bubble" burst, Japan has suffered a huge loss of asset values—in such sectors as real estate and corporate stocks—in amounts well over 1,000 trillion yen. Its economic slide necessitated the implementation of compensatory measures by the government and business. The government instituted a Fiscal Structure Reform Law; it increased taxes; and it cut its own budget. Businesses started implementing measures that run counter to accepted practices, such as forced early retirements, staff reductions, cuts in benefits, and the widespread use of temporary hires. These measures shook the heretofore secure world of Japanese workers. The ripple effect will touch families, schools, and other sectors of Japan’s society in unpredictable ways.

Politically, the government already has had to consider making massive changes to the economic infrastructure in order to move from a government-controlled economy to a market-led economy. An example of its response is the recent establishment of the Monetary Supervising Agency, which now supervises banks’ capital adequacy ratio (4 percent for domestic lending and 8 percent for foreign lending) and has the authority to stop all banking transactions if the ratio is violated. In effect, the banking function has been removed from the purview of the powerful Ministry of Finance.

Other examples are the development of the Plan of Doubling Living Space and legislation for the Plan of Industries Reconstruction. The purpose of these plans is to dispel psychological pressure on Japanese consumers, investors, and managers that is caused by deflation. The plans, initiated in January 1999, are meant to reinvigorate the economic life of the Japanese people and raise their living standards. The fact that a government plan to double living space was even devised is a reflection of the socioeconomic pressures on the populace. More attention was needed to focus on the parameters of Japan’s political, social, and economic infrastructure changes engendered by the economic crisis and other events, both domestic and international.

• U.S. Role. Participants generally agreed regarding the importance of the U.S. role in Japan and Northeast Asia. A common view shared by all Asia-Pacific states seems to be that the U.S. security commitment is the indispensable anchor of East Asian security, insofar as it is conducive to peace and stability and prevents an arms race in the region. Virtually every country would like to see the continued presence of the United States in the region. An abrupt large-scale withdrawal of the U.S. military presence there would leave a power vacuum that could produce an intense and destabilizing competition in the region. Japan, without its security umbrella, would feel compelled to expand its military forces, which would cause an arms race in with China (and Korea as well). Even China welcomes the U.S. military presence in the region, albeit with ambivalence. Beijing, however, would strongly oppose the U.S. presence in the region if it does not prevent Japan’s militaristic tendencies or if it interferes with China’s goal of national unification with Taiwan.

The U.S.–Japan Security Agreement provides an important deterrent force in the region. However, Japan’s must facilitate security cooperation with the United States by: 1) passing an "emergency" law, so that the government can act in an emergency; 2) implementing the Security Guidelines quickly to establish cooperation in the region; 3) admitting that it has a right to collective defense (the United States should hesitate to place its trust in Japan until the current law on self-defense is changed); and 4) resolving the problem of U.S. forces in Okinawa.

The challenge for U.S. leaders in responding to the financial crisis in Japan and the region is to contain the damage so that it does not cause a round of global economic deflation and domestic instability, which would threaten regional security and confidence in U.S. leadership. Despite limits on its own fiscal capabilities, the United States is expected to demonstrate its leadership position by helping to ease the impact of the crisis on impoverished populations throughout Asia. The United States and Japan should strive to keep the new trilateral relationship with China stable. The United States should not take advantage of a rivalry between Japan and China; and Japan should pursue future-oriented relations with China.

PANEL II: CHINA

In one presenter’s view, the People’s Republic of China (PRC) is the chief beneficiary of the "new" Asia—a region free from superpower competition but in economic turmoil. The erosion of the national power coefficient in Japan, South Korea, and the Association of South-East Asian Nations (ASEAN) brought about by the economic crisis shifted the relative balance of power in China’s favor. Although China fared better than did other nations in Asia during the economic crisis (with the exception of Taiwan), opinions were mixed about the state of China’s economy.

• Health of the Economy. China’s economy is seen as strong, with good potential for continued growth. Yet, some participants warned about China’s endemic economic structural weaknesses, and alluded to an economic profile not unlike that of other Asian nations just before the economic crisis began. The China’s budget deficit–to–GDP ratio of 4 percent or 5 percent is higher than the official government estimate of 2.2 percent. Short-term foreign debt (including unauthorized debt) is perhaps $35 billion to $45 billion, compared with the government’s estimate of $18 billion. Non-paying loans are increasing and run as high as 40 percent, rather than the 25 percent reported by Beijing. The actual debt-to-service ratio (including unauthorized debt) is closer to 15 percent than the announced 11 percent.

However, China is progressing too slowly in restructuring its loss-making state-owned enterprises, repairing an overregulated agricultural sector, and effectively using the extraordinarily high level of household savings to invest in industries that are more productive. Even the positive indicator of high household savings takes on a different hue when it is noted that the Chinese people are saving more (and buying less) as a hedge against lower retirement income, government stoppage of low-cost (or no-cost) housing, and government’s authorization of a health system with increased medical costs to the individual.

Other troubling economic signs include: decreased real estate values; stagnating stock markets; faulty loans from state-owned banks (including unauthorized and "hidden" loans, and banks with a debt-to-asset ratio of 80 percent); and an overabundance of industry production capacity (larger firms are operating at less than 60 percent of capacity) and overproduction, which results in large inventories of unsaleable goods. State-owned enterprises depend on government-directed bank loans, which account for more than one-third of state-owned bank loans (state-owned enterprises lost an estimated $38 billion in the first half of 1998).

Some participants expressed positive outlooks regarding China’s economic situation. The government is moving along with economic reforms. State-owned enterprises are being closed and/or curtailed (it was reported, for example, that the non-state sector now contributes over 50 percent of gross domestic output and 70 percent of gross industrial output). The government also is pushing reform in the banking sector. Moreover, the People’s Liberation Army (PLA) claims to have divested itself of non-military business.

In analyzing China’s economy, consideration should be given to China’s economic development over the past thirty years, or at least since its march from a command or "planned" economy toward a market economy that began in 1984. It was generally agreed that China ultimately will show a 4 percent to 5 percent real GDP growth ratio for the past year (1998). China is not expected to devalue the Ren Min Bi (RMB) in the near future. A long list was presented at the symposium of the positive measures China instituted during the past year to promote exports, improve monetary policies, and improve fiscal policy.

• Reforms in the Social, Business, and Education Sectors. Government reforms have affected every sector of China’s society. But the Asian economic crisis influenced China’s domestic situation directly. The government will not move ahead on political reforms in light of such 1999 events as the 70th anniversary of the May 5th Movement and the 10th anniversary of the Tian An Men demonstrations and killings. China’s reforms and the Asian financial crisis increased unemployment and the number of "waiting" (xiagang) workers who have been laid off from state-owned enterprises. Even before the reforms, the number of floating workers was estimated at 100 million, a number still used today. The important effects of underemployment and unemployment on family and consumer insecurity were discussed.

China’s recent reforms and the Asian economic crisis exacerbated the inequality of income distribution in China. Residents on the east coast earn higher incomes than do those living in the middle and western regions. The richest 20 percent of urban families make more than four times the income of the poorest 20 percent of families. World Bank figures cited indicate that the highest 20 percent of workers account for 47.5 percent of China’s total income/consumption, while the lowest 20 percent (52 million) account for 5.5 percent. The income gap between rural and urban areas has widened since the 1980s.

December 1998 polls revealed that while over 34 percent of the Chinese people polled felt that the Asian economic crisis had not affected their lives, 60 percent felt it had. The polls revealed concern about the loss of job opportunity (38.1 percent), psychological pressure (28.7 percent), reduction of income (26.6 percent), impact on the business environment (26.7 percent), and loss of investment earnings (26.6 percent).

The information presented revealed a country in transition, with increasing pressure on the populace, government, and business to perform well. Structural reforms that result in increased unemployment and underemployment will cause further uneasiness among the Chinese people, as will changes in the government housing and medical payments systems.

• Foreign Relations. The discussion of China’s foreign relations was limited to its security and economic relations with the more powerful nations in the region, which includes the United States.

Japan: China’s relations with Japan are troubled (see Japan discussion above). The two nations are quite dependent on each other economically—China is Japan’s second largest trading partner and Japan is China’s largest trading partner. Such mutual economic dependence provides little room to maneuver in foreign relations. Japan may not like China’s unrelenting stance on Japan’s record of atrocities during World War II, but it is forced to consider the importance and vulnerability of trade, aid, and investment in China before reacting with political or economic punitive measures. Even if Japan did render a full apology, the Chinese might not accept it; Beijing may choose instead to keep Japan in a moral headlock.

Still, President Jiang Zemin’s state visit to Japan in November 1998 resulted in an agreement for stronger bilateral economic cooperation, including an agreement from Japan to maintain the level of overseas development assistance (ODA) it provided in the last three years and a $3.6 billion loan over a two-year period. The Chinese view relations with Japan as fairly favorable, but China raised concerns about what the U.S.–Japan TMD program means for China’s defense and for Taiwan. (One participant wondered why China would be so concerned about TMD if it did not plan to fire any missiles.) China has expressed its uneasiness with the parameters of the Revised U.S.–Japan Security Agreement. Overall, the generally positive relationship between China and Japan should continue to be fraught with difficulty as competition between the two increases.

Southeast Asia: Relations with India have been strained by the latter country’s recent testing of nuclear weapons. India’s nuclear ambitions, it was said, might well be driven more by the "China factor" than by concern over troubles with Pakistan. Although China and India have much in common as they move from government/bureaucratic-controlled economies toward market-oriented economies, competition will likely increase and India may feel a stronger need to balance China’s increasing power and influence in Asia. Divergent views were expressed concerning the health of their relations, especially regarding border disagreements over the "line of control" (India claims territory that is controlled by China), border incursions, and China’s military posture in Tibet. China’s alleged or actual support of Pakistan’s nuclear weapons program is a matter of serious contention in India.

Yet, India and China show renewed signs of normalizing their relations. In December 1998, India’s External Affairs Minister Jaswant Singh stated that India desired to improve relations with China based on the "five principles of peaceful coexistence" (Panchsheel) treaty. China responded through its Foreign Ministry spokesman Zhu Bangzao that the normalization of their relations was in the fundamental interest of the people of both nations.

Korea: China pursues a stable strategic environment on the Korean Peninsula. The continued separation of the Koreas would benefit its interests most, allowing Beijing to maintain and enhance its influence on issues of importance to the Koreans. The Taepo Dong-1 missile test in 1998 by the Democratic People’s Republic of Korea (DPRK) only served to accelerate the pace of TMD development in the region—which China views with concern. Today, however, China may not wield as much influence over North Korea’s Premier Kim Jong Il as it did over his father, Kim Il Sung. Yet, reports persist that Kim Jong Il will go to China in 1999 for a summit with President Jiang Zemin.

China established diplomatic relations with the Republic of Korea (ROK) in 1992. Since then, bilateral trade increased 84 percent from 1994 to 1997. South Korea has become China’s fourth largest trading partner, and China is the ROK’s third largest trading partner. ROK President Kim Dae Jung’s state visit to China in November 1998 resulted in the elevation of relations to what was called a "cooperative partnership for the 21st Century."

Relations have improved between China and Vietnam, and China’s "Diplomatic Offensive" to repair goodwill and cultivate relations with the countries of Southeast Asia and expand its economic ties was noted. China and the Philippines are not likely to collide over Mischief Reef, and China gave Indonesia assurances that it has no claim to Natuna Island.

It was pointed out that China is committed to observing the United Nations Convention on the Law of the Seas (UNCLOS). In 1992, it signed the ASEAN Declaration on the South China Sea; and in 1997, it signed the China-ASEAN Declaration, which commits China to settling the dispute over the Spratly Islands in a peaceful manner. There was disagreement regarding China’s intentions in the South China Sea, but this was not considered a serious matter requiring attention at the symposium. Yet, China has raised the prospect of greater trade with Malaysia and the possibility of supplying it with China-made weapons.

Russia: Discussion surrounding China’s relations with the Russian Federation focused on the concept of an "equal partnership aimed at cooperation in the 21st century" facilitated by the end of a Cold War’s "era of triangles" in Asia. Specific aspects of this partnership include an agreement on mutual non-targeting of missiles, non-use of nuclear weapons, confidence-building measures, and reduction of armed forces in border areas between China, Kazakstan, Kyrgyzstan, Russia, and Tajikistan. Growing economic interaction between China and Russia will augment China’s economic penetration of the Russian Far East and Central Asia.

• Relations with the United States. The discussion regarding China’s relations with the United States focused on China’s expressed uneasiness over the degree and nature of America’s forward presence in the Asia-Pacific region, the significance of the TMD program, and the revised U.S.–Japan Security Agreement. China increased its positioning of short-range ballistic missiles on its southeastern coast opposite Taiwan, a move that increased the likelihood of military tension with the United States over Taiwan. The Taiwan issue was not discussed extensively.

PANEL III: KOREA

The symposium presentations on Korea focused on the impact of the Asian economic crisis on South Korea, the security posture of the North, and the U.S. role on the Peninsula. Because of Korea’s geostrategic position, issues discussed ranged from foreign relations and the U.S.–Japan Security Agreement to TMD and how to deal with North Korea. Participants felt the need for more information on North Korea’s actual domestic situation and its military, social, political, and economic realms. Overall, participants agreed that China is increasingly less influential in North Korea.

• Economic Recovery. The government of the Republic of Korea (ROK) has taken decisive measures to snap back from the economic downturn after the crisis, which encouraged guarded optimism about South Korea’s economic recovery. The caveat is that Seoul must continue its various programs. A number of key factors precipitated the economic crisis: a foreign currency crisis; slowness of the government (as well as the business and financial sectors) to take remedial actions; overconfidence; an overheated economy (in real estate, labor, commodities, and services); and structural defects in financial institutions and industry (especially in the chaebol, the large conglomerates).

The government under Kim Dae Jung, who took office right after the economic downturn in 1997, has instituted dynamic and far-reaching measures to deal with the crisis. It is carrying out comprehensive economic reforms in banking, corporate management, labor, and the public sector. Insolvent banks were closed and the financial market opened to overseas investment. Government and large business groups are implementing a restructuring agreement reached in November 1998, which will reform corporate management, remove redundancy in investments, and promote completely transparent financial reporting practices beginning with fiscal year 1999. Government, management, and labor agreed to measures that will allow flexibility in the labor market. The Government Reorganization Committee in February 1998 announced a plan to phase out 17,612 government officials (10 percent of personnel) by the year 2000. It privatized five state-owned enterprises and twenty-one subsidiaries, and it will privatize six other state-owned enterprises by 2002.

Many participants underscored the importance of the IMF bailout deal of $57 billion (including $21 billion from the IMF, $10 billion from the World Bank, $4 billion from the Asia Development Bank [ADB], and $22 billion from seven nations). The IMF’s involvement in Korea and elsewhere was criticized as heavy handed at times. Nonetheless, participants expressed the promise of a good recovery for the South Korean economy—albeit probably not to its former dynamic level—within the next four to five years.

To a degree, some of the impact of the economic crisis and reform upon South Korean society was noted. Guaranteed lifetime employment ended. Many companies closed, downsized, or merged, throwing employees out of work. The unemployment rate (habitually below 3 percent for the past thirty years) reached an unprecedented 7.5 percent by September 1998. One estimate predicted an unemployment rate of 8 percent to 10 percent in 1999. Full employment probably will not return to South Korea, and a continuing unemployment rate of 5 percent will see many people take temporary or part-time jobs and move from job to job. Highly educated people are having trouble finding employment, creating a trend toward enrollment in vocational schools rather than universities. South Koreans are living with a great deal of uncertainty.

Political instability is of great concern. One example given was the major clash between the ruling party and the opposition following a new year’s eve break-in at the office of the National Assembly Building, which was masterminded by the opposition Grand National Party (GNP). Participants agreed on the need for political stability in order to carry out the reforms.

• North-South Relations. North Korea’s internal situraion and North-South relations were discussed. Participants deliberated on the DPRK’s militant belligerent policy and actions, and North Korea’s relations with other Asian nations. Among North Korea’s recent threatening actions are the August 1998 launch of a Taepo Dong-1 missile over Japan, construction of at least one suspected nuclear site, plutonium production at its Yongbyon and Taechon facilities, and sales of missiles and technology to other nations. In the opinion of some participants, these actions and North Korea’s dispatch of infiltrators and submarines to the South severely harmed both the Agreed Framework signed with the United States in 1994 and the Four Party Talks proposed by South Korea and the United States in 1997.

South Korean President Kim Dae Jung is attempting to improve relations with the North by promoting peace, reconciliation, and cooperation. His policies are based on three principles: showing intolerance for the North’s military provocation, making it clear that the South has no intention of "absorbing" the North, and promoting conciliatory cooperation. South Korea emphasizes the implementation of the South-North Border Agreement of 1991 and continues to stress its strong national defense posture, the ability to respond to military provocation, and the building of a solid regime for the maintenance of peace. Kim Dae Jung’s policies aim not for immediate unification, but for peaceful management of the divided territory. Many South Koreans believe that the gradual assimilation of North and South is preferable to early unification, which could bring economic havoc to both Koreas (similar to what occurred during and after the unification of East and West Germany).

South Korea’s first priority is to get through the current economic crisis successfully. It also was noted that China carries less influence over North Korea. As relations within Northeast Asia continue to shift (PRC–ROK, DPRK–Commonwealth of Independent States), China’s relations with North Korea are shifting from that of allies to a "state-to-state" focus. It was generally agreed that China and the United States should cooperate more fully on the North Korean situation and that the Four Party Talks should be pursued.

Some of North Korea’s positive moves may give rise to cautious optimism. For example, North Korea revised its constitution in the fall of 1998, which opened the doors for change. It allowed experts to travel to the United States and other countries to learn. The Hyundai-Dae Woo project earned $20 million in 1998. If these activities and the cultural exchanges can be pushed forward, an evolution may occur in the power structure in much the same way it has occurred in China. President Kim Dae Jung voiced the hope that this would lead to further cooperation between the North and South.

• U.S. Involvement. The United States should remain directly involved in South Korea’s economic recovery, defense structure, and the search for solutions to the issues raised by North Korea’s activities, including support for South Korea’s efforts to improve North-South relations, participation in the Four Party Talks, and fulfilling what is possible of its promises in the Agreed Framework.

PANEL IV: SOUTHEAST ASIA

The discussion regarding Southeast Asia focused on Indonesia—its current situation and its prospects for the future. Other aspects of the region, including the policies and strategies of other nations in or involved in Southeast Asia, were discussed briefly.

• Economic Recovery. Indonesia’s future prospects were viewed with some pessimism. The collapse of the Thai currency created "an economic tsunami" that engulfed an already weak Indonesian economy, which in turn led to massive protests and uprisings against President Suharto’s military-run regime. In May 1998 rioting in Jakarta, military forces lost control and over 1,000 people lost their lives. Suharto was ousted from power, though there was no civil war.

The problems in Indonesia today, with its economy in such distress, are causing almost unbearable pain for millions of urban poor and the swelling of the ranks of dispossessed, discontented, and disenchanted. Hundreds of thousands of families are facing malnutrition and disease without access to medicine, the inability to continue schooling their children, and the loss of jobs with the resultant loss of income and dignity. With the legitimacy of B. J. Habibie’s presidency questioned, the image of the military tarnished, the ruling party (GOLKAR) morally and intellectually bankruptcy, and the bureaucracy demoralized, few symposium participants expressed surprise that the situation in Indonesia is deteriorating.

In 1998, Indonesia’s GDP shrank 15 percent, inflation hit 80 percent, and unemployment skyrocketed. Between 20 million and 50 million people are believed to have fallen below the poverty line. Corruption, collusion, and nepotism, popularly abbreviated as KKN, have created a high-cost economy. The protection of certain business groups (associated with the Suharto power complex of family, favorites, and cronies) caused a misallocation of resources and overcapacity of production in a number of industrial sectors. Rampant imprudent and illegal banking practices resulted in bad debts in the hundreds of trillions of rupiah. The environment infested with KKN enabled Suharto and others to influence bankers to provide credits (loans) for non-viable projects of their relatives and cronies. Analysts estimate that 60 percent to 70 percent of Indonesia’s bank assets (Rp700 trillion to Rp800 trillion in the form of credit) is buried in non-performing loans.

Reform, greatly needed in the banking sector, is necessary in the business sector as well. Anti-monopoly measures should address, for example, the Indofood Corporation, which controls 70 percent to 80 percent of the wheat flour market and 90 percent of the instant noodle market in a nation of 220 million people. The Salim family, a Suharto crony, controls it. The Sinar group, another monopoly, controls about 70 percent of the domestic market for paper even after exporting over half of its output.

President Habibie’s must turn around the economy and revive economic activity while ensuring a smooth and peaceful transition of power. He is hampered by his government’s lack of legitimacy in the eyes of various Indonesians. The government introduced new policies with a strong political agenda that interfere with overall economic stabilization and recovery programs.

• The IMF’s Role. Throughout the symposium, the role of the International Monetary Fund in the economic crisis was criticized. In Indonesia’s case, it was said that IMF’s solutions "didn’t kill the patient, but the patient is nearly dead," since the IMF had prescribed "the right medicine for the wrong patient." The negotiations between the IMF and the Suharto government occurred during the crisis, when the country was in dire need of assistance; the government accepted a host of unrealistic conditions. Political dimensions were not considered. With no social security safety net in place, the people of Indonesia suspected that IMF activities, controlled by the United States with European collusion, were aimed at causing trouble in Indonesia. One view was that the IMF acted in Southeast Asia in ways that helped New York "big business."

• Upcoming Elections. The future for Indonesia is uncertain. General elections are scheduled for June 7, and presidential elections for November 10, 1999. Widespread unrest, tensions between the rich and poor and between pribumi (native sons) and non-pribumi, and religious differences between Muslims and Christians dominate Indonesian politics. The role of the Indonesian military (the ABRI) in the elections will have repercussions in the overall political debate now taking place. It is unclear what will happen after electoral laws are passed and the process for electing the legislature and the president is in place.

Given the current organization and financing of the ruling party (GOLKAR), it is expected to win a majority of seats in the June election. GOLKAR has organizational links throughout Indonesia, while the other major contesting parties—Megawati Sukarnoputri’s Indonesian Democratic Party (PDI), Amien Rais’ National Awakening Party (NAP), and Edi Sudarjati’s Justice Party—are reported to be focusing on Java.

General Wiranto, the Commander of the Armed Forces, made assurances that the army will maintain strict impartiality in the election process. Participants voiced doubts that the army could live up to this promise without intensive retraining and reversal of an ingrained mindset. The army has logged more than 30 years of continuous military support for GOLKAR and was a highly effective vehicle for Suharto’s efforts to maintain and sustain power. Many Indonesians are skeptical that the elections will be held. Formidable power still resides with deposed Suharto loyalists, who could create trouble during the elections. There have been allegations that at least some elements of the military are already inciting religious and ethnic conflicts to foment the unrest as a convenient pretext for reimposing stringent authoritarian control.

Three possible scenarios regarding Indonesia’s elections were tabled. The first: The elections in June will result in a coalition cabinet under Habibie or with a new president from the opposition coalition. This scenario could involve rule by a triumvirate that includes Habibie and opposition party leaders or candidates. The second scenario: Social unrest escalate into such violence that the military is compelled to demand emergency powers and postpone or cancel the elections. The third scenario: Social strife and violence will be of such magnitude that responding to them is beyond the capability and resources of the military, which may become embroiled in divisive factionalism. Central authority would be fractured.

There was concern over the possible "balkanization" of the Republic of Indonesia. Participants pointed to the importance of Indonesia’s geographic position atop vital sea lanes of communication (SLOCs); its proximity to Singapore, Malaysia, the Philippines, Brunei, and Australia; and the fact that, by 2040, Indonesia will have a population that is 30 percent to 40 percent larger than the population of the United States. Balkanization of Indonesia, with its accompanying chaos in a region of 13,700 islands that stretch across 3,000 miles, could reverberate throughout lower Southeast Asia and Australia.

Views on Indonesia’s future ranges from pessimism to cautious optimism, based on a host of "ifs." If Habibie manages well, Indonesia will struggle through the elections and muddle through its crises. If he does not, the likelihood of any form of cohesive and effective political coalition after the elections appears slim. It would lead to a kind of "Burmese disease"—military rule with economic and political stagnation. At worst, the second and third scenarios above could prove permanently destructive to Indonesia.

• U.S. Role in Indonesia’s Future. The United States should focus on the critical importance of unity and cohesiveness in Indonesia to the stability of Southeast Asia as a whole. The United States urgently needs to initiate sensible and constructive policies toward Indonesia, rather than merely echoing the trendy economic rationalism of the IMF and the U.S. Department of Treasury. One suggestion was that the United States should develop a sort of Marshall Plan for Indonesia. But the United States would need to take the lead to implement such a plan soon; Indonesia is already teetering on the brink of collapse.

• Greater Southeast Asia. Symposium proceedings on greater Southeast Asia, beyond Indonesia, addressed strategic and economic issues. For additional information on the future of Southeast Asia, see the sections on China, Japan, and India.

Security: The Asian financial crisis reinforced the centrality of economics in the security equation in Southeast Asia. Easy money in the financial sector, overcapacity of production, uncoordinated monetary policies, and euphoric lending which collapsed into panic withdrawals at the first sign of the crisis all contributed to the crisis in Southeast Asia. Initially, the crisis was purely economic in nature, but it quickly adversely affected the political and social fabric of the countries in the region.

The economic crisis affected the balance of power in Southeast Asia by forcing countries in the region to cut defense budgets and postpone arms modernization programs. Two key questions raised in this regard were: What will happen if economic growth in Indonesia, and to a lesser extent Malaysia, continues to be impacted negatively by political and social problems? If Southeast Asia is unable to overcome the impact of the economic crisis in the next few years, how will ASEAN and other multilateral structures in the region be affected?

The effect of the economic crisis on the security of Southeast Asia was viewed in terms of reduced national forces and capabilities; diversion of attention and energy from regional to more pressing national economic problems; decreased effectiveness of the regional multilateral organizations; and increased domestic political and social turmoil.

Economic Recovery: Indonesia’s future course may be the linchpin in Southeast Asia’s near- to mid-term future development. The region is showing signs that it is headed for recovery, although these signs are somewhat fragile and uneven among the different countries. Some signs of favorable change include: the declining global interest rates; improvements in foreign reserves; implementation of fiscal and banking measures; improved attitudes in dealing with the economic crisis; and a clearer perception of the measures needed to address weaknesses in the global financial environment. Malaysia, whose problems still need to be sorted out, is showing signs of economic recovery. If the current trend continues in Thailand, it will achieve positive growth in the second half of 1999. Singapore, which was not hit as severely by the crisis, is showing signs of greater economic health.

Observers estimate that Indonesia could enter a recovery period of three years, although the less optimistic do not see how recovery is possible so long as the political situation remains fragile and unpredictable. The basic viability of security in Southeast Asia rests upon the region’s ability to snap back from the economic crisis.

• U.S. Policy in Southeast Asia. U.S. interests at stake in Southeast Asia include: maintaining global power; past sacrifices in blood and money; stabilizing markets; economic interactions; sea lanes and air lanes of communication for the United States and its allies; and its role in shaping the future. The direct goals of the United States include: preventing rivalries and hegemonies; promoting stability; encouraging prosperity; ensuring U.S. access to the region; encouraging infrastructure development; and balancing the role of a modernized China in the region.

The identification of these interests and goals led participants to discuss strategy and policy considerations. In general, the United States should continue to support multilateral arrangements and provide economic help to the region. It should work to preempt or prevent a crisis, rather than wait until a crisis occurs to react. Policy makers in Washington should stop weighing the strategic significance of events in Cold War terms. For example, South Korea received quick and significant assistance because it faced a communist North armed with nuclear weapons. Indonesia did not receive quick and significant assistance because Indonesia is no longer useful to the United States as a bastion against communism. The United States can do better in its policy responses to events such as the Asian economic crisis that have the potential to destabilize whole regions.

PANEL V: INDIA

Symposium participants generally agreed that the Asian financial crisis had minimal effect on the quality of life, business environment, and support of government in India.

• Economic Stability. India’s economy continues to show a reasonable degree of stability despite the crash in financial markets in East Asia. The sharp devaluation of East Asian currencies did not have a significant impact on India’s exports, since only 7 percent of India’s total exports were directed to the affected East Asian countries. India will see a continuing healthy GDP growth of more than 5 percent and a level inflation rate of about 5 percent. Foreign currency assets increased from $22.4 billion in 1997 to $26 billion in 1998.

India is transitioning to a more market-oriented, outward-looking economic strategy. It is becoming strategically more relevant to ASEAN. In time, India will act as a counterweight to the other major powers in Southeast Asia, especially China and Japan. India’s move towards greater marketization and free enterprise will have significant consequences for international trade and investment. India will likely assume a much higher regional and global posture by the early part of the 21st century.

• Nuclear Proliferation and Security. The nuclear blasts in both India and Pakistan in May 1998 placed a new face on South Asia’s security situation. On May 26, 1998, the World Bank postponed consideration of a $130 million package to support India’s renewable energy program, a $450 million loan to develop a national power grid and transmission company, and a $275 million loan for highway improvement, among other smaller loans. Japan, India’s largest bilateral aid donor, called off a meeting of donor states after the nuclear tests. A Joint Communiqué issued in Geneva by China, France, Russia, the United Kingdom, and the United States on June 4, 1998, expressed deep concern that the nuclear tests endangered peace and stability in the region. India and Pakistan were asked to adhere to the Comprehensive Test Ban Treaty (CTBT). Both the United Nations and the United States Senate passed resolutions (UN RES 1172, June 12, 1998; U.S. SEN RES 227, May 12, 1998) condemning the nuclear tests. A G-8 communiqué condemning the tests called for the two states to comply with existing nuclear regimes. The United States and some of its allies placed economic sanctions on India and Pakistan in June 1998. U.S. sanctions also froze loans from the IMF, the World Bank, and the Asian Development Bank.

Following India’s test, India’s Defense Minister George Fernandes was quoted as saying that China posed the main threat to its security. Chinese President Jiang Zemin expressed surprise that India had tested the weapons and China was cited as a reason for conducting the tests. China’s ambassador to India, Zhou Gang, said there is "no conflict of fundamental interests between them." An agreement concerning the Indian-Chinese border was signed in 1993, and their borders have been peaceful. President Jiang went to Delhi on a state visit in 1996. The two countries had established a framework by which they could carry on discussions called the India-China Joint Working Group and an India-China Expert Group.

China consistently denies that it supplied Pakistan or any state with equipment or technology that could be used to make nuclear weapons. The United States disagrees with that stance, and claims China has supplied missile technology and missiles to Pakistan. Participants generally accepted that one of the main motives for India’s development of a nuclear weapons program was the perceived threat from China. India continues to be suspicious of U.S. policy toward China. The United States does not include the "China factor" in the context of disarmament; India feels any discussion of disarmament must involve China. India’s justification for its nuclear testing, and for becoming a de facto nuclear weapons state, rests upon its claims of sovereignty and its non-acceptance of a discriminatory non-proliferation regime imposed by the five declared nuclear states. India’s strategic thinkers perceive Pakistan, with whom it shares a border, a secondary but significant concern.

On the nuclear threat, participants’ views ranged from the perception that, as the Cold War experience revealed, nuclear weapons are "unusable" except as a threatening deterrent to the view that nuclear weapons are indeed usable. Those with practical experience in nuclear weapons operations expressed concern about nuclear safety, citing the extreme difficulties and dangers inherent in the mere possession of nuclear weapons.

There was also disagreement regarding India’s prior development of nuclear weapons. One view stated that the detonation in India in 1974 was an experimental nuclear energy test, not a weapons test. Another view insisted that India conducted its first nuclear weapons test in 1974 in Pokharan. In any case, India showed signs during the 1970s and 1980s that it was developing a nuclear weapons capability; therefore, India’s 1998 test should not have come as a surprise. There was concern that certain elements of India’s political right wing would like India to match China’s nuclear arms holdings. Pakistan has not ruled out first use, which tends to lower the nuclear threshold dangerously. In the end, the view prevailed that India’s acquisition of a nuclear weapons capability was not motivated by a perception of threat from the United States. India merely responded to perceived threats from China, then Pakistan.

A Southeast Asia view expressed at the symposium was that if India (or Pakistan) only offers nuclear weapons and democracy to Southeast Asia, then it is not enough. Southeast Asia needs to know how government and money can increase the people’s well-being and reduce the gap between the rich and the poor.

The possibility for India’s technological cooperation with Southeast Asian states exists in the military and civilian sectors. This could serve as an alternative for, and an additional source of, purchases of sophisticated military technology and equipment for defense establishments in Southeast Asia. The growing importance of the Indian naval presence in the region carries the prospect of strategic positioning in the Indian Ocean and Southeast Asian waters. Such strategic positioning and the development of naval facilities in the Andaman and Nicobar Islands archipelago are designed to protect and promote the commercial, maritime, and security interests of this rising Asian power in the next millennium.

• U.S. Role in South Asian Security. India is the key factor in South Asian security, given its territorial size, economic potential, democratic government, relations with key neighbors such as China and Pakistan, military power projection capabilities, leadership role, and its newly acquired status as a nuclear power. The United States can play a positive role in facilitating confidence-building measures between India and Pakistan on nuclear non-proliferation. Concrete tradeoffs, such as the lifting of sanctions, could promote the greater goal of nuclear peace in the region. The United States also could facilitate such initiatives as technical cooperation between nuclear participants; creation of a joint committee on nuclear policy; creation of international incentives for nuclear rivals; prevention of deployment of nuclear weapons; and enactment of measures to resolve national security issues between India and Pakistan.

In attempting to play a constructive role in South Asian security, the United States needs to be cognizant of India’s security perceptions and strategies. India perceives: 1) major external threats from China and Pakistan (essentially of a military nature), and from a U.S.-led group of Western industrial nations (essentially of a political/diplomatic nature); and 2) major internal threats, including ethnic separatist movements and rebellions that facilitate support or intervention from China, Pakistan, and the West. With the successful nuclear tests, the politics of self-esteem have been settled between India and Pakistan, as well as between India and the other major nuclear powers. The time for serious negotiations in the context of the Nuclear Non-Proliferation Treaty (NPT) and CTBT regimes has arrived. In this regard, the United States, more than any other major power, is uniquely positioned by its traditional relationships and historical contacts with both India and Pakistan to accelerate the pace of nuclear disarmament in the region.

The continued strategic dominance of the United States is a major feature of regional security in South Asia (and in Southeast and Northeast Asia) at the turn of the 21st century. But a necessary requirement for the success of U.S. engagement policy in South Asia is that the United States begins to accept India as a de facto nuclear weapons state.

PANEL VI: A LOOK TO THE FUTURE

There were reminders throughout the symposium proceedings that, in past years, strategists, politicians, academicians, consultants, advisors, analysts, and pundits fell far short in envisioning the future—be it was the collapse of the Soviet Union, the fall of the Berlin Wall, the Gulf War, the Asian economic crisis, the precipitous fall of Suharto, the nuclear weapons tests by India and Pakistan, North Korea’s missile launch, or any other occurrence. Moreover, predictions that Asia would continue its phenomenal economic surge, "outstrip the West," or become the world’s center of economic gravity failed to materialize.

There was general agreement that the United States must remain strategically engaged in the Asia-Pacific region. It should continue its forward-deployed presence. Symposium participants found the suggestion that the United States examine alternative strategic futures appealing. Other views opined that over time, it may be possible and desirable for the United States to reduce or remove its ground forces from Japan and South Korea, leaving only technical personnel with regular joint exercises and bases kept in readiness. The future lies in rapid deployment. The credibility of the U.S. commitment (at that point in the future) will not necessarily be weakened by increased emphasis on this strategy.

As Korea moves toward unification, the security issue will be reexamined. A tendency may emerge to draw back U.S. forces in Korea, perhaps even in Japan (in keeping with the "three Rs" strategy of regular joint exercises, ready bases, and rapid deployment). For the present and near- to mid-term future, it is essential that the balance of power be maintained. The United States should retain bilateral security ties with Japan and the Republic of Korea, as well as its security agreements with select Southeast Asian nations and Australia––as the recent U.S. Defense Department policy review stipulated.

To pursue a concert of powers and a balance of power simultaneously is not unrealistic, as some critics assert. These two strategies already exist side by side. As the 21st century opens, the prospect for peace among nations in the Asia-Pacific region is much stronger than it was at the outset of the 20th century. Violence will occur, but the likelihood is greater that it will be domestic and, in some cases, perpetrated by individuals or by small groups of terrorists. Failing states will be a problem, and without the proper mechanisms to respond already in place, the regionalization of domestic conflicts remains a risk. Yet, on balance, the Asia-Pacific scene warrants cautious optimism.

The basic ingredients for the continued rise of Asia are present throughout the region: governments that are committed to rapid growth and, through experiment, to discovering appropriate strategies; an increasingly educated citizenry; and the enhanced capacity to acquire advanced technology and capital through the process of globalization. For some nations, resources will be an increasing problem, but the greater application of science and technology and the use of multiple sources of energy should make their problems manageable, at least through mid-century.

Asian security planners should consider that the United States will seek to respond to armed conflicts in the most domestically acceptable way—in other words, with air power and sea power. Americans expect fewer casualties from air (and/or missile) strikes than from the deployment of ground troops. Unfortunately, in the likely East Asian scenarios—such as in Korea and Taiwan—a ground force response will be necessary to restore the status quo. Strategists must consider the degree of American popular support for scenarios that involve the likelihood or even the possibility of significant casualties. One example of a low level of support was Henry Kissinger’s harsh criticism of the Clinton administration’s decision to earmark 4,000 troops for possible deployment in a NATO peacekeeping force in Kosovo.

The dilemma for future strategists is clear: Economic sanctions may punish people, but not their leaders (such as Saddam Hussein or Slobodan Milosevic). If force is used, Americans are likely to tolerate only a "quickly in, quickly out" scenario, using the most modern weaponry that rely primarily on air and sea power and risking minimal American causalities. An overwhelming number of Americans believe the era of employing large-scale U.S. ground forces to win a war is over. Any conflict with a major state—which is unlikely—that involves a transcontinental war will see cities and civilians as the primary targets, and the possibility of indecisive results will bring exhausted nations crawling towards a settlement.

A NORTHEAST ASIA PERSPECTIVE

The future of Northeast Asia will continue to challenge security planners and forces. Chances are slim for the development of a regional multilateral security organization (a "Northeast Asia Security Organization," a military alliance like NATO, or an economic/political alliance like ASEAN). Northeast Asia will continue to exhibit a bilateral framework for political, economic, diplomatic, and military intervention. Moreover, Northeast Asia in the near- to mid-term will continue to be the seat of worrisome situations and developments, primarily from North Korea’s belligerency, but also due to the possibility of open warfare, a continuing economic crisis, the possibility of fragmenting and failing states, and belligerent nationalism. There are possibilities for ideological, cultural, ethnic, and territorial clashes; all forms of transnational activities (terrorism using guns and bombs; biological or chemical attacks; interracial fighting; illegal drug activities; piracy; smuggling; illegal weapons dealing; intellectual rights violations; human rights violations; and international finance and banking violations); and other destabilizing activities. Still, the collective view was one of cautious optimism for general security in Northeast Asia in the near- to mid-term.

• Japan. Japan will eventually pull out of its economic nosedive and return to pre-crisis social and economic levels within four or five years. A caveat was that Japan will have to make massive structural changes in its social, political, and economic spheres soon. Concern was expressed that a fast-rising sense of strident nationalism could derail structural changes and lend momentum to the drive to give Japan complete equality with others nations in the strategic realm.

Japan is at a crossroads, and major readjustments will have to be made in domestic, foreign, and defense policy. The "greying" of Japanese society raises questions about its future workforce. By 2015, approximately one-fourth of the Japanese population will be 65 years of age or older. Will Japan have to rely on overseas-based operations or increased numbers of migrant workers, or both? Japan’s failure to resolve the issue of overseas atrocities against many Asian nations during the war in Asia (1931–1945) and even before (in Korea from to 1910–1945) was raised. It was opined that when Japan takes the necessary initiatives to grapple with the past, and China, Korea, and others in the region recognize that Japan has changed, then Japan will have an historic opportunity to contribute to the well-being of the region.

• China. China very likely will become a major power in the future, but one with major problems. Alarms were sounded over the possibility that the economic crisis could hit China. The Chinese economy is dominated by large state-owned enterprises that are far more indebted and less competitive than Korea’s chaebols (large business conglomerates) ever were, and its banking system is in worse shape than any in Asia. Participants stressed the significant risk of collapse cannot be ignored. Participants were asked to think about the alarming results, domestically and abroad, that could accompany a collapse of China’s economy. In China’s case, there is significant cause for some optimism, but other governments and the strategic analysts who advise them cannot assume things will turn out well. The need to prepare for plausible alternative scenarios is clear.

Those who argued against a possible spread of the Asian economic crisis to China cited such evidence as: China had not devalued its currency; it has had large foreign exchange reserves and successive trade surpluses since 1994; it has a relatively small foreign debt, and because of the inconvertibility of the Ren Min Bi, China’s banks and financial markets have been kept apart from world markets, thereby buffering China’s economy.

Premier Zhu Rongji appears to have the needed political backing to press ahead with reforms in the foreign policy and security areas. The degree to which the People’s Liberation Army (PLA)—China’s Army, Navy, and Air Force—will carry out the reforms is uncertain. China has played, and on balance probably will continue to play, an increasingly active and involved role both in the region and globally. It will continue to voice its support for the CTBT and to play a role in the Asia-Pacific Economic Cooperation (APEC) forum, the ASEAN Regional Forum (ARF), and to a point (as far as one can tell) in the Four Party Talks with Korea.

China will continue to be concerned about a U.S. forward presence in East Asia, the U.S. and Japan roles in theater missile defense (TMD), and the U.S.–Japan Security Agreement. China will continue to demand a "three no’s" policy regarding Taiwan. And it cannot be expected to change its policy that it will use armed force if Taiwan pushes for independence. China may have some residual sense of commitment to North Korea, particularly within the higher echelons of the PLA, but ideological ties will continue to erode. Beijing increasingly finds the DPRK to be a burden, and there seems to be little warmth between top leaders of the two countries. Doubt was expressed that Kim Jong Il of North Korea will indeed go to China for a summit with President Jiang Zemin this year.

• South Korea. The reunification of the Koreas is still years away. South Korea (ROK) has taken pragmatic steps to restructure the country’s society, politics, and economy. It was generally thought that the South Korean economy will recover, but it will need time, and it probably will not recover to its pre-crisis level. The situation on the Peninsula should be stable during the period that the South needs to recover. Exchange of trade and personnel between the North and South will expand, which should contribute to the gradual unification of the two Koreas. It is difficult to predict what will happen in Peninsula relations after South Korea’s economic recovery. South Korea will continue to promote economic cooperation with the North under the principle of keeping economic matters separate from politics. Future South-North talks will seek ways to implement the 1991 Basic Agreement. The Four Party Talks will address the peace regime on the peninsula. In any case, South Korea will increasingly move toward internationalism and continue to emphasize a combined defense with its allies as well as advocate a security forum for Northeast Asia.

• Russia. It may take Russia the better part of a decade to find the appropriate political and economic means for advancement; however, there is the potential for authoritarianism to reassert itself, albeit not of the old Communist variety. The point was made that the West should have done better in helping Russia when the Soviet Union collapsed; Americans might live to rue the day they did not help Russians more. Eventually, Russia will resume its development, and that will lead to a more active role in Northeast Asia. Russia views Japan as one of the most important centers in the multipolar world of the next millennium. Talks in Moscow in November 1998 between Russian President Boris Yeltsin and Japanese Prime Minister Keizo Obuchi portend increasing progress toward settling territorial disputes (such as in the Northern Territories and South Kuril Islands) and signing a large-scale Peace, Friendship and Cooperation Treaty.

Special handling must be given to China, a huge nation bordering a sparsely populated Russian Far East. Russia and China reconfirmed their commitment to develop close links in the energy sector, focusing on the Kovytka natural gas field near Irkutsk, as well as a pipeline project. Russia plans to build a nuclear power plant in China. The Russian Federation considers China to be a huge market for Russian high-tech products, including advanced military equipment. It was pointed out that, in this rare moment of history, major powers in Northeast Asia are free from open regional rivalry and military confrontation despite certain conflicts of interest. As a result, Russian diplomacy will become increasingly Asia-Pacific and trade-and-investment oriented. Additional views regarding Russia’s future role in Asia can be found throughout this report.

A SOUTHEAST ASIAN PERSPECTIVE

There was cautious optimism on the future of Southeast Asia and the recovery of Thailand, Malaysia, Singapore, and even Indonesia over time. Hope was expressed that the United States would restore its leadership role in Southeast Asia and take the lead in creating regulatory structures to ensure sound banking and finance infrastructures in the region. Several participants expressed the view that the United States should consider some sort of emergency bailout package (similar to the Marshall Plan) for Southeast Asia.

In general, the region welcomes the U.S. military presence. Thailand appreciates the U.S. F-18 agreement. But future Southeast Asia policy cooperation with the United States should not be seen as a blank check. ASEAN cannot be expected as a whole to go along with U.S. policies; some members may do so, while others have to consider domestic factors. There will be frequent quiet cooperation within their domestic constraints.

The ASEAN summit in Hanoi in November 1998 demonstrated the will to keep the forum together. ASEAN may have to become more inward looking, at least temporarily, because members will be concerned about maintaining internal stability and national unity. Indications of ASEAN’s future health and well-being are demonstrated by its commitment, even during such serious economic crises, to 1) the ASEAN Free Trade Agreement (AFTA), by advancing its implementation date from 2003 to 2002; 2) the ASEAN Investment Area, by moving the date forward to the year 2003 from 2010; and 3) encouraging members to relax their foreign investment regulations. From a Southeast Asian perspective, "ASEAN unity" remains intact, even though personal relations among the ASEAN countries that consolidated unity in the past could be affected by leadership changes in ASEAN member countries.

There is strategic uncertainty in Southeast Asia with the bilateral territorial disputes, such as the disputes between some of the Southeast Asia states and China over the Spratly Islands in the South China Sea. Domestic insecurity could lead to intra-regional insecurity; and troubles in Indonesia could easily affect its neighbors. Low-intensity conflict arising from tensions over the Spratly Islands or navigation rights and overflight rights may occur. But there are no signs so far of such developments in the immediate two to three years.

A SOUTH ASIAN PERSPECTIVE

India will assume a much higher regional and global posture by the early part of the 21st century, and South Asia may hold the highest risk of major conflict. Disputes, such as the dispute between India and Pakistan over Kashmir, divide large states. Present and future alignments—such as Russia’s recommitment to India, and China’s close ties with Pakistan—will further complicate the South Asian scene. Although the prospects for an advancing India are reasonably strong, for various reasons Pakistan and Afghanistan present long-continuing problems. The question was raised as to whether or not the small Himalayan states would be able to continue to act as a buffer of sorts between India and China.

India will continue to push for a permanent seat on the U.N. Security Council. Future U.S. engagement policies with India will have to take into account that India is now a de facto nuclear weapons state. India’s participation in the ASEAN Regional Forum (ARF) since 1996 is recognition of the growing economic power and political influence of South Asia in Asian politics. China’s strategic links to Myanmar are a matter of growing concern. The persistence of low-intensity violence—as in Afghanistan, Sri Lanka, and Kashmir—reflect the existence of flash points, though minor ones at present, that could gain potency in combination with the exacerbation of economic, ideological, ethnic, and religious factors.

Strategic considerations are likely to push India and Pakistan to reduce bilateral tensions after the recent nuclear tests. Such considerations include the political and economic bankruptcy of a continuing stalemate; the end of nuclear-related suspicions (now that they both have nuclear weapons capability); the need for movement on the Kashmir issue; and the futility of military conflict in South Asia (demonstrated in 1948 and 1965 over Jammu and Kashmir, in 1971 over East Pakistan, and in border wars with China).

Just before the symposium opened, Indian Prime Minister Atal Bihari Vajpayee made a significant diplomatic move to consolidate dialogue with Pakistan by accepting an invitation from Pakistan’s Prime Minister, Nawaz Sharif, to make a historic crossing into Pakistan on February 20, 1999. It was suggested that there is sufficient evidence to conclude that the post-Cold War strategic relationships among the major powers in the Asia-Pacific region—the United States, China, Russia, India, and Japan—are characterized by basic stability. Elements of change should be governed more by economics than geopolitical considerations—a factor increasingly relevant to Indo-Pakistani relations, as well as to U.S. policy in South Asia in the 21st century.

THE FUTURE U.S. ROLE IN THE ASIA-PACIFIC REGION

Symposium sentiment was clear that the United States must remain engaged strategically in the Asia-Pacific region, and continue its military presence by keeping forces forward deployed. The United States also must cease allocating economic support to countries in the region based on Cold War strategic values. It must refine the process for assessing the strategic significance of events and deciding the weight to be given policy and economic responses to pivotal episodes, such as the current economic crisis, that will determine the strategic and political future of Asia.

• U.S.-Japan Security Agreement. The Asian financial crisis highlighted the necessity for a sustained U.S. security presence in East Asia, both to protect against the renewal of old tensions and to respond to the potential outbreak of new sources of instability. The first task of importance is to make the U.S.–Japan Security Agreement both reliable and workable. Japan’s basic security strategy to protect the country is based on a deterrent force provided through its military alliance with the United States. The United States should continue to provide this security umbrella for Japan, balance the power in Asia, and work to prevent the proliferation of weapons of mass destruction. It also should continue its support for regional cooperation mechanisms, such as the Asia-Pacific Economic Cooperation (APEC) forum and the ASEAN Regional Forum (ARF).

• A Trilateral Relationship with Japan and Korea. A future goal of the United States should be to stabilize the U.S.–Japan–ROK trilateral relationship. The United States should reassess the use of forward-deployed forces in Korea as reunification unfolds on the Peninsula. Reapportionment of forward-deployed forces in Japan also may be necessary.

• Theater Missile Defense. The United States will need to find a way to allay the fears and suspicions of China and Russia regarding theater missile defense (TMD) and a revised U.S.–Japan Security Agreement. In relations with China, the United States will have to resolve the issue of Taiwan as it relates to TMD and the security agreement with Japan.

• Improving Relations with China. The United States should make clear to China the benefits it derives from a U.S.-Japan alliance—which is the key strategic alignment in the region. It was suggested that in this less ideologically driven post-Cold War era, it is even more important that U.S. decision makers make policy based on a good understanding of the situations with which they will be dealing. That understanding must be informed by a knowledge of the historical and cultural sensitivities of other players, such as China, as well as an appreciation of U.S. interests. For the most part, the assessments and strategies articulated in the latest U.S. Department of Defense East Asia Strategic Report (EASR98) are positive, and confirm the continuing engagement of the United States in the Asia-Pacific region as well as the commitment to engage constructively and comprehensively with key players, such as Japan, China, South Korea, and Russia. The importance of the U.S.-Australia alliance also was acknowledged.

• Korean Peninsula Relations. With the full consent of South Korea, a peace treaty should be concluded between the United States and North Korea separate from a non-aggression treaty between North and South Korea. The United States should promote food support to North Koreans in the coming years.

• U.S. Global Policing Role. In assessing the strategic implications of the Asian economic crisis, security planners cannot rely on assurances from the Pentagon, however sincere, that the United States will continue to maintain 100,000 troops in East Asia in the near future. Alternative scenarios need to be considered. A deepening of Asia’s economic crisis would accelerate anti-American sentiment, which has been exacerbated by events over the past two years. As grateful as the world should be for the U.S. global policing role, no one should expect this role to be carried out perfectly. Regional nations will have to provide, and should be encouraged and assisted to provide, for their own self-reliant defense.

In addition to the general comments throughout this symposium regarding the U.S. role in Asia, it was suggested that, in addition to dealing with the nuclear issue in South Asia, the United States could explore the role of mediator in the highly sensitive Kashmir conflict. India is in the process of a major economic transformation from strong government and bureaucratic controls to market-oriented reforms. India’s former pro-Soviet and non-aligned stance in foreign and security policies will be influenced by its need to balance the rising power and influence of China in Asia and Myanmar; its greater engagement, both politically and economically, with Northeast and Southeast Asia; the challenges presented by the CTBT and NPT; and other related dealings with the United States and nuclear-capable countries.

The United States can facilitate how it addresses critical issues in the region by staying in the power construct through forward engagement of its military forces through 2005. It should push for multilateral engagement at the operational and tactical levels of military activity. In addition, it was suggested that the United States must strengthen its ability to deal with transnational issues (such as energy, migrations, food, water) and to enlarge its multilateral activities.

Finally, symposium participants agreed on a number of larger issues facing the United States and the Asian nations in the future:

The tendency to blend or mix what is meant by "security." To what degree, for example, are territorial conflicts, migration, and the environment security issues?¹

The need to participate in and build institutions in Asia in an effort that goes beyond mere multilateralism.

The usefulness of a "concert of power" to solve problems and leave something behind.

The need to examine and restructure U.S. military forward deployment in the Asia-Pacific region, and the importance of involving states in that region in in-depth discussions to determine what "forward deployment" should mean.

The need to pay more attention to the U.S.-Japan relationship. Rather than overplay the seriousness of current Sino-Japanese relations, more attention should be given to evaluating how the United States and Japan have managed this relationship so far.

The usefulness of "hedging" on the one hand to "engage" and "invite in," and on the other hand the need to "keep our powder dry." U.S. interests should not be put at risk unnecessarily.

The symposium concluded with the suggestion that a broad reevaluation of the future role of the United States in the Asia-Pacific region and its policies around the world is required.

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