Democracy and Development: The East Asian Experience by Richard Saludo In October 1996, 15 months after lifting the house arrest of Nobel Peace Prize winner Daw Aung San Suu Kyi, Myanmar's (Burma's) ruling junta, the State Law and Order Restoration Council (SLORC), cracked down on dissidents, barricading Suu Kyi's house and arresting hundreds of her supporters. The SLORC's action galvanized advocates of Myanmar democracy abroad, particularly in the U.S., and put the Association of Southeast Asian Nations (ASEAN) on the spot. ASEAN had gained some credit for Suu Kyi's release in July 1995, but the SLORC's iron fist gave ammunition to critics of the organization's policy of coaxing Myanmar toward change by quiet persuasion and cordial dialogue rather than by sanctions and confrontation. ASEAN's Myanmar quandary again threw into sharp focus the intertwined and entrenched issues in Asian democracy and development: Can economic pressure prod despots to liberalize? Should prosperity come before political rights? The remarkable success of the East Asian economies has occurred in countries under one-person or one-party rule, including Japan, governed almost continuously by the Liberal-Democratic Party for 41 years. Rather than immediately working to establish democracy, the region's winning formula has called for economic acceleration with one person in the driver's seat. Indeed, in the 1960s and 1970s, after a decade or so of trying to stay on the democratic path set by their former foreign colonial rulers, one Asian nation after another became autocratic. The East Asian Miracle, a much-quoted World Bank report on Japan and the newly industrialized economies, acknowledged the key role played by powerful governments whose technocrats forged sound economic and social policies--free enterprise, mass education, fiscal and monetary prudence, and business incentives--with a minimum of lobbying for special favours from politicians and interest groups. Rather than embracing the whole of Western democracy, East Asia absorbed mainly the capitalist elements. Thus, Lee Kuan Yew in Singapore, Chiang Kai-shek on Taiwan, and Park Chung Hee in South Korea sternly presided over years of relative political and social stability and spectacular business growth. Hong Kong prospered under a laissez-faire regime run by competent, unelected bureaucrats. In its reforms China has also kept draconian political control while encouraging economic free enterprise. By contrast, India adopted democracy's political processes but rejected its market economics. If East Asia put economics first, politics eventually followed, largely as a result of social changes brought on by prosperity. The rise of a confident, affluent, and educated middle class, the expansion of schools and mass media, the growing assertiveness of young people and women, and the increased exposure to Western culture made more and more Asians less willing to follow their leaders without question. To these social pressures for greater freedom, economics added a further impetus. Stanford University economist Paul Krugman caused a stir in late 1994 by predicting a long-term East Asian economic slowdown unless the region improved total factor productivity (TFP), the output produced per unit of input. He maintained that innovation in the workplace was needed for improvement of TFP. Lee Kuan Yew agreed, stating that new industries require work units with freedom to plan. Quite naturally, Lee concluded, such liberties could lead to demands for similar prerogatives in the political sphere, including the right to elect leaders. Some of that is already happening in China. In a presentation for the U.S. National Endowment for Democracy, Minxin Pei, an assistant professor of politics at Princeton University, spoke of "the liberalizing effects of market forces." He notes the decreasing state control over people's economic decisions, the formation of thousands of business and professional groups, the widespread election of village councils, and even the expansion of a nongovernment press. Speaking in Shanghai in November, U.S. Secretary of State Warren Christopher acknowledged China's efforts to invest authority in its people through legal and administrative reforms and village elections. Henry Rowen, a senior fellow at the Hoover Institution, reported that the government media in China had only a third of the market in 1988, down from 95% in 1979. He predicted that if China's economy continued to grow at the present rate, its per capita gross domestic product would be $7,000 in 2015, the level at which democracy elsewhere has become stabilized. What role, if any, have economic sanctions and international pressure played in democracy's new march across Asia and, indeed, the world? Not much. Eastern Europe and Latin America broke their chains with hardly any threats from Western nations. In Asia six nations made great strides in democracy over the past decade: Bangladesh, Pakistan, the Philippines, South Korea, Taiwan, and Thailand. None of them ever faced sanctions, most being U.S. allies. Rowen counseled patience in dealing with China and an end to "making economic relations hostage to political disputes." If anything, it appears that commerce with the rest of the world has been the best catalyst for both economic development and democratic change in Asia. Ricardo Saludo is assistant managing editor of Asiaweek. DENMARK A constitutional monarchy of north-central Europe, Denmark lies between the North and Baltic seas. Area: 43,094 sq km (16,639 sq mi), excluding the Faroe Islands and Greenland. Pop. (1996 est.): 5,244,000. Cap.: Copenhagen. Monetary unit: Danish krone (crown), with (Oct. 11, 1996) a free rate of 5.87 kroner to U.S. $1 (9.25 kroner = 1 sterling). Queen, Margrethe II; prime minister in 1996, Poul Nyrup Rasmussen. Denmark's domestic peace was shattered in 1996 by an escalating conflict involving rival motorcycle gangs, which prompted Prime Minister Poul Nyrup Rasmussen to launch a major offensive against the feuding bikers. In a speech to the Folketing (national legislature) in October, he declared war on the Hell's Angels and the rival Bandidos gang and presented emergency legislation barring gang members from setting up bases in residential areas. The bill gave police the power to forbid members or associates of a particular group to occupy or visit a designated property "where there is an estimated risk that it will be attacked, placing in danger persons living or passing through the vicinity." The bill's sweeping powers stirred strong criticism among jurists in a country in which the freedom and rights of the individual were near-sacrosanct. The legislation was enacted after Copenhagen residents staged protests demanding the eviction of Hell's Angels in the wake of a spate of bomb, grenade, gun, and antitank missile attacks on biker clubhouses that often adjoined family homes in heavily populated urban districts. Otherwise, Rasmussen's speech pledged improved womb-to-tomb health and welfare services, a reduction in the size of the government, a more just society, better schools, and more parish priests for the government-financed Lutheran Church. In regard to the economy, Denmark seemed poised for an upturn after a period of relative stagnation, with low inflation, the lowest central bank discount rate in 60 years, current-account and foreign-trade surpluses, growing investment and private consumption, and reduced unemployment. Concerning foreign relations, Denmark remained a lukewarm European Union (EU) member, with polls revealing a majority of Danes opposed to joining the European economic and monetary union (EMU). Danes had voted in a 1993 referendum to endorse the Maastricht Treaty on the condition that Denmark would not participate in the EMU. Opposition to the treaty continued, however, as 11 Danish citizens won a Supreme Court ruling allowing them to mount a high court challenge to its constitutional legality in Denmark. Most analysts believed it was inconceivable for the government to lose the case, but some legal experts feared that if the 11 won, it could at worst eventually mean Denmark's exit from the EU and at best complicate the country's ratification of any revisions to the Maastricht Treaty emerging in 1997 from the EU's intergovernmental conference. A major dispute over fishing rights in the Denmark Strait between Iceland and Greenland intensified during the year, with little sign of any compromise between Denmark and Iceland in sight. On the cultural front Copenhagen basked in the limelight throughout the year as European "capital of culture," the 12th host for an impressive 13-month arts festival involving 50,000 participants and attended by more than five million visitors. (CHRISTOPHER FOLLETT) DJIBOUTI The republic of Djibouti is in the Horn of northeastern Africa on the Gulf of Aden. Area: 23,200 sq km (8,950 sq mi). Pop. (1996 est.): 604,000. Cap.: Djibouti. Monetary unit: Djibouti franc, with (Oct. 11, 1996) a par value of DF 177.72 to U.S. $1 (free rate of DF 279.96 = 1 sterling). President in 1996, Hassan Gouled Aptidon; prime minister, Barkat Gourad Hamadou. On March 27 Pres. Hassan Gouled Aptidon dismissed Ahmed Boulaleh Barreh and Moumin Bahdon Farah, ministers, respectively, of defense and of justice, Islamic affairs and prisons. Their departure was likely to strengthen the positions of Prime Minister Barkat Gourad Hamadou and the chef de cabinet, Ismael Omar Guelleh, both of whom were lining up to succeed the president who had just spent three months in a French hospital. The International Monetary Fund (IMF) agreed to a standby credit of SDR 4.6 million ($6.7 million) for 14 months to support the government's reform program. This was the first time Djibouti had used the IMF, which it joined in 1977. After having been imprisoned for a month, five deputies, including Farah, who had announced the formation of a new political party in April, went on a hunger strike in August in protest against their detention; they were accused of insulting Aptidon. (GUY ARNOLD) This article updates Djibouti, history of. JAPAN Domestic Affairs. On January 5 Tomiichi Murayama, Japan's first Socialist prime minister in five decades, resigned. Six days later both houses of the Diet (parliament) designated Ryutaro Hashimoto (see BIOGRAPHIES), president of the Liberal-Democratic Party (LDP), prime minister. Although his party had dominated Japanese politics from 1955 to 1993, it no longer commanded a majority in the Diet. Hashimoto, therefore, sought and obtained support from the same parties that had supported Murayama. His Cabinet reflected the fluid nature of the coalition. LDP members received 11 portfolios, including that of foreign minister and chief Cabinet secretary. Social Democratic Party (SDP) members were given six Cabinet positions, including the important position of finance minister. The smallest coalition partner, the New Harbinger Party (Sakigake), took two posts. The political opposition was represented by the New Frontier Party (Shinshinto). It was led by Ichiro Ozawa, Hashimoto's rival when both were in the LDP. When the new Diet convened, the LDP occupied 206 seats in the House of Representatives, the SDP 63, and Sakigake, 23, which gave the coalition a total of 292 of the 511 seats. In the House of Councillors the coalition commanded 140 of the 252 seats. In his policy speech to the Diet on January 22, Hashimoto called 1996 "the first year of structural reform." He emphasized the need for a "high-transparency financial system," the importance of building a society founded on "advanced information and telecommunications," and the need to provide health and comfort to Japan's aging population. Looking abroad, the prime minister called the Japan-U.S. security pact "our most important bilateral relationship" while urging a "realignment, consolidation, and reduction" of U.S. military bases on Okinawa. The coalition government faced a five-month deadlock in the Diet, wrangling with the opposition over bills to liquidate housing loan firms (jusen) that had failed since the 1980s. When the government announced on March 5 that taxpayers would bear the burden of $6.8 billion in losses (plus half the "secondary" debts), the Shinshinto boycotted the budget committee for three weeks. On May 10 the Diet passed a $750 billion budget for fiscal year 1996. Finally, on June 18, one day before the session's close, the House of Councillors approved six jusen liquidation bills. Maneuvers within factions and across party lines pointed to an election showdown. As early as February, junior LDP members had formed what they called the "New Century" group. Coalition representatives from Sakigake and the SDP acted as observers. On August 27 Yukio Hatoyama resigned as secretary-general of Sakigake and made plans for a "neoconservative party," which was expected to support deregulation, decentralization, and small government. Two days later Hatoyama unveiled a revolutionary proposal calling for the direct election of the prime minister. On September 28 the new Democratic Party (Minshuto) was formally organized, with 37 incumbent Diet members on its rolls. The opposition also experienced the impact of change. On August 8 Shinshinto leader Ozawa reshuffled the party's leadership by appointing Takeo Nishioka secretary-general. The goal was to "do well" in the next election and "to assume power." This move, and the changes that had been made in other parties, reflected a generational shift in politics. On September 27 Hashimoto dissolved the House of Representatives. The general election that followed on October 20 was the first under a new law, which allotted 300 seats to single constituencies and reserved 200 seats for proportional representation. In a record low turnout (below 60%), the LDP improved its position by taking 239 seats. Hashimoto marshaled 262 votes to win reelection, but no party agreed to join the LDP in a coalition. Shinshinto (156 seats) remained a formidable opponent, while the Democratic Party (52) seemed to hold the balance of power. The Social Democrats (15) and Sakigake (2) were almost eliminated from the political scene. In November Hashimoto appointed a new 21-member Cabinet, all from the LDP. Two developments on the home front originated in the realm of public health, but they profoundly affected the world of politics. In March, after a seven-year legal battle, five pharmaceutical firms apologized for having distributed HIV-contaminated drug products to hemophiliacs. They agreed to a district court settlement that awarded $430,000 to each of some 400 plaintiffs, as well as $1,500 per month to those who contracted AIDS. Health and Welfare Minister Naoto Kan frankly admitted public responsibility for what happened and agreed that the government would bear 44% of the financial burden, while the pharmaceutical firms would pay the remaining 56%. On August 16 in Sakai, near Osaka, a 12-year-old girl died after being infected by the O157-H7 strain of E. coli bacteria. White radish sprouts continued to be the target of investigation. Later, domestic beef also became suspect. The health and welfare ministry called the outbreak an epidemic, the first such official declaration in two decades. Eventually, the illness affected some 9,800 patients and caused 11 deaths. A third problem was inherited from 1995. On April 24 Shoko Asahara, founder of the Aum Shinrikyo religious cult, went on trial in the Tokyo District Court. After 17 criminal charges were read, he refused to enter a plea. Asahara and the sect had been implicated in several crimes in 1994 and 1995, including the spread of the nerve gas sarin in Tokyo subways. The Economy. A gradual recovery continued as corporate performance in fiscal 1995 (ended March 1996) showed a double-digit growth in profits. As a result of the yen's rise, however, Japan's cost of living index was among the world's highest. (Late in 1995 the ratio of Tokyo prices to those in New York City was 1.59 to 1.) In their end-of-May reports, banks reported combined losses of 1,750,000,000,000 yen, mainly the result of failed jusen loans. Japan's official discount rate was kept at a historic low of 0.5% in the hope that it could stimulate domestic demand. For senior Japanese it was a disaster. Characteristically they had saved money, but interest on their accounts, which was needed to supplement limited pensions, proved to be inadequate. After dropping for two months, the unemployment rate reached 3.4% in April and a record high of 3.5% in May. The number of jobless had risen to over 3 million (with 63 million employed). This trend prevailed despite an increase of 3% in gross domestic product (GDP) for the last quarter (January-March) of fiscal 1995, ending a three-year period of no growth. The annualized real-term value of GDP was $4,750.000,000,000, which included a strong growth in domestic demand. On June 25 the Cabinet authorized an increase in the national consumption tax from 3% to 5% (effective April 1, 1997). The world's largest bank began operations April 1 after a merger of the Bank of Tokyo and Mitsubishi Bank. Their combined assets totaled $738 billion and included 756 service bases in Japan and 438 overseas. FRANCE Domestic Affairs. The start of the year was clouded by the death on January 8 of former president Franois Mitterrand. (See OBITUARIES.) He was the only man under the Fifth Republic to serve two full seven-year presidential terms, and his chief legacies were judged to be the creation of the modern Socialist Party in France and the forging of a strong alliance with Germany. Mitterrand's death came after a prolonged struggle with prostate cancer. Just how long a struggle became clear with the sensational revelation in a book by his personal physician, Claude Gubler, that the cancer had been discovered just after Mitterrand entered office in 1981 but was hushed up until the president underwent a first operation in 1992. Gubler claimed that the president had in fact been unfit to govern the country from the autumn of 1994 on. The Mitterrand family persuaded the government to ban the Gubler book, but not before many copies were sold and the text was put on the Internet. Gaining in stature from the sympathetic and statesmanlike way in which he addressed the nation on the death of his old Socialist political opponent, Chirac went on to make his mark with another television address, this time on his sweeping defense reforms. He announced the progressive replacement of France's part-conscript armed forces of more than 500,000 with a fully professional force of 350,000 by the year 2002. He also set defense spending at a maximum of F185 billion a year over the same period. This constituted a sizable reduction from the previously planned total, with most of the savings to be achieved on equipment produced by a restructured defense industry. This restructuring was to centre on the privatization of the state-owned Thomson electronics group and the merger of France's two aircraft companies, the state-owned Aerospatiale and the privately controlled Dassault. This merger had long been resisted by Serge Dassault, who held nearly 50% of the public company's shares, but his ability to continue running an independent aviation group was undermined by the international arrest warrant issued against him in May by a Belgian judge investigating alleged bribes paid by Dassault in that country. Dassault had also balked at negotiating with Louis Gallois, the head of Aerospatiale. In July the government moved Gallois on to run the SNCF railroad company in place of Loik Le Floch-Prigent, who was jailed while magistrates investigated charges that in his earlier position at the Elf-Aquitaine oil company, he had improperly used company funds in return for favours. Jupp's "favourable" rating in the opinion polls remained below 40% throughout the year and sometimes dipped below 30%. His main preoccupation was to cut the deficits in the central government budget and the welfare system. He achieved one structural reform early in the year with a change to the constitution that would allow Parliament some supervision of the social security system, which had historically been managed (or mismanaged) by the trade unions in conjunction with employers. Jupp's ability to handle the coalition of his own neo-Gaullist Rally for the Republic with that of the centre-right Union for French Democracy (UDF) was made no easier when a national convention of the UDF on March 31 elected Franois Lotard to replace former president Valry Giscard d'Estaing as party leader. During the 1995 presidential election campaign, Lotard had been one of the strongest supporters of Prime Minister douard Balladur against Chirac, who had the backing of Giscard. Jupp also found himself faced with a growing number of National Assembly backbenchers, and they pressed him to adopt more popular policies, such as faster tax cuts. On October 2 Jupp opened the autumn session by calling for a motion of confidence in the government and so daring his internal critics to vote against him. He won the motion by 464 votes to 100, but the result reflected more the size of the centre-right's majority than a change of heart toward the prime minister. Immigration flared up again as an issue on August 23 when police stormed a Paris church sheltering some 300 "illegal" immigrants, mainly African, 10 of whom had been on a protest hunger strike for 50 days. Some of those arrested were then deported back to Africa. The government pledged to toughen the law against illegal immigration. It also moved to strengthen France's antiracist laws in the wake of public remarks by National Front leader Jean-Marie Le Pen about "the inequality of the races." The government was also confronted with rising terrorist activity by Corsican nationalists, most of whom were seeking increased autonomy for the island rather than its outright independence. On the eve of a visit to Corsica by Jean-Louis Debr, the interior minister, the "historic wing" of the Corsican National Liberation Front (FLNC-Canal Historique) staged a spectacular press conference on the night of January 12 in the hills, attended by 600 masked and armed men. It offered a truce to the government. The latter ignored Corsica's demands for more political autonomy but planned to revive the island's economy with increased tax breaks. Bombings of government property and shootings--often between the FLNC and other nationalist groups--continued, and the "truce" was only nominal by the time the FLNC formally ended it in August. Violence spread to the mainland with the September 29 bombing of the main court building in Aix-en-Provence and the bombing of the town hall in Bordeaux on October 5. A bomb exploded in a Paris train station in December, killing two. The Economy. The year was one of low growth (1.2%) sandwiched between an increase in real gross domestic product (GDP) of 2.2% in 1995 and a predicted rate of expansion of 2.3% in 1997. After the autumn 1995 strikes, output rose by 1.1% in January-March only to fall back by 0.2% in the second quarter. Lower interest rates and artificially strong automobile sales (related to the ending in September of a subsidy for car buyers) helped GDP bounce back in the third quarter by 0.9%, and growth was forecast to continue more modestly at 0.4% in the final three months of 1996. The main strength came from household spending and, to a lesser extent, from export demand, but investment remained weak. Economic policy was dominated by government efforts to reduce the country's overall deficit from the equivalent of 5% of GDP in 1995 to 4% in 1996, with the aim of reaching 3% in 1997 and so qualifying France for the EU monetary union. Mainly through tax increases, the government had less difficulty in cutting the budget deficit to F288 billion than it did with cutting the welfare deficit. The social security system ended the year around F50 billion in the red, compared with the government target of F17 billion. CHINA Domestic Affairs. Pres. Jiang Zemin dominated the Chinese political stage in 1996 in his triple capacity as general secretary of the Communist Party of China (CPC), head of state, and chairman of the CPC's Central Military Commission. A cautious centrist rather than a bold innovator, Jiang continued to rule by consensus, undertaking no policy initiatives that might cause his colleagues to unite against him. There were no significant changes in the top leadership in 1996. Major Gen. Ba Zhongtan, head of the People's Armed Police, resigned following the murder in February of Li Peiyao, vice-chairman of the National People's Congress, during a bungled burglary. Beijing Mayor Li Qiyan, who had been implicated in the 1995 scandal that led to the purge of Political Bureau member Chen Xitong, was demoted to secretary of the CPC's Committee of the Ministry of Labour. Wang Li, one of the last of the Cultural Revolution radicals, died at age 75. A popular best-seller, The China That Can Say No, authored by Song Qiang and two other youthful writers, angrily denounced the U.S. for subverting the national aspirations of the Chinese and poisoning the wellsprings of their culture with Hollywood films and Western fast food. Popular nationalism complemented official nationalism but also challenged it to be more active in defending Chinese interests. Jiang wrapped himself tightly in the banner of Chinese nationalism while promoting the rather amorphous concept of socialist spiritual civilization. This was the main theme of his address to the October plenum of the CPC Central Committee. The communiqu affirmed economic reform as the central task of the CPC but stressed that the party had yet to solve the problem of promoting ideological, educational, ethical, and cultural progress. Energetic campaigns were launched to curb such national bad habits as spitting, littering, smoking, and cursing in public. Otherwise, socialist spiritual civilization seemed to be a euphemism for domestic law-and-order policies and the maintenance of tight controls over culture, literature, and the arts. For example, Wang Shuo, the popular novelist who chronicled Beijing lowlife, was criticized for decadence. The CPC deferred any serious initiatives to grapple with major economic and social issues at least to its 15th Congress, which would convene in late 1997 in the afterglow of the recovery of Hong Kong. Lacking a distinctive vision for the future, the CPC reveled in its revolutionary past, glorifying the heroism of the famous Long March, the 60th anniversary of which was widely celebrated on stage and screen and in song. Jiang used the occasion to reemphasize a favourite theme, the loyalty of the People's Liberation Army to the CPC. Jiang's neoconservative nationalism presented the CPC as indispensable in holding Chinese society together and guiding China toward prosperity and greatness. The CPC stepped up its campaign against rampant corruption, criticizing cadres (government and party officials) for wasting public funds by such means as extravagant banquets and unessential travel. In October Chinese prosecutors filed criminal charges against Zhou Beifang and 29 others, including two ex-Beijing officials. Zhou, who reportedly paid millions in bribes to corrupt officials in return for favours, was the son of the former chairman of Capital Iron and Steel Corp. and a confidant of Deng. The Central Committee for Discipline Inspection called for harsher punishment of corrupt officials while declaring that ethical and cultural progress should not be sacrificed in the name of economic development. This was one of several implicit criticisms of Deng's reforms. A thorough critique of the reforms was contained in the unpublished but widely circulated "Ten Thousand Character Essay," attributed to the conservative ideologue Deng Liqun. The tract, which warned that the CPC's hold on power was seriously threatened by the rise of a new Chinese bourgeoisie, revived the old Maoist emphasis on class struggle. This viewpoint was challenged by Cao Siyuan, a leading reformer who had been purged in 1989. In an article published in an obscure provincial economics journal, he argued that reform was the only way the CPC could retain power, but it would do so only if it stopped meddling in all aspects of social life. Authorities forbade republication of the article. In April Beijing launched a new and well-publicized campaign called yanda ("strike hard") against violent crime, which shot up 13% in 1995. Within the first two months, according to estimates by Amnesty International, 100,000 illegal firearms were seized nationwide, tens of thousands of alleged criminals arrested, and 1,000 executed. On the information front Chinese leaders ordered stepped-up monitoring of computer bulletin boards and blocked access to numerous sites on the World Wide Web. These included those operated by foreign newspapers, human rights groups, overseas dissidents, and the Voice of America. Chinese leaders were equally determined to root out the vestiges of domestic dissent. They brushed aside international criticism of the 14-year prison term imposed in 1995 on Wei Jingsheng, who received the European Union's prestigious Andrey Sakharov Prize for Human Rights. In October Wang Dan, a student leader of the 1989 democracy movement, was sentenced to 11 years in prison on charges of conspiring to overthrow the government. The specific charges included publishing critical articles in foreign newspapers, raising money abroad for needy dissidents, and accepting a scholarship from the University of California. Another Chinese democrat, Liu Xiaobo, was sentenced to three years in a labour camp. Along with Wang Xizhe, he had drafted a letter critical of Jiang and called on the CPC to honour political and human rights. Wang Xizhe managed to escape from China and was granted political asylum in the U.S. After his release from prison in May, Bao Tong was kept in seclusion outside Beijing. He had been the top aide to Zhao Ziyang, the CPC chief purged in 1989. As a small gesture to the U.S. on the eve of Secretary of State Warren Christopher's November visit to Beijing, China released dissident Chen Ziming, who was suffering from cancer. Chinese leaders also put Hong Kong on notice that freedom of the press, as well as free speech and assembly, would be curtailed after 1997, solemn promises to the contrary notwithstanding. Hong Kong papers, for example, would be forbidden to advocate independence for Taiwan or to engage in political advocacy. In January, Human Rights Watch/Asia, a U.S. organization, using information supplied by a former staff physician at Shanghai's largest orphanage, charged officials there with deliberately starving unwanted orphans to death. China acknowledged an unusually high infant mortality rate at the orphanage but angrily denied the allegations, branding them part of an ongoing effort to besmirch China's international reputation. Trouble again flared in Tibet. In May monks at the Ganden monastery attacked Chinese police and officials after the imposition of a ban on photographs of the Dalai Lama. The police stormed the monastery, shot 2 monks, and arrested 100 others. Beijing threatened economic reprisals against such countries as Australia, whose leaders disregarded Chinese warnings by meeting with the Dalai Lama. The Tibet Daily, the CPC's mouthpiece in the region, urged Tibetans to embrace atheism in order to counter the influence of the Dalai Lama. This was tantamount to asking Tibetans to renounce their cultural identities. In September Premier Li Peng reminded restive Muslims in the Xinjiang Uygur autonomous region that they had to obey the law and support socialism. Violent clashes erupted between Muslim separatists and Chinese authorities, and in May China tightened border controls to curb arms smuggling from Central Asia. The Economy. The Chinese economy performed well in 1996, although massive socioeconomic problems remained unsolved. Gross domestic product grew by about 10%, while the inflation rate dropped to just 6%, four points below the government's target. Industrial output increased 13.2% in the first six months, paced by small and medium township and village enterprises. The easing of inflation was mostly due to the drop in exports, which at $90.6 billion during the January-August period were down 4% from 1995. Exports picked up in the second half of the year, however, and the overall trade surplus for the year was expected to be $6 billion. Foreign investment, the engine of economic growth, grew 20% in the first half of 1996. With the economy having made a soft landing after several years of dizzying growth, the government slightly eased lending rates while keeping a tight hand on the growth of the money supply. The steady march toward convertibility of China's currency, the renminbi yuan, continued as foreign companies operating in China were given permission to convert the yuan freely into dollars or Japanese yen. After a record grain harvest of 466 million metric tons in 1995, another record crop of 475 million metric tons was expected in 1996. This yield was anticipated despite torrential summer rains throughout China that flooded 3,250,000 ha (8 million ac) of cropland, caused thousands of deaths, left millions homeless, and cost billions of yuan in damage. The Yellow River crested at its highest recorded level, inspiring fears of a catastrophic dike breach. Nevertheless, over the past 50 years, natural disasters on average had reduced China's harvests by just 1% annually. Work proceeded on the world's largest flood-control and hydroelectric project, the controversial Three Gorges Dam on the Chang Jiang (Yangtze River) above Yichang. Chinese planners were considering huge water-diversification projects to channel excess water from the Chang Jiang to arid northern regions. Compared with the early 1990s, the CPC was now promoting slower growth, reasserting strong central control over the economy, and trying to redirect investments from the prosperous coastal provinces to the more slowly developing interior, especially the mountainous western provinces, where most of China's hard-core poor lived. China estimated that 65 million people, or just over 5% of the population, fell below a poverty line defined as an income of 5 yuan (60 cents) per day. The World Bank, using 8 yuan (96 cents) per day as the poverty line, estimated that 350 million (well over one-quarter of the Chinese population) fell below this line. Recalculating China's per capita income, the World Bank estimated China's 1992 per capita income at $1,800, compared with $1,210 for India, $2,970 for Indonesia, and $5,250 for Brazil. The calculations took into account the prices of goods on the various domestic markets. Unemployment, real and prospective, cast a huge shadow over the Chinese economy. The Ministry of Labour forecast that the number of rural jobless would rise to 140 million by the year 2000 because the economy was expected to generate only 70 million new jobs for the 210 million rural workers who would be seeking employment at that time. Large state-owned enterprises continued to struggle under mountains of debt. After years of decline these firms, employing some 115 million persons (70% of the industrial workforce) accounted for only one-third of China's industrial output and generated only 1% of industrial profits while absorbing three-quarters of industrial investments. The medium-sized and small state firms were experimenting with various ways to increase their profitability and orient themselves to a market economy, but no solutions were in sight for the industrial dinosaurs of the old state socialist economy. Many workers in state-run enterprises were given extended vacations, furloughed, simply not paid, or paid months in arrears. The Bank of China was admitted to the Swiss-based Bank for International Settlements (the so-called bankers' bank), in recognition of China's growing international importance. China's admission to the World Trade Organization was still blocked, however, by foreign, particularly U.S., insistence on various market-opening and statistical conditions that China still had not met. This increased Chinese resentment against the U.S. DOMINICA An island republic within the Commonwealth, Dominica is in the eastern Caribbean Sea. Area: 750 sq km (290 sq mi). Pop. (1996 est.): 73,800. Cap.: Roseau. Monetary unit: Eastern Caribbean dollar, with (Oct. 11, 1996) a par value of EC$2.70 to U.S. $1 (free rate of EC$4.25 = 1 sterling). President in 1996, Crispin Anselm Sorhaindo; prime minister, Edison James. The governing United Workers' Party began putting its financial house in order in 1996 by announcing the sale of four state-owned entities--Dominica Electricity Services Ltd., the Agricultural, Industrial and Development Bank, the Dominica Export-Import Agency, and certain facilities at the port of Roseau, the capital. The government's external debt burden in January was EC$320 million and its internal debt EC$80 million. In May, after a visit to Dominica by Cuba's foreign minister, Roberto Robaina, the two governments decided to establish diplomatic relations. (DAVID RENWICK) This article updates Dominica. DOMINICAN REPUBLIC The Dominican Republic covers the eastern two-thirds of the Caribbean island of Hispaniola, which it shares with Haiti. Area: 48,671 sq km (18,792 sq mi). Pop. (1996 est.): 7,502,000. Cap.: Santo Domingo. Monetary unit: Dominican peso, with (Oct. 11, 1996) a free rate of RD$13.78 to U.S. $1 (RD$21.71 = 1 sterling). Presidents in 1996, Joaqun Balaguer and, from August 16, Leonel Fernndez Reyna. Elections for the president of the Dominican Republic were held in two rounds, on May 16 and June 30, 1996. After the first round Jos Francisco Pea Gmez of the Dominican Revolutionary Party (PRD) led with 48.75% of the vote. In the second round Leonel Fernndez Reyna of the Dominican Liberation Party (PLD) formed an alliance with the governing Social Christian Reformist Party (PRSC). This coalition, which was supported by smaller right-wing groups, enabled Fernndez to gain 51.25% of the second vote, and he was sworn in as president on August 16. The elections were called early because of allegations of fraud at the 1994 elections. Pres. Joaqun Balaguer, who was 89 on Sept. 1, 1996, was barred from running again. Having achieved its aims in the elections, the PRSC changed allegiances again. On August 8 it signed an agreement with the PRD allowing the PRSC to have control over the Senate and the PRD the presidency of the Chamber of Deputies. The PLD was in a minority in both houses, which was expected to hinder President Fernndez's plans to combat corruption and reform the inefficient state sector. (SARAH CAMERON) This article updates Dominican Republic. ECUADOR The republic of Ecuador is in western South America, on the Pacific Ocean. Area: 272,045 sq km (105,037 sq mi), including the Galpagos Islands. Pop. (1996 est.): 11,698,000. Cap.: Quito. Monetary unit: sucre, with (Oct. 11, 1996) a free rate of 3,309 sucres to U.S. $1 (5,213 sucres = 1 sterling). Presidents in 1996, Sixto Durn Balln and, from August 10, Abdal Bucaram Ortz. The second round of the presidential elections was won in July 1996 by Abdal Bucaram Ortz (see BIOGRAPHIES) of the centre-left Ecuadorian Roldosist Party (PRE), who took 54.5% of the vote. It was the third time that Bucaram had run for president, and much of his support came from the nation's poor, who had rejected the austerity measures imposed by the previous government. The first round of the elections had been narrowly won by Jaime Nebot Saadi of the centre-right Social Christian Party. He had waged a strong negative media campaign against the PRE but failed to counteract the widespread resentment against the austerity program. A scandal in late 1995 involved former vice president Alberto Dahik Garzozi, who fled the country after an order was given for his arrest on corruption charges. He was granted political asylum by Costa Rica just before being found guilty of embezzlement and illicit enrichment. The central bank was expected to run a deficit in 1996; the new government inherited several outstanding debts from the previous administration, amounting to a total of 3% of gross domestic product. Estimated real GDP growth in the first half of 1996 was 2.8%. The oil sector continued to lead the growth, expanding by 3.5% owing to rising world prices. From February inflation remained above the 1995 levels. Official estimates for inflation for the year were revised from 17-19% to 25%. (ALAN MUR

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